When Parliament Tries to Outrun the Courts: Andhra Pradesh High Court's Masterclass in Constitutional Boundaries

The Hook

This is not just another tax judgment. This is the Andhra Pradesh High Court drawing a line in the sand and telling Parliament: you cannot legislate away judicial decisions simply because you dislike them. The Division Bench of Justices Ninala Jayasurya and T.C.D. Sekhar has struck down Section 147A of the Income Tax Act, 1961—a provision that was nothing short of a legislative ambush designed to nullify adverse judgments across multiple High Courts. In doing so, the Court has delivered a stinging rebuke to the increasingly common practice of retrospective amendments being used as a blunt instrument to override inconvenient judicial pronouncements. This judgment will resonate far beyond tax law—it speaks to the very architecture of constitutional governance in India.

The Facts

The controversy centres on the faceless assessment regime introduced into the Income Tax Act, 1961. In 2020, Parliament inserted Sections 130, 135A, 144B, and 151A into the Act, empowering the Central Government to frame schemes for conducting assessments, reassessments, and related proceedings in a faceless manner. The stated objectives were laudable: efficiency, transparency, accountability, and elimination of personal interface between tax authorities and assessees.

Pursuant to Section 151A, the Central Board of Direct Taxes issued Notification No. 18 of 2022 dated 29th March 2022, formulating the e-Assessment of Income Escaping Assessment Scheme, 2022. Critically, this scheme included Section 148 within its ambit, meaning notices for reassessment were to be issued through automated allocation in a faceless manner.

Despite this, Jurisdictional Assessing Officers (JAOs) across the country continued issuing notices under Sections 148 and 148A directly, bypassing the faceless mechanism entirely. Assessees challenged these notices before various High Courts, arguing that once Section 148 was included in the faceless scheme, JAOs lacked jurisdiction to issue such notices.

The Andhra Pradesh High Court, by order dated 28th October 2025, agreed with the assessees and quashed the impugned notices. Similar views were expressed by other High Courts. The Revenue preferred Special Leave Petitions before the Supreme Court. While these were pending, Parliament struck back—inserting Section 147A through the Finance Act, 2026, with retrospective effect from 1st April 2021. This provision declared that the Assessing Officer for Sections 148 and 148A would mean an officer other than the National Faceless Assessment Centre or any assessment unit.

The Supreme Court, by order dated 10th April 2026, set aside the High Court judgments on the limited ground that the foundation of those decisions had been altered by the amending legislation. The matters were remitted to the respective High Courts for fresh consideration, with liberty granted to assessees to challenge the constitutional validity of Section 147A itself.

The Arguments

The petitioners mounted a multi-pronged attack on Section 147A. Their primary contention was that the provision was not genuinely clarificatory but was designed to nullify judicial decisions—a legislative overreach that violated the doctrine of separation of powers. They argued that when there was no ambiguity in the original scheme, the pretence of "removal of doubts" was a transparent fiction.

The petitioners also raised a technically compelling argument regarding legislative competence. The Income Tax Act, 1961 stood repealed on 31st March 2026, with the Income Tax Act, 2025 coming into force from 1st April 2026. The Finance Act, 2026, which inserted Section 147A, itself came into force only on 1st April 2026. Therefore, Parliament was purporting to amend an Act that had already ceased to exist—an impossibility in law.

Further, the petitioners contended that Section 151A and the scheme framed thereunder remained unamended. Section 148 continued to be part of the faceless scheme. Without removing Section 148 from the scheme, any amendment declaring that JAOs could issue notices under Section 148 was internally inconsistent and legally untenable.

The Revenue, represented by the Additional Solicitor General, defended the amendment on familiar grounds. They invoked the presumption of constitutionality attaching to fiscal legislation, argued that Parliament possessed plenary power to enact validating legislation with retrospective effect, and contended that the twin test for validating Acts had been satisfied—the defect identified by Courts had been removed through subsequent enactment.

The Revenue also emphasised practical considerations: divergent views among High Courts had created chaos, multiple writ petitions were clogging the system, and reassessment proceedings worth over Rs. 21.71 lakh crores were at stake. They argued that the amendment merely clarified the legislative intent that pre-assessment proceedings under Sections 148A and 148 were always meant to be conducted by JAOs, with only the assessment stage being faceless.

