Ahmedabad Chartered Accountant Journal February, 2026 951TMVolume : 49 Part : 11 February, 2026E-mail : [email protected] Website : www.caa-ahm.orgAhmedabad Chartered Accountant JournalIn this IssueContents Author's Name Page No.- caaahmedabadJournal CommitteeCA. Tarjani Shah CA. Shreyanshi RakhashiyaChairperson ConvenerCA. Shivang Chokshi CA. Jayesh SharedalalE. C. Representative Past PresidentMembersCA. Ashok Kataria CA. Disha Shah CA. Labdhi ShahCA. Mayur Zanjrukiya CA. Mira Shah CA. Monish ShahCA. Niket Rasania CA. Rajni Shah CA. Yash Shah - Efforts Counts than Perfection CA. Labdhi Shah 954 Editorial CA. Tarjani Shah 955From the President CA. Rushabh Shah 957Compliance Tracker CA. Manthan Khokhani 959ArticlesWhat AI Cannot do for a Chartered Accountant CA. Hency Shah 960India-UK Free Trade Agreement : A Practical Guide for Business and CA. Amrin Alwani 963Policy ReadersThe Curious Case of 180 Days vs. 18 Months: Decoding DGFT's CA. Pratik Trivedi 966Amendment to Export Obligation Period for Advance AuthorisationsStrengthening Trust in Sustainability Reporting : Framework for ESG CA. Dhruv K. Bhavsar 969Assurance and Sustainability Auditing in BharatCan a Bona Fide Purchaser Be Denied Input Tax Credit under GST ? CA. Sonal Jain 974Direct TaxesGlimpses of Supreme Court Rulings Adv. Samir N. Divatia 977From the Courts CA. Jayesh Sharedalal 978Tribunal News CA. Yogesh G. Shah & 983CA. Aparna ParelkarUnreported Judgements CA. Sanjay R. Shah 991Judicial Analysis Sr. Advocate Tushar Hemani 993Controversies CA. Kaushik D. Shah 1001TM
952 Ahmedabad Chartered Accountant Journal February, 2026TMContents Author's Name Page No. FEMA & International TaxationFEMA & International Taxation CA. Dhinal A. Shah & 1002CA. Sunil ManglaniFEMA Updates CA. Dr. Savan R. Godiawala 1004GULF Insights CA. Sanskar Jain 1005 Indirect TaxesGST and VAT Judgments and Updates CA. Bihari B. Shah & 1011CA. Vishrut R. ShahAdvance Ruling under GST CA. Monish S. Shah 1014Corporate Law & OthersInd AS Insights CA. Niket Rasania 1020Corporate Law Update CA. Naveen Mandovara 1022GujRERA Corner CA. Manan Doshi 1025Capital Markets CA. Karan P. Vora 1028From Published Accounts CA. Pamil H. Shah 1033From the Government CA. Ashwin H. Shah & 1036CA. Kunal A. ShahIT Corner CA. Dhrumit Parikh 1037CSR Stories CA. Siddharth Bhatt 1039Association News CA. Ashish Sharma & 1041CA. Sulabh PadshahACAJ Crossword Contest 1042
Ahmedabad Chartered Accountant Journal February, 2026 953TMAttentionMembers / Subscribers / Authors / Contributors1. Journals are carefully posted. If not received, you are requested to write to the Association's Office within onemonth. A copy of the Journal would be sent, if extra copies are available.2. You are requested to intimate change of address to the Association's Office.3. Subscription for the financial year 2025-26 is ` 1500/-, single copy ` 150/- (if available).4. Please mention your membership number in all your correspondence.5. While sending Articles for this Journal, please confirm that the same are not published / not even meant forpublishing elsewhere. No correspondence will be made in respect of Articles not accepted for publication,nor will they be sent back.6. The opinions, views, statements, results published in this Journal are of the respective authors / contributorsand Chartered Accountants Association, Ahmedabad is neither responsible for the same nor does it necessarilyconcur with the authors / contributors.7. Life Membership/Annual Membership and Other Fees F. Y. 2025-26 Amount in `Basic GST Total1. Admission Fees 500 90 5902. Annual Membership Feesa. If Paid Prior to june 30 of each financial year :i. In case of membership (of ICAI) for a period of less than or equal to five years 750 - 750ii. In case of membership of (ICAI) for a period more than five years, 800 - 800b. If paid after june 30 of each financial year :i. In case of membership (of ICAI) for a period of less than or equal to five years, 900 - 900ii. In case of membership of (ICAI) for a period of more than five years 980 - 9803. Life Membership Feesi. In case of membership (of ICAI) for a period of less than or equal to five years 8000 1440 9440ii. In case of membership of (ICAI) for a period more than five years 10000 1800 118004. Brain Trust Membership Feesa. Individual Membership Feesi. In case of membership (of ICAI) for a period of less than or equal to five years 1000 180 1180ii. In case of membership of (ICAI) for a period more than five years 1500 270 1770b. Flexi Firm/Corporate Membership Fees*** 3600 648 4248*** Registered Firm/Corporate can nominate any two participants from their firm for each Brain Trust Meeting.Additional Representatives can be nominated @1800/- plus GST per participant subject to maximum of 20 participantper firmPublished ByCA. Tarjani A. Shah, on behalf of Chartered Accountants Association, Ahmedabad, 2nd Floor, Darshak, 14/A,Swastik Society, Opp. Shrey Hospital, Navrangpura, Ahmedabad - 380 009 Phone : +91 79 40392596While every effort has been made to ensure accuracy of information contained in this Journal, the Publisheris not responsible for any error that may have arisen.Professional AwardsThe best articles published in this Journal in the categories of 'Direct Taxes', 'Company Law and Auditing' and 'AlliedLaws and Others' will be awarded the Trophies/ Certificates of Appreciation after being vetted by experts in theprofession. Articles and reading literatures are invited from members as well as from other professional colleagues.Printed : Pratiksha Printer, Ahmedabad Mobile : 98252 62512 E-mail : [email protected]
954 Ahmedabad Chartered Accountant Journal February, 2026TMIn a village nestled among hills, lived Arun, a youngpotter. His hands shaped clay into beautiful pots, butone stormy night, fire razed his workshop. Everytool, every creation gone. Neighbours whispered,“His dreams are finished and Arun is defined by thisfailure.”Arun felt the weight of loss. Self-doubts crept in: AmI too weak? Too limited? Then from the heart deepinside burned a flame and that inner spirit refusedhim to dim. He rose at dawn, borrowed clay froma friend and moulded his first pot on a provisionalwheel. It cracked. He tried again. Day after day,having faith on Goad and his skill; he consistentlytry to make pot day by day having strong belief inhis Karmas.Months passed. Villagers mocked his small,imperfect pots at the market. One day, a richmerchant smashed one in contempt and said, “Youare worthless without your old skills.” Arun’s hearthurt, but he smiled. Limitations test us, hethought. Courage rebuilds us.He worked tirelessly, refining his craft. His spiritwhispered: The goal is not perfection today, butprogress every day. Slowly, his pots gained strength- sleek, enduring forms admired for their quietEfforts Counts than Perfectionbeauty. Word spread. Orders poured not only fromthe towns but different cities of the different states.One evening, the same merchant returned, buyinga full set. “What defines you, Arun?” he askedhumbly.Arun replied, “Not the fire that destroyed, nor thecracks that broke. I am defined by the courage tostart again, the spirit that endured, and the steadysteps patiently toward my dream having strongbeliefs in Karma.”Today, Arun’s workshop thrives, larger than before.He teaches young potters: A person is not their falls,but the rise fuelled by unwavering pursuit.In life, like clay, we crack under pressure. Yet, it isour inner fire: courage, spirit, consistency, faith, selfBelief : that shapes our true legacy.CA. Labdhi [email protected]
Ahmedabad Chartered Accountant Journal February, 2026 955TMWalking Together: Partnership in the ProfessionOn the occasion of Women’s Day, it is easy to speak about strength, resilience and achievement. Yet inour profession, the real story is not about one side rising over the other. It is about walking together. Theaccounting profession has always grown when men and women have worked hand in hand, respectingeach other’s competence and sharing responsibility with mutual trust.As I write this editorial, I feel immense pride in serving as the Chairperson of our esteemed JournalCommittee. Our committee is a true reflection of what the profession should look like. It is a balancedblend of men and women, young and experienced members, each contributing ideas, discipline andperspective.This is not representation for the sake of appearance. It is collaboration in its truest sense. It proves thatinclusion is not about reserving one seat for one woman to represent all women. Every woman representsherself through her capability and commitment.At the same time, we must acknowledge certain realities.Many talented women step away from their careers due to personal responsibilities such as motherhood,family care, or relocation. When they wish to return, they often find the profession has moved ahead interms of technology, regulations, and networks. The absence of structured re-entry pathways can makethis transition difficult.Another challenge is the subtle but powerful presence of self-doubt. Many women hesitate to apply forleadership positions, speaking engagements, or committee roles because they feel they must be perfectlyprepared before stepping forward. In contrast, opportunities often reward those who are willing to learnwhile leading. These invisible mental barriers sometimes become larger than the external ones.Steps to Strengthen Women’s ParticipationIf we genuinely wish to strengthen women’s participation in leadership, the profession must take deliberatesteps.1. Structured Mentorship and SponsorshipExperienced members can actively guide women professionals, encourage them to take upassignments and recommend them for leadership opportunities. Mentorship not only buildsconfidence but also helps in navigating the professional ecosystem.CA. Tarjani [email protected]
