Supreme Court & High Courts Weekly Round-Up

This weekly round-up analytically summarises the key stories related to the Supreme Court & High Courts reported at Taxscan.in during the previous week, from January 04, 2026 to January 10, 2026, Part - II.

GST Appeal filed Beyond 120 Days: Gujarat HC Refuses to Condone 6-Day Delay, says ‘Cannot call Back & Examine OIO’ when Appeal filed

HARSH DEEPK SHAH vs UNION OF INDIA CITATION : 2026 TAXSCAN (HC) 126

The Gujarat High Court dealt with the issue of whether a writ court can direct the GST Appellate Authority to entertain an appeal filed beyond the statutorily prescribed limitation period under Section 107 of the Central Goods andServices Tax Act, 2017. The case arose from the rejection of a GST appeal filed after the expiry of the maximum condonable period of 120 days, where the assessee sought interference under Article 226 of the Constitution to overcome a marginal delay of six days. The core question before the Court was whether, after availing the statutory appellate remedy and failing on limitation, the High Court could set aside the appellate order and examine the Order-in-Original on merits.

The Division Bench comprising Justice A.S. Supehia and Justice Pranav Trivedi dismissed the writ petition filed by Harsh Deepk Shah, holding that once the assessee has exhausted the statutory appellate remedy and the appeal is barred by limitation, the High Court cannot “call back and examine” the Order-in-Original. Relying on Assistant Commissioner (CT) v. Glaxo Smith Kline Consumer Health Care Ltd., the Court held that the wide powers under Article 226 cannot be exercised to defeat the clear legislative intent on limitation. The Bench clarified that writ jurisdiction may be invoked only in cases involving lack of jurisdiction or violation of principles of natural justice, neither of which was present in the case, as the dispute was purely factual. Accordingly, the petition was dismissed.

Madras HC directs DRI to Decide Whether ‘Vital Wheat Gluten’ is covered by DFIA for Wheat Flour

M/s Bhansali Chematics Private Limited vs The SeniorIntelligence Officer CITATION : 2026 TAXSCAN (HC) 127

The Madras High Court examined whether the product “vital wheat gluten” imported by Bhansali Chematics Private Limited could be treated as “wheat flour” for the purpose of duty-free import under the Duty Free Import Authorization (DFIA) issued under the Foreign Trade Policy, and whether the Directorate of Revenue Intelligence was justified in issuing a mahazar and proposing seizure of the perishable goods. The petitioner challenged the mahazar dated 17 November 2025, contending that the DFIA permitted duty-free import of wheat flour and that vital wheat gluten is classifiable and exempted in the same manner, making the action without jurisdiction.

The single-judge Bench of Justice Abdul Quddhose held that the core issue required a factual determination by the authorities and directed the Directorate of Revenue Intelligence to grant a personal hearing, consider the petitioner’s explanation and the judicial precedents relied upon, and pass a reasoned final order within one week. Taking note of the perishable nature of the goods and the pendency of the matter without a counter-affidavit, the Court restrained the respondents from seizing the goods until the final decision was taken and directed immediate release if the petitioner’s contentions were accepted. The writ petition was disposed of without costs.

Chhattisgarh HC Grants Bail to Applicant for Offences u/s 7 & 12 of Prevention of Corruption Act in ₹4000 Cr Liquor Scam Case

Chaitanya Baghel vs State Of Chhattisgarh CITATION : 2026 TAXSCAN (HC) 128

The High Court of Chhattisgarh considered a bail application in connection with the alleged ₹4,000 crore liquor scam, examining whether continued custodial detention of the applicant, Chaitanya Baghel, was justified for offences under Sections 7 and 12 of the Prevention of Corruption Act, 1988, read with Sections 420, 467, 468, 471 and 120-B of the IPC. The applicant, who was not named in the FIR registered by the EOW/ACB and was not arraigned in the initial or five supplementary charge sheets, challenged his arrest as arbitrary and mala fide, contending that it violated statutory safeguards under Section 35(b) of the Bharatiya Nagarik Suraksha Sanhita (BNSS) and amounted to pre-trial punishment in breach of Article 21 of the Constitution. The key issue before the Court was whether further incarceration was warranted when the investigation was substantially complete and the triple test for bail stood satisfied.

Justice Arvind Kumar Verma allowed the bail application, holding that no compelling reason survived for the applicant’s continued detention. The Court noted that the applicant was neither named in the FIR nor charge-sheeted despite multiple supplementary charge sheets, and that no recovery of money, property, or incriminating material had been made from him. Observing that custodial interrogation was no longer necessary and that several co-accused, including those with allegedly graver roles, had already been granted bail, the Court held that the principle of parity squarely applied. It further held that given the scale of the case, the number of accused and witnesses, and the improbability of an early trial, prolonged incarceration would amount to pre-trial punishment, violating Article 21. Accordingly, bail was granted on furnishing a personal bond of ₹1,00,000 with two local sureties, subject to stringent conditions.

