Direct Tax Weekly Round-Up: January 19 - January 25, 2026
Kapil Dhyani
27 Jan 2026 12:40 PM IST
SUPREME COURT
CITATION : 2026 LLBiz SC 16
Case Number : CIVIL APPEAL NO.197 OF 2026
Case Title : Income Tax Assessing Officer, Baroda & Ors. v. Shobhan Shantilal Doshi
The Supreme Court on January 12, 2026, set aside directions issued by the Gujarat High Court requiring the Central Board of Direct Taxes (CBDT) to modify the income-tax department's software. The court, however, left untouched the relief granted to the taxpayer on merits. A bench of Justices Rajesh Bindal and Vijay Bishnoi was hearing an appeal filed by the Income Tax Department against a Gujarat High Court order passed in favour of Shobhan Shantilal Doshi, an individual taxpayer.
Supreme Court Upholds Gujarat High Court Order Quashing Adani Power's Income Tax Reassessment Notice
Case Title : Assistant Commissioner Of Income Tax, Circle vs Adani Power Limited
Case Number : Diary No(s).404/2026
CITATION : 2026 LLBiz SC 21
The Supreme Court has refused to interfere with a 2024 Gujarat High Court ruling that quashed a reassessment notice issued to Adani Power Limited for the 2014–15 assessment year. A bench led by the Chief Justice of India, Surya Kant, and comprising Justices Joymalya Bagchi and Vipul M. Pancholi said the High Court's view “warrants no interference at all.” The court declined to condone a delay of 426 days in filing the petition. It said the explanation offered by the tax department was “absolutely vague and unacceptable.”
HIGH COURTS
Bombay HC
Bombay HC Quashes IT Assessment for Breach of Natural Justice, Orders Fresh Hearing
CITATION : 2026 LLBiz HC(BOM) 33
Case Number : WRIT PETITION NO.15217 OF 2023
Case Title : Yogesh Mangalsen Behl vs Union of India & Ors.
The Bombay High Court has reiterated that a tax assessment order passed without granting the assessee an effective personal hearing violates the principles of natural justice. A Division Bench of Justice B.P. Colabawalla and Justice Firdosh P. Pooniwalla was hearing a writ petition filed by Yogesh Mangalsen Behl, challenging the assessment under Section 143(3) of the Income Tax Act, 1961, and the consequential demand notice issued under Section 156. The Bench noted that the assessment was challenged “on the short ground that it is passed in breach of principles of natural justice.”
CITATION : 2026 LLBiz HC(BOM) 34
Case Number : WRIT PETITION (L) NO.19724 OF 2025
Case Title : Y-NOT Films LLP Vs National Faceless Assessment Centre & Ors.
Granting relief to Y-NOT Films LLP, the Bombay High Court reiterated that the Income Tax Department could not take the entire tax refund of a later year to recover an earlier tax demand that is still under appeal. The court said that in such situations, the tax department can normally adjust only 20% of the disputed amount, unless senior tax authorities specifically approve a higher recovery.
A Division Bench of Justices B.P. Colabawalla and Firdosh P. Pooniwalla was hearing a petition filed by the production house challenging the 100% adjustment of its tax refund for the year 2023–24, against a dispute of the previous year.
Calcutta HC
Case Title : Basu Tea Pvt. & Anr. v. The Union of India & Ors.
Case Number : WPA 18470 of 2025
CITATION : 2026 LLBiz HC (CAL) 28
The Calcutta High Court on 20 January held that merely uploading income tax notices on the portal, without issuing a real-time alert to the taxpayer's registered mobile number, is insufficient to sustain reassessment proceedings under the Income Tax Act, as it violates the principles of natural justice. A Single Judge Bench of Justice Om Narayan Rai set aside the reassessment proceedings against Basu Tea Pvt. Ltd., the taxpayer and legally unsustainable. The Bench held that the it had been deprived of a meaningful opportunity of being heard.
Case Title : Principal Commissioner of Income Tax, Kolkata v. Megapode Vyapar Pvt. Ltd.
Case Number : ITAT/146/2025
CITATION : 2026 LLBiz HC (CAL) 30
The Calcutta High Court has dismissed the income tax department's appeal against an ITAT order allowing an NBFC to set off losses described by the department as penny stock trades against its interest and other income. The Court held that the case raised no substantial question of law. A Division Bench of Justice Rajarshi Bharadwaj and Justice Uday Kumar said the department had failed to produce any direct or substantial evidence to support its case.
