LiveLawBiz Direct Tax Weekly Round-Up: October 05 - October 11, 2026
Kapil Dhyani
13 Oct 2026 1:19 PM IST
SUPREME COURT
Supreme Court Refuses To Interfere With Delhi HC Order Reading Down CBDT Circular On AIF Taxation
Case Title : THE CENTRAL BOARD OF DIRECT TAXES VS. EQUITY INTELLIGENCE AIF TRUST
Case Number : DIARY NO. - 2801/2026
The Supreme Court on Wednesday refused to interfere with the Delhi High Court judgment reading down CBDT Circular No.13/2014 concerning taxation of Category-III Alternative Investment Funds (AIFs) at the Maximum Marginal Rate (MMR). Allowing Equity Intelligence's writ petition, the Delhi High Court held that the SEBI framework itself made it impossible for a Category-III AIF to name its investors in the original Trust Deed before registration and investment. Applying lex non cogit ad impossibilia, the Court held that the law cannot compel an entity to perform an impossible act.
Electricity Subsidy Linked To Power Charges Is Revenue Receipt: Supreme Court
Case Title : M/s Mepco Industries Ltd. v. Commissioner of Income Tax, Madurai
Case Number : Civil Appeal No. 8694 of 2012
CITATION : 2026 LLBiz SC 328
The Supreme Court has held that the “purpose test” is the governing test for deciding whether a subsidy is a capital or revenue receipt, and that the purpose must be determined from the scheme as a whole rather than from one broad policy objective. “The “purpose test” cannot be applied by isolating one general object clause while disregarding the operative provisions of the scheme. The scheme must be read as a whole, and when so read, the general object of industrial development is implemented through a specific subsidy on power charges, calculated with reference to actual energy charges and available only for a defined period after production commences. It is this immediate and operative purpose of the financial assistance that determines its character in the hands of the assessee,” the court observed.
HIGH COURTS
Bombay HC
Case Title : Farah Khurshed Titina v. Income Tax Officer, Ward 22(1)(6), Mumbai & Ors.
Case Number : Writ Petition No. 4002 of 2026
CITATION : 2026 LLBiz HC(BOM) 557
The Bombay High Court has ruled that taxpayers can seek waiver of income tax penalties even in cases of misreporting of income under the amended Section 270AA of the Income Tax Act, 1961. It also held that an earlier rejection does not prevent a taxpayer from applying again under the amended law. “However, we note that the position has changed considerably as a result of the amendments made by the Finance Act, 2026 w.e.f. 1st March 2026. As is evident from the amendments made, an application for waiver of penalty already levied, can now be made and the same will have to be considered by the AO even in circumstances where penalty is levied for under-reporting of income which is in consequence of misreporting of income” the court ruled.
Case Title : Sanjay Nathalal Shah v. The Assistant Commissioner of Income Tax, Central Circle 5(2), Mumbai & Ors.
Case Number : Writ Petition (L) No. 29400 of 2026
CITATION : 2026 LLBiz HC(BOM) 559
The Bombay High Court has ruled that the Income Tax Department cannot wait for a certified copy of a court order to compute the limitation period for completing an assessment when a digitally signed copy has already been received by the relevant tax authorities. “In this era of electronic filing and electronic uploading, and in order to alleviate difficulties of the litigants before us, this is a practice which this Court has adopted. Instead of asking a litigant to apply for a certified copy of the order on payment of fees, a digitally signed copy of the order can be produced before a party, and such order has to be acted upon,” a Division Bench of Justices B.P. Colabawalla and Farhan P. Dubash observed.
Calcutta HC
Calcutta High Court Quashes Pre-IBC Resolution Income Tax Proceedings Against Binani Cement
Case Title : Ultra Tech Cement Limited & Anr. v. Union of India & Ors
Case Number : WPA 2036 of 2020
CITATION : 2026 LLBiz HC(CAL) 239
The Calcutta High Court has quashed income tax notices, orders, and proceedings relating to the period before UltraTech Cement took over management of Binani Cement under an approved IBC resolution plan. The Court held that claims not forming part of the resolution plan could not survive after its approval. The Court also directed the Income Tax Department to refund amounts adjusted against such pre-transfer tax demands, along with applicable interest.
Calcutta High Court Upholds ITAT Order Deleting ₹11.35 Crore Addition For Alleged Cash Loans
Case Title : Principal Commissioner of Income Tax (Central)-2, Kolkata v. Suresh Kumar Banthia
Case Number : ITAT No. 171 of 2026
CITATION : 2026 LLBiz HC (CAL) 245
On 5 October, the Calcutta High Court dismissed the Revenue's appeal against the Income Tax Appellate Tribunal's (ITAT) September 2025 order deleting a Rs. 11.35 crore addition made against businessman Suresh Kumar Banthia for Assessment Year 2020-21. A Division Bench comprising Justices Rajarshi Bharadwaj and Sudip Deb held that although the strict rules of evidence do not apply to income-tax proceedings, tax authorities and tribunals are guided by the general principles underlying the law of evidence and natural justice.