The Judgment

The Division Bench systematically dismantled the Revenue's defences. On the core constitutional question, the Court held that Section 147A represented an impermissible attempt by the Legislature to overreach judicial decisions without removing the basis on which those decisions rested.

The Court's reasoning proceeded on several interconnected grounds:

First, the scheme framed under Section 151A remained unamended. Section 148 continued to be included in the faceless scheme. The proviso to Section 151A(2) stipulated that no direction could be issued after 31st March 2022—meaning if the Government intended to exclude Section 148 from the faceless mechanism, it should have done so before that date. Having failed to do so, the Revenue could not now claim that JAOs retained jurisdiction.

Second, the Court applied the principles laid down in 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. While acknowledging that the Legislature can remove the basis of a judicial decision through retrospective legislation, the Court emphasised that this power is not unlimited. The Legislature must actually remove the defect identified by the Courts. Here, no defect in the scheme or the Act had been identified by any High Court—the Courts had simply held that JAOs lacked jurisdiction because Section 148 was included in the faceless scheme. Without amending the scheme, inserting Section 147A was an exercise in futility.

Third, on the question of legislative competence, the Court delivered a knockout blow. Applying Section 5 of the General Clauses Act and the Supreme Court's decision in Common Cause v. Union of India, (2003) 8 SCC 250, the Court held that when an enactment expressly provides for its commencement date, it comes into force only on that date—not on the date of Presidential assent. The Finance Act, 2026 came into force on 1st April 2026. By that date, the Income Tax Act, 1961 had already been repealed. You cannot amend a dead statute.

The Court rejected the Revenue's reliance on practical consequences and revenue implications, holding that statutory mandates cannot be disregarded merely because compliance is inconvenient or because most assessees did not challenge the proceedings.

The Critique

This judgment is constitutionally sound and intellectually honest. The Court has correctly identified what Section 147A truly was—a legislative ambush designed to nullify inconvenient judicial decisions through the fiction of "clarification."

The practice of retrospective amendments to tax legislation has a long and controversial history in India. From the Vodafone controversy to the present case, Parliament has repeatedly sought to overturn judicial decisions by changing the law retrospectively. While this power exists within constitutional limits, the Andhra Pradesh High Court has correctly insisted that those limits be respected.

The Court's analysis of the repeal argument is particularly persuasive. The Revenue's contention that Presidential assent on 30th March 2026 saved the amendment ignores the express language of the Finance Act itself. When Parliament specifies a commencement date, that date controls. The Income Tax Act, 1961 was repealed at midnight on 31st March 2026. The Finance Act came into force on 1st April 2026. At the moment the amendment purportedly took effect, there was no Income Tax Act, 1961 left to amend.

However, I must note one concern. The Supreme Court has already stayed the operation of a similar judgment by the Punjab and Haryana High Court. The final word on Section 147A's constitutional validity will likely come from the Supreme Court itself. Practitioners should be cautious about treating this judgment as the last word on the subject.

That said, the reasoning here is robust. The Court has not merely relied on technicalities—it has engaged with the substantive constitutional principles governing the relationship between Legislature and Judiciary. The observation that the Legislature cannot ask instrumentalities of the State to disobey or disregard judicial decisions is a reminder that the rule of law is not a one-way street.

The Takeaway

For practitioners, several lessons emerge:

First, when challenging reassessment proceedings initiated by JAOs after the faceless scheme came into effect, the jurisdictional objection remains viable. The scheme under Section 151A has not been amended, and Section 148 continues to be part of it.

Second, the repeal argument deserves serious attention in any challenge to Section 147A. The timing issue is not a mere technicality—it goes to legislative competence.

Third, do not be swayed by Revenue's arguments about practical consequences or revenue implications. Constitutional limitations do not yield to administrative convenience.

Fourth, watch for the Supreme Court's eventual decision. The stay granted in the Punjab and Haryana matter suggests the issue is far from settled. However, the reasoning in this judgment provides a solid foundation for arguments before any forum.

This judgment reaffirms a fundamental principle: in a constitutional democracy governed by the rule of law, the Legislature cannot simply legislate away judicial decisions it dislikes. The separation of powers is not a suggestion—it is a structural imperative. The Andhra Pradesh High Court has done the Constitution a service by insisting that Parliament respect the boundaries of its competence.