The Legislature Can't Rewrite History: Why AP High Court's Strike-Down of Section 147A Is a Constitutional Masterclass

The Hook: When Parliament Tries to Turn Back Time

This is not just another tax dispute. This is about whether Parliament can simply erase judicial pronouncements it doesn't like by passing retrospective amendments dressed up as "clarifications." The Andhra Pradesh High Court's decision in Bala Sreenivas Rao Somisetty vs ITO is a resounding answer: No, it cannot.

Over 150 writ petitions. A retrospective amendment going back to 2021. A faceless assessment scheme that the Revenue conveniently ignored. And a legislature that thought it could simply wish away adverse judgments by inserting Section 147A into the Income Tax Act, 1961. The Division Bench of Justices Ninala Jayasurya and T.C.D. Sekhar was having none of it.

What makes this judgment significant is not merely that it strikes down Section 147A as unconstitutional. It's that the Court systematically dismantles every argument the Revenue threw at it, exposing the amendment for what it truly was: a legislative overreach designed to nullify judicial decisions without removing their legal basis. In an era where retrospective taxation has become Parliament's favourite weapon, this judgment is a necessary constitutional corrective.

The Facts: A Scheme Ignored, A Judgment Nullified, An Amendment Born

The factual matrix is straightforward but revealing. Between 2022 and 2024, Jurisdictional Assessing Officers (JAOs) across Andhra Pradesh issued notices under Sections 148A and 148 of the Income Tax Act, 1961, seeking to reopen assessments on the ground that income had escaped assessment. The problem? By then, the e-Assessment of Income Escaping Assessment Scheme, 2022, notified under Section 151A, had come into force. This scheme explicitly required that proceedings under Sections 147 and 148 be conducted in a faceless manner through the National Faceless Assessment Centre (NFAC), not by JAOs.

The petitioners challenged these notices, arguing that JAOs had no jurisdiction to issue them once the faceless scheme was operational. A coordinate bench of the AP High Court agreed, quashing the notices on 28.10.2025. The Revenue approached the Supreme Court, but while the SLPs were pending, Parliament struck. Through the Finance Act, 2026, it inserted Section 147A with retrospective effect from 01.04.2021, declaring 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 deciding the merits, remitted the matter back to the High Court, granting liberty to challenge the constitutional validity of Section 147A. The petitioners amended their writ petitions. The stage was set for a constitutional showdown.

The Arguments: Legislative Competence vs. Judicial Overreach

The petitioners' case rested on a simple but powerful proposition: Parliament cannot nullify a judicial decision without removing its legal foundation. They argued that Section 147A was not a clarificatory amendment but a blatant attempt to overrule the High Court's judgment by legislative fiat. The faceless scheme under Section 151A was never amended. Section 148 remained part of that scheme. Yet, through Section 147A, the legislature sought to confer jurisdiction on JAOs retrospectively, without touching the scheme itself. This, they contended, violated the doctrine of separation of powers, a basic structure of the Constitution.

The petitioners also raised a jurisdictional point: the Income Tax Act, 1961 was repealed on 31.03.2026 when the Income Tax Act, 2025 came into force. The Finance Act, 2026, which inserted Section 147A, itself stated it would come into force on 01.04.2026. How, then, could Parliament amend a repealed statute?

The Revenue, represented by the Additional Solicitor General, countered with the classic validating legislation defence. It argued that Parliament has plenary power to enact retrospective legislation, especially in fiscal matters. Section 147A was merely clarificatory, removing doubts about who the competent authority was. The Revenue emphasized the "twin test" for validating Acts: (1) remove the defect identified by the Court, and (2) do so through retrospective legislation. It claimed both were satisfied.

Critically, the Revenue also argued that the scheme under Section 151A did not mandate faceless issuance of notices under Section 148. According to the Revenue, the reassessment process had two stages: the pre-assessment stage (Sections 148A and 148) handled by JAOs, and the assessment stage (Section 147) handled by the NFAC. Section 147A merely codified this understanding.

The Judgment: A Systematic Demolition

The Court rejected every single argument advanced by the Revenue, and it did so with surgical precision.

First, on the scope of the faceless scheme, the Court held that once Section 148 was included in the scheme notified under Section 151A, it was mandatory for all proceedings under that section to be conducted facelessly. The Revenue's argument that the scheme only applied to Section 147 and not Section 148 was rejected as "blowing hot and cold." The Court pointed out that the scheme explicitly mentioned Section 148, and if the legislature intended to exclude it, it could have done so before 31.03.2022, the deadline under Section 151A(2).