956 Ahmedabad Chartered Accountant Journal February, 2026TM2. Flexible Career PathwaysInstitutions and firms can create flexible pathways for career continuity. Hybrid working models,project-based assignments and structured return programs after career breaks can make it easierfor women to re-enter and re-establish themselves without feeling that they must start from zero.3. Encouraging VisibilityVisibility matters. Professional bodies and forums should consciously encourage women to write,speak, and contribute to policy discussions. Representation in panels, committees and academicplatforms helps build role models for the next generation.4. Shared ResponsibilitiesWe must normalize shared responsibilities at home and at work. When families, colleagues andinstitutions view professional growth as a shared priority rather than an individual struggle, theenvironment naturally becomes more supportive.The Courage to Take the First StepWomen at the top may still be fewer in number, but the path is open. The profession does not restrictthem. Sometimes the first step simply needs courage. When that step is taken, the ecosystem supportsgrowth.Finally, the most important change must come from within. Women professionals should believe thatleadership does not require perfection, only participation. The profession grows when capable individualsstep forward, contribute, and learn along the way.A Message for Women’s DayThis Women’s Day, let us not speak of competition. Let us speak of partnership.Let us encourage morewomen to take positions, accept opportunities and move beyond self-imposed limitations. Together, wecan shape a profession that is not just equal in numbers, but equal in voice, vision and leadership.Warm regards,CA. Tarjani ShahEditorial
Ahmedabad Chartered Accountant Journal February, 2026 957TMDear Members,If there is one month in the professional calendar that truly defines what it means to be a CharteredAccountant, it is March. Year-end closings, statutory audits, advance tax computations, GST reconciliations- the demands are relentless. And yet, what stands out every year is not the volume of work, but thecomposure, commitment and calibre with which our members across Ahmedabad and beyond rise tothe occasion. As a community, we should take quiet pride in this. Our profession does not just servebusinesses - it underpins the nation’s financial integrity.This month, we were privileged to host the Brain Trust Meeting- a platform that brought together someof the finest minds in our fraternity for an open, candid and forward-thinking exchange. These conversationsgo beyond the routine; they challenge assumptions, spark ideas, and shape the Association’s direction.The energy and depth of dialogue at the Brain Trust is a testament to the intellectual richness of ourmembership and we remain committed to nurturing such forums where expertise meets purpose.February also witnessed a highly enriching Union Budget Session organised jointly with the AhmedabadBranch of WIRC of ICAI. This collaborative programme is a reflection of our commitment to workingwith our parent body to keep members informed, analysis-ready, and professionally current. Budgetseason is perhaps the most demanding and consequential period for our profession, and programmeslike this ensure that our members are not merely processors of change, but interpreters and advisorswho add real value to their clients and organisations.As we head into the new financial year, CAAA is gearing up with two significant knowledge series that webelieve will be transformative for our members. The first is Income Tax 2025 - Unlearn and Relearn, aseries designed to address the shifting landscape of income tax law with the introduction of the newIncome Tax Bill. For many of us, decades of practice have been built on frameworks and interpretationsthat are now being revisited. This series will provide the structured guidance to do exactly that - let go ofoutdated assumptions and rebuild understanding on a firm, contemporary foundation. The second seriesis on Transfer Pricing- a domain of increasing relevance and complexity, especially for membersserving corporates with cross-border operations. Both series reflect CAAA’s ongoing commitment tokeeping our fraternity at the cutting edge of professional knowledge.From the PresidentCA. Rushabh [email protected]
958 Ahmedabad Chartered Accountant Journal February, 2026TMEven amid this demanding season, the Association has remained committed to nurturing the profession’snext generation. The Articleship Mela initiative continues to bridge the gap between aspiring studentsand experienced firms, creating meaningful opportunities for those beginning their CA journey. In a monthwhen seniors are at their busiest, our members’ willingness to still invest time in guiding the next generationspeaks volumes about the ethos of our fraternity. This is the culture of CAAA - one of giving back, ofmentoring, of building forward.March also brings with it the colour and warmth of Holi- a festival of renewal, of letting go of the old, andwelcoming what is new. As the financial year draws to a close on March 31st, I invite each of you toembrace that spirit in our professional lives as well. Let us close this year with integrity, with thoroughness,and with the pride that comes from work done well. And as FY 2026–27 begins, let us step into it with freshenergy, renewed purpose, and the collective strength of an association that has stood the test of 75 years.March 8th also gives us the opportunity to pause and celebrate International Women's Day and, with it, theremarkable women CAs of our fraternity who bring rigour, empathy, and leadership to every role theyoccupy. As CAAA, we remain proud of and committed to a profession where talent knows no gender, andwe look forward to seeing more women members take centre stage in the years ahead.To every member navigating the pressures of this season: your work is seen, your contribution is valued,and your dedication continues to make this profession what it is.Warm regards,CA. Rushabh ShahPresident❉ ❉ ❉From the President
Ahmedabad Chartered Accountant Journal February, 2026 959TMDate Compliance Applicable To02-Mar-26 Challan cum statement - 194M Furnishing challan-cum-statement (Form 26QD) for TDS onpayments to contractors/professionals by individuals/HUFsexceeding ` 50 lakh, made or credited in January 202607-Mar-26 TDS/TCS Payment All Deductors07-Mar-26 GSTR - 7 GST TDS Deductors11-Mar-26 GSTR-1 (Monthly) Turnover > ` 5 Cr or opted monthly13-Mar-26 GSTR-6 Input Service Distributors (ISD)13-Mar-26 IFF (QRMP Scheme) Quarterly filers (QRMP)13-Mar-26 GSTR-5 (Non-Resident Taxable Person) Filing of GSTR-5 by Non-Resident foreign taxable personscarrying out transactions in India for November 2025.15-Mar-26 Advance tax Payment of fourth installment of advance tax for FY 2025-2615-Mar-26 Provident Fund (PF) Filing of Provident Fund (PF) Electronic Challan cum Return(ECR) and payment of PF contributions for November 202515-Mar-26 ESIC Payment Filing of Employees’ State Insurance (ESI) return andpayment of ESI contributions for November 2025.15-Mar-26 Professional Tax Employers in applicable states18-Mar-26 CMP-08 Composition Tax payers20-Mar-26 GSTR-3B (Monthly) All regular GST filers20-Mar-26 GSTR-5A (OIDAR Services) Filing of GSTR-5A by non-resident providers of OnlineInformation and Database Access or Retrieval (OIDAR)services for November 2025.25-Mar-26 PMT-06 (QRMP Scheme) QRMP taxpayers31-Mar-26 Form 67 Uploading of statement [Form 67], of foreign income offeredto tax and tax deducted or paid on such income in previousyear 2024-25, to claim foreign tax credit [if return of incomehas been furnished within the time specified under section139(1) or section 139(4)31-Mar-26 CbC Report Filing of Country-by-Country Report by eligible MNEconstituent entities. Due within 12 months from end of thereporting accounting year. 31 Mar 2026 applies wherereporting year ends 31 Mar 202531-Mar-26 Updated Return AY 2021-22 Last date to file Updated Return (ITR-U) for AY 2021-22 withadditional tax under Section 140B31-Mar-26 Form CMP-02 Taxpayers opting into the Composition Scheme for FY 2026-27 must file CMP-02 by this date.CA. Manthan [email protected]
960 Ahmedabad Chartered Accountant Journal February, 2026TMKill unrealistic expectations. No judgment. Noprofessional skepticism. No accountability.Artificial intelligence is no longer theoretical in theaccounting profession. It is embedded in audit tools,tax software, ERP systems, compliance utilities, andanalytics platforms. It reads invoices. It matchesledgers. It flags anomalies. It drafts reports. It predictspatterns.This has created a dangerous narrative.That narrative says AI will replace large parts of aChartered Accountant’s role. That narrative assumesjudgment is programmable. That skepticism is analgorithm. That accountability can be outsourced to amachine.This article dismantles that narrative.AI is powerful. But it has hard limits. Limits that matterprecisely because CAs operates in areas whereconsequences are real, legal, financial and personal.The profession must kill unrealistic expectations now.Not to resist technology, but to protect the integrity ofprofessional work.AI cannot replace three core pillars of the CharteredAccountant’s role.