The Madras High Court on Monday sought responses from the Union government and the Income Tax Department on a petition challenging retrospective amendments introduced to the Income Tax Act, 1961, through the Finance Act, 2026.
The Division Bench of Chief Justice SA Dharmadhikari and Justice Arul Murugan issued notice on the plea filed by the Revenue Bar Association (RBA), challenging the amendments that affected provisions related to transfer pricing proceedings, the Dispute Resolution Panel (DRP) mechanism, assessment and reassessment timelines, as well as validation of tax proceedings.
The Court directed the Union government to file its counter-affidavit within four weeks, while granting the petitioner two weeks thereafter to file a rejoinder. The matter is expected to be heard next on July 21.
Senior Advocate Arvind P. Datar, appearing for RBA, argued that the impugned amendments sought to override judicial pronouncements delivered by the Madras High Court and other High Courts without curing the legal defects identified in those rulings.
Datar contended that Parliament cannot simply nullify judicial decisions by introducing a non-obstante clause stating that amended provisions would operate notwithstanding any judgment, decree or order of a court. According to him, such legislative overruling, without removing the basis of the verdicts, violated the constitutional doctrine of separation of powers.
The petition particularly challenged the newly-inserted Section 92CA(3AA) of the Income Tax Act, 1961, which was introduced retrospectively from June 1, 2007, and concerned references made by the Assessing Officers to the Transfer Pricing Officers for determining arm’s length pricing in international and specified domestic transactions.
The petition further assailed amendments to Sections 144C, 153 and 153B, dealing with the DRP mechanism and limitation periods for assessment and reassessment proceedings. Reassessment provisions under Sections 147 and 147A, along with validation provisions such as Section 292BA relating to computer-generated Document Identification Numbers, have also been challenged.
According to the petitioner, the amendments retrospectively validated tax proceedings and effectively nullified the High Court judgments, including matters presently pending before the Supreme Court. Opposing the plea, Additional Solicitor General ARL Sundaresan argued that an association challenging legislation must establish a concrete cause of action and cannot question a statute in the abstract.
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