The Madras High Court has sought the response of the Union government and Income Tax Department on a plea challenging retrospective amendments made to the Income Tax Act, 1961 through the Finance Act, 2026 (Revenue Bar Association Vs Union of India).
A Bench of Chief Justice SA Dharmadikari and Justice Arul Murugan issued notice on a plea by the Revenue Bar Association (RBA) in the matter.
The petitioner challenges amendments made with respect to provisions on transfer pricing proceedings, Dispute Resolution Panel procedure, assessment timelines, reassessment and validation of tax proceedings.
The matter is likely to be heard next on July 21. The Central government has been granted four weeks to file their counter affidavit and the petitioner (RBA) has been granted two weeks thereafter to file a rejoinder.
Senior Advocate Arvind P Datar, appeared for the Revenue Bar Association in today's hearing of the matter and argued that the amendments under challenge seek to override judgments delivered by the Madras High Court and other High Courts without removing the basis of those judgments.
The core submission was that Parliament cannot get over judicial decisions merely by inserting a non-obstante clause stating that the amended provision will apply notwithstanding anything contained in any judgment, decree or order of any court.
Datar argued that such legislative overruling, without curing the defect or removing the basis of the judgment, would violate the doctrine of separation of powers.
The plea particularly challenges the amendment to Section 92CA of the Income Tax Act, 1961, which deals with reference by the Assessing Officer to the Transfer Pricing Officer for determining the arm’s length price in international transactions and specified domestic transactions. The Finance Act inserted this amendment, Section 92CA(3AA), with retrospective effect from June 1, 2007.
The petition also assails amendments to Section 144C, which deals with the Dispute Resolution Panel mechanism, and Sections 153 and 153B, which prescribe limitation periods for completion of assessment, reassessment and recomputation proceedings, including in search-related cases.
The plea further challenges reassessment-related provisions under Sections 147 and 147A, and validation provisions such as Section 292BA, which concerns assessment orders and computer-generated Document Identification Numbers.
According to the petitioner, the amendments retrospectively validate tax proceedings and nullify the effect of High Court judgments, even in cases where matters are pending before the Supreme Court in special leave petitions.
It was submitted that some of the issues covered by the amendments are already before the Supreme Court. In one case, the matter was stated to be partly heard, while in another, notice was said to have been issued.
The petitioner has argued that the challenged provisions violate Articles 14, 19, 245 and 265 of the Constitution, Entry 82 of List I of Schedule VII, the doctrine of separation of powers and the basic structure doctrine.
During the hearing, Additional Solicitor General ARL Sundaresan countered that an association challenging legislation would have to show a cause of action and could not question a law in the abstract.
The RBA's plea was filed by Advocate Sandeep Bagmar.
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