Andhra Pradesh High Court Strikes Down Section 147A: Parliament Cannot Amend a Dead Act to Resurrect Dead Notices

The Hook: A Constitutional Rebuke Disguised as a Tax Ruling

When over two hundred writ petitions converge on a single question of law, you know the Revenue has overplayed its hand. The Division Bench of Justices Ninala Jayasurya and T.C.D. Sekhar at the Andhra Pradesh High Court has delivered a judgment that is less about income tax procedure and more about a fundamental constitutional principle: Parliament cannot legislate retroactively on a repealed statute, and it certainly cannot do so to nullify judicial decisions without removing their legal foundation.

This is the second High Court — after Punjab and Haryana — to strike down Section 147A of the Income Tax Act, 1961. But unlike the Punjab and Haryana judgment (whose operation has been stayed by the Supreme Court), this Bench went further, identifying an independent and arguably more devastating ground: the Finance Act, 2026 attempted to amend a statute that had already ceased to exist. That is not legislative clarification. That is legislative necromancy.

The Facts: Faceless Scheme, Familiar Overreach

The essential facts are straightforward. Parliament introduced Section 151A through the Taxation and Other Laws Act, 2020, empowering 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 29.03.2022. The scheme expressly included Section 148 within its ambit — meaning notices for income escaping assessment were to be issued through automated, faceless allocation, not by the Jurisdictional Assessing Officer (JAO).

Despite this, JAOs across the country continued issuing notices under Sections 148A and 148. Multiple High Courts — including a co-ordinate bench of this very Court on 28.10.2025 — quashed these notices, holding that the JAO lacked jurisdiction once the faceless scheme was in force. The Revenue filed SLPs before the Supreme Court. While those SLPs were pending, Parliament enacted the Finance Act, 2026, inserting Section 147A with retrospective effect from 01.04.2021, declaring that the Assessing Officer for Sections 148 and 148A "shall always be deemed to have meant" the JAO, notwithstanding any judgment or the scheme under Section 151A.

The Supreme Court, by order dated 10.04.2026, set aside the favourable High Court judgments on the limited ground that the legislative landscape had changed, and remitted the matters to the jurisdictional High Courts with liberty to challenge Section 147A itself. The petitioners amended their writ petitions accordingly. The result is this judgment.

The Arguments: Two Ships Passing in the Night

The petitioners' case rested on multiple pillars. First, the scheme under Section 151A included Section 148, making faceless issuance mandatory. Second, Section 147A was not clarificatory but an attempt to nullify judicial decisions without removing their basis — a violation of the separation of powers. Third, the Income Tax Act, 1961 was repealed effective 01.04.2026 by the Income Tax Act, 2025, and the Finance Act, 2026 — which itself came into force only on 01.04.2026 — could not amend a statute that no longer existed.

The Revenue's counter was predictable but not without force. The ASG argued presumption of constitutionality, the wider latitude afforded to fiscal legislation, and the twin test for validating acts from Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality, (1969) 2 SCC 283 — namely, that the legislature removes the defect identified by the Court and does so through retrospective enactment. The Revenue also placed heavy reliance on practical consequences: over 8.82 lakh reassessment notices, Rs. 21.74 lakh crore in assessed income, and four years of stalled reassessments.

The Judgment: Methodical and Devastating

The Bench dismantled the Revenue's case on two independent grounds, each sufficient to strike down Section 147A.

First, on the merits of the validating act: The Court held that Section 147A failed the twin test from Prithvi Cotton Mills. The earlier High Court judgments did not identify any "defect" in the statute that needed curing. They simply held that the JAO lacked jurisdiction because the scheme included Section 148. To validate the JAO's actions, Parliament needed to amend the scheme itself — remove Section 148 from the faceless framework. It did not do so. Section 151A and the 2022 scheme remained unamended. The Court observed, with evident disapproval:

"Without amending the said scheme, any clarification or validation through amendment cannot be permitted especially when the basis is not removed. Therefore, by introducing Section 147A of the Act, the Legislature is trying to over reach the judgments rendered by various High Courts in this regard, in direct conflict with Doctrine of separation of powers, which is the basic structure of the Constitution."