• Professional judgment• Professional skepticism• Professional accountabilityEverything else is secondary.The Core Confusion About AI In AccountingMost discussions about AI in accounting start at thewrong place. They start with Efficiency,Speed, Scale, Automation and Cost reduction. Thoseare operational benefits and not professional functions.A Chartered Accountant is not defined by speed orvolume; the profession is defined by judgment underuncertainty, skepticism under pressure andaccountability under the law. AI performs best whereWhat AI Cannot Do fora Chartered Accountantrules are fixed and outcomes are easily measuredbutaccounting and auditing rarely fit that description.Financial statements are not mere mechanical outputs;they are interpretations shaped by assumptions,estimates, management intent, regulatory guidance,and economic reality. AI can process data, but aChartered Accountant interprets reality. This distinctionis not semanticit is fundamental.What Professional Judgment Actually MeansProfessional judgment is not decision making. It isreasoned choice under ambiguity, guided bystandards, experience, ethics, and consequence.Judgment involves choosing between acceptablealternatives, interpreting principles-based standards,weighing substance over form, assessing the intentbehind transactions and anticipating regulatory andjudicial perspectives.AI does none of this.AI produces outputs based ontraining data and predefined objectives. It does notunderstand why one accounting treatment is moreappropriate in context. It does not understandeconomic substance. It does not understand futurescrutiny.Consider impairment testing.AI can calculate value in use. It can run sensitivitymodels. It can compare historical forecasts. It cannotdecide whether management assumptions arereasonable considering industry disruption,governance weaknesses or strategic misalignment.That decision requires judgment informed byexperience and skepticism.Consider revenue recognition.AI can identify contract terms. It can allocate transactionprices. It can apply rule-based logic. It cannot judgewhether a contract is structured to accelerate revenueartificially. It cannot evaluate commercial intent. It cannotCA. Hency [email protected]
Ahmedabad Chartered Accountant Journal February, 2026 961TMWhat AI Cannot Do for a Chartered Accountantassess ethical risk. Judgment is contextual. AI isstatistical.Why Judgment Cannot Be CodedJudgment depends on factors that cannot be reducedto data points, such as Incomplete information,Conflicting incentives, Human behaviour, Regulatoryuncertainty, Litigation risk.AI requires defined objectives while Judgment ofteninvolves competing objectives.AI optimizes whereasJudgment balances.AI requires historical patterns butJudgment often responds to novel situations. AIassumes good faith unless trained otherwisenevertheless Judgment actively questions it. Notraining dataset can capture the infinite variations ofhuman intent and economic substance. That is whystandards deliberately require judgment not precision.Professional Skepticism is Not an AlgorithmProfessional skepticism is a mindset, not a checklist.It involves questioning evidence, challengingmanagement assertions, staying alert to bias and fraud,recognizing contradictions, and with holdingacceptance until satisfied.AI cannot be skeptical.AI flags anomalies becausethey deviate from patterns but Skepticism questionspattern themselves. If fraudulent behaviour is consistentand well-disguised, AI may treat it as normal butskeptical auditor will not.Skepticism is triggered bydiscomfort, inconsistency and intuition developed overyears of exposure. AI has no intuition. It has correlation.Consider audit evidence.AI can analyse entire populations that improvescoverage. But skepticism is not about coverage. It isabout challenge. If management explanations areplausible but misleading, AI will not sense that, but CAmight. If numbers reconcile but do not makecommercial sense, AI will accept them whereas CAwill not. Fraud does not announce itself as an outlier. Ithides within normality. Skepticism detects what dataalone cannot.Why AI Cannot Be Trusted to Question AuthorityOne of the most overlooked limitations of AI is itsimpact on power dynamics. Professional skepticismoften involves challenging authority, includingpromoters, senior management, CFOs, boards andinfluential clients.AI lacks courage. It does not resist pressure, evaluatereputational risk, or fear losing a client. A CharteredAccountant, however, does. It is precisely this fear thatmakes skepticism essential. When financial pressureis high and incentives are misaligned, skepticismbecomes a professional duty. AI does not experiencepressure, nor does it resist it. The control over the AIsystem the setting of its parameters, the definition ofwhat is material, and the authority to override its outputsare all human decisions. AI does not challenge itsowner.Accountability Is the Line AI Cannot CrossThis is the most critical point; accountability cannot bedelegated to a machine. A Chartered Accountant signsreports, certifies statements, and represents facts toregulators, investors, lenders, and courts. Whensomething goes wrong, accountability is personal andlegal, encompassing disciplinary proceedings, civilliability, criminal prosecution, and reputational damage.AI bears none of these consequences. It does notappear before the ICAI, respond to show causenotices, or face cross-examination. The responsibilityultimately remains with the Chartered Accountant. Thisalone limits the extent to which AI can be relied upon.You cannot outsource risk to something that cannotbe punished.Why “AI Made the Decision” Is Not a DefenceRegulators and courts do not accept technologicalexcuses. When an audit fails, the focus will bestraightforward: Did the Chartered Accountant exercisedue care and professional judgment? It will not matterif the software was sophisticated, if the algorithm waswidely used, or if others relied on it too. Relying on AIwithout conducting an independent evaluation onlyincreases risk, rather than reducing it. Blindly trustingAI outputs constitutes professional negligence, notinnovation.The Illusion of ObjectivityAI is often marketed as being objective, but this is amisconception. AI reflects the biases inherent in itstraining data, the design of its models and the intentionsof its users. These biases can manifest in various
962 Ahmedabad Chartered Accountant Journal February, 2026TMforms, such as data selection bias, model design bias,objective function bias, and interpretation bias.Chartered Accountants are trained to recognize andaccount for bias, a skill that is crucial in their profession.However, AI lacks the awareness to recognize its ownbiases. For instance, if past years involved aggressiveaccounting, AI will simply treat that as normal. Similarly,if industry practices are flawed, AI will inadvertentlyreinforce them. This is why professional skepticism isessential historical practices are not always proof ofcorrectness.Areas Where Unrealistic Expectations Are MostDangerousSome areas deserve special caution.• Audit risk assessmentAI can rank risks based on past data. It cannotanticipate black swan events, governancebreakdowns, or cultural issues.• Tax planning and interpretationAI can apply rules. It cannot predict judicialinterpretation, departmental stance, or retrospectiveamendments.• ValuationAI can compute. It cannot judge whetherassumptions are aggressive, conservative ormisleading.• Going concern assessmentAI can analyse ratios. It cannot assess promoterintent, lender behaviour, or market confidence.• Ethical dilemmasAI has no ethics. It has constraints.What AI Should Be Used For And Nothing MoreAI should be regarded as an assistant, not as asubstitute for a professional. It’s appropriate usesinclude tasks such as data extraction and classification,reconciliations and matching, trend and varianceanalysis, exception identification and drafting workingpapers. These functions enhance efficiency but do notreplace the professional responsibility that a CharteredAccountant holds.Every output generated by AI must be carefullyreviewed, challenged and contextualized by aChartered Accountant. If a CA cannot explain an AI resultin clear, understandable terms, then that output shouldnot be used. The role of AI is to support, not replace,the professional judgment and expertise that CAsprovide in their work.The Risk of Deskilling the ProfessionOver reliance on AI poses a significant long-term risk:the erosion of skill. If junior professionals begin to stopthinking critically and instead place their trust solely inautomated tools, their judgment will gradually weaken.Judgment is honed through repetition, error, andreflection, not through automation. When a professionstops exercising judgment, it risks losing that essentialskill altogether. This is not just a theoretical concernithas already happened in other fields. The CharteredAccountant profession must take care to avoidbecoming mere tool operators, ensuring that itsprofessionals maintain the critical thinking and judgmentthat define the role.The Right Question to Ask About AIThe wrong question is whether AI will replace CharteredAccountants. The right question is whether CharteredAccountants will relinquish the very qualities that makethem irreplaceable: judgment, skepticism andaccountability. If these are sacrificed for the sake ofspeed and convenience, the profession will hollowitself out. AI will not destroy the profession complacencywill.Final perspectiveArtificial intelligence is a powerful tool, but it is not aprofessional. It lacks judgment, skepticism andaccountability qualities that are fundamental to the workof a Chartered Accountant. These are not weaknessesthat can be fixed; they are inherent limitations of AI.The Chartered Accountant profession exists preciselybecause these qualities matter.It is crucial to set realistic expectations now. EmbraceAI where it can drive efficiency and enhanceproductivity, but reject it where the need for judgment,skepticism, and accountability begins. This boundaryis what will define the future relevance and integrity ofthe profession.What AI Cannot Do for a Chartered Accountant
