Section 147A Struck Down: AP High Court on Faceless Reassessment

On 12 October 2026, a Division Bench of the Andhra Pradesh High Court struck down Section 147A of the Income-tax Act, 1961. Justices Ninala Jayasurya and T.C.D. Sekhar decided Bala Sreenivas Rao Somisetty v. Income Tax Officer, Ward 1, Eluru together with more than 200 connected writ petitions.

Section 147A was Parliament's retrospective fix. It was meant to confirm that Jurisdictional Assessing Officers (JAOs), and not faceless units, can issue reopening notices. The High Court has rejected that fix on three separate grounds. It quashed every JAO-initiated proceeding under Sections 148A and 148 in the batch.

The Revenue told the court that about ₹21.7 lakh crore of reassessed income across 8.8 lakh assessees is at stake nationally. That makes this one of the most consequential tax rulings of the year.

Background

The dispute is about who may start a reassessment: the local JAO, or the faceless machinery the Act itself set up.

Section 151A, inserted from 1 November 2020, let the Central Government frame a scheme for faceless reassessment. It covers assessment under Section 147, notices under Section 148, inquiries and orders under Section 148A, and sanctions under Section 151. Using that power, the CBDT notified the e-Assessment of Income Escaping Assessment Scheme, 2022 (Notification No. 18/2022, dated 29 March 2022). Clause 3 of the Scheme says that both reassessment under Section 147 and "issuance of notice under section 148" shall be through automated allocation and in a faceless manner.

JAOs nevertheless continued to issue Section 148A and 148 notices themselves. Taxpayers challenged those notices, and High Courts across the country quashed them for lack of jurisdiction.

Date	Event
12 Oct 2026	AP High Court strikes down Section 147A and quashes JAO-initiated proceedings
18 Sep 2026	Supreme Court stays the Punjab & Haryana High Court ruling (SLP (C) 33196/2026)
10 Sep 2026	Punjab & Haryana High Court holds Section 147A unconstitutional
10 Apr 2026	Supreme Court sets aside the High Court rulings on the limited ground of the amendment and remits the matters so Section 147A can be challenged; reassessments stayed meanwhile
1 Apr 2026	Finance Act, 2026 comes into force; Income-tax Act, 2025 replaces the 1961 Act
30 Mar 2026	Finance Act, 2026 (Act No. 4 of 2026) receives Presidential assent, inserting Section 147A with effect from 1 Apr 2021
28 Oct 2025	AP High Court quashes JAO-issued notices as contrary to Section 151A and the 2022 Scheme
29 Mar 2022	e-Assessment of Income Escaping Assessment Scheme, 2022 notified
1 Nov 2020	Section 151A comes into force

Section 147A reads, in substance: notwithstanding any judgment or Section 151A or any scheme under it, the "Assessing Officer" for Sections 148 and 148A "shall mean and shall always be deemed to have meant" an AO other than the National Faceless Assessment Centre or any faceless assessment unit.

Issues before the court

1. Do Section 151A and the 2022 Scheme require Section 148A and 148 proceedings to be faceless, which would oust the JAO?
2. Can Section 147A validly cure that defect retrospectively, given that it leaves the Scheme unchanged and overrides court judgments?
3. Could Section 147A be inserted into the 1961 Act at all, when the 1961 Act was repealed on the same day the Finance Act, 2026 came into force?
4. Should the scale of revenue at stake, and the fact that most assessees never objected, persuade the court not to interfere?

The court's analysis

1. Section 148 is inside the faceless scheme, and "shall" means shall

The court read Clause 3 of the 2022 Scheme plainly. Issuing a Section 148 notice must happen through automated allocation under the Board's risk management strategy. Here, the Revenue conceded in open court that no such arrangement existed and that JAOs had picked the cases themselves. Because the Scheme uses "shall", the court held that JAOs are ousted.

The Revenue said Section 148A was not named in the Scheme, so JAOs could still run the inquiry. The court rejected this. A Section 148 notice cannot issue without the Section 148A inquiry, and that inquiry exists only to lead to reassessment. Leaving Section 148A out of the Scheme therefore gives JAOs no jurisdiction of their own.

The Revenue also argued that "faceless" applies only "to the extent provided in Section 144B", which covers assessment and not notices. This argument failed as well. The government chose to include Section 148 in the Scheme. If it did not want notices to be faceless, it had to take Section 148 out before 31 March 2022, the deadline in the proviso to Section 151A(2). It never did.

On this point the court respectfully disagreed with the Gujarat High Court in Snehdham Trust v. ACIT (2026) 485 ITR 24 (Guj).

2. The Revenue was "blowing hot and cold"

On the Revenue's own case, two officers handle one reassessment: the JAO up to the Section 148 notice, then the NFAC. The court said that amounts to transferring the case. Under Section 127, a transfer needs a reasoned order and, where possible, a hearing for the assessee. No such orders were passed.

