Andhra Pradesh HC Strikes Down Section 147A: A Masterclass in Legislative Overreach and the Limits of Retrospective Validation

The Hook: When Parliament Tries to Turn Back Time

The Andhra Pradesh High Court's decision in Bala Sreenivas Rao Somisetty v. Income Tax Officer (2026) is not merely a tax ruling—it is a constitutional checkpoint. At stake was Section 147A of the Income Tax Act, 1961, Parliament's audacious attempt to retrospectively nullify judicial pronouncements that had quashed reassessment notices issued by Jurisdictional Assessing Officers (JAOs) instead of the mandated faceless authorities. The Court's message is unequivocal: the Legislature cannot use the guise of "clarification" to sit in appeal over coordinate benches, nor can it amend a statute that has already exited the statute books.

This judgment arrives at a critical juncture. With the Supreme Court having remanded the matter specifically to test the validity of Section 147A, and with the Punjab and Haryana High Court having already struck down the provision (albeit stayed), the Andhra Pradesh High Court's detailed reasoning provides a roadmap for understanding the constitutional limits of validating acts. For practitioners, this is essential reading on how to challenge retrospective fiscal legislation that seeks to overturn concluded litigation.

The Facts: A Tale of Two Schemes and an Overreach

The controversy traces back to the introduction of the Faceless Assessment Scheme, 2019, later codified through Section 144B by the Finance Act, 2021. Simultaneously, Section 151A empowered the Central Government to frame schemes for faceless reassessment. Pursuant to this, the CBDT notified the e-Assessment of Income Escaping Assessment Scheme, 2022 on March 29, 2022, explicitly bringing Sections 147 and 148 under the faceless regime through automated allocation.

Despite this clear statutory mandate, JAOs across the country continued issuing notices under Sections 148A and 148, prompting a wave of writ petitions. In October 2025, a coordinate bench of the Andhra Pradesh High Court quashed such notices, holding that the Scheme mandated faceless proceedings. While the Revenue's SLPs were pending, Parliament intervened through the Finance Act, 2026, inserting Section 147A with retrospective effect from April 1, 2021. This provision declared that the "Assessing Officer" for Sections 148 and 148A "shall mean and shall always be deemed to have meant" an officer other than the National Faceless Assessment Centre (NFAC).

The Supreme Court, rather than deciding the validity of this amendment, remanded the matters to the High Courts with liberty to challenge Section 147A. The petitioners accordingly amended their writs, leading to the present judgment.

The Arguments: A Clash of Constitutional Titans

The Petitioners' Case: The petitioners mounted a multi-front attack. First, they argued that Section 147A was a colorable exercise of power—a legislative attempt to nullify judicial decisions without removing their basis. Second, they contended that the amendment violated the doctrine of separation of powers, as Parliament was effectively sitting in appeal over coordinate benches. Third, they raised a novel jurisdictional point: the Income Tax Act, 1961 stood repealed on March 31, 2026, by the Income Tax Act, 2025, rendering any amendment to the repealed Act void ab initio. Finally, they argued that the Revenue could not blow hot and cold—having framed a scheme mandating faceless proceedings, it could not now claim JAOs had concurrent jurisdiction.

The Revenue's Defense: The Revenue relied on the presumption of constitutionality and the twin test for validating acts laid down in Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality (1969) 2 SCC 283: (1) removal of the defect identified by the Court, and (2) retrospective operation. They argued that Section 147A merely clarified legislative intent, removing the "defect" of ambiguity regarding jurisdiction. They emphasized that Section 148A was not explicitly mentioned in the 2022 Scheme, creating a lacuna that JAOs could fill. Regarding the repeal argument, they contended that since the Finance Act, 2026 received Presidential assent on March 30, 2026—before the 1961 Act's repeal—the amendment was valid.

The Judgment: Constitutional Rigour Over Fiscal Expediency

Justice T.C.D. Sekhar, writing for the Division Bench, delivered a judgment that systematically dismantles the Revenue's position. The Court held that Section 147A suffers from three fatal constitutional defects.

First, the Failure of Validation: The Court emphasized that a validating act must remove the very basis of the judicial decision it seeks to overcome. Here, the basis was the 2022 Scheme framed under Section 151A, which explicitly included Section 148 within the faceless regime. Without amending the Scheme or Section 151A, Parliament could not legislatively "clarify" that JAOs had jurisdiction. The Court observed: "Without amending the said scheme, any clarification or validation through amendment cannot be permitted especially when the basis is not removed." The non-obstante clause in Section 147A ("Notwithstanding anything contained in any judgment...") was insufficient to override the statutory scheme that remained unamended.