Ahmedabad Chartered Accountant Journal February, 2026 963TMThe India - United Kingdom Comprehensive Economicand Trade Agreement (CETA) concluded in 2025 is awide-ranging FTA covering goods, services,investment, procurement and cooperation onstandards, with important opportunities for exporters,services providers and investors and significantpolitical-economic trade-offs that both governmentscontinue to manage.A detailed brief on the CETA:A. Why the deal mattersTrade between India and the UK has beenexpanding steadily over the years. Businessesin both countries already export a wide range ofgoods and services to each other from textilesand pharmaceuticals to financial and professionalservices.For the UK, especially after its exit from theEuropean Union, building independent tradepartnerships became a priority. For India,strengthening ties with major developedeconomies aligns with its strategy of integratinginto global supply chains while protectingdomestic interests. The FTA is therefore not justa trade deal;it is a strategic economicpartnership.India-UK Free Trade Agreement :A Practical Guide for Businessand Policy ReadersToday, the two countries buy and sell goods andservices worth several billion pounds annually. Tofurther strengthen this growing partnership, bothgovernments decided to enter into acomprehensive Free Trade Agreement (FTA). Theidea behind the agreement was simple,- make it easier for businesses in bothcountries to access each other’s markets,- encourage more investment, and- deepen overall economic and politicalcooperation.Formal discussions for this arrangement began in2022 and after several rounds of negotiations, theagreement was officially signed in July 2025.Perspective ImportanceEconomic Reduction in tariffs, higher tradevolumesStrategic Stronger bilateral partnershipBusiness Better market access and clarityin rulesInvestment More confidence for long-termprojectsB. What the agreement covers:The published texts and government summariesshow the CETA is ambitious in scope. Theagreement is comprehensive. It does not dealonly with customs duties but also covers services,investment, digital trade, regulatory cooperationand government procurement.CA. Amrin [email protected]
964 Ahmedabad Chartered Accountant Journal February, 2026TMStructural Overview of Key ChaptersChapter What It Means in Simple Terms Why It MattersTrade in Goods Reduction or removal of customs duties Makes products cheaperRules of Origin Conditions to qualify for benefits Prevents misuse of concessionsTrade in Services Access for service providers Important for IT & financeInvestment Protection for investors Encourages cross-border fundingGovernment Procurement Access to public tenders Opens new business opportunitiesDigital Trade Rules for e-commerce & data Supports modern economySPS & TBT Standards and technical regulations Reduces non-tariff barriersIndia-UK Free Trade Agreement : A Practical Guide for Business and Policy ReadersC. Quantified impact:UK analytical documents and impact assessmentsmodel a meaningful long-run uplift in GDP andtrade volumes. The UK government’s publishedimpact assessment estimated multi-billion-poundgains to UK GDP and projected significant bilateraltrade growth over time; Indian analyses and tradeministry notes underline gains for manufacturingexports, services and software exports. These arelong-run projections and depend on fullimplementation of schedules and rules.D. Opportunities for Indian businessesServices and digital businesses:Indian IT companies and professional servicefirms are likely to benefit because theagreement clearly defines how services canbe provided in the UK. It may also make iteasier for certain professional qualificationsto be recognised and improve access tosectors like finance and consulting.Manufacturing and industrial exports:Since customs duties on many products willbe reduced gradually, Indian exporters oftextiles, engineering products and automobileparts may become more competitive in theUK market. However, businesses will needto meet the required origin rules to claimthese benefits.Investment and supply chain opportunities:Investors from the UK may invest more inareas such as technology, renewable energyand healthcare in India. At the same time,Indian companies can use the UK as a baseto expand into European and otherinternational markets.Illustrative Services OpportunitiesSector Potential BenefitIT & IT-enabled Market access clarityServicesFinancial Services Regulatory cooperationProfessional Services Framework for recognitionBusiness Consulting Easier commercialpresenceE. Risks, sensitivities and sectoral concerns: NoFTA is just upside, and so as the concerns overIndia UK FTA will be there. Notable concernsinclude:Concern ExplanationAgriculture Domestic livelihood impactMSMEs Competition from importsImmigration Debate Political sensitivity in UKRegulatory Implementation challengesDifferencesF. Practical steps for businesses andProfessionals:Read the schedules: check tariff lines andphase-in years for your HS codes.Assess rules of origin: map your inputs toensure preferential origin. Also, the
Ahmedabad Chartered Accountant Journal February, 2026 965TMcompanies may consider to calculate dutysavings vs. compliance costs.Test service commitments: CharteredAccountants/lawyers/market accessspecialists should check licensing, presenceand recognition requirements.Customs and compliance readiness:update export documentation, invest incustoms classification and supply-chaintraceability.Use government supports: bothgovernments are providing guidance andtrade facilitation measures to help SMEs tapthe deal.Internal Trainings: Businesses shouldensure that their documentation andcompliance teams are properly trained on thenew requirements under the FTA. Preferentialtrade benefits often depend on accuratepaperwork.Staying updated and ready:In addition,companies must regularly monitorgovernment notifications, circulars andimplementation guidelines issued byauthorities in both countries. Tradeagreements evolve through clarifications andoperational updates and staying informed isessential to fully and correctly utilise thebenefits available.G. Practical Role of Chartered Accountants underthe India–UK FTAThe India–UK FTA opens up significant advisory,compliance and strategic opportunities forChartered Accountants. Beyond traditional tax role,CAs can play a critical part in helping businessesunderstand, structure and implement trade benefitseffectively. Below are certain service areas whicha CA or Tax professional can perform as a part ofthese services:• Tariff Mapping and Benefit Identification• Rules of Origin Advisory and Cost Structuring• Certification and Documentation Support• Service Sector Advisory• Investment Structuring and Entry Strategy• Supply Chain and Business Model Review• Training and Capacity Building• Regulatory Monitoring and Updates• Risk Management and Litigation SupportAuthor’s comments:In conclusion, the India–UK Free Trade Agreementrepresents more than a policy milestone. It reflects ashared vision of deeper economic partnership in arapidly changing global landscape. While theagreement creates new pathways for trade, investmentand services, its real value will unfold through thoughtfulimplementation and informed participation. Forbusinesses, it is an opportunity to rethink markets andexpand confidently. For professionals, it opensavenues to guide and shape cross-border growth. Andfor both nations, it signals a commitment to collaborationbuilt not merely on commerce, but on long-term trustand strategic alignment. The coming years willdetermine how effectively this framework transformspotential into progress. Those who prepare early willbe best positioned to lead that journey.India-UK Free Trade Agreement : A Practical Guide for Business and Policy Readers
966 Ahmedabad Chartered Accountant Journal February, 2026TMIntroductionPolicy evolution under the Foreign Trade Policy (FTP)has often walked the tightrope between administrativerigidity and pragmatic facilitation. The recent DGFTNotification No. 28/2025-26 dated 28 August 2025, whichamends Para 2.03(A)(i)(g) of FTP 2023, is aquintessential example of this delicate balance.By removing the restrictive 180-day Export Obligation(EO) period for imports exempted from mandatoryQuality Control Orders (QCOs) and aligning them withthe general 18-month EO under Para 4.40 of theHandbook of Procedures (HBP), the Government hasushered in welcome relief for exporters struggling withcompressed timelines.Yet, one interpretive puzzle remains unanswered: Doesthis amendment benefit Advance Authorisations issuedprior to 28 August 2025? Or, does it apply onlyprospectively to licences issued thereafter?Here we will examine the competing legal positionson this issue through the lens of statutory interpretation,policy intent, and administrative practice.The Amendment at a GlancePrior to the amendment, Para 2.03(A)(i)(g) of FTP 2023stipulated that for imports made under QCO exemption,the export obligation must be fulfilled within 180 daysfrom the date of clearance of import consignments, asnotified by the Department of Chemicals &Petrochemicals (DCPC).The newly issued Notification No. 28/2025-26 replacesthis with the following:“The Export Obligation period for suchauthorisations shall be as per Para 4.40 of theHandbook of Procedures.”Para 4.40 of HBP 2023 prescribes a standard 18-monthEO period, extendable twice by six months each,upon payment of nominal composition fees.Thus, the amendment does not merely extend the EOperiod—it harmonises the compliance framework forall Advance Authorisations, removing a technicalbottleneck that had long plagued exporters dealingwith QCO-sensitive imports.The Legal Crossroads: Pre-Notification LicencesConsider an Advance Authorisation issued on 04 July2025, i.e., before the notification date.Such licences, issued under the earlier version of Para2.03(A)(i)(g), typically contain two crucial clauses:Condition 4:The Export Obligation shall be fulfilled by theAuthorisation Holder as per the terms and conditionsspecified in the Foreign Trade Policy and theHandbook of Procedures and other guidelines issuedby the Director General of Foreign Trade from time totime.Condition 28:The Export Obligation period for such authorisationsshall be as per Para 4.40 of HBP 2023. However, EOperiod is restricted to 180 days from the date ofclearance of import consignment in respect of QCOexemption for Textile products- (or other products asmay be the case).While Condition 28 reflects the policy as it stood inJuly 2025, Condition 4 explicitly imports the policyand procedural changes “from time to time.” Thisinterplay gives rise to two equally plausibleinterpretations—each supported by legitimate legalreasoning.The Curious Case of 180 Days vs. 18 Months:Decoding DGFT's Amendment to ExportObligation Period for Advance AuthorisationsCA. Pratik [email protected]