Electricity Duty Cannot Be Levied on ‘Net Charges’ Without Amending Charging Section: Jharkhand HC Strikes Down 2021 Amendment

M/s. Pali Hill Breweries Private Limited vs The State ofJharkhand CITATION : 2026 TAXSCAN (HC) 129

The Jharkhand High Court examined the validity of the levy of electricity duty based on the value of electricity supplied (“net charges”) under the Jharkhand Electricity Duty (First Amendment) Act, 2021 and the Electricity Duty Rules, 2021, in the context of Section 3 of the parent Electricity Duty Act, which is the charging provision. The principal legal issue before the Court was whether the State could shift the basis of levy from units of electricity consumed or sold to a value-based levy without amending the charging section itself, and whether such a levy suffered from arbitrariness and excessive delegation, particularly when the term “net charges” was undefined in the statute.

The Division Bench comprising Chief Justice Tarlok Singh Chauhan and Justice Sujit Narayan Prasad held that in a taxing statute, the charging section must clearly authorise both the levy and the measure of tax, and since Section 3 continued to levy duty only on units of electricity, the State could not impose duty on “net charges” without amending that provision. The Court ruled that provisos, schedules, or delegated legislation cannot override or enlarge the scope of the charging section, and further held that the absence of a statutory definition of “net charges” rendered the levy uncertain and arbitrary. Consequently, the Jharkhand Electricity Duty (First Amendment) Act, 2021 and the Electricity Duty Rules, 2021 were struck down to the extent they imposed a value-based levy, while the subsequent Second Amendment Act, 2021 restoring a unit-based levy was upheld. The Court quashed electricity bills raised under the invalid provisions and directed adjustment of excess duty already paid against future bills, allowing the writ petitions.

Supplier’s Failure to Pay GST Cannot Deny ITC to Bona Fide Buyer: Tripura HC says ‘Parliament fails to Distinguish Bona Fide Buyers’

M/S. Sahil Enterprises vs Union of India CITATION : 2026 TAXSCAN (HC) 130

The Tripura High Court examined whether Input Tax Credit (ITC) can be denied to a bona fide purchasing dealer under Section 16(2)(c) of the Central Goods and Services Tax Act, 2017, solely on the ground that the supplier failed to file returns or remit the tax collected to the Government. The core legal issue before the Court was the interpretation and application of Section 16(2)(c), particularly whether the provision could be enforced against genuine purchasers despite there being no statutory mechanism enabling them to verify the supplier’s actual payment of tax, and whether such denial imposed an arbitrary, impossible, and disproportionate burden violative of Articles 14, 19(1)(g), 265 and 300-A of the Constitution.

The Division Bench comprising Chief Justice M.S. Ramachandra Rao and Justice S. Datta Purkayastha held that while Section 16(2)(c) of the CGST Act is constitutionally valid, it must be read down and cannot be interpreted to deny ITC to bona fide purchasers who have entered into genuine transactions after taking all statutory precautions. The Court observed that Parliament failed to distinguish between honest purchasing dealers and collusive or fraudulent transactions, and that a purchaser cannot be expected to do the impossible by predicting whether a supplier would default in remitting tax. Concluding that the petitioner’s transactions were genuine and non-collusive, the Court set aside the impugned order and directed the GST authorities to allow ITC of ₹1,11,60,830/- to the petitioner, holding that denial of credit in such circumstances would unjustly punish bona fide buyers instead of defaulting suppliers.

No Reopening of Settled Issues: Delhi HC Bars Plea against RBI in Property Loan Dispute with Revoked ATS and PoA

AJAY NARAIN vs RESERVE BANK OF INDIA CITATION : 2026 TAXSCAN (HC) 131

The Delhi High Court examined whether issues conclusively settled in prior civil proceedings could be reopened by invoking writ jurisdiction under Article 226 of the Constitution of India in a Letters Patent Appeal arising from a long-standing loan and property dispute. The core legal issue before the Court was whether the appellant could challenge, through writ proceedings, matters relating to ownership of property, validity of an Agreement to Sell and Powers of Attorney, and related foreign exchange approvals, when these issues had already been adjudicated and attained finality in earlier civil and appellate proceedings before the same High Court.

The Division Bench comprising Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela dismissed the Letters Patent Appeal, holding that the appellant was impermissibly attempting to re-litigate issues already conclusively decided. Justice Gedela, delivering the oral judgment, observed that earlier Division Bench decisions had rendered clear findings on the validity of the Agreement to Sell, the Powers of Attorney, and the alleged transfer of property, and those findings had attained finality. The Court held that writ jurisdiction under Article 226 cannot be invoked to reopen settled questions merely because the appellant was dissatisfied with the outcome of earlier proceedings, and accordingly affirmed the Single Judge’s dismissal of the writ petition.

Land kept as Security can be Auctioned for Loan Default after giving 30 Days Time to clear Dues u/r 9(1) SARFAESI: J&K HC

Nazir Ahmad Bhat vs Chairman/ Managing Director J&KBankCorporate Office CITATION : 2026 TAXSCAN (HC) 132

The High Court of Jammu & Kashmir and Ladakh examined whether a secured creditor bank can auction mortgaged land under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, and the SARFAESI Security Interest (Enforcement) Rules, 2002, while ensuring compliance with Rule 9(1), which mandates that a borrower must be given 30 days from the date of notice of sale to repay outstanding dues. The legal issue before the Court was whether the auction and sale of the petitioner’s mortgaged property by J&K Bank, following his default on repayment, was valid and in accordance with statutory provisions.

