Andhra Pradesh High Court Strikes Down Section 147A Of Income Tax Act As Unconstitutional

The Andhra Pradesh High Court on Monday struck down Section 147A of the Income Tax Act, 1961, as unconstitutional.

Introduced retrospectively through the Finance Act, 2026, the provision clarifies that Jurisdictional Assessing Officers (JAOs), rather than the National Faceless Assessment Centre or an assessment unit, can act as the Assessing Officer for issuing reassessment notices under Sections 148 and 148A.

A division bench of Justice Ninala Jayasurya and Justice T.C.D. Sekhar held that the amendment failed to remove the basis of earlier High Court judgments holding that JAOs lacked jurisdiction to issue reassessment notices under Sections 148A and 148. The court also held that Section 147A could not be inserted into the 1961 Act after its repeal.

“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, which is the basic structure of the Constitution” the court held.

The dispute arose from reassessment notices issued by JAOs despite the e-Assessment of Income Escaping Assessment Scheme, 2022, notified on March 29, 2022, under Section 151A. The scheme provides for automated allocation and faceless proceedings for reassessment.

On October 28, 2025, a coordinate bench of the High Court had quashed notices and orders issued under Sections 148A(b), 148A(d) and 148, holding that they violated Section 151A read with the notification dated March 29, 2022. The Revenue challenged those decisions before the Supreme Court.

While the special leave petitions were pending, Parliament introduced Section 147A through the Finance Act, 2026, with retrospective effect from April 1, 2021. The provision clarified that, for Sections 148 and 148A, an Assessing Officer meant an officer other than the National Faceless Assessment Centre or an assessment unit referred to in Section 144B(3).

On April 10, 2026, the Supreme Court set aside the earlier judgments on the limited ground that the amendment had altered the foundation of those decisions and remitted the matters to the respective High Courts. It expressly left the amendment's validity, scope, effect, retrospectivity and applicability open for consideration.

The petitioners argued that Section 147A sought to nullify judicial decisions without curing the defect identified by the courts. The Revenue maintained that the amendment was clarificatory and that JAOs could conduct pre-assessment inquiries and issue notices, while subsequent reassessment would be conducted through the faceless mechanism.

Rejecting the Revenue's position, the High Court held that Section 148 continued to be included in the scheme under Section 151A. The government had not amended the scheme to exclude such notices after introducing Section 147A.

“A plain reading of the scheme would make it clear that no discretion is given to the authorities manning the Act to conduct proceedings in non-faceless manner,” the court observed.

It further held: “Therefore, the amendment brought in through Section 147A with retrospective effect without excluding Section 148 from the scheme, is not sustainable under law.”

Relying on the Supreme Court's decision in Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality, the High Court reiterated that retrospective validating legislation must remove the defect forming the basis of a judicial decision.

“In such circumstances, without amending the scheme made under Section 151A of the Act, insertion of Section 147A into Income Tax Act, 1961 in the name of clarification or validation cannot be permitted,” the court held.

The court added, “Admittedly, even as on today, Section 148 remains in the scheme and without making amendment to the scheme, incorporation of any provision to nullify the judgments rendered by various High Courts, is beyond Legislative competence and legally impermissible.”

“Such acts of Legislature over reach which unsettle the decisions of Courts and lead to chaos cannot be allowed,” it observed.

The court separately considered the repeal of the Income Tax Act, 1961, and the commencement of the Income Tax Act, 2025, on April 1, 2026. Although the Finance Act, 2026, received presidential assent on March 30, 2026, the relevant provisions were expressly stated to come into force on April 1.

Rejecting the Revenue's argument that the amendment was valid because presidential assent preceded the repeal, the court held: “Since, Finance Act, 2026 has expressly provided 1st day of April, 2026, it cannot be said that the same has come into force on 30.03.2026, the date on which it received the assent of the President.”

It concluded, “Any amendment/insertion made to the Repealed Act is not sustainable under law and it has no legal sanctity, accordingly the same is liable to be struck down from the date of its inception or nativity.”

The High Court ultimately held that Section 147A was unconstitutional and that the reassessment proceedings initiated by the respective JAOs under Sections 148A and 148 were without jurisdiction. It allowed the writ petitions and set aside the impugned proceedings and orders. There was no order as to costs.

The Punjab and Haryana High Court had also declared Section 147A unconstitutional in Jyoti Sareen v. Union of India on September 10, 2026. However, the Supreme Court stayed the operation of that judgment on September 18, directing that the assessment and reassessment proceedings covered by the dispute should not proceed until final disposal of the Union government's challenge.

The Andhra Pradesh High Court noted that it had considered the matter independently and recorded its own reasons for striking down Section 147A. Its judgment was delivered on October 12, 2026.

For Petitioners: Sri A.V.A. Siva Kartikeya, Sri Kondala Rao Kotapati, Sri P. Pavan Kumar Rao, Sri Vivek Chandra Sekhar, Sri N. Rupeswar Reddy, Sri Dundu Manmohan, Sri V. Harish Kumar, Sri M.V.J.K. Kumar, Sri V. Vinod K. Reddy, Sri M. Naga Deepak, Smt. Jyothi Ratna Anumolu, Sri C. Sanjeeva Rao, Sri Phani Viswanath Challa, Sri A. Sarveswar Rao, Sri L. Chandra Obul Reddy, Sri P. Rama Sharana Sharma, Sri G.V.N. Hari, Sri B. Abhay Siddhanth Mootha, Sri K.P.S. Sailesh Reddy, Sri K. Ravindra Nath Tagore, Sri Kadimisetty Sai Sreenadh, Sri Anil Kumar Bezawada, Sri P. Sravan Kumar Reddy, Sri Vivekananda Virupaksha, Sri Sreemannarayana Mallela, Sri T. Venu Gopal, Sri Sricharan Telaprolu, Sri Nuvvula Ram Babu, Sri Badranaga Seshayya, Sri B. Siva Kesava Reddy, Sri A.V. Raghu Ram, Sri T. Chaitanya Kumar, Sri Ravi Kiran Ponnuru, Smt. T.V.P. Sai Vihari and Sri T. Pradyoth.

For Respondents: Sri N. Venkataraman, Additional Solicitor General of India; Sri T. Niranjan, Additional Solicitor General, High Court of Andhra Pradesh; Sri Y.N. Vivekananda, Senior Standing Counsel for Income Tax; and Sri Anup Koushik Karavadi, Senior Standing Counsel for Income Tax.