Ahmedabad Chartered Accountant Journal February, 2026 967TMThe Liberal Interpretation: Beneficial and DynamicIncorporationThe first school of thought argues that the amended18-month EO period applies even to existingauthorisations, for the following reasons:1. Dynamic Reference Clause:Condition 4’s “from time to time” languagedynamically incorporates subsequentamendments to FTP/HBP into the licenceframework. Consequently, the EO period shouldautomatically adjust to the current policyenvironment, not remain frozen at the date ofissuance.2. Beneficial and Clarificatory Character:The amendment merely removes a restrictiveproviso; it does not introduce a new substantiveright. It can therefore be construed as clarificatory,intended to align QCO-exempt imports with thegeneral 18-month rule already recognized in Para4.40.3. Procedural, Not Substantive:EO timelines are procedural in nature, governingcompliance and reporting. Proceduralamendments are generally applied to pendingauthorisations unless expressly excluded, sincethey do not affect vested rights.4. Equity and Policy Intent:The objective of the amendment is facilitative—to ease export operations and ensure parityamong exporters. Denying the extended timelineto those holding valid, unfulfilled authorisationsas of 28 August 2025 would undermine that verypurpose.Under this view, any exporter holding a valid AdvanceAuthorisation as on 28 August 2025 could legitimatelyclaim the benefit of an 18-month EO period from thedate of import clearance, without requiring a formalrevalidation.The Conservative Interpretation: ProspectiveApplicationThe second school of thought, however, relies onstatutory construction and administrative certainty toassert that the amendment applies only to authorisationsissued on or after 28 August 2025.1. “With Immediate Effect” – Prospective byDefault:The notification explicitly states that the amendmentis effective “with immediate effect.” This phrase,long used in DGFT’s legislative drafting, hasconsistently been understood to denoteprospective application, unless a retrospectiveclause is expressly inserted.2. Para 4.02 of FTP – Date-of-Issue Rule:Para 4.02 mandates that “Authorisation under thisChapter shall be issued in accordance with thePolicy and Procedures in force on the date of issueof the Authorisation.”The licence issued on 04 July 2025, therefore,was governed by the FTP then prevailing, whichcarried the 180-day restriction.3. Absence of Retrospective Language:The notification does not contain any language—express or implied—suggesting retrospective orclarificatory intent. In law, a presumption againstretrospectivity applies, especially wheresubstantive conditions are altered.4. Judicial Precedents:In DGFT v. Kanak Exports (Supreme Court), theCourt held that amendments to FTP made underSection 5 of the FT(D&R) Act are prospectiveunless expressly declared retrospective.Similarly, in Patanjali Foods Ltd. v. Union of India(Karnataka High Court), it was reiterated that DGFTcannot retrospectively modify conditions ofauthorisations without specific statutory authority.Under this reasoning, exporters holding licencesissued before 28 August 2025 remain bound by the180-day EO period.The Curious Case of 180 Days vs. 18 Months: Decoding DGFT's Amendment toExport Obligation Period for Advance Authorisations
968 Ahmedabad Chartered Accountant Journal February, 2026TMReconciling the Two ViewsBoth interpretations stand on credible legal footing.The liberal view draws strength from the internallanguage of the licence (Condition 4) and the principleof beneficial construction; the conservative view restson the canonical rule of prospective operation andlegal certainty.The policy vacuum can be bridged only through anofficial clarification by the Policy InterpretationCommittee (PIC) under Para 2.95 of HBP 2023. Untilsuch clarification is issued, exporters may adopt a dualstrategy—comply conservatively with the shorter EOtimeline, while simultaneously representing beforeDGFT for confirmation of the extended period.Way ForwardExporters holding pre-amendment authorisations mayconsider the following sequential approach:1. File a Representation to DGFT/PICSeek an interpretive ruling confirming thatNotification No. 28/2025-26 applies to all runningauthorisations. A favourable clarification wouldensure parity and remove uncertainty.2. Maintain Conservative ComplianceFor ongoing exports, adhere to the original 180-day schedule to mitigate exposure to interest orpenalty under the FT(D&R) Act, while keepingdocumentary evidence ready to support relianceon the amended provision.ConclusionFrom a policy standpoint, the amendment is undeniablybeneficial—a rational relaxation aligning the exportobligation framework with industrial reality. From a legalstandpoint, however, its temporal reach remainsambiguous.While Para 4.02 FTP and the notification’s “immediateeffect” language favour prospective application, thedynamic incorporation clause in licence Condition 4,read with the beneficial nature of the amendment,provides a compelling argument for retrospectivebenefit to pending cases.Until DGFT issues a formal clarification, prudencedictates a twin-track approach—comply conservativelywith the existing EO timeline while actively pursuingpolicy interpretation relief.Either way, the amendment marks a significant stridetowards harmonising India’s trade facilitation narrativewith the practical timelines of global commerce—a smallbut meaningful shift from bureaucratic inflexibility toexporter-centric governance.DisclaimerThis article represents an independent legal analysisbased on the Foreign Trade (Development &Regulation) Act, 1992, the Foreign Trade Policy 2025,the Handbook of Procedures 2025, and DGFTNotification No. 28/2025-26 as available on the date ofwriting.This article is intended for academic and informationalpurposes only and the views expressed are those ofthe author in a professional capacity and do notconstitute legal advice or a binding interpretation byany governmental authority.The Curious Case of 180 Days vs. 18 Months: Decoding DGFT's Amendment toExport Obligation Period for Advance Authorisations
Ahmedabad Chartered Accountant Journal February, 2026 969TM1. Strategic Evolution: From Financial Reportingto ESG IntegrationIn the current professional landscape, theevaluation of corporate performance is undergoinga fundamental paradigm shift that necessitates amore holistic approach to value measurement.Financial profitability, while remaining a core pillar,is no longer the sole arbiter of organizationalsuccess or investment worthiness. The transitionfrom historical financial-only reporting to anintegrated Environmental, Social, and Governance(ESG) framework is strategically vital for fosteringcorporate resilience and driving long-termenterprise value in the Indian market. This evolutionis closely aligned with international benchmarks,including the United Nations SustainableDevelopment Goals (UN SDGs), the Task Forceon Climate-related Financial Disclosures (TCFD),and the emerging International SustainabilityStandards Board (ISSB) guidelines, ensuring thatIndian corporate disclosures facilitate cross-bordercapital flows.ESG is a comprehensive framework designed toevaluate an organization’s non-financialperformance and impact. The following tabledelineates the core components of theseinterconnected dimensions as synthesized fromprofessional reporting requirements:Dimension Core ComponentsEnvironmental Energy efficiency, GHGemissions (Scope 1, 2 and 3),water stewardship, wastemanagement (circulareconomy), biodiversity andclimate risk resilience.Social Labor relations, occupationalhealth and safety, diversity andequity, human rights, dataprivacy, consumer protection,and community development(CSR).Governance Board composition,independent oversight, ethicalconduct (Anti-Bribery/Corruption), risk managementframeworks, whistleblowermechanisms, and shareholderrights.The transformation of ESG from a voluntarysustainability initiative to a mandatory regulatoryrequirement has profound implications for thecapital markets. This shift proactively mitigates“information asymmetry,” thereby strengtheningstakeholder trust and reducing the risk premiumassociated with capital costs. Organizations thatfail to demonstrate technical competence in ESGreporting face increased scrutiny and potentialexclusion from sustainable finance avenues, suchas green bonds and sustainability-linked loans.This regulatory movement signifies a convergenceof statutory compliance and strategic riskmanagement, transitioning the focus from highlevel conceptual definitions to the specific,rigorous regulatory architecture governing thesedisclosures in India.2. The Regulatory Architecture of ESG in IndiaThe implementation of a multi-dimensionalregulatory framework is strategically essential forensuring corporate accountability and aligningIndian businesses with global benchmarks oftransparency. By formalizing ESG disclosures,Strengthening Trust in SustainabilityReporting : Framework for ESG Assuranceand Sustainability Auditing in BharatCA. Dhruv K. [email protected]
