The Punjab and Haryana High Court has declared Section 147A of the Income-tax Act, 1961, unconstitutional and directed that it be struck down, holding that the legislature could not, through a retrospective “clarification”, circumvent findings of constitutional courts without removing the legal basis of those judgments.Taking up a bunch of nearly 700 petitions, the division bench of Justice Deepak Sibal and Justice Rupinderjit Chahal in its 97-page judgment also set aside the Section 148 notices issued to the petitioners by their jurisdictional Assessing Officers (AOs), holding that such notices were required to be issued through randomised automated allocation and in a faceless manner under Section 151A of the Act read with the scheme dated March 29, 2022.The bench was assisted in the matter on the petitioners’ behalf by, among others, senior advocates Sanjay Bansal, Radhika Suri, Sandeep Goyal, Pankaj Jain, Munisha Gandhi and Salil Dev Singh Bali. The petitions had challenged the constitutional validity of Section 147A and the Section 148 notices issued by jurisdictional AOs. The petitioners had contended that the officers issuing the notices had not been selected randomly through automated allocation, in violation of Section 151A read with the March 29, 2022 scheme. In one of the matters, the controversy arose after the high court had earlier set aside a Section 148 notice issued to the petitioner by her jurisdictional AO, primarily on the ground that it violated Section 151A read with the March 29, 2022 scheme. That judgment was challenged before the Supreme Court.While the matter was pending before the Supreme Court, Section 147A was introduced through the Finance Bill, 2026, with retrospective effect from April 1, 2021. It provided that, notwithstanding any judgment, order or decree of any court or anything contained in Section 151A or the scheme framed thereunder, an AO for the purposes of Sections 148 and 148A would mean an AO other than the National Faceless Assessment Centre or an assessment unit referred to in Section 144B(3).The Supreme Court thereafter set aside the earlier judgments and remitted the matters to the high courts for fresh consideration. The Supreme Court left open the validity, scope, effect, retrospectivity and applicability of the amended provision.The high court then examined whether the retrospective legislation had actually removed the legal basis of the earlier judicial decisions. It referred to the settled principle that retrospective validating legislation is permissible, but only if it cures the defect identified by the court.“There is no legal impediment to enacting a law to validate a legislation which has been held by a court to be invalid, provided, such a law removes the basis of the judgment of the court, by curing the defects of the legislation,” the bench observed, quoting the Supreme Court.The bench further held that the legislature could not directly annul a constitutional court judgment or overrule it merely through a declaration. At the same time, it recognised that the legislature could retrospectively validate legislation if it removed the foundation of the judicial decision by curing the defect identified by the court.“Setting at naught a decision of a court without removing the defect pointed out through the decision of the court is opposed to the rule of law and also breaches the doctrine of separation of powers,” the bench said. It added that “abrogation is not to be used as a device by the legislature to bye-pass an unfavourable judicial decision”.The court found that this test was not satisfied in the present case. It noted that several constitutional courts had held that, under Section 151A and the March 29, 2022 scheme, a Section 148 notice could be issued only by a faceless AO, while Section 151A and the scheme remained unchanged after the enactment of Section 147A.“The primary basis on which the constitutional courts had held that notices issued under Section 148 of the Act could not have been issued by the assessees’ jurisdictional AOs has not been removed through the retrospective enactment of Section 147A,” the bench held.It said the retrospective provision was also in direct conflict with Section 151A and the scheme framed under it. “Through such ‘clarification’, the legislature visibly seeks to substitute its opinion over and above the findings returned by the constitutional courts which is legally impermissible,” it held.The bench further observed that the legislature had “clearly trenched upon judicial power” and that the attempt was “clearly to circumvent unfavourable judicial decisions”.The court also noted that the stated objectives behind Section 147A — certainty, clarity and avoidance of litigation — had not been achieved. “Therefore, introduction of Section 147A of the Act did not bring any clarity or certainty. It only added to the confusion,” it said. The bench added that the provision had instead become the “breeding ground of litigation”, with thousands of petitions pending in at least eight high courts. “In the light of the discussion, we have no hesitation to declare Section 147A of the Act to be unconstitutional,” the bench ruled. Independently, the court examined whether the Section 148 notices could survive even without Section 147A. It held that the March 29, 2022, scheme mandated randomised automated allocation and faceless issuance of Section 148 notices.“When clauses 2 and 3 of the scheme are harmoniously read with the purpose behind framing of the scheme, the only conclusion that can be arrived at is that as per the scheme framed under Section 151A, notices under Section 148 are required to be issued through randomised automated allocation and in a faceless manner,” the bench held. It rejected the Revenue’s contention that the scheme did not cover Section 148 notices and held that such an interpretation would render the scheme a “dead letter”. It also rejected the argument based on earlier jurisdictional notifications, observing: “Once the scheme provides for randomised automated allocation of AOs there is no question of conferment of concurrent jurisdiction on faceless AOs and jurisdictional AOs.”The bench concurred with the Bombay, Punjab and Haryana, Rajasthan, Madras, Karnataka, Andhra Pradesh and Gauhati High Courts on the issue, while respectfully differing from the views expressed by the Delhi, Gujarat and Calcutta High Courts.Ultimately, the court held: “after holding Section 147A of the Act to be unconstitutional and directing it to be struck down”, the Section 148 notices were also required to be set aside because they had not been issued through randomised allocation and in a faceless manner as mandated by Section 151A read with the March 29, 2022 scheme. “The writ petitions are allowed in the above terms,” the bench ordered.