The Division Bench comprising Justice Sanjeev Kumar and Justice Sanjay Parihar dismissed the writ petition filed by Nazir Ahmad Bhat, holding that the bank had adhered to all statutory requirements under Section 13(4) of the SARFAESI Act and Rule 9(1) of the Security Interest (Enforcement) Rules. The Court noted that although the initial sale notice granted only 15 days, the bank subsequently issued an extension, providing the petitioner with a full 30-day period to clear his dues. Since the statutory prescriptions were fully complied with, the auction and issuance of the sale certificate were lawful, and the petitioner could not challenge the validity of the sale.

Security Cheque Defence Rejected: Himachal Pradesh HC upholds Conviction u/s 138 NI Act but Reduces Jail Term to 6 Months

Sandeep Kumar Sharma vs PNB CITATION : 2026 TAXSCAN (HC) 133

The Himachal Pradesh High Court dealt with a revision petition challenging a conviction under Section 138 of the Negotiable Instruments (NI) Act, 1881. The legal issue before the Court was whether a cheque issued by the petitioner, Sandeep Kumar Sharma, could be treated as a security and thus exempt from liability under Section 138. The petitioner had defaulted on a bank loan of ₹26.66 lakh sanctioned by Punjab National Bank, issued a cheque of ₹9.95 lakh toward part repayment, which was dishonoured for insufficient funds, and claimed that the cheque was issued only as security.

Justice Rakesh Kainthla upheld the conviction, relying on precedents including APS Forex Services (P) Ltd. v. Shakti International Fashion Linkers (2020) and Sampelly Satyanarayana Rao v. Indian Renewable Energy Development Agency Ltd. (2016), which establish that a cheque issued as security still attracts liability under Section 138 if dishonoured. The Court found that all statutory ingredients of Section 138 were satisfied, including deemed service of notice and non-payment. While the conviction was affirmed, the sentence of two years’ imprisonment was reduced to six months due to absence of aggravating circumstances, with the compensation of ₹13 lakh maintained.

Delhi HC Suspends Chartered Accountant for 1 Year over Irregular Allotment of Shares using Ante-Dated Stock Invests

COUNCIL OF INSTITUTE OF CHARTERED ACCOUNTANTS vs SHRI KISHANGUPTA CITATION : 2026 TAXSCAN (HC) 134

The Delhi High Court addressed a reference under Section 21(6) of the Chartered Accountants Act, 1949 concerning allegations of professional misconduct against Shri Kishan Gupta, a Chartered Accountant and then Chairman of Bharthari Financial Services Limited (BFSL). The legal issue involved whether Shri Gupta’s role in the irregular allotment of shares in BFSL’s public issue, facilitated through the use of ante-dated stock invests after the closure of the issue, amounted to “other misconduct” under Section 22 read with Section 21 of the Act. The case arose from SEBI’s findings of manipulation in the allotment process and ICAI’s disciplinary proceedings against Shri Gupta.

A Division Bench comprising Justice V. Kameswar Rao and Justice Vinod Kumar upheld ICAI’s findings, noting that Shri Gupta, as Chairman and Whole-Time Director, knowingly accepted applications supported by post-dated stock invests and failed to halt allotments, prejudicing genuine investors. The Court observed that Chartered Accountants are fiduciaries expected to uphold the highest standards of integrity and ethics. Accordingly, the Court suspended Shri Gupta from ICAI membership for one year, restraining him from practicing as a Chartered Accountant and directing him to pay Rs. 10,000 in costs, thereby allowing the reference made by ICAI.

Denial of GST Appeal would Cost Taxpayer an Important Forum: Calcutta HC allows Appeal Subject to Conditions

Ishika Packaging Private Limited vs The State of West Bengal CITATION : 2026 TAXSCAN (HC) 135

The Calcutta High Court dealt with a GST appeal under Section 107 of the West Bengal GST Act, 2017, concerning the dismissal of an appeal against a Section 73 adjudication order on the ground of limitation. The legal issue was whether a taxpayer could be allowed to file a delayed appeal when the delay arose due to alleged unawareness of the adjudication order, which had been uploaded on the GST portal under the “Additional Notices and Orders” tab instead of the main “View Orders” tab. The case arose from an April 24, 2024, order under Section 73 and the subsequent challenge by Ishika Packaging Private Limited.

Justice Om Narayan Rai, after considering arguments, observed that the petitioner’s explanation for the delay was not entirely satisfactory, noting that the taxpayer appeared to have knowledge of the notice. However, balancing the equities and ensuring that the petitioner did not miss an important forum, the Court allowed the appeal to be filed on the condition that Rs. 20,000/- be deposited with the State Legal Services Authority, West Bengal within two weeks. Upon such deposit, the appellate authority was directed to hear the appeal on merits.