970 Ahmedabad Chartered Accountant Journal February, 2026TMregulators have moved sustainability from theperiphery of annual reports into the core ofstatutory filings, requiring a level of precisionpreviously reserved only for financial statements.India’s ESG regulatory journey is defined by adecade of progressive legislative milestones:- Companies Act, 2013 (Section 135):Introduced mandatory Corporate SocialResponsibility (CSR), requiring eligiblecompanies to spend 2% of average netprofits on social development.- SEBI (LODR) Regulations, 2015:Institutionalized governance reforms,strengthening board oversight, independentdirector representation, and stakeholderprotection.- Business Responsibility and SustainabilityReporting (BRSR), 2021: Replaced thelegacy BRR, mandating comprehensivequantitative and qualitative disclosures for thetop 1,000 listed entities.The governance of ESG in India is a collaborativeeffort between several key regulatory bodies,mapping as follows:Regulatory Body Legislative Instrument /Primary FocusSecurities and BRSR Framework; LODRExchange Board governance standards;of India (SEBI) ESG Ratings regulation.Ministry of Companies Act, 2013; CSRCorporate Affairs obligations; Board Report(MCA) requirements.MoEFCC Environment ProtectionAct, 1986; Air Act; Water Act;Waste Management Rules.Reserve Bank of Guidance on Climate RiskIndia (RBI) and Sustainable Finance;Green Deposit frameworks.Of particular importance to the assuranceprofession is the BRSR Core framework.Applicable initially to the top 250 listed companies,it mandates a “Core” set of KPIs that requirereasonable assurance by a third party. This moveto mandatory assurance is designed to enhancedisclosure granularity and provide investors withhigh-quality, verified data.The increasing rigor of these regulatoryrequirements necessitates a direct link to thespecific professional standards—ISAE 3000 andSAE 3410—used by practitioners to verify theveracity of these claims.3. The Professional Assurance Framework:Standards and PrinciplesAs ESG disclosures become mandatory,independent verification has become a strategicnecessity to mitigate the pervasive risk of“greenwashing”—the practice of makingunsubstantiated or misleading environmentalclaims. For global institutional investors, third-partyassurance is critical to enhancing the reliability ofnon-financial data, ensuring it possesses the sameintegrity as audited financial statements.Practitioners in India apply international standardsto ensure consistency and cross-bordercomparability:- ISAE 3000 (Revised):Assurance Engagements Other than Audits orReviews of Historical Financial Information.This serves as the overarching standard forproviding limited or reasonable assurance onnon-financial performance.- SAE 3410:Assurance Engagements on Greenhouse GasStatements. This technical standard is appliedspecifically to the verification of emissionsdata, ensuring that Scope 1, 2 and 3disclosures are free from materialmisstatement.The core objectives of an ESG assuranceengagement require the auditor to exerciseprofessional skepticism while evaluating:1. Data Collection Systems:Testing the robustness of the IT systems andmanual processes used to aggregatesustainability data.Strengthening Trust in Sustainability Reporting : Framework for ESG Assurance and Sustainability Auditing in Bharat
Ahmedabad Chartered Accountant Journal February, 2026 971TM2. Internal Controls:Evaluating the design and operatingeffectiveness of controls that ensure dataaccuracy and completeness.3. Risk Assessment:Identifying areas where there is a high risk ofmaterial misstatement, whether due to fraudor error, in sustainability reporting.Chartered Accountants (CAs) possess a distinctcompetitive advantage in this domain. Theirfoundational expertise in governance, financialanalysis, and rigorous assurance methodologiesallows them to integrate non-financial data into thebroader “Enterprise Value” map. As the demandfor carbon accounting and climate risk advisorygrows, the accountancy profession is evolving tobecome the primary guardian of sustainability dataintegrity.This professional framework provides themethodological basis for the practical, technicalverification of environmental performance andclimate-related risks.4. Technical Verification: Environmental Metricsand Climate RiskEnvironmental stewardship and climate resiliencehave transitioned from ethical considerations tocritical determinants of enterprise valuation.Investors now utilize environmental performancedata as a proxy for operational efficiency and apredictor of future climate-related liabilities.A structured methodology for verifyingenvironmental data must include the followingtechnical procedures:1. GHG Emissions & Air Quality:Verify emissions data against the Air(Prevention and Control of Pollution) Actand apply the technical rigor of SAE 3410.This includes testing the emission factorsused and performing substantive testing onfuel consumption records and electricitybills.2. Resource Management:Audit water consumption and wastemanagement systems for compliance with theWater Act and the Environment ProtectionAct, 1986. This involves reconciling wastedisposal certificates from authorized recyclersand verifying meter readings against internallogbooks.3. Energy Transition:Evaluate compliance with the Perform,Achieve, and Trade (PAT) scheme and thefulfillment of Renewable PurchaseObligations (RPOs). Auditors must verify thepurchase of Renewable Energy Certificates(RECs) and the operational efficiency of onsite renewable installations.Strategic Impact (“So What?” Layer):Robust environmental compliance directlyinfluences the “Enterprise Value Map.” Bydemonstrating superior resource efficiency andproactive climate risk mitigation, companies canlower their “Risk Premium,” thereby accessingcheaper capital and protecting long-term assetvalue against potential climate-related impairmentsor regulatory penalties.The environmental footprint of a company isinextricably linked to its “social license to operate,”necessitating a corresponding shift in focus towardthe governance of human capital and communityimpact.5. Technical Verification: Social Responsibility andHuman CapitalSocial governance is strategically vital formaintaining operational stability and enhancingworkforce productivity. In an era of radicaltransparency, an organization’s treatment of itshuman capital and communities directly impactsits brand equity and its ability to attract and retaintalent.The verification process for social metrics focuseson three high-impact pillars:Strengthening Trust in Sustainability Reporting : Framework for ESG Assurance and Sustainability Auditing in Bharat
972 Ahmedabad Chartered Accountant Journal February, 2026TM- Labor Practices:Auditors must verify the transition from legacyacts (such as the Payment of Wages Act) tothe New Labour Codes (Wages, IndustrialRelations, Occupational Safety, and SocialSecurity). This involves testing payrollsystems for minimum wage compliance andreviewing safety logs for reportable incidents.- Diversity & Inclusion (D&I):Verification of quantitative workforce diversitydata, including gender ratios and equity inremuneration. Auditors should evaluate theimplementation of policies regarding sexualharassment (POSH) and equal opportunity.- CSR Impacts:Under the Companies Act, 2013, auditorsmust go beyond verifying the mandatory 2%spend; they must audit the actual projectoutcomes and social impact assessments toensure that capital is effectively deployed.Ethical supply chain management and robust dataprivacy frameworks are also critical components.Verifying these areas mitigates reputational risksand prevents operational disruptions caused bylabor disputes or breaches of consumer trust.These social performances are ultimately drivenand monitored by the governance structures thatoversee them.6. Governance, Internal Controls, and DisclosureIntegrityGovernance serves as the “backbone” of the ESGframework, providing the institutional mechanismsto ensure sustainability is embedded in decisionmaking. Audit requirements focus on whether theboard has established sufficient oversight tomanage ESG-related risks.Key areas of governance verification include:- Board and Committee Oversight:Ensuring compliance with SEBI LODR normsregarding board composition, independentdirector representation, and the functionalityof audit and risk committees.- Whistleblower Mechanisms:Testing the effectiveness and confidentialityof grievance redressal systems.- Internal Financial Controls (IFC):Practitioners must now advocate for theextension of IFC frameworks to non-financialdata points. This involves ensuring that thesame level of control rigor applied to financialnumbers is applied to BRSR data points toprevent material misstatements.Auditors must specifically verify that the entityadheres to the Nine Core Principles of theNational Guidelines on Responsible BusinessConduct (NGRBC) as reported in the BRSR:1. Ethics, Transparency, and Accountability.2. Safety and Sustainability of Goods andServices.3. Well-being of all Employees.4. Responsiveness to Stakeholders.5. Respecting and Promoting Human Rights.6. Protecting and Restoring the Environment.7. Responsible Policy Advocacy.8. Inclusive Growth and EquitableDevelopment.9. Engagement and Value to Consumers.While these frameworks provide a path forward,auditors face significant practical hurdles inimplementing these checks, particularly regardingdata reliability from external partners.7. Implementation Challenges and the FutureRoadmapThe dynamic nature of ESG necessitatescontinuous professional capacity building to keeppace with evolving reporting standards. While theregulatory framework is robust, its practicalapplication is currently hindered by severalsystemic challenges:- Data Quality and Fragmentation:Capturing reliable ESG data acrossfragmented supply chains (Scope 3) remainstechnically difficult and prone to error.Strengthening Trust in Sustainability Reporting : Framework for ESG Assurance and Sustainability Auditing in Bharat