Second, Violation of Separation of Powers: The Court held that Section 147A represented an impermissible legislative encroachment into the judicial domain. By declaring that the Assessing Officer "shall always be deemed to have meant" the JAO, Parliament was not merely changing the law for the future but attempting to render ineffective judicial interpretations of existing law. This, the Court held, violates the basic structure doctrine as articulated in State of Tamil Nadu v. M. Rayappaiah Gounder (1971) 3 SCC 1.

Third, the Repeal Conundrum: In a masterstroke of statutory interpretation, the Court applied Section 5 of the General Clauses Act, 1897, and the Supreme Court's ruling in Common Cause v. Union of India (2003) 8 SCC 250. Since the Finance Act, 2026 expressly stated it would come into force on April 1, 2026, it could not be deemed to have come into force on March 30, 2026 (the date of Presidential assent). By April 1, 2026, the Income Tax Act, 1961 had been repealed by the Income Tax Act, 2025. Therefore, Parliament lacked the competence to amend a dead statute. The Court rejected the Revenue's argument based on Section 536 of the 2025 Act, holding that savings clauses preserve pending proceedings but do not empower Parliament to amend the repealed Act.

The Critique: Where the Court Got It Right (And What It Missed)

This judgment is constitutionally sound and doctrinally coherent. The Court correctly identified that the Revenue was attempting to have it both ways—retaining the 2022 Scheme (which provided the legal basis for faceless assessments) while simultaneously claiming that the Scheme never applied to Section 148. This selective reading of the statute was rightly rejected as an attempt to "blow hot and cold."

The Court's reliance on the repeal argument is particularly ingenious and demonstrates sophisticated statutory analysis. By highlighting the temporal gap between Presidential assent and the expressed commencement date, the Court exposed a critical legislative drafting error. This serves as a warning to the Legislature that retrospective amendments cannot be smuggled in through technicalities when the parent statute has been replaced.

However, one wishes the Court had engaged more deeply with the practical consequences of its decision. The Revenue's additional affidavit revealed that reassessment proceedings totaling ₹21.74 lakh crores were pending, with 6,46,897 orders already passed. While the Court correctly held that fiscal exigencies cannot validate unconstitutional legislation, it could have provided clearer guidance on the fate of completed assessments where assessees had not challenged jurisdiction. The blanket quashing of all JAO-initiated proceedings, while legally correct, may create administrative chaos and potentially allow tax evaders to escape scrutiny through procedural technicalities.

Furthermore, the Court's dismissal of the Revenue's "two-stage" argument (pre-assessment by JAO, assessment by NFAC) is somewhat summary. While the Court rightly noted that Section 148 is included in the Scheme, it could have engaged more substantively with the practical impossibility of conducting pre-assessment inquiries under Section 148A through a faceless mechanism that lacks territorial jurisdiction. A more nuanced discussion of whether Section 148A inquiries inherently require territorial jurisdiction would have strengthened the judgment against future challenges.

The Takeaway: Lessons for Practitioners

1. The "Basis Removal" Test is Sacred: When challenging a validating act, focus on whether the legislature has actually removed the basis of the prior judicial decision. If the foundational regulation or scheme remains unamended, the validation fails. Here, the unamended 2022 Scheme was the Achilles' heel of Section 147A.

2. Check the Repeal Status: In an era of frequent tax code revisions, always verify whether the parent statute has been repealed and re-enacted. The temporal gap between Presidential assent and commencement dates can be a potent weapon, as demonstrated by the Court's application of Common Cause.

3. Preserve the "Blowing Hot and Cold" Argument: The Court's observation that the Revenue cannot simultaneously rely on the Scheme for legitimacy while claiming exemption from its mandates is a powerful tool in administrative law. Document inconsistencies in the State's position across different proceedings.

4. Interim Relief Strategy: Given the Supreme Court's stay of the Punjab and Haryana High Court's similar ruling, and the likelihood of an appeal against this judgment, practitioners should immediately seek interim stays of any reassessment proceedings initiated by JAOs. The constitutional validity of Section 147A is now sub judice, and pending final determination, the status quo ante (faceless assessment) should arguably apply.

5. Watch the Scheme, Not Just the Statute: This judgment underscores that subordinate legislation—schemes framed under Sections 144B and 151A—have independent constitutional significance. A challenge to the parent amendment must be accompanied by a challenge to the continued operation of inconsistent schemes.

The Andhra Pradesh High Court has drawn a constitutional line in the sand. Parliament's power to validate laws retrospectively is not a license to overturn judicial decisions through semantic games. For tax practitioners, this judgment offers both a shield against arbitrary reassessments and a template for constitutional challenges to legislative overreach.