LiveLawBiz Direct Tax Weekly Round-Up: May 18 - May 24, 2026
Kapil Dhyani
25 May 2026 2:31 PM IST
HIGH COURTS
Allahabad HC
No Rectification For Debatable Points Under Section 254(2) Of Income Tax Act: Allahabad High Court
Case Title : Abusaad Ahmad Versus The Assistant Commissioner Of Income Tax Central Circle – 1 Lko
The Allahabad High Court on 6 May held that only mistakes apparent from the record can be rectified under Section 254(2) of the Income Tax Act, 1961, and that debatable issues fall outside its scope. A Division Bench of Justices Shekhar B. Saraf and Abdhesh Kumar Chaudhary dismissed the appeal filed by Abusaad Ahmad, upholding the Income Tax Appellate Tribunal's refusal to rectify its earlier order rejecting condonation of delay.
Delhi HC
Case Title : Vijender Pal Jain L/H Late Rishi Raman Jain v. Assistant Commissioner Of Income Tax Circle 28(1) Delhi & Ors.
Case Number : W.P.(C) 12617/2022
CITATION : 2026 LLBiz HC(DEL) 515
The Delhi High Court has held that the father of a deceased assessee can be treated as a “legal representative” under the Income Tax Act even if he is not a Class-I heir under the Hindu Succession Act. A Division Bench of Justices Dinesh Mehta and Amit Mahajan observed, “A person need not be a legal heir, much less a Class I heir under the Hindu Succession Act to fall within this definition. The test is not one of inheritance; it is one of representation vis-à-vis the estate of the deceased.”
Case Title : Sanjeev Kumar Bidhuri v. National Faceless Appeal Centre, New Delhi
Case Number : W.P.(C) 3934/2026
CITATION : 2026 LLBiz HC(DEL) 517
The Delhi High Court has quashed an income tax assessment order and demand notice after finding that a taxpayer was denied a fair hearing. The tax department failed to communicate whether his adjournment request had been accepted or rejected. It also passed the order without considering the reply he had filed. A Bench of Justice Dinesh Mehta and Justice Vinod Kumar observed, “It is clear that the petitioner's right of being heard has been infracted and the violation of petitioner's Fundamental Right guaranteed by Article 14 of the Constitution of India is apparent.”
Case Title : Pr. Commissioner Of Income Tax – 1 v. M/S. American Express (India) Pvt. Ltd.
Case Number : ITA 656/2019
CITATION : 2026 LLBiz HC(DEL) 520
The Delhi High Court has held that a company with a vastly different turnover and scale of operations may not be a proper comparable for transfer pricing analysis. A division bench of Justices V. Kameswar Rao and Vinod Kumar observed that huge differences between the tested entity and the comparable would necessarily require the exclusion of the comparable. The court made the observation while dealing with an appeal filed by the Income Tax Department against an order of the Income Tax Appellate Tribunal in the case concerning American Express India (assessee).
Company's Car, Telephone Costs Not 'Personal' Despite Being Separate Legal Entity: Delhi High Court
Case Title : Raunaq International Ltd v. Commissioner Of Income Tax I N
Case Number : ITA 113/2006
CITATION : 2026 LLBiz HC(DEL) 523
The Delhi High Court has held that telephone and car expenses incurred by a company cannot be disallowed as “personal” expenses merely because a company is treated as a separate legal person. A division bench of Justices Dinesh Mehta and Vinod Kumar allowed the company's appeal and set aside an order of the Income Tax Appellate Tribunal (ITAT), which had upheld disallowance of one-sixth of the company's telephone and car expenses on the ground of possible personal use.
'Left No Stone Unturned To Harass': Delhi HC On IT Dept's Delay In Releasing KVPs, IVPs
Case Title : Pradeep Misra v. UoI & Ors.
Case Number : W.P.(C) 2470/2006
CITATION : 2026 LLBiz HC(DEL) 524
The Delhi High Court has pulled up the Income Tax Department for delaying the release of seized Kisan Vikas Patras (KVPs) and Indira Vikas Patras (IVPs) even after the assessee deposited the settlement amount, observing that the authorities had “left no stone unturned to harass” the petitioner. A division bench of Justices Dinesh Mehta and Om Prakash Shukla directed the tax authorities to compensate the petitioners for loss of interest caused due to wrongful retention of the instruments.
ITAT
ITAT Kolkata Upholds Interest Deduction On Loans Advanced On Commercial Expediency Grounds
Case Title : DCIT, Circle-11(1), Kolkata v. South City Projects (Kolkata) Ltd.