Delhi HC
CITATION : 2026 LLBiz HC(DEL)52
Case Number : ITA 4/2026
Case Title : The Commissioner Of Income Tax - International Taxation -3 v. Sri Lanka Cricket
The Delhi High Court has reiterated that payments received for granting the right to live telecast international cricket matches in a specific series do not constitute “royalty” under the Income Tax Act, 1961. A Division Bench of Justices Dinesh Mehta and Vinod Kumar thus upheld the orders of the Income Tax Appellate Tribunal (ITAT) in favour of Sri Lanka Cricket, ruling that consideration received for providing live broadcast feeds of cricket matches cannot be taxed as royalty under Section 9(1)(vi) of the Act.
CITATION : 2026 LLBiz HC (DEL) 59
Case Number : W.P.(C) 16354/2025
Case Title : SFDC Ireland Limited v. Commissioner Of Income Tax International Taxation 3 New Delhi & Anr.
The Delhi High Court has criticised the Income Tax Department for adopting a revenue-driven approach while issuing tax deduction at source (TDS) certificates, holding that the government's “ease of doing business” policy must translate into fair and reasoned tax orders. A Division Bench of Justices Dinesh Mehta and Vinod Kumar observed,
“Ease of doing business cannot be confined to slogans and Government policies; it has to percolate down in executive actions and quasi judicial orders. Passing similar orders year after year portrays an unhealthy and unwelcoming picture of the country's bureaucracy on the one hand and gives pseudo satisfaction to the Revenue on the other.”
Case Number : W.P.(C) 578/2026
Case Title : Express Freight Consortium v. Assessment Unit, Income-Tax Department & Ors.
In order to flag gaps in the income tax faceless assessment regime, the Delhi High Court has directed the Dispute Resolution Panel (DRP) Registry to not accept objections filed by assessees/taxpayers against draft assessment orders unless accompanied by proof that the same have been served on the Assessing Officer (AO) as well. A Division Bench of Justices Dinesh Mehta and Vinod Kumar passed the direction while dealing with a case in which the AO proceeded to pass the final assessment order under Section 144C(4) of the Income Tax Act, as he was unaware of the objections filed by the petitioner-assessee.
Kingfisher Airlines Employee Cannot Be Denied TDS Credit For Employer's Default: Delhi High Court
CITATION : 2026 LLBiz HC(DEL) 61
Case Number : W.P.(C) 538/2026
Case Title : Venkatachalam Thangavelu v. ITO
The Delhi High Court has held that an employee can't be penalised for the failure of its employer to deposit tax deducted at source (TDS) with the Revenue. The bench of Justices Dinesh Mehta and Vinod Kumar was dealing with a writ petition filed by a former employee of Kingfisher Airlines, whose salary had suffered TDS deductions, but the employer failed to deposit the deducted amount with the Income Tax Department.
Case Title : Commissioner Of Income Tax Delhi Xvii v. Royal Jordanian Airlines
Case Number : ITA 187/2008
CITATION : 2026 LLBiz HC (DEL) 73
The Delhi High Court has held that Royal Jordanian airline can't be saddled with the burden of proving, after a decade, that its travel agents had discharged their tax liability. The observation was made by the division bench of Justices Dinesh Mehta and Vinod Kumar while dealing with proceedings relating to deduction of tax at source (TDS) under the Income Tax Act.
Gujarat HC
Ten-Year Limitation Bars Reopening Assessment For AY 2015-16: Gujarat High Court
Case Title : JayantiBhai Karamshibhai Maniya vs. Income Tax Officer, Ward, Bhavnagar
Case Number : R/Special Civil Application No. 16615 of 2025
CITATION : 2026 LLBiz HC (GUJ) 4
The Gujarat High Court on 5 January held that a notice to reopen an assessment is barred by limitation if issued beyond ten years from the end of the relevant assessment year A Division Bench of Justice A.S. Supehia and Justice Pranav Trivedi was hearing a case which included four different but legally identical writ applications. It clarified that under Section 153A(b) of the Income Tax Act, 1961, the “relevant assessment year” must be computed backwards from the end of the search year. The Court emphasised that Sections 147 to 151, as they stood prior to the Finance Act (No. 2), 2024, govern such instances.
Gujarat High Court Reaffirms Mandatory Draft Order In Transfer Pricing Officer Assessments
Case Title : Sun Pharmaceutical Industries Limited vs. Deputy Commissioner of Income Tax, Circle, Vadodara & Anr.
