Parliament Cannot Amend a Repealed Act: Andhra Pradesh High Court Strikes Down Section 147A as Unconstitutional

Why This Judgment Matters Right Now

The Andhra Pradesh High Court's decision in Bala Sreenivas Rao Somisetty vs ITO is a constitutional thunderclap that should reverberate through every tax practitioner's office in India. By striking down Section 147A of the Income Tax Act, 1961 as unconstitutional, the Division Bench of Justices Ninala Jayasurya and T.C.D. Sekhar has not merely quashed reassessment notices—it has delivered a masterclass on the limits of legislative power when Parliament attempts to resurrect dead statutes and override judicial pronouncements through the backdoor of retrospective amendments.

This judgment arrives at a critical juncture. The Income Tax Act, 1961 was repealed on March 31, 2026, and replaced by the Income Tax Act, 2025. Yet Parliament, through the Finance Act, 2026, attempted to insert Section 147A into the repealed 1961 Act with retrospective effect from April 1, 2021. The Court's firm rejection of this legislative sleight of hand reaffirms a foundational principle: you cannot amend what no longer exists. For practitioners handling reassessment proceedings initiated by Jurisdictional Assessing Officers (JAOs) under Sections 148 and 148A, this judgment is not just persuasive authority—it is a roadmap for challenging the very competence of such proceedings.

The Facts: A Legislative Override Gone Too Far

The factual matrix is straightforward but constitutionally explosive. The petitioners challenged notices issued by JAOs under Sections 148 and 148A of the Income Tax Act, 1961, contending that after the introduction of Section 151A and the e-Assessment of Income Escaping Assessment Scheme, 2022 (notified on March 29, 2022), all reassessment proceedings were required to be conducted in a faceless manner through the National Faceless Assessment Centre (NFAC). A coordinate bench of the Andhra Pradesh High Court had earlier accepted this contention and quashed the notices.

Aggrieved, the Revenue approached the Supreme Court. While the SLPs were pending, Parliament enacted the Finance Act, 2026, inserting Section 147A into the Income Tax Act, 1961 with retrospective effect from April 1, 2021. This provision declared that the "Assessing Officer" for Sections 148 and 148A shall mean an officer other than the NFAC or any assessment unit—effectively restoring jurisdiction to JAOs and nullifying the High Court's earlier judgment. The Supreme Court, without expressing any opinion on merits, remitted the matters back to the High Courts to consider the validity of Section 147A.

The Arguments: Separation of Powers vs Legislative Competence

The petitioners mounted a multi-pronged constitutional assault. Their core contention was that Section 147A was a blatant attempt by the legislature to nullify judicial decisions without removing their basis—a violation of the doctrine of separation of powers, which forms part of the basic structure of the Constitution. They argued that the legislature cannot sit in appeal over judicial pronouncements by retrospectively amending the law to achieve a desired outcome.

More fundamentally, the petitioners raised a jurisdictional point that proved decisive: the Income Tax Act, 1961 was repealed on March 31, 2026, and the Income Tax Act, 2025 came into force on April 1, 2026. The Finance Act, 2026, which inserted Section 147A, itself came into force only on April 1, 2026. Therefore, Parliament attempted to amend a statute that had already ceased to exist. The petitioners relied on Section 5 of the General Clauses Act and the Supreme Court's decision in Common Cause vs Union of India, (2003) 8 SCC 250, to argue that when an Act specifies its commencement date, it comes into force only on that date—not on the date of Presidential assent.

The Revenue, represented by the Additional Solicitor General, defended Section 147A as a valid exercise of legislative power to clarify statutory intent and remove doubts. Relying on the twin test for validating acts laid down in Shri Prithvi Cotton Mills Ltd. vs Broach Borough Municipality, (1969) 2 SCC 283, the Revenue contended that Parliament had merely removed the defect identified by the High Courts—namely, the lack of clarity on whether JAOs or NFAC had jurisdiction under Sections 148 and 148A. The Revenue also emphasized the practical consequences: over 6.46 lakh reassessment orders had been passed, involving tax demands exceeding Rs. 21.74 lakh crores, and most assessees had submitted to the jurisdiction of JAOs without challenge.

The Judgment: A Masterclass in Constitutional Reasoning

The Division Bench systematically dismantled the Revenue's defence. First, the Court held that Section 147A could not be sustained because it attempted to amend the Income Tax Act, 1961 after its repeal. The Court noted that the Finance Act, 2026 expressly provided that it would come into force on April 1, 2026—the same day the Income Tax Act, 2025 came into force and the 1961 Act stood repealed. Relying on Common Cause, the Court held that when an Act specifies its commencement date, Section 5 of the General Clauses Act has no application. Therefore, the Finance Act, 2026 could not have come into force on March 30, 2026 (the date of Presidential assent), and any amendment to the repealed 1961 Act was a nullity.

