The Delhi High Court has upheld the validity of show cause notices issued after independent scrutiny of income tax records, while cautioning against reliance on AI-generated legal citations.

The Court, in a writ petition, has upheld the Show Cause Notice (SCN) which was issued by the GST Department based on intelligence shared by the Income Tax Department.

The Division Bench held the challenge to SCN as 'premature' and noted the existence of a clandestine server that revealed a parallel accounting system

The court emphasized that proper application of mind by tax authorities justifies such notices, but warned that artificial intelligence tools cannot replace judicial precedent analysis in legal proceedings.

The Supreme Court has issued notice on a fresh Public Interest Litigation challenging the constitutionality of Section 13A sub-clause (d) of the Income Tax Act, which grants tax exemptions for cash donations up to Rs 2,000 and for contributions via electoral bonds.

Filed by Dr. Khem Singh Bhati, the petition argues that the provision creates an opaque political funding mechanism, undermining democratic transparency and accountability. 

It contends that with widespread digital payments, there is no justification for cash donations and seeks directions for stricter scrutiny of political party contributions, PAN and bank details disclosure, and audit of party accounts.

[Khem Singh Bhati v. Election Commission of India]

The Bombay High Court has ruled that cross-border trademark transfers constitute export of goods rather than local sales, making them ineligible for taxation under the Bombay Sales Tax Act, 1959. 

The Court applied the principle that the situs of intangible property follows its owner (mobilia sequuntur personam), holding that the ‘Crocin’ trademark juridically moved outside India upon its assignment from Duphar Interfran Ltd. to SKB Plc (UK).

The court emphasized that international trademark assignments fall under export transactions, aligning with the Central Sales Tax Act's definition of goods movement outside India, even when the asset is intangible and involves no physical transfer.

[M/s. Duphar Interfran Ltd. v. The State of Maharashtra]

The Gujarat High Court revived a revision petition filed under Section 264 of the Income-tax Act by an 82-year-old woman who failed to submit her return for AY 2017–18 due to Alzheimer related ailments. 

The authority had rejected her plea by invoking Section 139, holding that the delay could not be condoned.

The Court held that the revisional jurisdiction under Section 264 is meant to remedy hardship and should not be denied on technical grounds, particularly when the petitioner’s medical condition was undisputed. 

The Court set aside the rejection order and remanded the matter for fresh consideration in accordance with the law.

[Shushilaben Jayantibhai Patel v Principal Commissioner of Income Tax Vadodara–1 & Anr]

Clarifying its decision in the Madras Bar Association, which struck down the Tribunal Reforms Act, 2021, the Supreme Court clarified that Chartered Accountants (CAs) need not possess 25 years of experience to be appointed as technical members in Tribunals such as the Income Tax Appellate Tribunal. 

The Bench of CJI BR Gavai and Justice K Vinod Chandran held that the provision is arbitrary and unconstitutional, applying the same reasoning the Court used when striking down experience requirements for advocates.

The Union government was directed to take this observation into account when drafting future laws governing tribunal appointments.

[Madras Bar Association V Union of India]

The Delhi High Court has permitted GST officials to continue parsing digital data from a CPU seized from advocate Puneet Batra, under strict supervision. Earlier attempts on September 11 and 12 gave only partial results.

The Bench directed that parsing be carried out at the National Forensic Sciences University lab, in the presence of local commissioners, the lawyer’s counsel, and two GST officials. 

Parsed data will be copied for the petitioner and preserved securely.

The exercise will run daily from November 17 to 25, ahead of the next hearing on December 4.

[Puneet Batra v Union of India & Ors]

The Kerala High Court has directed the GST department to investigate alleged tax evasion by a company that billed frozen chicken at 0% GST instead of the applicable 5% rate.

The court recorded that the petitioner, who is a chicken meat dealer, had highlighted serious allegations of tax evasion in the sale of frozen chicken in Kerala.

The court ordered authorities to examine whether the incorrect classification was intentional, potentially resulting in significant revenue loss, and take appropriate action against violations of tax laws.