The Revenue also relied on CBDT Notification No. 61/2022, which gives JAOs concurrent jurisdiction. The court held that a notification cannot override Sections 130 and 151A or the Scheme framed under them.

3. A validating law must remove the basis of the judgment

This is the core of the ruling. The court relied on Shri Prithvi Cotton Mills v. Broach Borough Municipality (1969) 2 SCC 283 and State of Tamil Nadu v. M. Rayappa Gounder (1971) 3 SCC 1. Parliament may legislate retrospectively and can remove the basis of a judgment. What it cannot do is simply tell the State to disregard a court's decision.

The earlier rulings found no defect in the Act or the Scheme. They held only that, because Section 148 sits inside the Scheme, JAOs lack jurisdiction. Section 147A left the Scheme untouched, and Section 148 is still in it today. The court therefore held that Section 147A does not cure anything and instead overreaches judicial decisions. That breaches the separation of powers, which is part of the Constitution's basic structure.

4. You cannot amend a repealed Act

The court then accepted a technical argument with large consequences:

•       Section 2(a) of the Finance Act, 2026 brings the relevant provisions into force on 1 April 2026.

•       The Income-tax Act, 2025 also commenced on 1 April 2026, so the 1961 Act was repealed at midnight on 31 March 2026.

•       The Revenue argued that the Finance Act received assent on 30 March 2026, while the 1961 Act still existed. The court rejected this. Under Section 5 of the General Clauses Act, assent fixes the start date only when the Act names no date of its own, as the Supreme Court held in Common Cause v. Union of India (2003) 8 SCC 250.

•       So Section 147A was inserted into an Act that had already ceased to exist, and it has "no legal sanctity" from inception.

Under Section 536(2)(c) and (u) of the 2025 Act, pending and pre-2026 proceedings continue under the repealed Act and the schemes made under it. The faceless requirement therefore still governs them.

5. Revenue at stake does not create jurisdiction

The Revenue filed figures for assessment years 2016-17 to 2025-26. It reported notices to 8,82,146 assessees, reassessment orders against 6,46,897, and about ₹21.7 lakh crore of income assessed on reassessment. It warned of "far reaching consequences" for the public interest.

The court held that these figures do not affect the outcome. The fact that most assessees did not challenge jurisdiction gives the Revenue no right to assess in a non-faceless manner contrary to the statute.

Decision

The court declared Section 147A unconstitutional and struck it down. All proceedings started by JAOs under Sections 148A and 148 were held to be without jurisdiction and set aside, because they had to be conducted in a faceless manner. The writ petitions were allowed, with no order as to costs.

The Bench noted the Punjab & Haryana High Court's 10 September 2026 ruling to the same effect, which the Supreme Court has stayed. It said it had reached its own conclusions independently.

Implications

For taxpayers. Anyone in Andhra Pradesh facing a JAO-issued reopening notice for an assessment year before 2026 now has binding authority to challenge jurisdiction. Elsewhere, the ruling is strongly persuasive. The repealed-Act ground is notable because it does not depend on how the Scheme is read. If the Supreme Court accepts it, Section 147A falls regardless of the separation-of-powers debate.

For the Revenue. The ruling exposes a drafting gap. A retrospective clarification that leaves the underlying Scheme unchanged was always open to attack. Amending the Scheme itself is now constrained by the 31 March 2022 deadline in Section 151A(2). On the court's reasoning, a further fix would need to amend the Scheme under a fresh statutory power, as well as the definition, and be properly placed in the 2025 Act.

What is unresolved. The Supreme Court has stayed the Punjab & Haryana ruling, and an appeal against this judgment is near certain. Three questions remain open:

•       Is the Gujarat High Court's reading in Snehdham Trust correct, that the Scheme's faceless mandate covers assessment and not the notice?

•       Can Section 147A survive as a genuine clarification rather than a legislative override?

•       How does the transition into the 2025 Act affect amendments that took effect on 1 April 2026?

Until the Supreme Court rules, taxpayers should keep jurisdictional objections on record at the Section 148A stage. They should not assume the issue is settled either way.

Conclusion

The AP High Court's message is that a retrospective clarification must actually clarify. When the government's own Scheme says "shall" and still lists Section 148, a deeming provision that ignores the Scheme cannot quietly reverse court rulings. That is especially so when the amendment is inserted into an Act that had already been repealed. The final word now rests with the Supreme Court, and with roughly ₹21.7 lakh crore of reassessed income in the balance, its ruling will set the limits of retrospective tax legislation for years to come.

Income Tax case Law Bala Sreenivas Rao Somisetty, S/o Venkata Swamy Versus ITO

Citation- 2026 TAXONATION 2755 (ANDHRA PRADESH)

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