Case Title : Principal Commissioner of Income Tax-2, Kolkata v. Superdeal Resources Private Limited
Case Number : ITAT No.162 of 2026
CITATION : 2026 LLBiz HC (CAL) 248
The Calcutta High Court on 5 October dismissed the Revenue's appeal against deletion of a Rs. 9.32 crore addition relating to sale proceeds from unlisted equity shares of Superdeal Resources Private Limited, finding that the Tribunal's conclusions were based on the evidence on record. A Division Bench comprising Justices Rajarshi Bharadwaj and Sudip Deb held that the Revenue cannot seek a fresh examination of factual findings in an appeal under Section 260A of the Income Tax Act in the absence of any substantial question of law, particularly where an addition is sought to be sustained on suspicion or generalised allegations.
Delhi HC
Case Title : Consistent Builders Pvt. Ltd. v. ACIT, Central Circle 05, Delhi & Anr.
Case Number : W.P.(C) 6037/2023
CITATION : 2026 LLBiz HC(DEL) 1062
The Delhi High Court has quashed a tax assessment against a company, holding that proceedings initiated on the basis of material found during search proceedings were barred by limitation. The Division Bench of Justices Dinesh Mehta and Aditi Choudhary observed that the satisfaction note in the case was recorded on June 25, 2021, corresponding to AY 2022-23, whereas the impugned order dated March 30, 2023 concerned AY 2010-11.
No Timeframe For Cancelling Duplicate PAN Can Cause Hardship To Taxpayers: Delhi High Court
Case Title : Abhay Gupta v. Union of India & Ors.
Case Number : W.P.(C) 14527/2026
CITATION : 2026 LLBiz HC(DEL) 1063
The Delhi High Court has observed that the absence of a prescribed timeframe for deciding applications seeking cancellation of duplicate Permanent Account Numbers (PANs) may cause hardship to taxpayers, particularly in relation to filing Income-Tax Returns and availing services linked to PAN. The Division Bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tejas Karia was dealing with a PIL seeking directions to the authorities to prescribe a timeframe for deciding applications for cancellation of duplicate PANs.
Case Title : Commissioner Of Income Tax, International Taxation-1, New Delhi v. Marguerite Lasusa Chawla
Case Number : ITA 521/2025
The Delhi High Court has given the Income Tax Department a final opportunity to comply with its earlier order directing adjustment of a ₹3.65 crore advance tax payment towards the capital gains tax liability of a 92-year-old assessee, failing which the Court said it would direct payment of interest on the amount. The Division Bench of Justices Subramonium Prasad and Renu Bhatnagar has directed the Department to ensure that the amount is credited to the assessee's account by October 31, 2026.
Gujarat HC
Case Title : Jyoti CNC Automation Limited v. Assistant Commissioner of Income Tax, Circle 1(1), Rajkot
Case Number : R/Special Civil Application No. 16806 of 2025
CITATION : 2026 LLBiz HC (GUJ) 146
The Gujarat High Court on 7 September held that reassessment proceedings cannot be sustained where the Revenue relies merely on screenshots from the Insight Portal without furnishing the underlying reports and material allegedly linking the taxpayer to accommodation transactions. A Division Bench comprising Justices A.S. Supehia and Vaibhavi D. Nanavati quashed the reassessment proceedings against Jyoti CNC Automation Ltd., finding that the notice issued under Section 148A(1) of the Income Tax Act, 1961 did not provide sufficient particulars to enable the taxpayer to effectively respond to the allegations.
Case Title : Ajay Surendra Patel v. Deputy Commissioner of Income Tax
Case Number : R/Special Civil Application No. 6580 of 2016
CITATION : 2026 LLBiz HC (GUJ) 149
The Gujarat High Court has held that a public limited company cannot be treated as a private company merely because one of its directors holds a substantial number of shares. Thus, a director cannot be held personally liable for the company's unpaid tax merely because the director holds substantial shares in the company. The case concerned Section 179 of the Income Tax Act. A Division Bench of Justice A.S. Supehia and Justice Vaibhavi D. Nanavati observed: “In our considered opinion, the status of public limited company cannot be doubted and held to be a private limited company by mere holding of substantial numbers of equity shares by a director.”
