Andhra Pradesh High Court strikes down Section 147A of the Income Tax Act, 1961, examining faceless reassessment, retrospective amendments and JAO jurisdiction.
Introduction
In a significant ruling on income tax reassessment proceedings, the Andhra Pradesh High Court has declared Section 147A of the Income Tax Act, 1961, unconstitutional. The Court held that the retrospective amendment introduced through the Finance Act, 2026, could not validate the jurisdiction of Jurisdictional Assessing Officers (JAOs) without removing the legal defect identified in earlier judicial decisions.
The judgment, delivered on 12 October 2026, addresses important questions concerning faceless income tax reassessment, retrospective legislation, legislative competence and the constitutional doctrine of separation of powers. The Court also examined whether a provision could validly be inserted into the Income Tax Act, 1961, after that legislation had been repealed.
Case: Bala Sreenivas Rao Somisetty & Others v. Income Tax Officer & Others
Court: Andhra Pradesh High Court
Decision date: 12 October 2026
Key provision: Section 147A of the Income Tax Act, 1961
Background of the Dispute
The controversy arose from reassessment proceedings initiated by Jurisdictional Assessing Officers under Sections 148A and 148 of the Income Tax Act, 1961. The taxpayers challenged these proceedings on the ground that they were inconsistent with the faceless reassessment framework prescribed under Section 151A.
The Central Government had notified the e-Assessment of Income Escaping Assessment Scheme, 2022, on 29 March 2022. The scheme provided for automated allocation and faceless handling of reassessment proceedings.
In earlier decisions dated 28 October 2025, a coordinate bench of the Andhra Pradesh High Court had quashed reassessment notices and related orders issued by JAOs under Sections 148A(b), 148A(d) and 148. The Court found that the proceedings were contrary to Section 151A and the notified scheme.
The Revenue challenged those decisions before the Supreme Court.
Why Was Section 147A Introduced?
While the challenges were pending, Parliament introduced Section 147A through the Finance Act, 2026, with retrospective effect from 1 April 2021.
The provision clarified that, for the purposes of Sections 148 and 148A, the expression “Assessing Officer” would refer to an officer other than the National Faceless Assessment Centre or an assessment unit specified under Section 144B(3).
The legislative objective was to clarify the authority of jurisdictional officers to issue reassessment notices and address the legal objections raised in earlier judgments.
On 10 April 2026, the Supreme Court set aside the earlier High Court decisions on the limited ground that the amendment had altered the foundation of those rulings. The matters were remitted to the respective High Courts for fresh consideration. The Supreme Court expressly left the amendment’s constitutional validity, scope, effect, retrospectivity and applicability open for examination.
The petitioners subsequently challenged Section 147A itself, arguing that the amendment attempted to overcome judicial decisions without curing the underlying legal defect.
High Court’s Analysis of the Faceless Reassessment Scheme
The Andhra Pradesh High Court examined whether introducing Section 147A was sufficient to overcome the restrictions imposed by the existing reassessment scheme.
The Court observed that Section 148 continued to fall within the framework notified under Section 151A. The Government had not amended the scheme to exclude the relevant reassessment notices from its operation.
Accordingly, merely clarifying the meaning of “Assessing Officer” could not remove the inconsistency between the statutory amendment and the existing scheme.
The Court emphasised that the scheme did not permit the authorities to exercise unrestricted discretion to conduct reassessment proceedings through a non-faceless process.
It concluded that the retrospective insertion of Section 147A, without making the necessary changes to the scheme under Section 151A, was legally unsustainable.
Retrospective Legislation Cannot Simply Override Judicial Decisions
An important aspect of the judgment concerns the limits of legislative power to validate actions previously held unlawful by courts.
Relying on the principles laid down by the Supreme Court in Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality, the High Court reiterated that validating legislation must remove the legal defect on which the judicial decision was based.
A legislature may amend the law retrospectively within its constitutional competence. However, it cannot simply declare an earlier judicial interpretation ineffective while leaving the underlying legal defect uncorrected.
The High Court held that introducing Section 147A without amending the existing faceless reassessment scheme amounted to impermissible legislative overreach. It also found that such an approach conflicted with the doctrine of separation of powers, which forms part of the basic structure of the Constitution.
Amendment to a Repealed Act: A Separate Ground
The Court also considered the effect of the repeal of the Income Tax Act, 1961, following the commencement of the Income Tax Act, 2025, on 1 April 2026.
The Finance Act, 2026, received Presidential assent on 30 March 2026. However, the relevant amendment was expressly scheduled to come into force on 1 April 2026.
Rejecting the Revenue’s argument that Presidential assent before the repeal was sufficient, the Court held that the specified commencement date had to be respected.
Since the amendment was scheduled to take effect on the date the 1961 Act stood repealed, the Court concluded that inserting Section 147A into the repealed legislation was legally unsustainable and lacked legal sanctity.
Final Decision and Relief Granted
The Andhra Pradesh High Court declared Section 147A of the Income Tax Act, 1961, unconstitutional and struck it down. It further held that the reassessment proceedings initiated by the concerned JAOs under Sections 148A and 148 were without jurisdiction.
The Court allowed the writ petitions and set aside the challenged proceedings and orders. No order as to costs was passed.
Implications for Taxpayers and Tax Practitioners
The judgment is important for taxpayers contesting reassessment notices issued by Jurisdictional Assessing Officers under the earlier faceless reassessment framework.
It reinforces the principle that reassessment proceedings must comply with the governing statutory provisions and notified schemes. It also highlights that retrospective amendments must address the actual legal defect rather than merely attempt to neutralise earlier judicial decisions.
However, the ruling should not be interpreted as automatically cancelling every reassessment notice issued by a JAO throughout India. Its application to individual cases depends on the relevant facts, procedural history, applicable law and subsequent appellate developments.
Taxpayers who have received reassessment notices should obtain a case-specific legal review before deciding whether to challenge them.
Conclusion
The Andhra Pradesh High Court’s decision is a significant development in income tax reassessment litigation. By striking down Section 147A, the Court has emphasised the importance of the faceless reassessment framework, constitutional limits on retrospective legislation and judicial independence.
The judgment may have wider implications for pending disputes concerning reassessment jurisdiction. Taxpayers and professionals should closely monitor subsequent proceedings before the Supreme Court and other courts to understand the ruling’s ultimate legal effect.