The Court also invoked State of Tamil Nadu v. M. Rayappaiah Gounder, (1971) 3 SCC 1, reiterating that while the legislature can remove the basis of a judicial decision, it cannot simply override it. The non-obstante clause in Section 147A — "notwithstanding anything contained in any judgment" — was precisely the kind of legislative overreach the Constitution prohibits.

Second, on the repeal point: This is where the judgment breaks new ground. The Court held that the Income Tax Act, 1961 stood repealed at midnight on 31.03.2026. The Finance Act, 2026, per its own Section 2(a), came into force on 01.04.2026 — not on 30.03.2026 when it received Presidential assent. Relying on Common Cause v. Union of India, (2003) 8 SCC 250, the Court held that Section 5 of the General Clauses Act has no application where the enactment itself specifies a commencement date. Therefore, Parliament inserted Section 147A into a statute that had already ceased to exist. The amendment was void ab initio.

The Critique: Strong Result, One Missed Opportunity

Let me be direct: this judgment gets the right result, and the repeal argument is genuinely brilliant. The petitioners' counsel deserve credit for identifying what is essentially a constitutional gotcha — Parliament was so eager to nullify judicial decisions that it forgot the 1961 Act had been repealed. The Bench's reliance on Common Cause is apt, and the analysis of Section 5 of the General Clauses Act is textbook statutory interpretation.

However, I have one significant reservation. The Court's treatment of the Revenue's "two-stage" argument — that Sections 148A/148 constitute a pre-assessment stage distinct from the Section 147 assessment — deserved more engagement. The Revenue's position, however self-serving, has a certain structural logic: the scheme under Section 151A speaks of "assessment, reassessment or re-computation under Section 147" and "issuance of notice under Section 148" as separate items. The Court dismissed this by noting that Section 148 was included in the scheme, full stop. That is correct as a matter of textual construction, but the Bench could have strengthened its reasoning by addressing why the inclusion of Section 148 in the scheme necessarily means faceless issuance, rather than merely faceless "allocation" as the Revenue contended. The judgment asserts the conclusion more than it demonstrates it.

Additionally, the Court's refusal to engage with the Revenue's practical consequences argument — 8.82 lakh notices, Rs. 21.74 lakh crore — is constitutionally sound but strategically shortsighted. When this reaches the Supreme Court (and it will), the Revenue will lead with these numbers. A paragraph acknowledging the scale of disruption while explaining why constitutional principles cannot yield to administrative convenience would have made the judgment more resilient on appeal.

The Takeaway: What Practitioners Should Note

1. The repeal argument is your strongest card. If you are challenging Section 147A in any other High Court, lead with the repeal point. It is clean, requires no value judgment about separation of powers, and is grounded in the unambiguous text of Section 2(a) of the Finance Act, 2026 and Section 1(3) of the Income Tax Act, 2025. It also has the virtue of being immune to the "presumption of constitutionality" doctrine — you cannot presume the constitutionality of an amendment to a non-existent statute.

2. The scheme amendment point remains potent. Even if the Supreme Court eventually upholds Parliament's power to validate retrospectively, the failure to amend the Section 151A scheme is a glaring omission. Any validating act must remove the basis of the judgment it seeks to override. The scheme was the basis. It was not removed.

3. Watch the Supreme Court closely. The stay of the Punjab and Haryana judgment signals that the Court is taking this seriously. The Andhra Pradesh judgment adds a new dimension — the repeal argument — that was not before the Punjab and Haryana High Court. Expect the Supreme Court to constitute a larger bench, given the pan-India implications and the conflicting views emerging from different High Courts.

4. For pending reassessment proceedings: If your client received a Section 148 notice from a JAO after 29.03.2022, and the reassessment is still pending, this judgment gives you a direct basis to seek quashing. The interim stay granted by the Supreme Court in its remand order continues to protect assessees, but you should now press for final relief citing this judgment.

The broader constitutional message here is one the Revenue would do well to internalise: you cannot legislate away judicial accountability by inserting non-obstante clauses into statutes that no longer exist, targeting judgments you do not like, while leaving the very scheme that produced those judgments untouched. That is not tax policy. That is institutional vandalism dressed in fiscal clothing.