Andhra Pradesh High Court Strikes Down Section 147A Unconstitutionally

The Andhra Pradesh High Court struck down Section 147A of the Income Tax Act, 1961, on 10 October 2026, declaring it unconstitutional. This section was introduced through the Finance Act, 2026, with retrospective effect from 1 April 2021. The court ruled that the provision attempted to override judicial decisions without altering the legal basis on which those judgments rested, according to TaxGuru.

The case involved a series of writ petitions challenging the authority of Jurisdictional Assessing Officers (JAOs) to initiate reassessment proceedings under sections 148A and 148, despite a faceless reassessment scheme established under section 151A. The Central Government had introduced the e-Assessment of Income Escaping Assessment Scheme, 2022, through Notification No. 18/2022 on 29 March 2022. This scheme explicitly included reassessment under section 147 and the issuance of notices under section 148 through automated processes.

Previously, the Andhra Pradesh High Court had set aside notices and orders initiated by JAOs, asserting that these proceedings violated the provisions of section 151A and the notified scheme. While the Revenue’s appeals were pending before the Supreme Court, Parliament retroactively inserted section 147A. This new provision sought to clarify the roles of JAOs in the reassessment process, allowing them to issue notices under section 148A and then conduct reassessments through the faceless mechanism.

However, the High Court found that the Revenue’s interpretation of section 147A was flawed. The court noted that the Revenue admitted the lack of an automated method for identifying cases for reassessment, indicating that JAOs were improperly identifying cases instead. The court emphasized that the faceless scheme included the issuance of notices under section 148, and thus, JAOs could not operate outside this framework.

The court’s ruling also addressed the limits of retrospective legislation. It stated that while Parliament has the power to legislate retrospectively, it cannot nullify judgments without fundamentally altering the legal basis that supported those decisions. The court referenced previous Supreme Court rulings, asserting that section 151A and the scheme remained unamended, including its express coverage of section 148.

In its decision, the High Court declared that the insertion of section 147A into the repealed Income-tax Act, 1961, was unsustainable, as the amendment commenced on 1 April 2026, coinciding with the repeal of that Act. This further supported the court’s conclusion that the new provision was unconstitutional.

As a result of the ruling, the High Court set aside the impugned proceedings initiated by the JAOs under sections 148A and 148, declaring that these lacked jurisdiction. The judgment underscored that retrospective validation must rectify the foundations of earlier judicial decisions rather than merely direct that those judgments be disregarded.

The ruling also clarified that it does not decide the merits of any alleged escaped income or other valuation inquiries related to the assessment stage, focusing primarily on the constitutional validity of section 147A. The court highlighted the importance of adhering to the established statutory scheme and emphasized that such schemes cannot be treated as optional administrative guidance.