GST Personal Hearing Fixed before Reply Date is Putting ‘Cart Before Horse’: Uttarakhand HC sets aside Order against Ad Agency

Yashika AD Agency vs Commissioner, State Goods and Service Tax CITATION : 2026 TAXSCAN (HC) 137

The Uttarakhand High Court addressed a GST adjudication issue involving M/s Yashika AD Agency, focusing on whether a personal hearing can be scheduled before the last date for submitting a reply to a Show Cause Notice (SCN). The legal issue was whether conducting a personal hearing prior to the statutory deadline for filing a response violates the scheme of the GST Act. The petitioner contended that the department fixed the personal hearing before the expiry of the reply period, citing the precedent of M/s Modine Thermal Systems Private Limited vs. State of Uttarakhand and others, where the court had observed that such an approach is “putting the cart before the horse.”

The Division Bench of Chief Justice G. Narendar and Justice Subhash Upadhyay, following the observations in the Modine Thermal Systems case, held that scheduling a personal hearing before the last date of reply is contrary to the statutory scheme and principles of natural justice. Relying on the precedent, the court emphasized that submissions during the personal hearing must be based on the reply, and any hearing prior to it is procedurally flawed. Accordingly, the court set aside the GST order against M/s Yashika AD Agency and disposed of the petition.

VAT ITC availed is Only Provisional until Dealer Produces Proof for ‘Transaction of Sale’: Madras HC directs Dealer to Submit Proof

Victoria Steel Enterprises Limited vs The Assistant Commissioner(CT) (FAC) CITATION : 2026 TAXSCAN (HC) 138

The Madras High Court addressed the issue of Input Tax Credit (ITC) under the Tamil Nadu Value Added Tax (TNVAT) Act, specifically whether ITC availed by a dealer can be treated as provisional pending proof of an actual sale transaction. The petitioner, Victoria Steel Enterprises Limited, challenged notices issued by the Assistant Commissioner (CT) proposing reversal of ITC for the assessment years 2011-14. The legal question revolved around the burden of proof under Section 17(2) of the TNVAT Act, which requires the purchasing dealer to demonstrate that a valid sale transaction occurred to justify retention of ITC.

Justice Senthil Ramamoorthy, applying the precedents of Sahyadri Industries Ltd. v. State of Tamil Nadu, 2023 and State Tax Officer v. M/s Arunachala Impex Private Limited, reiterated that ITC remains provisional until the dealer produces sufficient evidence of the underlying sale. The court emphasized that dealers must preserve and submit transport documents, lorry receipts, consignment notes, or other collateral proof. Following these principles, the High Court disposed of the writ petition, directing Victoria Steel Enterprises Limited to submit a detailed reply along with all relevant supporting documents within 30 days.

Business Setback and Accountant’s Lapse in Filing Returns is Bona Fide Cause: Madras HC Directs GSTN to Enable Filing of Returns

Tvl.Premium Tyres Private Limited vs The Assistant Commissioner CITATION : 2026 TAXSCAN (HC) 139

The Madras High Court dealt with the issue of GST registration cancellation and non-filing of returns, examining whether genuine business setbacks and accountant’s failure to file returns constitute sufficient cause for relief. The petitioner, Tvl. Premium Tyres Private Limited, had its GST registration cancelled after failing to file returns for six months. The legal question before the court was whether such non-filing, caused by financial difficulties and reliance on an errant accountant, could justify restoration of GST registration under the GST law.

Justice Krishnan Ramasamy, after considering the petitioner’s submissions and finding the reasons for non-filing genuine, set aside the cancellation order. The court directed the GST Network (GSTN) to update the portal to facilitate filing of pending returns. The petitioner was allowed to clear all tax liabilities, interest, and late fees within four weeks, while unutilised Input Tax Credit (ITC) was to remain frozen until proper scrutiny and approval. The court cautioned that failure to comply with these conditions would automatically terminate the relief granted, and the matter was disposed of accordingly.

Arrest Valid if “Grounds” and "Reasons to Believe” are Communicated to Arrested Person u/s 19 PMLA: Calcutta HC

Yogesh Dua vs Directorate of Enforcement through its AssistantDirector CITATION : 2026 TAXSCAN (HC) 140

The Calcutta High Court examined the validity of an arrest under Section 19 of the Prevention of Money Laundering Act, 2002 (PMLA). The petitioner, Yogesh Dua, challenged his arrest and remand by the Enforcement Directorate (ED) in connection with an alleged ₹47 lakh financial fraud, claiming that the “grounds of arrest” and “reasons to believe” were procedurally defective and lacked substance. The key legal issue before the court was whether compliance with Section 19(1) and 19(2) of the PMLA, requiring communication of reasons to the accused and forwarding material to the Adjudicating Authority, had been satisfied.

Justice Suvra Ghosh observed that the ED had duly communicated both the “grounds of arrest” and the “reasons to believe” to the petitioner at the time of arrest and forwarded the material to the Adjudicating Authority in accordance with Section 19(2) of the PMLA. The court held that these procedural safeguards were fully complied with and no irregularity had occurred. Accordingly, the Calcutta High Court dismissed the writ petition, upholding the lawfulness of the ED’s arrest and remand.