Revenue Cannot Reopen Assessment Over Additions Already Pending In Tax Appeals: Gujarat High Court
Case Title : Venus Township (India) LLP v. Deputy Commissioner of Income Tax, Central Circle 1(1), Ahmedabad
Case Number : R/Special Civil Application Nos. 14467, 14472, 14547, 14568, 14595, 14597, 14608, 14609, 14611, 14613, 14615, 14624, 14629, 14630, 14753, 14784 & 15323 of 2025
CITATION : 2026 LLBiz HC (GUJ) 147
The Gujarat High Court on 16 September held that the Revenue cannot reopen an assessment under Section 147 of the Income Tax Act and pursue parallel proceedings where the same additions have already been examined by the CIT(A) on merits and remain subject matter of tax appeals before the High Court. A Division Bench comprising Justices A.S. Supehia and Vaibhavi D. Nanavati quashed reassessment proceedings initiated against Venus Township (India) LLP, finding that the reassessment sought to replicate the identical additions of Rs. 1.32 crore made in the original assessment under Sections 153A/153C.
Karnataka HC
Infosys, Infosys BPO Not Comparable To Goldman Sachs: Karnataka HC Upholds ITAT Order
Case Title : The Principal Commissioner of Income Tax (CIT) & Anr. v. M/s Goldman Sachs Services Pvt. Ltd
Case Number : Income Tax Appeal No. 49 of 2021 GOLDMAN SACHS
CITATION : 2026 LLBiz HC(KAR) 186
The Karnataka High Court has upheld the exclusion of Infosys Ltd and Infosys BPO Ltd as comparable companies for Goldman Sachs Services Pvt Ltd in a transfer pricing dispute, finding no reason to interfere with the tribunal's factual assessment of the companies. A Division Bench of Justice S.G. Pandit and Justice Chillakur Sumalatha dismissed the Income Tax Department's appeal against the tribunal's order concerning Goldman Sachs for assessment year 2014-15.
Case Title : Obedulla v. Union of India
Case Number : WRIT PETITION NO. 31229 OF 2026 (T-IT)
CITATION : 2026 LLBiz HC(KAR) 189
On 6 October, the Karnataka High Court held that a company director cannot challenge an income-tax search and seizure conducted against the company in his individual capacity when the search is not directed against him personally. Justice B M Shyam Prasad found force in the Revenue's contention that Obedulla A, a director of Attica Gold Private Limited, could not challenge the search against the company in his individual capacity.
Case Title : Anurag Kalia v. Union of India
Case Number : WP 28761 of 2025
The Centre on Friday told the Karnataka High Court that same-sex partners seeking a tax exemption on gifts exchanged between spouses must challenge the laws governing marital status, rather than the Income Tax Act. The latter, it argued, merely refers to the legal status recognised under other enactments. Additional Solicitor General K. Arvind Kamath, appearing for the Centre before Justice B.M. Shyam Prasad, made the submission while opposing a petition by Anurag Kalia and Akhilesh Godi.
Kerala HC
Kerala High Court Upholds Rejection Of South Indian Bank's ₹52 Cr. Additional Bad-Debt Claim To ITAT
Case Title : The South Indian Bank Ltd. v. Dy. Commissioner of Income Tax
Case Number : ITA NO. 21 OF 2026
CITATION : 2026 LLBiz HC(KER) 193
The Kerala High Court on 28 September held that the Income Tax Appellate Tribunal (ITAT) cannot refuse to examine a bad-debt disallowance on merits merely because a separate additional claim was raised before the first appellate authority. A Division Bench comprising Justices Devan Ramachandran and Basant Balaji remanded South Indian Bank's Rs. 14.10 crore bad-debt disallowance to the ITAT for fresh consideration, while upholding the rejection of the Bank's separate Rs. 52 crore additional bad-debt claim.
Madras HC
Madras High Court Acquits Woman, Says Non-Filing Of IT Return Not Wilful Without Tax Liability
Case Title : Manivannan Umarani v. The Income Tax Officer
Case Number : CRL RC No. 614 of 2026
CITATION : 2026 LLBiz HC(MAD) 297
The Madras High Court has acquitted a woman convicted for failing to file her income tax return, holding that the non-filing was not wilful where the Income Tax Department had failed to establish that she was liable to pay any tax. Justice Sunder Mohan observed that Section 276CC of the Income Tax Act makes the tax payable by the assessee relevant for determining whether prosecution for failure to file a return can be sustained. It held that, in the absence of any assessment or determination showing the tax payable by the petitioner, the prosecution was misconceived.
