LiveLawBiz Direct Tax Weekly Round-Up: October 19 - October 25, 2026
Kapil Dhyani
26 Oct 2026 7:31 PM IST
HIGH COURTS
Bombay HC
Case Title : Swan Defence and Heavy Industries Ltd. v. Assistant Commissioner of Income Tax, Central Circle 6(3) & Ors.
Case Number : Writ Petition (L) No. 31588 of 2026
CITATION : 2026 LLBiz HC(BOM) 605
The Bombay High Court has recently reiterated that the Income Tax Department cannot reassess a company's income for a period before its insolvency resolution plan was approved. This applies even when the Department receives fresh information suggesting fraudulent transactions. A Division Bench of Justice B.P. Colabawalla and Justice Farhan P. Dubash quashed reassessment proceedings initiated against Swan Defence and Heavy Industries Ltd., formerly Reliance Naval and Engineering Ltd. The proceedings related to the 2020-21 assessment year.
Proportionate Rights Shares Allotment Not Taxable Merely Due to Price Difference: Bombay High Court
Case Title : Grasim Industries Limited v. Deputy Commissioner of Income-tax & Ors.
Case Number : Writ Petition No. 4298 of 2026
CITATION : 2026 LLBiz HC(BOM) 591
On Thursday, 22 October, the Bombay High Court held that the difference between the subscription price and fair market value of proportionately allotted rights shares cannot, by itself, be taxed under Section 56(2)(x) of the Income-tax Act when the shareholder's percentage holding remains unchanged and no disproportionate benefit is identified. A Division Bench comprising Justices B. P. Colabawalla and Farhan P. Dubash allowed Grasim Industries Limited's petition challenging reassessment proceedings over an alleged taxable benefit of Rs. 329 crore arising from its subscription to Vodafone Idea Limited's rights shares.
Case Title : Cine Artist Welfare Trust v. Commissioner of Income Tax (Exemptions) & Anr.
Case Number : Writ Petition No. 3976 of 2026
CITATION : 2026 LLBiz HC(BOM) 595
The Bombay High Court has condoned a 260-day delay by Cine Artist Welfare Trust in filing Form 10 (a form required to claim tax benefits on income set aside for future use) under the Income Tax Act, 1961. The court observed that denying the tax exemption could deplete the trust's funds and affect its charitable activities. A Division Bench of Justice B.P. Colabawalla and Justice Farhan P. Dubash set aside the Income Tax Department's order rejecting the trust's request to condone the delay. It directed the department to reconsider the trust's claim to accumulate ₹70 lakh for Assessment Year 2019-20.
Delhi HC
Case Title : Sunil Verma v. Assessing Officer, Assessment Unit, National Faceless Assessment Centre & Anr.
Case Number : W.P.(C) 6249/2026
CITATION : 2026 LLBiz HC(DEL) 1156
The Delhi High Court has set aside an income tax assessment order after the Assessing Officer (AO) failed to consider the assessee's reply filed before the assessment was finalised. The Division Bench of Justices Dinesh Mehta and Aditi Choudhary observed that an AO, being a quasi-judicial authority, is expected to act objectively and dispassionately while dealing with the material available on record.
Case Title : Sunil Verma v. Assessing Officer, Assessment Unit, National Faceless Assessment Centre & Anr.
Case Number : W.P.(C) 6249/2026
CITATION : 2026 LLBiz HC(DEL) 1156
The Delhi High Court has set aside an income tax assessment order after the Assessing Officer (AO) failed to consider the assessee's reply filed before the assessment was finalised. The Division Bench of Justices Dinesh Mehta and Aditi Choudhary observed that an AO, being a quasi-judicial authority, is expected to act objectively and dispassionately while dealing with the material available on record.