Ahmedabad Chartered Accountant Journal February, 2026 973TM- Skill Gaps:There is a pressing need for a “multidisciplinary” audit approach, blendingtraditional accounting skills with environmentalscience and social impact expertise.- Regulatory Complexity:Evolving standards from SEBI, MCA, andglobal bodies (ISSB) create interpretationalchallenges for preparers and auditors alike.The Future RoadmapThe trajectory of ESG in India points toward anera of verified, data-driven sustainability:- Expansion of Mandatory Assurance:A phased rollout of mandatory assurancerequirements beyond the top 250 companiesto include a wider segment of the listeduniverse.- Carbon Market Operationalization:The development of structured carbon credittrading mechanisms, requiring CAs to providecarbon accounting and verification services.- Digital Sustainability Platforms:The adoption of AI and blockchain-basedtools to streamline the “audit trail” for nonfinancial data, improving accuracy andreducing costs.In summary, ESG assurance professionalizescorporate conduct, transforming sustainability from avoluntary disclosure into a verified, strategic asset. Byupholding these standards, the accounting professionplays a central role in fostering investor confidenceand contributing to India’s inclusive and resilienteconomic growth.Strengthening Trust in Sustainability Reporting : Framework for ESG Assurance and Sustainability Auditing in Bharat
974 Ahmedabad Chartered Accountant Journal February, 2026TMAn In-Depth Analysis of M/s Sahil Enterprises v.Union of India & Ors. (Tripura High Court, 6 Jan 2026)IntroductionThe Goods and Services Tax (GST) regime in India wasconceptualised as a unified, transparent, and efficientindirect tax system aimed at eliminating cascadingtaxation and promoting ease of doing business. One ofits most fundamental pillars is the concept of Input TaxCredit (ITC), which allows businesses to claim credit ofGST paid on purchases against their output tax liability.ITC ensures tax neutrality and prevents tax-on-taxaccumulation across the supply chain.However, the GST framework also introduced strictcompliance conditions, particularly under Section16(2)(c) of the CGST Act, 2017, which makes ITCconditional upon actual payment of tax to theGovernment by the supplier. Over the years, thisprovision has caused significant hardship for honestbusinesses because it makes a purchaser’s taxentitlement dependent on the conduct of anotherperson — the supplier.The landmark judgment in M/s Sahil Enterprises v.Union of India &Ors. [WP(C) No. 688 of 2022, decidedon 6 January 2026], delivered by the Hon’ble TripuraHigh Court, addresses this deep-rooted injustice in GSTlaw. The decision marks a turning point in Indian GSTjurisprudence by protecting bona fide purchasersfrom the consequences of supplier default.This judgment does not merely decide a disputebetween a trader and the tax department — it redefinesthe relationship between compliance, fairness, andconstitutional principles in tax law.Core Legal IssueThe central question before the Court was:Can a genuine buyer lose Input Tax Credit even afterpaying GST to the supplier, merely because theCan a Bona Fide Purchaser BeDenied Input Tax Credit under GST ?supplier failed to deposit that tax with theGovernment?Until now, based on a literal interpretation of Section16(2)(c) of the CGST Act, the answer was generally“Yes.” The law stated that ITC is available only if thetax charged in respect of such supply has beenactually paid to the Government.This created a harsh legal reality:- A buyer genuinely purchases goods takes itsdelivery,- Pay the invoice value including GST,- Maintain proper documentation,- File returns correctly.…and still lose ITC if the supplier defaulted.The Tripura High Court judgment fundamentally altersthis position.Background of the CaseParties Involved- Petitioner:M/s Sahil Enterprises, a trader in rubberproducts- Supplier:M/s Sentu DeyTransaction Details- GST paid by the petitioner: ` 1.11 crore- GST charged on genuine commercial transactionsCompliance Manipulation by SupplierAlthough the supplier filed returns, the filings weredeceptive:- GSTR-1: Filed as NIL- GSTR-3B: Filed in a manner showing zero tax liabilityAs a result, despite collecting GST from the buyer, notax was deposited with the Government.CA. Sonal [email protected]
Ahmedabad Chartered Accountant Journal February, 2026 975TMCan a Bona Fide Purchaser Be Denied Input Tax Credit under GST ?Departmental ActionBecause of the supplier’s default, the GST Department:- Blocked ITC of ` 1.11 crore- Issued demand under Section 73- Imposed: o Tax demand o Interest o PenaltyThis meant the buyer was effectively being forced topay GST twice — once to the supplier and again tothe Government.The Practical Problem in the GST SystemThe case exposed a serious systemic flaw in GSTarchitecture:No Verification Mechanism for BuyersThere is no technological or legal system under GSTthat allows a purchaser to verify whether:- The supplier has actually deposited the GST collectedAt best, a buyer can only check:- Whether GSTR-1 is filed- Whether GSTR-3B is filedBut the GST portal does not show actual tax remittancedetails.In this case, the supplier exploited this loophole by:- Filing returns- Declaring NIL liability- Creating a false appearance of complianceA bona fide purchaser had no practical means todetect the fraud.The Court recognised that the law was imposing animpossible compliance burden on buyers.Court’s Key Observations1. Impossible Burden on BuyersThe Court observed that Section 16(2)(c) placesa condition that is entirely outside the buyer’scontrol. A purchaser has no statutory authority,contractual power, or technological access toensure that the supplier deposits tax.Imposing such a condition violates basic principlesof fairness and legal reasonableness.2. Honest Taxpayers Are Being PunishedThe Court made a powerful moral and legalobservation:“Honest taxpayers are being troubled andpunished for someone else’s wrongdoing.”The judgment recognises that GST law should notoperate as a tool of victimisation of compliantbusinesses.3. Violation of Fairness, Reasonableness, andPracticalityBlind application of Section 16(2)(c), withoutconsidering the buyer’s bona fides, was held tobe:· Unfair· Impractical· Arbitrary in effectThe Court clearly indicated that a law that punishesinnocence and rewards fraud is incompatible withconstitutional governance.Reading Down Section 16(2)(c): A ConstitutionalTechniqueInstead of striking down Section 16(2)(c), the Courtadopted the doctrine of “reading down” — a judicialmethod used to save a provision from beingunconstitutional.The Court’s Interpretation:Section 16(2)(c) must be interpreted to mean that:- ITC can be denied only in cases involving:o Fraudo Collusiono Fake transactionso Sham invoiceso Non-genuine supplies- ITC cannot be denied in cases of:o Genuine transactionso Bona fide purchaseso Real commercial dealingso Actual payment of consideration and taxThis interpretation preserves the constitutionality of theprovision while preventing injustice.
976 Ahmedabad Chartered Accountant Journal February, 2026TMConstitutional DimensionsDouble Taxation and Article 265Article 265 of the Constitution states:“No tax shall be levied or collected except by authorityof law.”Forcing a buyer to pay GST again, after already payingit to the supplier, amounts to double taxation withoutlegal authority.The Court recognised that:- The State’s failure to recover tax from the defaultingsupplier cannot justify recovery from an innocent buyer.Judicial Precedents FollowedThe Court relied on well-established precedents:1. Quest Merchandising (Delhi High Court)Held that ITC cannot be denied where:- Transactions are genuine- There is no buyer involvement in fraud2. Arise India (Delhi High Court, upheld bySupreme Court)Declared that denial of ITC for supplier defaultviolates principles of fairness and constitutionalreasonableness.These cases laid the foundation that the TripuraHigh Court has now strengthened and expanded.Final VerdictThe Court conclusively held:Section 16(2)(c) remains validBut it cannot be applied mechanicallyDirections Issued:- Demand of ` 1.11 crore set aside- Interest and penalty quashed- ITC to be restored immediately- Authorities restrained from denying ITC in bona fidecasesLegal Principle Established:ITC denial is permissible only where fraud, collusion,or fake transactions are proved — not in genuinecommercial dealings.Broader Impact on GST Ecosystem1. Protection of Honest BusinessesThe ruling shields compliant taxpayers fromcascading liabilities and arbitrary enforcement.2. System-Level Reform PressureThe judgment highlights the urgent need for:- GST portal reforms- Supplier tax-payment visibility- System-level verification tools- Automated compliance transparency3. Uniform Interpretation Across IndiaThis judgment is likely to:- Influence High Courts in other States- Promote consistent interpretation- Reduce contradictory departmental practicesAuthor’s PerspectiveThis judgment is a game-changer in GSTjurisprudence.It restores balance between:- Revenue protection- Business fairness- Constitutional governanceIt reinforces a fundamental legal truth:Tax law must punish wrongdoing, not innocence.By protecting bona fide purchasers, the Court hasupheld the core purpose of GST — seamless creditflow, tax neutrality, and economic fairness.ConclusionThe decision in M/s Sahil Enterprises v. Union of Indiais not merely a judgment — it is a doctrinal correctionin Indian tax law.It transforms the GST framework from a rigid complianceregime into a justice-oriented tax system, where:- Genuineness matters- Intent matters- Conduct matters- Fairness mattersThis ruling ensures that honest taxpayers are no longercollateral damage in the fight against tax evasion.It is a decisive step toward a fair, constitutional andhumane GST regime — one that protects the integrityof the system without destroying the confidence ofcompliant businesses.Can a Bona Fide Purchaser Be Denied Input Tax Credit under GST ?