Second, on the validity of Section 147A as a clarificatory amendment, the Court was unequivocal. Citing Shri Prithvi Cotton Mills Ltd. vs Broach Borough Municipality, (1969) 2 SCC 283, the Court reiterated that while Parliament can enact validating legislation, it must remove the defect identified by the Court. Here, there was no defect in the scheme or the Act. The defect, if any, was in the Revenue's failure to follow its own scheme. Section 147A did not amend the scheme. It simply declared, through a non-obstante clause, that JAOs always had jurisdiction. This, the Court held, was not clarification but legislative overruling.

"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."

Third, on the repeal argument, the Court agreed with the petitioners. 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 held that the Finance Act, 2026 came into force on 01.04.2026, not 30.03.2026 when it received Presidential assent. By that date, the Income Tax Act, 1961 had already been repealed. Therefore, the insertion of Section 147A into a repealed statute was a nullity.

Finally, the Court addressed the Revenue's "public interest" argument—that ₹21.74 lakh crores were at stake and that most assessees had not challenged the proceedings. The Court dismissed this curtly: "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 Near-Perfect Judgment, But Missed Opportunities

This is a strong, well-reasoned judgment that gets the constitutional law right. The Court correctly identifies that Section 147A was not a genuine clarificatory amendment but an attempt to nullify judicial decisions without removing their basis. The reliance on Prithvi Cotton Mills and the separation of powers doctrine is apt. The Court's refusal to be swayed by the Revenue's revenue-collection argument is particularly commendable—constitutional validity cannot be bartered for fiscal expediency.

That said, there are areas where the judgment could have been sharper. First, the Court does not engage deeply with the legitimate expectation argument raised by the petitioners. Once the faceless scheme was notified, assessees had a legitimate expectation that reassessment proceedings would be conducted in a faceless manner. The retrospective amendment took away this expectation without any transitional safeguards. While the Court hints at this, a more detailed analysis would have strengthened the judgment.

Second, the Court's treatment of the repeal issue, while correct, feels somewhat mechanical. The deeper question is: what happens to proceedings initiated under a repealed statute when Parliament seeks to amend that statute retrospectively? The Court holds that Section 536(2)(c) of the Income Tax Act, 2025 saves pending proceedings, but it does not fully explore whether this saving clause permits Parliament to amend the repealed Act. A more nuanced discussion would have been helpful.

Third, the Court does not address the practical consequences of its ruling. Thousands of reassessment proceedings across the country have been initiated by JAOs in reliance on Section 147A. What happens to them? The Court simply states that all proceedings initiated by JAOs are "without jurisdiction and are liable to be set aside." But does this mean they are void ab initio, or can they be regularized? The judgment leaves this ambiguous.

Finally, while the Court correctly holds that the legislature cannot nullify judgments without removing their basis, it does not adequately address the Revenue's argument that divergent views among High Courts created uncertainty. The proper response to judicial divergence is not retrospective legislation but an appeal to the Supreme Court. The Court could have made this point more forcefully.

The Takeaway: What Practitioners Should Learn

For tax practitioners, this judgment is a goldmine. Here are the key takeaways:

1. Jurisdictional challenges are alive and well. If your client has received a notice under Section 148 from a JAO after 29.03.2022, you have a strong jurisdictional challenge. The faceless scheme is mandatory, and any deviation renders the proceedings void.

2. Retrospective amendments are not a magic wand. Parliament cannot simply wish away adverse judgments. If the basis of the judgment—here, the faceless scheme—is not amended, a retrospective amendment will not save the Revenue.

3. The repeal argument is potent. With the Income Tax Act, 2025 now in force, any amendment to the 1961 Act must be carefully scrutinized. If the amendment comes into force after the repeal, it is vulnerable to challenge.

4. Public interest cuts both ways. The Revenue cannot invoke public interest to justify unconstitutional actions. If proceedings are initiated without jurisdiction, they must be quashed, regardless of the revenue at stake.

5. Legitimate expectation matters. While the Court did not dwell on this, future litigants should emphasize that once a statutory scheme is notified, assessees have a legitimate expectation that it will be followed. Retrospective amendments that defeat this expectation are suspect.

This judgment is a reminder that the rule of law is not a convenience. It is a constraint. Parliament may have the power to tax retrospectively, but it does not have the power to rewrite history. The AP High Court has drawn that line clearly. Whether the Supreme Court will uphold it remains to be seen. But for now, this is a victory for constitutionalism.