Gujarat HC
Case Title : Sanjaykumar Amrutlal Patel v. Income Tax Officer, Ward 1, Patan
Case Number : R/Special Civil Application No. 13210 of 2026
CITATION : 2026 LLBiz HC (GUJ) 155
The Gujarat High Court on 8 October quashed a reassessment notice issued under Section 148 of the Income Tax Act, 1961, against Sanjaykumar Amrutlal Patel for Assessment Year 2022-23, holding that a seized broker's register entry, without a live nexus to the taxpayer, could not justify reopening the assessment. A Division Bench comprising Justices A.S. Supehia and Vaibhavi D. Nanavati held that the entry dated 16 January 2020, at best, reflected the asking rate for land in the Bhadaj area and did not establish a concluded transaction involving Patel.
Case Title : Jayaben Ratilal Sorathia v. Assistant Commissioner of Income Tax
Case Number : R/Tax Appeal No. 632 of 2017
CITATION : 2026 LLBiz HC (GUJ) 156
The Gujarat High Court on 14 October held that penalty for concealment of income under Section 271(1)(c) of the Income Tax Act cannot be levied where the Assessing Officer accepts additional income disclosed in a return filed in response to a search-related notice without making any further addition, leaving no tax sought to be evaded under Explanation 4(c). A Bench comprising Justices Bhargav D. Karia and Nirzar S. Desai set aside the Income Tax Appellate Tribunal's order restoring a penalty of Rs. 21.16 lakh on additional income of Rs. 64.54 lakh disclosed by the taxpayer.
Timely Reassessment Notice Cannot Cure Invalid Income Tax Sanction: Gujarat High Court
Case Title : Ritaben Arvindbhai Patel v. Assistant Commissioner of Income Tax, Central Circle 3, Surat
Case Number : R/Special Civil Application No. 8482 of 2022
CITATION : 2026 LLBiz HC (GUJ) 157
The Gujarat High Court has quashed a tax reassessment, ruling that a timely notice to a taxpayer cannot cure an approval obtained from the wrong authority. The court held that the tax department could not rely on the time given to the taxpayer to respond to a reassessment notice to justify the sanction granted by the Principal Commissioner of Income Tax. The tax department argued that excluding this period meant the approval granted by the Principal Commissioner of Income-tax was valid. The court rejected this interpretation, holding that a 2023 amendment to the Income-tax Act could not retrospectively validate the sanction.
Karnataka HC
Karnataka High Court Quashes Reassessment Over ₹13.39 Crore Turnover Without Supporting Computation
Case Title : Sri Kunjalu Venkatesh Kini v. Additional Commissioner of Income Tax
Case Number : WRIT PETITION NO. 28400 OF 2026 (T-IT)
CITATION : 2026 LLBiz HC(KAR) 203
The Karnataka High Court on 7 October set aside an income tax reassessment order against Kunjalu Venkatesh Kini over alleged non-disclosure of business turnover of Rs. 13.39 crore, holding that the Income Tax Department must disclose the computation and supporting material before proceeding with reassessment. Justice B.M. Shyam Prasad partly allowed Kini's petition and quashed the order passed under Section 148A(3) of the Income Tax Act, 1961, the related approval and the consequential reassessment notice.
Karnataka High Court Upholds Reitzel India Relief, Says Export Incentives Count As Operating Income
Case Title : Principal Commissioner of Income Tax v. M/s Reitzel India Pvt. Ltd.
Case Number : INCOME TAX APPEAL NO. 143 OF 2021
CITATION : 2026 LLBiz HC(KAR) 205
The Karnataka High Court on 8 October dismissed the Income Tax Department's appeal against an Income Tax Appellate Tribunal (ITAT) order directing it to include export incentives received by Reitzel India Pvt. Ltd. in its operating income while determining the arm's length price (ALP) of international transactions. A Division Bench comprising Justices S.G. Pandit and Chillakur Sumalatha held that export incentives directly linked to a taxpayer's export business must be included in operating income for determining the arm's length price, while comparable companies can be rejected only by applying the functional comparability criteria under Rule 10B of the Income Tax Rules.