Case Number : R/Special Civil Application No. 5973 of 2025
CITATION : 2026 LLBiz HC (GUJ) 5
The Gujarat High Court has held that failure to issue a draft assessment order under Section 144C in cases involving Transfer Pricing Officer (TPO) adjustments renders the final assessment order void. The Court emphasised that an “eligible assessee” must be issued a draft order in terms of Section 144C, including cases with TPO adjustments, and that skipping this step deprives the assessee of the statutory right to approach the Dispute Resolution Panel (DRP).
Madras HC
Case Title: Sindhi Educational Society v. The Principal Commissioner of Income Tax
Citation: 2026 LLBiz HC (MAD) 20
Case Number: W.P.No.20037 of 2023
The Madras High Court has held that a charitable trust cannot be denied tax exemption merely because it filed Form 10 late, when the return of income and audit report were filed within time. Form 10 is the declaration through which a charitable trust informs the tax department that it intends to set aside part of its income for charitable use in future years. A single-judge bench of Justice C Saravanan said the tax department, in effect, treated a procedural delay as a ground to deny a substantive benefit.
Large Cash Claims In Civil Suits Can Be Flagged To Income Tax Department: Madras High Court
Case Title: Venkateshan v. Sanjay
Citation: 2026 LLBiz HC (MAD) 21
Case Number: CRP.No.5650 of 2025
The Madras High Court has recently held that courts may forward civil suit records to the Income Tax Department for its consideration when the pleadings disclose very large cash transactions. This can be done even if the transaction took place before Section 269ST of the Income Tax Act came into force. Justice S. Sounthar noted that Section 269ST, which bars receipt of Rs 2 lakh or more in cash, was introduced on April 1, 2017, to curb black money. The provision also prescribes a penalty equal to the amount received.
Realty Company's Sale of Long-Held Freehold Land Is Capital Gains Not Business Income: Madras Court
Case Title: Commissioner Of Income Tax, Chennai v. Gwl Properties Ltd.
Citation: 2026 LLBiz HC (MAD) 22
Case Number: TCA No. 288 of 2011
The Madras High Court has held that profits earned from the sale of decades-old freehold land must be taxed as capital gains and not as business income, rejecting the income tax department's attempt to treat the transaction as part of a real estate business. A division bench of Justices Anita Sumanth and Mummineni Sudheer Kumar said the record clearly showed that the land was held as a long-term asset and was sold without any development or trading activity.
Orissa HC
Tax Authority Must Consider 'Genuine Hardship' to Condone Filing Delays: Orissa High Court
The Orissa High Court has reiterated that tax authorities must exercise their power to condone a delay in filing income tax returns to address "genuine hardship" and not reject such requests mechanically. A Division Bench comprising Chief Justice Harish Tandon and Justice Murahari Sri Raman set aside an order of the Principal Chief Commissioner of Income Tax (PCCIT), Odisha Region, which had refused to condone the delay in filing income tax returns by The Reserve Bank Employees Co-operative Credit Society Limited. The Court noted that the tax authority failed to properly exercise discretion under the Income Tax Act while dealing with the society's plea of “genuine hardship” arising from delays in statutory audit beyond its control.
ITAT
ITAT Pune Upholds ₹6 Lakh Professional Fees Disallowance For Lack of Evidence
Case Title: Tooltech Global Engineering Pvt Ltd v. The Income Tax Officer
Case Number: ITA No.2212/PUN/2025
Citation: 2026 LLBiz ITAT(PUN)16
The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has upheld the disallowance of Rs. 6 lakh claimed as professional fees for the assessment year 2017-18, noting that the payment was not supported by sufficient evidence such as the recipient's income tax return, Form 26AS (annual tax statement), or bank statements. The Bench, comprising Accountant Member Dr Dipak P. Ripote and Judicial Member Vinay Bhamore, reaffirmed that expenses claimed as professional fees must be substantiated with proper evidence and reflected in the recipient's tax filings, failing which they can be disallowed under the Income Tax Act.
Case Title : Hasbro SA v. Deputy Commissioner of Income Tax (International Tax)
Case Number : ITA No. 2842/Del/2025
CITATION : 2026 LLBiz ITAT(DEL)17
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) held that an assessee should not be penalised for a technical lapse in filing evidence and allowed Swiss-based Hasbro SA to submit additional evidence in support of its claim for TDS credit. It remanded the matter to the assessing officer for fresh consideration. A Bench comprising Accountant Member Ramit Kochar and Judicial Member Raj Kumar Chauhan passed the order in an appeal filed by Hasbro SA against the Commissioner of Income Tax (Appeals), which had upheld the denial of TDS credit of Rs. 21.14 lakh for the assessment year 2020–21.