Madras High Court Seeks Response from Union on Tax Amendments
The Madras High Court has issued notices to the Union government and the Income Tax Department in response to a petition challenging retrospective amendments made to the Income Tax Act, 1961, through the Finance Act of 2026. The case, titled Revenue Bar Association Vs Union of India, involves a plea filed by the Revenue Bar Association (RBA). The amendments in question pertain to provisions concerning transfer pricing, the Dispute Resolution Panel, assessment timelines, and the validation of tax proceedings.
The bench, comprising Chief Justice SA Dharmadikari and Justice Arul Murugan, has set a hearing date for July 21. The Central government has been granted a four-week period to submit their counter affidavit, with the RBA receiving two weeks thereafter to file a rejoinder.
Arguments Against Retrospective Amendments
Senior Advocate Arvind P. Datar, representing the RBA, argued that these amendments attempt to override judicial decisions of the Madras High Court and other High Courts without addressing the basis of those judgments. He emphasized that legislative changes cannot nullify judicial decisions merely by adding a non-obstante clause, thereby violating the doctrine of separation of powers.
The plea specifically targets the amendment to Section 92CA of the Income Tax Act, which concerns the Assessing Officer’s referral to the Transfer Pricing Officer for determining the arm’s length price in international and specified domestic transactions. The amendment, Section 92CA(3AA), is set to take effect retrospectively from June 1, 2007.
Legal and Constitutional Concerns
The petition also challenges amendments to Section 144C, regarding the Dispute Resolution Panel mechanism, as well as Sections 153 and 153B, which define the time limits for completing assessment and reassessment proceedings, including those related to searches. Further contested are the reassessment provisions under Sections 147 and 147A and the validation provisions such as Section 292BA, which deals with assessment orders and computer-generated Document Identification Numbers (DINs).
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According to the RBA, the retrospective amendments aim to validate tax proceedings and negate the influence of High Court judgments, even in instances where matters are pending before the Supreme Court through special leave petitions. They argue that such provisions infringe upon Articles 14, 19, 245, and 265 of the Indian Constitution, Entry 82 of List I of Schedule VII, and the basic structure doctrine.
Response from the Government
During the hearing, Additional Solicitor General ARL Sundaresan countered that an association cannot challenge legislation in the abstract and must demonstrate a specific cause of action. The plea filed by Advocate Sandeep Bagmar on behalf of the RBA underscores the significance of this legal confrontation over the balance of legislative and judicial powers in India.