Banks cannot Reduce Contractual Fixed deposit (FD) Rates in Mid-term: Allahabad HC says Depositors Cannot suffer due to Bank’s Oversight

Nem Kumar Jain vs Union Of India CITATION : 2026 TAXSCAN (HC) 141

The Allahabad High Court ruled that banks cannot unilaterally reduce the interest rates on Fixed Deposit Receipts (FDRs) mid-term, holding that depositors cannot be made to suffer for any mistake or internal circular issued by the bank. The petitioners, Nem Kumar Jain and family members, challenged the reduction of interest rates on their FDRs after the merger of Oriental Bank of Commerce with Punjab National Bank, where rates were cut from 10.75% to 9.25% and 10.25% to 8.25%, despite being contractually agreed at higher rates. The key legal question was whether the bank could retrospectively alter the contracted interest rates without depositor consent.

The division bench of Justice Swarupama Chaturvedi and Justice Ajit Kumar held that once an interest rate is expressly stated in an FDR, it forms a contractual obligation, and banks cannot reduce it to the detriment of the depositor. Citing the RBI Master Circular and Supreme Court precedents, the court noted that neither internal circulars nor RBI guidelines empower banks to retrospectively alter agreed rates. The High Court directed the bank to compute and pay interest on the petitioners’ FDRs at the originally contracted rates from the respective dates of maturity.

GST does not Mandate Toll Plaza Receipts to Prove Movement of Goods: Allahabad HC says E-waybill and Invoices sufficient

Raghuvansh Agro Farms Ltd vs State of U.P CITATION : 2026 TAXSCAN (HC) 142

The Allahabad High Court dealt with the legal issue of whether toll plaza receipts are mandatory to prove the movement of goods under the Goods and Services Tax Act, 2017, particularly in proceedings initiated under Section 74 relating to recovery of tax in cases of alleged suppression, misstatement, or fraud. The court examined whether the petitioner, a registered dealer in agricultural goods, could be penalized or denied input tax credit solely for failing to produce toll plaza receipts when other evidence of goods movement, such as tax invoices, e-way bills, transport bilties, and banking records, was already furnished.

The Division Bench, comprising Justice Piyush Agarwal, held that the absence of toll plaza receipts did not invalidate the evidence submitted by the petitioner and emphasized that Section 74 proceedings require clear proof of wilful misstatement, fraud, or suppression of facts to initiate recovery. The court quashed the GST orders against Raghuvansh Agro Farms Ltd, affirming that e-way bills, invoices, and transporter payment records were sufficient to prove the legitimate movement of goods and that the authorities could not impose liability based solely on missing toll receipts.

HP HC Grants Bail to Govt Official in ₹200 Cr Scholarship Scam Case Citing Prolonged Incarceration and Delay in PMLA Tria

Arvind Rajta vs Directorate of Enforcement (ED) CITATION : 2026 TAXSCAN (HC) 143

The Himachal Pradesh High Court addressed the legal issue of granting bail under the Prevention of Money Laundering Act, 2002 (PMLA) in cases involving alleged economic offences, particularly considering the impact of prolonged incarceration and delayed trial. The court examined whether the applicant, a government official accused in a Rs. 200 crore post-matric scholarship scam, could be granted regular bail under Section 45 of the PMLA, despite the serious nature of the alleged offences and ongoing investigations by the Enforcement Directorate (ED) and CBI.

A Division Bench comprising Justice Virender Singh granted bail to the applicant, Arvind Rajta, holding that the delay in trial and extended pre-trial custody violated his fundamental right to a speedy trial under Article 21 of the Constitution. The court noted that charges had not yet been framed in either the PMLA case or the predicate offences, and the matter involved voluminous evidence and numerous witnesses, making early trial completion unlikely. Relying on Supreme Court precedents, the bench observed that the rigours of Section 45 could be diluted in such circumstances and directed release on bail upon furnishing requisite bonds and sureties, subject to regular conditions.

AO Cannot Invoke S.147/148 to Reopen Income Tax Assessment Solely on Search Material Without S.153C Satisfaction Note: Gujarat HC

PARAS CHANDRESHBHAI KOTICHA vs INCOME TAX OFFICER WARD CITATION : 2026 TAXSCAN (HC) 144

The Gujarat High Court dealt with the legal issue of whether a jurisdictional Assessing Officer (AO) can reopen assessments under Sections 147 and 148 of the Income Tax Act, 1961 solely based on material obtained during a search under Section 132, without following the special procedure prescribed under Sections 153A and 153C. The Court examined whether the non-obstante clauses in Sections 153A/153C override the general reassessment provisions of Sections 147/148 and emphasized that AOs cannot bypass the statutory mandate to record satisfaction before transmitting search material to the jurisdictional AO of other persons.

A Division Bench of Justices A.S. Supehia and Pranav Trivedi held that reopening under Sections 147/148 based solely on search material without recording satisfaction under Section 153C is illegal and without jurisdiction. Relying on Manish Maheshwari v. Asstt. CIT and Indore Construction (P) Ltd. v. CIT, the court clarified that Sections 147/148 can only be invoked if independent post-search material exists suggesting escaped income. Applying these principles, the Court upheld reassessment in cases where independent evidence emerged (Group A) but quashed reassessments based solely on search material without satisfaction (Groups B, C, D).