Second, the Court held that even if Section 147A were validly enacted, it failed the twin test for validating acts. The Court emphasized that a validating law must remove the defect identified by the judiciary. However, in this case, the High Courts had not identified any defect in the statute or the scheme—they had merely held that JAOs lacked jurisdiction because Section 148 was included in the faceless assessment scheme notified under Section 151A. The Court observed:

"Admittedly, in all these cases, no defect whatsoever was expressed by various High Courts either in the scheme or in the Act in the earlier round of litigation. All that the Courts have held that JAOs have no jurisdiction to exercise powers under Section 148 of the Act. In such circumstances, 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."

Third, the Court rejected the Revenue's contention that Section 147A was merely clarificatory. The Court noted that the provision employed a non-obstante clause to override Section 151A and the scheme framed thereunder, which clearly indicated that it was not a mere clarification but a substantive amendment intended to nullify judicial decisions. The Court held that such legislative overreach violated the doctrine of separation of powers.

Finally, the Court addressed the Revenue's practical concerns about the volume of reassessment proceedings and the revenue at stake. The Court held that these considerations were irrelevant to the constitutional validity of Section 147A:

"Merely because there was no challenge to the proceedings initiated under Section 148 by most of the assessees, that by itself, will not give any right to the Revenue to undertake assessment in non-faceless manner, contrary to the statutory provisions."

The Critique: A Sound Judgment with Broader Implications

This judgment is constitutionally sound and legally unassailable. The Court's reasoning on the repeal issue is particularly compelling. It is a fundamental principle of statutory interpretation that a repealed Act cannot be amended unless the repealing statute expressly preserves such power. Section 536 of the Income Tax Act, 2025 contains no such provision. The Court's reliance on Common Cause is apt and correctly applied.

However, the judgment's broader implications deserve scrutiny. By striking down Section 147A, the Court has effectively invalidated thousands of reassessment proceedings initiated by JAOs across the country. While the Court is correct that practical considerations cannot override constitutional principles, the Revenue's concerns about administrative chaos are not entirely misplaced. The judgment highlights a systemic failure: Parliament's tendency to draft ambiguous legislation and then attempt to clarify it retrospectively when courts interpret it in ways the executive finds inconvenient.

The Revenue could have argued more forcefully that Section 536(2)(c) of the Income Tax Act, 2025, which provides that the repealed Act shall continue to apply to pending proceedings, implicitly preserved Parliament's power to amend the repealed Act for the limited purpose of such proceedings. However, this argument would have faced the insurmountable hurdle that the Finance Act, 2026 itself came into force only on April 1, 2026, and could not retroactively amend a statute that ceased to exist on March 31, 2026.

The Court's rejection of the Revenue's "clarificatory amendment" argument is also well-founded. The use of a non-obstante clause in Section 147A clearly indicates that Parliament intended to override Section 151A and the scheme framed thereunder, not merely to clarify existing law. This is consistent with the Supreme Court's jurisprudence on validating acts, which requires the legislature to remove the very basis of a judicial decision, not merely to restate the law in different words.

The Takeaway: What Practitioners Should Learn

For tax practitioners, this judgment provides a powerful precedent for challenging reassessment proceedings initiated by JAOs. The key takeaways are:

First, always examine the statutory basis for the Assessing Officer's jurisdiction. If the notice under Section 148 was issued by a JAO after March 29, 2022 (the date of the faceless assessment scheme), and the case falls within the ambit of Section 151A, there is a strong argument that the JAO lacked jurisdiction.

Second, pay close attention to the commencement provisions of amending Acts. If an Act specifies its commencement date, it cannot come into force earlier, even if it receives Presidential assent before that date. This principle can be invoked to challenge retrospective amendments that purport to validate actions taken under repealed statutes.

Third, the doctrine of separation of powers remains a potent weapon against legislative overreach. When Parliament attempts to nullify judicial decisions through retrospective amendments without removing their basis, courts will not hesitate to strike down such amendments as unconstitutional.

Finally, this judgment underscores the importance of the basic structure doctrine in tax litigation. While taxation is generally considered a matter of legislative policy, courts will intervene when the legislature violates fundamental constitutional principles such as the rule of law and separation of powers.

The Andhra Pradesh High Court has delivered a judgment that will be cited for years to come as a benchmark for constitutional review of tax legislation. It reaffirms that even in matters of fiscal policy, Parliament's power is not unlimited, and the judiciary remains the ultimate arbiter of constitutional validity.