Orissa HC
Orissa High Court Issues Notice On Challenge To Section 147A Of Income Tax Act
Case Title : Ashok Kumar Sahu v. Central Board of Direct Taxes (CBDT) and others
Case Number : W.P.(C) No.10246 of 2026
CITATION : 2026 LLBiz HC(ORI) 28
The Orissa High Court has recently issued notice on a plea challenging the constitutional validity of Section 147A of the Income Tax Act, 1961, which was introduced by the Finance Act, 2026, with retrospective effect from April 1, 2021. Section 147A was introduced to clarify that the Assessing Officer issuing notices under Sections 148 and 148A would mean an officer other than the National Faceless Assessment Centre or an assessment unit under Section 144B. The provision was made retrospective from April 1, 2021.
Telangana HC
Case Title : M/s EKGE Retail LLP v. Assistant Commissioner of Income-Tax
Case Number : WRIT PETITION No.21210 of 2022
CITATION : 2026 LLBiz HC(TEL) 77
The Telangana High Court on 13 October set aside the Income Tax Department's directions invoking the General Anti-Avoidance Rule (GAAR) against EKGE Retail LLP, allowing it to set off a short-term capital loss of Rs. 49.32 crore against long-term capital gains from a business sale. A Division Bench comprising Acting Chief Justice P. Sam Koshy and Justice Narsing Rao Nandikonda allowed EKGE Retail's writ petition challenging the GAAR directions dated 23 February 2022.
ITAT
Case Title : Deputy Commissioner of Income Tax v. IG3 Infra Limited
Case Number : ITA Nos. 2577 and 2578/Chny/2026
CITATION : 2026 LLBiz ITAT(CHE) 292
On 16 October, the Income Tax Appellate Tribunal (ITAT), Chennai, dismissed the Revenue's appeals against IG3 Infra Limited, holding that cash transactions recorded in a seized Excel sheet could not be attributed entirely to the company without reliable verification and entity-wise segregation. A Bench comprising Judicial Member Manu Kumar Giri and Accountant Member S.R. Raghunatha dismissed the Revenue's appeals for Assessment Years (AYs) 2019-20 and 2020-21.
Case Title : Akara Foundation for Education and Research v. Income Tax Officer, Exemptions Ward-1, Chennai
Case Number : ITA No. 1398/Chny/2026
CITATION : 2026 LLBiz ITAT(CHE) 293
The Income Tax Appellate Tribunal (ITAT), Chennai, has ruled that a charitable trust does not automatically violate tax provisions merely because its founder or trustee receives a salary in excess of ₹50,000. The law restricts payments to certain persons connected with a trust when the remuneration exceeds what may reasonably be paid for the services rendered. The tax authorities must establish whether the payment was actually made and, if so, whether it was excessive.
Case Title : Vikas Ashokkumar Masand v. The Deputy Commissioner of Income Tax
Case Number : ITA No. 3130/AHD/2026
CITATION : 2026 LLBiz ITAT(AHM) 294
On 19 October, the Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) allowed Vikas Ashokkumar Masand's appeal against an order of the Commissioner of Income Tax (Appeals) [CIT(A)] sustaining the addition for Assessment Year 2017–18. A Bench comprising Vice-President Dr. B.R.R. Kumar and Judicial Member Tapas Ram Misra held that cash receipts from customers during demonetisation cannot be treated as unexplained money merely because customer confirmations have not been furnished, and deleted an addition of Rs. 34.40 lakh made against a petrol pump owner under Section 69A of the Income Tax Act, 1961.
Case Title : Azure Knowledge Corporation Pvt. Ltd. v. The Deputy Commissioner of Income Tax
Case Number : ITA No. 2013/AHD/2024
CITATION : 2026 LLBiz ITAT(AHM) 295
On 19 October, the Income Tax Appellate Tribunal (ITAT), Ahmedabad, remanded Azure Knowledge Corporation Pvt. Ltd.'s dispute over Rs. 2.46 crore in software-related intangible assets to the Assessing Officer for fresh verification, including examination of the company's claim for customisation and development expenses and alleged duplicate disallowances. A Bench of Vice-President Dr. B.R.R. Kumar and Judicial Member Tapas Ram Misra set aside the order of the Commissioner of Income Tax (Appeals) in the company's appeal for Assessment Year 2018–19, directing the Assessing Officer to verify the disputed expenditure and recompute the assessed income after checking whether certain expenses had been disallowed twice.