GST Registration Cancelled as Authorities Unaware of Business’ Relocation: Calcutta HC Directs Reconsideration

Bhola Prasad Barui vs The State of West Bengal CITATION : 2026 TAXSCAN (HC) 145

The Calcutta High Court dealt with the issue of revocation of GST registration under the Goods and Services Tax Act, 2017, specifically examining whether cancellation on the ground of alleged “fraud, wilful misstatement or suppression of facts” was justified when the petitioner had shifted his place of business. The Court considered whether the GST authorities were required to verify the petitioner’s new business location before cancelling registration and emphasized the availability of an equally efficacious alternative remedy under Section 30 of the GST Act, which allows for application for revocation of cancellation.

A Single Bench of Justice Om Narayan Rai directed that if the petitioner, Bhola Prasad Barui, filed an application for revocation before the Proper Officer within one week, it would be treated as filed within time and decided on merits. The Court clarified that the Revenue must provide the petitioner a fair opportunity of hearing while considering the revocation application but did not mandate restoration of registration, leaving the decision to the discretion of the Proper Officer. The writ petition was accordingly disposed of.

Axis Bank’s Freeze Based on Third‑Party Letter Unjustified: Calcutta HC Restores Defreezing of Company Accounts

Ravindra Pratap Singh vs Reserve Bank of India CITATION : 2026 TAXSCAN (HC) 146

The Calcutta High Court dealt with the issue of freezing and defreezing of a company’s bank accounts by a commercial bank, examining whether Axis Bank’s freeze based on communications from a third-party entity Vindhya Telelinks Ltd. (VTL) was justified. The legal question revolved around the bank’s reliance on third-party letters instead of communications from the company itself, and whether such action violated the company’s rights to operate its bank and demat accounts, particularly when the Registrar of Companies (ROC) had removed the “management dispute” marking.

A Division Bench of Justices Sabyasachi Bhattacharyya and Supratim Bhattacharya observed that Axis Bank had no locus standi to intervene in the internal management disputes of August Agents Ltd. and had unjustifiably relied on letters from VTL rather than the company’s own communications. The Court held that the Single Judge’s order suspending the defreezing of the accounts and keeping the contempt application in abeyance was unsubstantiated and unsustainable. Accordingly, the Bench set aside the impugned order and clarified that the company’s bank and demat accounts should be defrozen in accordance with the earlier direction, with no further fetters imposed.

Income Earned from Sale of Tissue-Cultured Plants is Agricultural Income, Exempted from Income Tax: Telangana HC

A.G. Biotech Laboratories vs Income Tax Office CITATION : 2026 TAXSCAN (HC) 147

The Telangana High Court addressed the legal issue of whether income earned from the sale of tissue-cultured plants qualifies as agricultural income and is therefore exempt under Section 10(1) of the Income Tax Act, 1961. The dispute arose when A.G. Biotech Laboratories (India) Ltd., the assessee, claimed such income as agricultural income, but both the Assessing Officer and the Income Tax Appellate Tribunal treated it as business income, arguing that the activity was carried out in laboratories using scientific processes and was not directly derived from land.

A Division Bench comprising Justice P. Sam Koshy and Justice N. Tukaramji observed that modern scientific methods like tissue culture do not sever the link between cultivation and land. The court held that cultivation of mother plants involved all basic agricultural operations, and the subsequent laboratory propagation was a continuation of these operations. Accordingly, the Bench allowed the assessee’s appeals, set aside the Tribunal’s orders, and ruled that income from the sale of tissue-cultured plants qualifies as agricultural income exempt from income tax.

ITR Refund of Rs. 5.37cr not Paid to Microsoft Corp India for 8 Years: Delhi HC orders Refund with Interest

MICROSOFT CORPORATION INDIA PVT vs DEPUTY COMMISSIONER OF INCOMETAX CITATION : 2026 TAXSCAN (HC) 148

The Delhi High Court dealt with the issue of delayed income tax refunds and interest under Section 244A(1A) of the Income Tax Act, 1961 in the case of Microsoft Corporation India Pvt. Ltd. The petitioner approached the court seeking refund of Rs. 5.37 crore, which had been held by the Income Tax Department for over eight years. The primary legal issue was the department’s undue delay in disbursing the refund and interest legally payable to the assessee.

A Division Bench comprising Justice Dinesh Mehta and Justice Vinod Kumar observed that the prolonged non-payment reflected callousness on the part of the authorities. The court directed the department to pay the full refund along with applicable interest by 15.02.2026 and held that failure to comply would attract personal liability on the Deputy Commissioner of Income Tax to pay Rs. 1,00,000 as costs to the petitioner. The court criticized the department’s unreasonable request for 12 weeks to process the refund, noting that such delays undermine citizen rights and the rule of law.

No PE Established: Delhi HC Quashes 3.5% TDS Certificate u/s 197 issued against GE Energy, Restores to 1.5%

GE ENERGY PARTS INC vs ASSISTANT COMMISSIONER OF INCOME TAX& ANR CITATION : 2026 TAXSCAN (HC) 149

The Delhi High Court addressed the issue of Tax Deduction at Source (TDS) under Section 197 of the Income Tax Act, 1961 in the case of GE Energy Parts Inc (USA) and GE Global Parts and Products GmbH (Switzerland). The petitioners challenged the issuance of a TDS certificate for 3.5% for AY 2025-26, claiming that no Permanent Establishment (PE) was constituted in India, and therefore, the higher TDS was not justified. The dispute arose after the Assessing Officer relied on alleged findings from AY 2022-23 to raise the TDS rate, despite the ITAT having set aside the PE finding in October 2025.

