Andhra Pradesh High Court Strikes Down Section 147A, Major Setback To Centre's Retrospective Income Tax Amendment

In a significant ruling delivered on October 12, 2026, the Andhra Pradesh High Court declared Section 147A of the Income Tax Act, 1961, unconstitutional in Bala Sreenivas Rao Somisetty v. Income Tax Officer (WP No. 28520 of 2023). The judgment raises important questions about retrospective legislation, judicial independence and the faceless reassessment framework.

Andhra Pradesh High Court Strikes Down Section 147A

Introduced by the Finance Act, 2026, with retrospective effect from April 1, 2021, Section 147A sought to clarify that Jurisdictional Assessing Officers (JAOs), rather than the National Faceless Assessment Centre or an assessment unit, could issue reassessment notices under Sections 148 and 148A.

The amendment followed High Court judgments questioning the jurisdiction of JAOs under the faceless reassessment scheme notified on March 29, 2022, under Section 151A.

Why Retrospective Tax Amendment Failed Legal Test

The Andhra Pradesh High Court held that the Government had not amended the existing scheme, which continued to cover reassessment notices under Section 148. Merely inserting Section 147A without removing the legal defect identified by earlier judgments could not validate the disputed proceedings.

Relying on the Supreme Court's decision in Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality, the Court reiterated that retrospective validating legislation must remove the defect on which a judicial decision is based. Otherwise, it risks impermissibly overriding judicial pronouncements and violating the constitutional separation of powers.

The Court also considered the repeal of the Income Tax Act, 1961, when the Income Tax Act, 2025, came into force on April 1, 2026, subject to applicable savings and transitional provisions. Although the Finance Act, 2026, received Presidential assent on March 30, the relevant amendment was effective from April 1. The Court held that the insertion of Section 147A into the repealed Act lacked legal validity.

The ruling follows the Punjab and Haryana High Court's decision in Jyoti Sareen v. Union of India, which struck down Section 147A on September 10, 2026. The Supreme Court stayed the operation of that judgment on September 18, pending the Union Government's challenge. Earlier, on April 10, 2026, the Supreme Court had remitted related matters to the High Courts, leaving the amendment's validity, scope and applicability open.

Court Questions Power To Override Judicial Rulings

Allowing the writ petitions, the Andhra Pradesh High Court set aside the impugned reassessment proceedings initiated by the concerned JAOs.

Implications for taxpayers: The ruling strengthens challenges to reassessment notices issued contrary to the faceless assessment framework. However, it does not automatically invalidate every reassessment notice nationwide. Its wider impact will depend on appellate proceedings, the Supreme Court's decisions and the facts of individual cases. Taxpayers should examine jurisdiction, notice dates, the applicable scheme and transitional provisions before pursuing remedies.

Retrospective legislation is not inherently unconstitutional, but it must respect constitutional limits. Parliament may amend the law to cure a judicially identified defect; it cannot simply disregard the defect through legislative wording.

A fair tax regime requires that the law bind the tax authority as firmly as it binds the taxpayer. Revenue collection cannot come at the cost of the rule of law.

- By Rajesh M. Kayal

(Author is Director of OPD Peoples co-op bank, F. C. A. and independent journalist.)