The High Court of Andhra Pradesh at Amravati Bench has declared Section 147A of the Income Tax Act, introduced by the Finance Act, 2026 with retrospective effect from April 01, 2021, as unconstitutional and struck it down from inception. The Court held that the Parliament cannot nullify or overrule binding judicial pronouncements by way of a retrospective amendment without removing the very basis or foundation of those decisions, as such exercise violates the doctrine of separation of powers, which forms part of the basic structure of the Constitution.
The Court said that since the Income Tax Act, 1961 stood repealed at the midnight of March 31, 2026, and the Finance Act, 2026 came into force only on April 01, 2026, the insertion of Section 147A into the repealed Act was legally unsustainable and carried no legal sanctity. Accordingly, all reassessment notices and orders issued by the Jurisdictional Assessing Officers under Sections 148A and 148 of the Income Tax Act, 1961 were declared to be without jurisdiction and were set aside, with the Court holding that such proceedings must be conducted only in a faceless manner as per the e-Assessment of Income Escaping Assessment Scheme, 2022.
The Court observed that without amending the e-Assessment of Income Escaping Assessment Scheme, 2022 framed under Section 151A, which expressly included Section 148 within its faceless framework, the insertion of Section 147A could not be sustained, as the Revenue itself admitted that cases were being identified by JAOs and not through automated allocation as mandated by the scheme.
Briefly, the batch of petitions was filed before the Andhra Pradesh High Court challenging the constitutional validity of Section 147A of the Income Tax Act, which was introduced through the Finance Act, 2026 (Act No. 4 of 2026) with retrospective effect from April 01, 2021. The petitioners also challenged reassessment notices and orders passed by the Jurisdictional Assessing Officers (JAOs) under Section 147 read with Section 144 and Section 144B of the Income Tax Act.
Earlier, a coordinate bench of the same High Court, by order dated Oct 28, 2025, had allowed similar petitions holding that the JAOs had no jurisdiction to issue notices under Section 148 in view of Section 151A and the e-Assessment of Income Escaping Assessment Scheme, 2022. The Revenue preferred Special Leave Petitions before the Supreme Court, and during the pendency of those SLPs, Parliament introduced Section 147A.
The Supreme Court, by order dated April 10, 2026, set aside the High Court orders and remanded the matters for fresh consideration, granting liberty to the assessees to challenge Section 147A. After remand, the petitioners amended their writ petitions to challenge the constitutional validity of Section 147A.
The Division Bench comprising Justice Ninala Jayasurya and Justice T.C.D. Sekhar traced the legislative history of faceless assessment, noting that Section 151A was introduced by Act 38 of 2020 with effect from Nov 01, 2020, and Section 144B was introduced by the Finance Act, 2021 with effect from April 01, 2021. The Central Government thereafter notified the e-Assessment of Income Escaping Assessment Scheme, 2022 on March 29, 2022, which expressly contemplated that assessment, reassessment, or re-computation under Section 147 and issuance of notice under Section 148 shall be through automated allocation and in a faceless manner to the extent provided in Section 144B.
The Court observed that Section 148 was specifically included in the scheme, and the Revenue itself admitted during hearing that no arrangement was made to identify cases through automated allocation, with cases being identified by the JAOs themselves, which ran contrary to the scheme. The Court further noted that the proviso to sub-section (2) of Section 151A mandated that no direction under the scheme could be issued after March 31, 2022, meaning that if Section 148 was not intended to be proceeded with in a faceless manner, it ought to have been removed from the scheme by that date.
The Court also observed that the Income Tax Act, 1961 stood repealed at the midnight of March 31, 2026, and the Income Tax Act, 2025 came into force from April 01, 2026. Although the Finance Act, 2026 received Presidential assent on March 30, 2026, Section 2(a) of the said Act expressly provided that it shall come into force only on April 01, 2026, and therefore any amendment to the repealed Income Tax Act, 1961 after its repeal would not be legally sustainable.
The Court found that Section 147A was not a clarificatory provision, but a substantive amendment introduced specifically to nullify the judgments of various High Courts that had held that JAOs had no jurisdiction to issue notices under Section 148. The Court further held that without amending the e-Assessment of Income Escaping Assessment Scheme, 2022 framed under Section 151A, the insertion of Section 147A could not be sustained, as the scheme continued to mandate faceless proceedings for issuance of notice under Section 148. The Court also held that since the Income Tax Act, 1961 stood repealed on the midnight of March 31, 2026, and the Finance Act, 2026 came into force only on April 01, 2026, the amendment inserting Section 147A into the repealed Act had no legal sanctity and was liable to be struck down from inception.