A Division Bench comprising Justices Dinesh Mehta and Vinod Kumar Gupta held that the ITAT’s order remained intact, and no appeal had been filed by the department, thereby nullifying the AO’s basis for the higher TDS. The court quashed the 3.5% certificate and directed the department to restore the TDS rate to 1.5% within 15 days. It further clarified that this rate should continue for future years unless the ITAT order is reversed or fresh material establishing a PE is brought on record after providing due opportunity to the assessee. The petitions were allowed accordingly.

ITR E-Filing Mandatory for Companies from May 2007: Madras HC Denies S. 80-IC Deduction to Gemini Communication Ltd

Commissioner of Income tax vs Gemini Communication Ltd CITATION : 2026 TAXSCAN (HC) 150

The Madras High Court addressed the issue of mandatory electronic filing of income tax returns by companies and its impact on claiming deductions under Section 80-IC of the Income Tax Act, 1961. The court considered an appeal filed by the Income Tax Department against Gemini Communications Ltd., which had filed its return for AY 2008-09 manually on 30.09.2008 and subsequently filed an electronic return belatedly on 06.11.2008. The Department had denied the Section 80-IC deduction on the ground that the company failed to comply with the mandatory e-filing requirements. The legal issue centered on whether manual filing beyond the notified date of mandatory e-filing could be treated as valid for claiming tax deductions.

A Division Bench comprising Justice Anita Sumanth and Justice Mummineni Sudheer Kumar upheld the department’s position, observing that Rule 12(3) of the Income Tax Rules, 2007, read with relevant CBDT notifications and circulars, mandated companies to file returns electronically, either through digital signatures or electronic transmission followed by verification via ITR-V, with no provision for manual filing beyond the transitional relaxation period. The Court rejected the assessee’s contention that manual filing within the due date should be treated as valid, noting that e-filing was intended to enhance administrative efficiency and streamline tax compliance. Accordingly, the High Court allowed the appeal and upheld the denial of deduction under Section 80-IC.

GST Refund on Exports Cannot Be Rejected Only for Delay in Furnishing LUT or Bond: Karnataka HC

M/S PRIME PERFUMERY WORKS vs ASSSITANT COMMISSIONER OF CENTRALTAX CITATION : 2026 TAXSCAN (HC) 151

The Karnataka High Court addressed the issue of GST refunds on exports under Section 54 of the Central Goods and Services Tax Act, 2017, specifically dealing with whether failure to furnish a Letter of Undertaking (LUT) or Bond before export can justify rejection of a refund claim. The matter arose from a petition filed by Prime Perfumery Works, a partnership firm, whose refund claim for zero-rated supplies during FY 2022-23 was rejected by the Assistant Commissioner solely on the ground that the LUT or Bond in Form GST RFD-11 had not been furnished prior to export.

A Single Judge, Justice S.R. Krishna Kumar, observed that the CBIC Circular dated 15 March 2018 allowed exporters to submit the LUT or Bond even after export and that such delay is only a procedural lapse which can be condoned. The Court emphasized that when the exports are genuine and all substantive conditions for refund are satisfied, non-furnishing of LUT or Bond before export cannot serve as a ground to deny the refund. Accordingly, the High Court set aside the rejection order and remanded the matter to the Assistant Commissioner to reconsider the refund application after permitting the petitioner to furnish the LUT or Bond on an ex post facto basis.

Compounding Fee must be Paid by ‘Officer in Default’, Not Third party: Telangana HC allows Request to Rectify MCA Records

Prem Jain vs The Union of lndia CITATION : 2026 TAXSCAN (HC) 152

The Telangana High Court dealt with the issue of rectification of Ministry of Corporate Affairs (MCA) records regarding compounding fees under Section 441 of the Companies Act, 2013. The matter arose when Prem Jain, a former director of a company, challenged an order dated 22.08.2023 passed by the Regional Director, South-East Region, MCA. The order incorrectly recorded that the petitioner had paid the compounding fee of ₹9,000 in relation to alleged violations of Sections 173(1) and 118 of the Companies Act, concerning failure to hold the requisite board meetings and maintain statutory gaps between meetings. In reality, the fee had been paid by a third party, although the petitioner was the “officer in default” named in the company’s annual report.

Justice Moushumi Battacharya allowed the petition, holding that the compounding fee must be borne by the officer in default and not by a third party. The Court directed the Regional Director to correct the impugned order, accept the fee from the petitioner, refund the amount already paid by the third party, and remove the incorrect entries from the MCA portal, including the annual and auditor reports. The ruling reinforced that MCA records must accurately reflect the party liable under Section 441 and that procedural errors regarding fee payment can be rectified upon proper application.

