AP High Court Strikes Down Section 147A: When Parliament Cannot Rewrite the Past to Win Pending Litigation

A Retroactive Amendment Meets Its Match

In a judgment that will reverberate through tax litigation across India, the Andhra Pradesh High Court has struck down Section 147A of the Income Tax Act, 1961, declaring it unconstitutional. The provision—introduced through the Finance Act, 2026 with retrospective effect from 01.04.2021—was Parliament's attempt to nullify judicial decisions that had quashed reassessment notices issued by Jurisdictional Assessing Officers (JAOs) in violation of the faceless assessment scheme.

The Division Bench of Justices Ninala Jayasurya and T.C.D. Sekhar did not mince words. This was not merely a tax dispute; it was a constitutional showdown over whether Parliament can legislatively "clarify" away inconvenient judicial pronouncements without removing the statutory basis on which those pronouncements rest. The Court's answer: an emphatic no.

The Facts: A Scheme Ignored, A Judgment Overridden

The petitioners, numbering over 150 across batch petitions, had challenged notices issued under Sections 148A and 148 of the Income Tax Act by JAOs. Their contention was straightforward: after the introduction of Section 151A and the e-Assessment of Income Escaping Assessment Scheme, 2022, all reassessment proceedings—including the issuance of Section 148 notices—had to be conducted facelessly through the National Faceless Assessment Centre (NFAC).

A coordinate bench of the AP High Court had agreed, quashing the notices on 28.10.2025. The Revenue's SLPs were pending before the Supreme Court when Parliament intervened. Section 147A 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 NFAC. The Supreme Court, without examining merits, remitted the matters to High Courts to consider the constitutional validity of this new provision.

The Arguments: Legislative Overreach vs. Validating Power

The petitioners mounted a multi-pronged attack. They argued that Section 147A was a transparent attempt to nullify judicial decisions without removing their basis—the unamended scheme under Section 151A. This, they contended, violated the doctrine of separation of powers, a basic feature of the Constitution. They also raised a novel technical argument: the Income Tax Act, 1961 stood repealed on 31.03.2026, and the Finance Act, 2026—which came into force on 01.04.2026—could not amend a repealed statute.

The Revenue, represented by the Additional Solicitor General, invoked the well-settled power of retrospective validation. Parliament, they argued, could cure defects identified by courts and validate past actions. The twin test—removal of the defect and retrospective operation—was satisfied. The Revenue also emphasised practical consequences: reassessments worth ₹21.71 lakh crores were at stake, and most assessees had submitted to JAO jurisdiction without challenge.

The Judgment: A Masterclass in Constitutional Reasoning

The Court systematically dismantled the Revenue's position. First, it held that the scheme under Section 151A explicitly included Section 148 within the faceless mechanism. The proviso to Section 151A(2) required any modification to be notified by 31.03.2022—a deadline the Government missed. Section 148 remains in the scheme even today.

Second, relying on Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality, (1969) 2 SCC 283, and State of Tamil Nadu v. M. Rayappaiah Gounder, (1971) 3 SCC 1, the Court held that while Parliament can remove the basis of a judicial decision, it cannot simply override that decision while leaving the statutory basis intact. The "defect" identified by various High Courts was not in the scheme but in the JAOs' lack of jurisdiction under it. Without amending the scheme, Section 147A was legislative overreach.

Third, on the repeal argument, the Court applied Common Cause v. Union of India, (2003) 8 SCC 250, to hold that the Finance Act, 2026 came into force on 01.04.2026—after the Income Tax Act, 1961 stood repealed. An amendment to a repealed Act, without express savings, is a nullity.

"Without amending the scheme made under Section 151A of the Act, insertion of Section 147A into Income Tax Act, 1961 in the name of clarification or validation cannot be permitted."

The Critique: Courageous, But Will It Survive?

This is a bold judgment, correctly reasoned on the validation doctrine. The Court rightly identified that Parliament cannot have it both ways—retaining the scheme that mandates faceless proceedings while simultaneously declaring that such proceedings were never required. The Revenue's argument that Section 147A merely "clarified" existing law was always disingenuous; you cannot clarify away a statutory scheme that remains on the books.

However, the repeal argument—while technically sound—feels like judicial overkill. Section 536 of the Income Tax Act, 2025 contains elaborate savings clauses that preserve the repealed Act's operation for pending proceedings. The Court's reliance on Common Cause is apt, but one wonders whether this ground was necessary when the constitutional challenge was already decisive.

The Revenue's strongest argument—practical consequences and revenue interest—was cursorily dismissed. While the Court was right that administrative convenience cannot override statutory mandates, a more nuanced discussion of the transition chaos this ruling will create would have strengthened the judgment's persuasive value.

The Takeaway: What Practitioners Must Know

First, this judgment creates a direct conflict with any contrary view from other High Courts, setting the stage for Supreme Court resolution. The stay on the Punjab and Haryana High Court's similar ruling suggests the apex court is watching closely.

Second, for pending reassessment proceedings initiated by JAOs between 01.04.2021 and the present, this judgment provides a powerful precedent for challenge. Practitioners should immediately review pending matters for jurisdictional objections.

Third, the judgment reaffirms that faceless assessment is not merely procedural preference but a statutory mandate. Tax authorities cannot cherry-pick which stages to conduct facelessly based on administrative convenience.

Finally, this case illustrates the limits of retrospective legislation. Parliament's power to validate is broad but not unlimited. When the basis of judicial decisions lies in an unamended statutory scheme, mere legislative declaration cannot substitute for actual amendment. The separation of powers doctrine has teeth—and this Court was willing to bite.

The Revenue will undoubtedly appeal. But for now, the Andhra Pradesh High Court has drawn a constitutional line: judgments of constitutional courts cannot be legislated into oblivion without doing the hard work of statutory amendment. That is a principle worth defending, whatever the revenue implications.