Sale Of Trademark Need Not Include Entire Corporate Identity, House Marks Or Packaging: ITAT Mumbai
Case Title : Novartis AG v. Assistant Commissioner of Income Tax (International Taxation), Circle 3(3)(1)
Case Number : ITA No. 1027/Mum/2023
CITATION : 2026 LLBiz ITAT(MUM) 296
The Income Tax Appellate Tribunal (ITAT), Mumbai, has held that selling a registered trademark does not require the seller to transfer its entire corporate identity, house marks, or every element of product packaging. Holding so, the tribunal deleted a ₹433.14 crore addition treated as royalty by the income tax department in the case of Swiss pharmaceutical company Novartis AG.
Case Title : Cornell University v. Deputy Commissioner of Income Tax (International Taxation)
Case Number : ITA No. 2195/Mum/2025
CITATION : 2026 LLBiz ITAT(MUM) 297
The Income Tax Appellate Tribunal (ITAT), Mumbai, has held that receipts earned by New York-based Ivy league college, Cornell University, from professional and executive education courses offered to Indian students and corporate employees cannot be taxed as Fees for Included Services (FIS) under the India-USA Double Taxation Avoidance Agreement (DTAA). This applies even when the courses are customised for corporate participants and impart technical knowledge.
Foreign Company's PE Cannot Be Presumed From Indian Affiliate's Activities: ITAT Mumbai
Case Title : Cornerstone OnDemand International Limited v. Assistant Commissioner of Income Tax (International Taxation)
Case Number : ITA Nos. 3228/Mum/2023, 4558/Mum/2023 and 2128/Mum/2025
CITATION : 2026 LLBiz ITAT(MUM) 298
The Income Tax Appellate Tribunal (ITAT), Mumbai, on 16 October held that tax authorities cannot presume that a foreign enterprise has a Permanent Establishment (PE) in India merely because its Indian associated enterprise carries out business activities. They must examine the actual contractual arrangements, the parties' conduct and the applicable tax treaty provisions. A Bench comprising Judicial Member Beena Pillai and Accountant Member Arun Khodpia remanded the PE determination and profit attribution issues in the case of Cornerstone OnDemand International Limited to the Assessing Officer for fresh examination, holding that the authorities must support any profit attribution with a reasoned analysis rather than an ad hoc percentage.
ITAT Ahmedabad Deletes ₹4.42 Lakh Penalty For Misreporting Of Income Over PF, ESI Disallowance
Case Title : Nascent Info Technologies Pvt. Ltd. v. Income Tax Officer
Case Number : ITA No. 2906/AHD/2026
CITATION : 2026 LLBiz ITAT(AHM) 299
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, has deleted a ₹4.42 lakh penalty imposed on Nascent Info Technologies Pvt. Ltd. for misreporting of income. It held that mere disallowance of employees' contributions towards Provident Fund (PF) and Employees' State Insurance (ESI) does not automatically constitute misreporting of income. The bench of Vice-President Dr. B.R.R. Kumar and Judicial Member Sanjay Kumar observed that the Revenue must establish that the case falls within the specific categories of misreporting under Section 270A(9) of the Income Tax Act, 1961.
ITAT Ahmedabad Holds BSNL's VRS-2019 Compensation Tax-Exempt
Case Title : Raysinh Atabhai Vala v. Income Tax Officer
Case Number : I.T.A. No.2831/Ahd/2026
CITATION : 2026 LLBiz ITAT(AHM) 300
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, has allowed tax exemption on compensation received by employees under Bharat Sanchar Nigam Limited's Voluntary Retirement Scheme (BSNL VRS-2019). It held that the compensation was exempt from tax and directed the Assessing Officer to recompute the assessees' taxable income and grant refunds, if due. A Bench comprising Judicial Member Rahul Chaudhary and Accountant Member Gangadhar Panda relied on earlier decisions of the Tribunal, which had recognised the eligibility of compensation received under BSNL VRS-2019 for exemption under Section 10(10B) of the Income Tax Act, 1961.