The Andhra Pradesh High Court’s Section 147A Verdict: A Bold Rebuke of Legislative Overreach, But Is It Built to Last?

The Hook: A Constitutional Clash That Transcends Tax Procedure

This is not merely another tax dispute. It is a full-throated constitutional confrontation between the judiciary and the legislature over who controls the machinery of reassessment under the Income Tax Act, 1961. In Bala Sreenivas Rao Somisetty vs The Income Tax Officer (WP No.28520 of 2023, decided on 12.10.2026), the Andhra Pradesh High Court has struck down Section 147A, introduced by the Finance Act, 2026 with retrospective effect from 01.04.2021, declaring it unconstitutional and void ab initio. The judgment is significant not only for tax practitioners but for every constitutional lawyer tracking the limits of legislative validation and the resilience of the faceless assessment regime.

At its core, the case asks a deceptively simple question: Can Parliament retrospectively amend a statute to nullify judicial decisions without amending the very scheme that formed the basis of those decisions? The High Court answers with an emphatic “No.”

The Facts: A Batch of Writs, A Retrospective Amendment, A Judicial Remand

The litigation originated in a batch of writ petitions challenging notices issued by Jurisdictional Assessing Officers (JAOs) under Sections 148 and 148A of the Income Tax Act, 1961. The petitioners argued that after the introduction of Section 151A and the e-Assessment of Income Escaping Assessment Scheme, 2022, all reassessment proceedings must be conducted in a faceless manner through the National Faceless Assessment Centre (NFAC). A coordinate bench of the Andhra Pradesh High Court had previously allowed these petitions, setting aside the impugned notices.

While the Revenue’s SLPs were pending before the Supreme Court, Parliament enacted Section 147A, explicitly clarifying that the “Assessing Officer” for Sections 148 and 148A “shall always be deemed to have meant” an officer other than the NFAC. The Supreme Court, by order dated 10.04.2026, set aside the High Court’s earlier judgment and remanded the matter for fresh consideration, granting liberty to challenge the new provision.

The Arguments: Separation of Powers vs. Legislative Competence

Petitioners’ Case: The petitioners contended that Section 147A is a legislative overreach designed to nullify binding judicial pronouncements. They argued that the Legislature cannot sit in appeal over court decisions, that the amendment violates the basic structure doctrine (separation of powers and rule of law), and that it takes away vested rights to faceless assessment. They also raised a technical objection: the Income Tax Act, 1961 was repealed on 31.03.2026, and the Finance Act, 2026 came into force on 01.04.2026, making any amendment to a repealed Act legally untenable.

Revenue’s Defence: The Revenue invoked the presumption of constitutionality, emphasizing Parliament’s plenary power to enact validating legislation. It argued that Section 147A satisfies the twin test for validation: it removes the defect identified by courts and does so retrospectively. The Revenue also relied on the memorandum to the Finance Bill, 2026, which framed the amendment as a clarification to resolve divergent judicial views and restore administrative certainty. On the repeal issue, it pointed to Section 536 of the Income Tax Act, 2025, which preserves the operation of the repealed Act for pending proceedings.

The Judgment: A Two-Pronged Strike

The Division Bench (Ninala Jayasurya and T.C.D. Sekhar, JJ.) struck down Section 147A on two independent grounds.

First, the repeal ground: The Court held that the Income Tax Act, 1961 stood repealed at midnight on 31.03.2026. The Finance Act, 2026 expressly came into force on 01.04.2026, not on the date of Presidential assent (30.03.2026). Relying 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, the Court concluded that an amendment to a repealed Act is a nullity.

Second, the validation ground: The Court held that Section 147A fails the twin test for validating legislation laid down in Shri Prithvi Cotton Mills Ltd. vs. Broach Borough Municipality (1969) 2 SCC 283. The earlier judicial decisions did not identify any “defect” in the statute; they merely held that the JAO lacked jurisdiction under the existing scheme. Without amending Section 151A or the 2022 Scheme, Parliament could not retrospectively nullify those decisions. The Court characterized Section 147A as a legislative attempt to “overreach” judicial authority, violating the doctrine of separation of powers.

The Critique: Bold, But Potentially Fragile

There is much to admire in this judgment. The Court’s insistence that legislative validation must remove the judicially identified defect is constitutionally sound. Its rejection of the Revenue’s statistical argument (that 8.82 lakh notices and ₹21.74 lakh crore in assessments justified non-interference) is a welcome affirmation that administrative convenience cannot trump legality.

However, the judgment is not without vulnerabilities. The repeal argument, while textually plausible, may be viewed as overly technical. Section 536(2)(c) of the Income Tax Act, 2025 explicitly preserves the repealed Act’s operation for pending proceedings. The Court’s dismissal of this savings clause as insufficient to sustain a retrospective amendment is open to challenge. The Supreme Court has historically taken a pragmatic view of such transitional provisions.

More substantively, the Court’s conclusion that “no defect was expressed” by earlier courts is contestable. The Revenue argued that the defect was the ambiguity surrounding the competent authority. The Court’s rigid distinction between a “defect” and a “jurisdictional holding” may not survive appellate scrutiny. The Supreme Court has upheld validating acts that clarify legislative intent even where the defect was not explicitly labeled as such.

The Revenue’s advocates could have pressed harder on the presumption of constitutionality and the limited scope of judicial review in fiscal matters. They could also have argued more forcefully that the 2022 Scheme’s inclusion of Section 148 was directory, not mandatory, and that the JAO’s role in pre-assessment inquiry was never intended to be faceless.

The Takeaway: What Practitioners Should Do Now

For tax practitioners, the immediate implication is clear: reassessment notices issued by JAOs in Andhra Pradesh are vulnerable to challenge. However, the Punjab and Haryana High Court’s similar ruling has already been stayed by the Supreme Court, and this judgment is almost certain to face the same fate. Advise clients to preserve their objections but prepare for a prolonged appellate battle.

For constitutional lawyers, this case is a masterclass in the limits of legislative validation. The judgment reinforces that Parliament cannot simply “clarify” its way out of adverse judicial precedent without addressing the underlying statutory framework. Future challenges to retrospective amendments should focus on whether the legislature has genuinely removed the basis of the prior decision or merely attempted to override it.

Finally, for policy watchers, the judgment exposes the fragility of the faceless assessment regime. If the Supreme Court ultimately upholds Section 147A, the NFAC’s role in reassessment will be severely curtailed. If it affirms the High Court, the Revenue will need to undertake a comprehensive overhaul of its reassessment machinery. Either way, the battle over faceless taxation is far from over.