Madras High Court Rejects Review Of ₹10 Crore Cash Credit Addition For Lack Of Due Diligence
Case Title : V. Babu v. Deputy Commissioner if Income Tax
Case Number : REV.APPL.No. 107 of 2021
CITATION : 2026 LLBiz HC(MAD) 298
The Madras High Court on 28 September dismissed a review application seeking to reopen a Rs. 10 crore unexplained cash credit addition against an individual engaged in civil contract business. A Division Bench comprising Chief Justice Sushrut Arvind Dharmadhikari and Justice G. Arul Murugan dismissed the review application, holding that the petitioner failed to show due diligence in producing documents relied upon as new evidence and failed to establish the identity and creditworthiness of the creditor and genuineness of the transaction.
Case Title : The Commissioner of Income Tax, Chennai v. M/s. Mahindra Holidays and Resorts India Ltd
Case Number : TCA.No.433 of 2013
CITATION : 2026 LLBiz HC(MAD) 310
The Madras High Court has ruled in favour of Mahindra Holidays and Resorts India Ltd. on its accounting treatment of membership fees worth ₹158.43 crore. It also held that expenditure on domestic software licence renewals could not be disallowed merely because the company had deducted tax on software purchases from foreign suppliers. A Division Bench of Justice Anita Sumanth and Justice S. Raveekumar observed that the company could apportion membership fees over the membership period instead of treating the entire amount received during the accounting year as income.
Rajasthan HC
Rajasthan High Court Quashes Jepee Construction's ₹6.93 Crore Tax Addition Over Short Response Time
Case Title : Jepee Construction Pvt. Ltd. v. The Assessment Unit, National Faceless Assessment Centre & Anr.
Case Number : D.B. Civil Writ Petition No. 5694/2024
CITATION : 2026 LLBiz HC(RAJ) 53
On 6 October, the Rajasthan High Court held that less than three days to respond to a substantial tax addition is not a reasonable opportunity of hearing and set aside an assessment order passed by the National Faceless Assessment Centre against Jepee Construction Pvt. Ltd., involving an addition of about Rs. 6.93 crore. A Division Bench comprising Chief Justice Sanjay K. Agrawal and Justice Baljinder Singh Sandhu found that the assessment order wrongly recorded that the company had not filed a response, despite its reply having been sent by email and acknowledged by the Centre.
ITAT
ITAT Ahmedabad Deletes ₹18.76 Lakh Disallowance On Herbalife Distributor's Commission To Wife's Firm
Case Title : Nirav Dineshbhai Bhavsar v. Income Tax Officer, Ward 5(3)(2), Ahmedabad
Case Number : ITA No. 1971/AHD/2025
CITATION : 2026 LLBiz ITAT(AHM) 289
On 1 October, the Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) held that commission paid by a Herbalife distributor to his wife's proprietary concern cannot be treated as excessive or unreasonable merely by comparing it with a different line of business. Vice-President Dr. B.R.R. Kumar and Judicial Member Rahul Chaudhary deleted the Rs. 18.76 lakh disallowance made under Section 40A(2)(b) of the Income Tax Act, 1961, holding that the reasonableness of expenditure must be examined with reference to the taxpayer's own business and the services actually rendered.
Rejection Of Tax Claim Alone Cannot Mean Concealment: ITAT Mumbai Deletes ₹1.23 Crore Penalty
Case Title : Cyqurex Systems Private Limited v. Deputy Commissioner of Income Tax, Central Circle-2(3), Mumbai
Case Number : ITA Nos. 297/Mum/2026, 3499/Mum/2026 & 4637/Mum/2026
CITATION : 2026 LLBiz ITAT(MUM) 290
The Income Tax Appellate Tribunal (ITAT), Mumbai, has held that merely because a taxpayer's claim is rejected, it does not mean the taxpayer concealed facts or gave a false explanation. The tribunal made the observation while deleting a ₹1.23 crore penalty imposed on Cyqurex Systems Pvt. Ltd. under Section 270A of the Income Tax Act. The penalty arose from the company's claim of ₹7.41 crore as revenue expenditure on software development.
Interest Between Indian Branch And Overseas Head Office Not Taxable: ITAT Mumbai
Case Title : American Express Bank Ltd. v. DDIT (IT)-1(1) / JT DIT (IT)-1(1)
Case Number : ITA Nos. 5667/Mum/2004 and 9414/Mum/2004
CITATION : 2026 LLBiz ITAT(MUM) 291
The Income Tax Appellate Tribunal (ITAT), Mumbai, on 8 October held that interest transactions between an Indian permanent establishment and its overseas Head Office or branches do not constitute taxable income under domestic law, as they represent transactions with oneself. Further that Section 14A of the Income Tax Act, 1961, cannot apply to such receipts. A Bench comprising Judicial Member Beena Pillai and Accountant Member Bijayananda Pruseth partly allowed cross-appeals filed by American Express Bank Ltd. and the Revenue against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2000-01. It also allowed a foreign exchange forward contract revaluation loss and upheld the deduction of expenditure incurred under a voluntary retirement scheme.