The Gujarat High Court has held that private hospitals must pay Value Added Tax (VAT) on the supply of medicines, implants, professional consumables, and related goods provided to in-patients, ruling that such transfers constitute a "deemed sale."

A Division Bench of Justices Bhargav D. Karia and D. N. Ray observed that after the 46th Constitutional Amendment, the definition of “works contract” under Article 366(29A) of the Constitution was broadened to cover composite transactions including transfer of goods with services

The Court dismissed the petition, stating that the hospitals’ supply of such goods during treatment involves ownership transfer for consideration and is therefore taxable.

The Madras High Court ruled that hostels providing accommodation for working men and women are residential properties, and cannot be taxed at commercial property-tax, water-tax or electricity-charge rates. 

The judgment arose from petitions by hostel owners in Chennai and Coimbatore, challenging municipal authorities’ reclassification of their hostels to commercial status.

The Court held that the proper test is the end use of the premises, as “sleeping apartments” for working individuals, not the business model of the operator.

As a result, all notices reclassifying such hostels as commercial were quashed, and the authorities were directed to treat petitioners’ properties as residential units for tax purposes.

The Supreme Court decided to examine whether registration of a trust under Section 12AA of the Income Tax Act, 1961 automatically entitles its donors to claim tax deductions under Section 80G.

A Bench of Justices J.B. Pardiwala and K.V. Viswanathan issued notice on a Revenue appeal challenging the Chhattisgarh High Court’s ruling that once charitable registration is granted under Section 12AA, approval under Section 80G(5) cannot be denied merely for engaging in religious activities.

The Revenue contended that 80G approval requires fresh verification of charitable purposes and cannot be presumed from 12AA registration. The Court issued notice returnable within four weeks.

[Commissioner of Income Tax v Sadhumargi Shantkranti Jain Society]

The Supreme Court has issued notice on a writ petition filed by Chartered Accountant Sharad Toshniwal seeking the consolidation of multiple FIRs registered against him in the ₹792 crore Falcon Invoice scam across six states.

A Bench of CJI BR Gavai, and Justices K Vinod Chandran and NV Anjaria heard the plea. Toshniwal submitted that he resigned from the company before the alleged scam began and was named in only one FIR.

The Court declined to grant interim protection but issued notice on his application seeking such relief. The matter is listed for further hearing after four weeks.

[Sharad Chandra Toshniwal v State of Telangana & Ors.]

A Division Bench of the Punjab and Haryana High Court, comprising Justices Lisa Gill and Meenakshi I. Mehta, directed the Central Board of Direct Taxes (CBDT) to extend the due date for filing Income-Tax Returns (ITRs) for assessees required to furnish audit reports.

The Court observed that since the due date for submitting audit reports under Section 44AB of the Income-Tax Act had already been extended to October 31, 2025, the ITR deadline must also be correspondingly extended to maintain the statutory one-month gap.

Relying on the Gujarat High Court’s similar extension, the Bench directed the CBDT to modify the ITR due date accordingly, noting that a detailed order is awaited.

The Gauhati High Court held that a Goods and Services Tax (GST) registration may be restored even after the statutory revocation period expires, provided the taxpayer complies with the conditions under Rule 22(4) of the Central Goods and Services Tax Rules, 2017.

The petitioner’s registration had been cancelled for non-filing of returns for over six months, but was later regularised through payment of dues and filing of pending returns.

The Court noted that cancellation entails severe civil consequences and directed that authorities must reconsider restoration when statutory compliance is achieved. 

[Dhirghat Hardware Stores & Anr v Union of India & Ors]

The Delhi High Court upheld the validity of an Income Tax Commissioner’s sanction for reopening an assessment under Section 151 of the Income Tax Act, 1961, even when expressed as “Yes, I am convinced.”

A Division Bench of Justices V. Kameswar Rao and Vinod Kumar ruled that the Act does not mandate a particular format for approval, provided the Commissioner records satisfaction after due application of mind.

The Court found the sanction in this case to be reasoned and non-mechanical, holding that the reassessment proceedings were lawfully initiated and setting aside the Income Tax Appellate Tribunal’s contrary order.

[Principal Commissioner of Income Tax v. XYZ Company]