Delayed Income Tax TDS Deposit Does Not Extinguish Criminal Liability, Managing Director Must Face Trial: Delhi HC

DR MANOJ KHANNA vs INCOME TAX OFFICE CITATION : 2026 TAXSCAN (HC) 153

The Delhi High Court addressed the issue of criminal liability for belated deposit of Tax Deducted at Source (TDS) under Sections 278B and 278E of the Income Tax Act, 1961. The case arose when Dr. Manoj Khanna, the Managing Director of a company, sought to quash a criminal complaint and the summoning order passed against him for allegedly failing to deposit TDS on time. The petitioner contended that the CEO and whole-time director of the company was solely responsible, and that the TDS had eventually been deposited belatedly.

Justice Amit Mahajan dismissed the petition, holding that belated payment of TDS does not extinguish criminal liability, and that disputed facts, including the attribution of responsibility between directors, could only be examined during trial. The Court emphasized that, as Managing Director, the petitioner was in charge of and responsible for the company’s affairs, and that statutory presumptions under Sections 278B and 278E apply. The Court concluded that there was no abuse of process, and the complaint and summoning order were valid, leaving the petitioner to face prosecution at trial.

GST ITC Reversal Unsustainable after GST Registration Restoration: Andhra Pradesh HC Quashes Reversal of Closing ITC

HITHAISHI INFRA MACHINE vs ASSISTANT COMMISSIONER ST FAC CITATION : 2026 TAXSCAN (HC) 154

The Andhra Pradesh High Court addressed the legality of reversing Input Tax Credit (ITC) under Section 29(5) of the CGST Act, 2017, in cases where the GST registration itself has been set aside. The case arose from a writ petition filed by M/s. Hithaishi Infra Machine, a registered GST dealer, whose registration had been cancelled on the ground that it was not operating from its declared principal place of business. Following the cancellation, the GST authorities issued a show cause notice directing reversal of ITC amounting to ₹22,68,580. The petitioner challenged the assessment order demanding reversal, contending that the registration had subsequently been restored by the High Court and that the demand was therefore baseless.

The Division Bench comprising Justice R. Raghunandan Rao and Justice T.C.D. Sekhar held that since the cancellation of GST registration had been quashed and the registration restored, the very premise for invoking Section 29(5) no longer existed. The Court observed that the demand for reversal of ITC was entirely predicated on the cancelled registration, and once the registration stood restored, no legal basis remained for the ITC reversal. Accordingly, the High Court set aside the assessment order and ruled that any demand raised solely on the basis of cancelled GST registration is unlawful.

Perverse Finding by CIT(A) from Same Documents before AO: Chhattisgarh HC sustains Deletion of ₹4.89 Cr Income Tax Addition

The Deputy Commissioner Of Income Tax vs M/s Merigold Impex CITATION : 2026 TAXSCAN (HC) 155

The Chhattisgarh High Court dismissed an appeal filed by the Deputy Commissioner of Income Tax, concerning the deletion of income tax additions amounting to ₹4.89 crore against M/s Merigold Impex. The case arose after the Commissioner of Income Tax (Appeals) [CIT(A)], and subsequently the Income Tax Appellate Tribunal (ITAT), deleted the additions made by the Assessing Officer. The Revenue challenged these orders, arguing that the CIT(A) relied on material not furnished to the Assessing Officer during assessment, allegedly violating Rule 46A of the Income Tax Rules, 1962, and contending that the deletion was therefore perverse.

The Division Bench comprising Justice Sanjay S. Agrawal and Justice Amitendra Kishore Prasad observed that all documents and submissions referred to by the CIT(A) had already been furnished to the Assessing Officer and were part of the assessment record. An affidavit filed during the appeal confirmed that the information relied upon was previously available to the AO. The Court held that the CIT(A) had not relied on any new or undisclosed evidence, and therefore, there was no violation of Rule 46A. Accordingly, the High Court dismissed the Revenue’s appeal, affirming the deletion of the ₹4.89 crore additions.

General Penalty u/s 125 Cannot Be Imposed When Late Fee is Levied u/s 47: Madras HC

Kandan Hardware Mart vs The Assistant Commissioner (ST) (FAC) CITATION : 2026 TAXSCAN (HC) 156

The Madras High Court ruled that when a late fee is levied under Section 47 of the GST Act for delayed filing of annual returns, the tax authorities cannot simultaneously impose a general penalty under Section 125 for the same delay, as the late fee itself constitutes a penal consequence. The case arose from writ petitions filed by Kandan Hardware Mart, challenging assessment orders for the financial years 2017-18, 2018-19, and 2019-20, where the department had imposed both late fees and general penalties for delayed filing of Form GSTR-9 annual returns. The petitioner contended that charging both amounts for the same delay was impermissible and violated principles of natural justice.

Justice C. Saravanan, hearing the batch of writ petitions, observed that Section 47 explicitly provides for a late fee, which is penal in nature, and therefore, the general penalty under Section 125 cannot be invoked for the same delay. The Court further noted that the amnesty notification under Section 128 offered limited relief to taxpayers filing within the prescribed period and could not be extended to those who had filed earlier. Accordingly, the High Court held that imposition of Section 125 penalties alongside Section 47 late fees was invalid, while allowing the late fees to stand, subject to amnesty benefits where applicable. The Court directed the tax authorities to revise the demands in accordance with this legal position.

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