Case Number : I.T.A. Nos. 94 & 1000/Kol/2025
CITATION : 2026 LLBiz ITAT(KOL) 138
The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) on 18 May upheld the deletion of disallowance of interest expenditure claimed by South City Projects (Kolkata) Ltd., holding that loans advanced to its subsidiary for overseas real estate projects were made on grounds of commercial expediency and qualified for deduction under the Income Tax Act. Accountant Member Rajesh Kumar and Judicial Member Pradip Kumar Choubey dismissed the Revenue's appeals for Assessment Years 2021-22 and 2022-23 against an order passed by the Commissioner of Income Tax (Appeals).
Case Title : Deputy Commissioner of Income Tax v. Trent Limited
Case Number : ITA No. 5243/Mum/2025 and ITA No. 5167/Mum/2025
CITATION : 2026 LLBiz ITAT(MUM) 137
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) on 22 April held that an assessing officer cannot invoke Rule 8D under Section 14A of the Income Tax Act without recording dissatisfaction with the taxpayer's suo motu disallowance. Judicial Member Sandeep Gosain and Accountant Member Girish Agrawal dismissed the Revenue's appeal and partly allowed Trent Limited's appeal for Assessment Year 2016–17, holding that brand equity fees paid to Tata Sons Ltd. are deductible under Section 37(1).
Case Title : Deputy Commissioner of Income Tax (Central Circle)-1(2) v. Lohitka Properties LLP
Case Number : ITA No. 6925 & 6926/MUM/2025
CITATION : 2026 LLBiz ITAT(MUM) 140
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has remanded to the Assessing Officer a tax dispute involving Lohitka Properties LLP's revised income computation for its “Montana” real estate project. The Tribunal held that the assessee's revised estimates and the Revenue's objections require detailed factual verification. A bench of Judicial Member Anikesh Banerjee and Accountant Member Om Prakash Kant observed: “Neither the approach adopted by the Assessing Officer in outrightly rejecting the revised estimates nor the acceptance thereof by the learned CIT(A) without exhaustive verification fully sub-serves the ends of justice. The matter, therefore, warrants comprehensive factual verification so as to ascertain the correctness of the computation of profits under the POCM method adopted by the assessee.”
Case Title : Aspri Spirits Pvt. Ltd. v. NFAC/DCIT
Case Number : ITA No. 8396/MUM/2025 & ITA No. 8643/MUM/2025
CITATION : 2026 LLBiz ITAT(MUM) 139
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that while taxpayers may file additional evidence at the appellate stage in appropriate cases, the appellate authority cannot rely on such fresh material without first giving the Assessing Officer an opportunity to examine it and respond. Referring to Rule 46A of the Income-tax Rules, 1962, which governs admission of additional evidence before the appellate authority, a bench of Judicial Member Anikesh Banerjee and Accountant Member Om Prakash Kant and observed: “Compliance with Rule 46A is not a mere procedural formality but a substantive safeguard intended to preserve fairness in adjudication.”
ITAT Ahmedabad Deletes ₹74.64 Lakh Addition After Waste Stock Discrepancy Was Adequately Explained
Case Title : Shakti Polyweave Private Limited v. Dy. CIT
Case Number : ITA Nos. 2403 & 2404/Ahd/2025
CITATION : 2026 LLBiz ITAT(AHM) 141
The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) deleted a ₹74.64 lakh addition made against Shakti Polyweave Private Limited towards estimated gross profit. The tribunal held that the company had adequately explained the alleged discrepancy in wastage stock reported in its tax audit report and that rejection of its books of account was unjustified. The bench of Judicial Member Siddhartha Nautiyal and Accountant Member Annapurna Gupta partly allowed the assessee's appeals for Assessment Years 2018-19 and 2019-20, with the latter being partly allowed for statistical purposes.
Case Title : Pallavi Nileshbhai Shah v. Income Tax Officer
Case Number : ITA No. 376/Ahd/2026
CITATION : 2026 LLBiz ITAT(AHM) 142
The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has deleted a ₹28.92 lakh addition made against a taxpayer after finding that the Assessing Officer could not selectively treat only the year-end outstanding creditor balances as unexplained while accepting the rest of the same transactions as genuine. The bench of Accountant Member Annapurna Gupta and Judicial Member Suchitra Kamble observed: “The AO has not made addition of the entire credits on account of transaction carried out that the said parties, but, only of the outstanding balance of credit as at the end of the year, which means that he has partly accepted as genuine the credit which was repaid during the year while the balance he has treated ingenuine without assigning any reason for this distinctive treatment.”