Ahmedabad Chartered Accountant Journal February, 2026 977TMConstructive Trust – Applicability to PublicentitiesA constructive trust arises by operation of law withoutregard to the intention of the parties to create a trust. ITdoes not require a deed signifying the institution oftrust. Under a constructive trust, the trust arises byoperation of law as from the date of the circumstanceswhich give rise to it. The function of the court is todeclare as such. It is regarded as a residuary category.It is imposed not necessarily to effectuate anyexpressed or implied intention but to redress a wrong.It is the result of judicial intervention.An express trust is a legal relationship which is createdby an individual(s) out of his own volition, whilemanifesting an intention to create a trust which may beexpressed either by words or through conduct.In English Private Trust jurisprudence three certaintiesare required – (a) certainty of intention (b) certainty ofthe subject matter of the property to the trust and (c)certainty of objects or the beneficiaries and the interestto be enjoyed by them.A trust can be said to have been created for a publicpurpose when the beneficiaries are the general publicwho are incapable of exact ascertainment. Though theymay not necessarily be public at large but they mustat least be a classified section of it and not a preascertained group of specific individuals.A Society registered under the Societies Act is not ajuristic person or a body corporate capable of holdingproperty by itself and it is for this reason that fictionalvesting of the property belonging to the society hasbeen made in favour of the governing body of thesociety. In absence of a separate vesting in trustees,the property belonging to the society would beautomatically vested through deeming fiction in thegoverning body. A public trust would be created priorto registration of the society subject to sec.92 of CPC.28Advocate Samir N. [email protected] ofRulingsSuch a governing body is duty bound to ensure that theproperty is put towards and utilized for the purposes/aims of the society as laid down in its memorandumetc. Moreover, in the event of society’s dissolution themembers would not derive any right to distribute theassets belonging to the society between themselvesbecause both during subsistence and dissolution of thesociety, the members or the governing body cannot besaid to possess any beneficial or individual interest overthe property vested in them. They are supposed tosafeguard the same for the future members or governingbody of the society.Operation Asha vs Shelly Batra [2026] [1 SCC 569].Double Taxation Avoidance – Mauritiusbased entitiesThe provisions of DTAA are expressions of sovereignpolicy of more than one sovereign State, negotiatedand entered into at a political, diplomatic level andhaving several explicit and subliminal and unarticulatedconsiderations as their basis. Such agreements mustbe seen in the context of aiding commercial relationbetween the partners and a bargain betweencontracting States as to the division of the tax revenuebetween them.The object of DTAA is to prevent double taxation andnot to facilitate avoidance or evasion of tax. To codifythe doctrine of “substance over form” ensuring that thereal intention of the parties, the actual effect oftransactions, and the purpose of an arrangement weretaken into account for determining tax consequences,the General Anti Avoidance Rules (GAAR). It was acomprehensive mechanism to deter tax evasion underthe guise of foreign institutional investment bycompanies misusing DTAA with Mauritius Govt.AAR v Tiger Global International [485 ITR 214].SUPREME COURT29
978 Ahmedabad Chartered Accountant Journal February, 2026TMInterest Paid on borrowings for purchase ofshares held as stock-in-trade.CIT v/s Ashini Lease Finance Pvt.Ltd.[2025] 482 ITR 81 (Guj)Issue:Whether interest paid on funds borrowed for sharesheld as stock-in-trade is a deductible businessexpense?Held: Head NotesHeld, dismissing the appeal, that the Assessing Officerobserved that the borrowed funds were used forinvestment in shares of A Ltd not for business purposesbut for acquiring controlling rights in the company andhence he disallowed the interest thereon. However,the Commissioner (Appeals) held that the assesseewas carrying on the business of purchase and saleand had purchased shares of substantial amount in asystematic manner and the shares had beenpurchased out of the borrowed funds in respect of whichinterest had been claimed and such shares were soldin the subsequent year where there was a substantialbusiness profit on sale of such shares. Consideringsuch facts, he held that the shares held by theassessee represented only 2.5 per cent of the sharecapital of A Ltd., and this itself showed that there wasno intention of acquiring controlling interest of thecompany because in the subsequent year, theassessee had sold the shares and shown substantialbusiness profit. This was in turn affirmed by the Tribunal.When both final fact finding authorities had arrived atthe same concurrent findings of fact, no furtherinvestigation was required to be undertaken to inquireabout circular trading entered into by the assesseesolely with the idea of evading tax by acquiring theshares through finances arranged mainly from sistercompanies of the group along with two othercompanies to enable the group to acquire andtakeover the business of A Ltd. The interest was rightlyheld to be deductible. No question of law arose fromthe order. (paras 3,3.6,6)Disallowance u/s 40A(2)(b) : Onus on A.O.CIT (International Taxation) v/s TechnipEnergies Italy S.P.A.[2025] 482 ITR 149 (Delhi)Issue:Whether mere allegation by A.O. is sufficient to makedisallowance u/s 40A(2)(b)?Held: Head NotesHeld, dismissing the appeals, That on the facts theTribunal had held that the assessee had dischargedits on us with reference to the expenses, that in termsof the provisions of section 40A(2)(a), the AssessingOfficer had to form an opinion based on cogentmaterial that expenses or payments made by theassessee to the related parties were excessive andunreasonable having regard to the fair market valueof goods or services, that the Assessing Officer hadnot established in what manner he had formed theopinion or that the expenses with reference to relatedparties were excessive and unreasonable havingregard to the fair market value and had not referredto any comparable case of similar nature of expensesto show that payments or expenses made by theassessee were excessive and unreasonable andmore that fair market value, that therefore, theAssessing Officer had failed to discharge the burdencast upon him under section 40A(2)(a), that for thefirst time, at the final assessment stage, theAssessing Officer had invoked the provisions ofCA. Jayesh C. [email protected] the Courts102
Ahmedabad Chartered Accountant Journal February, 2026 979TMsection 40A(2) without providing any opportunity tothe assessee, that neither at the draft assessmentstage, not before the Dispute Resolution Panel, wasthe applicability of section 40A(2)(b) ever an issue,that at the final assessment stage, the AssessingOfficer had not found any anomalies in the documentsfurnished by the assessee and that only for thepurpose of circumventing the directions of theDispute Resolution Panel and to repeat the addition,had gone in different tangent by invoking section40A(2)(b) which was unjustified. In respect of theapplicability of section 44BBB, it was found that theassessee did not execute a turnkey power project.The Tribunal did not err in holding that the expensesincurred by the assessee were not excessive underthe provisions of section 40A(2)(b). (paras 4,5)Holding period of shares of a penny stockcompany.Principal CIT v/s Damodar Jajoo[2025] 482 ITR 154 (Guj)Issue:Whether it is justified for authorities to consider longterm capital gains as bogus, even in cases where thereis a demonstrated longer holding period?Held: Head NotesHeld, dismissing the appeals, That considering thefinding of facts arrived at by the Tribunal that theassessee had sold shares after seven years and,therefore, the proximity of time between the purchaseand sale of share could not be considered anaccommodation entry in a penny stock company withina short period of about one year to claim bogus longterm capital gains or loss to defraud the Revenue. TheAssessing Officer and the Commissioner (Appeals)had ignored the facts which were considered by theTribunal to arrive at a finding of fact that the assesseehad to be treated as an investor and could not betreated to have engaged in fraudulent activity ormanipulation activity. The Tribunal, therefore,considering the period of holding of shares by theassesssee, arrived at a finding that the long -termcapital gain earned by the assessee was not aFrom the Courtssignificant amount and, therefore, held that theassessee could not be said to have takenaccommodation entry by entering into transaction ofshares in the penny stock company. Therefore, therewas no error in the finding of facts and the conclusionarrived at by the Tribunal that the investment made byassessee was long-standing and genuine and was notthe penny stock company on the basis of which thelong-term capital gains under section 10(38) waswrongly claimed. No question of law arose on thefindings of fact arrived at by the Tribunal. (paras12,13,14)Section 263 : No inquiry v/s insufficientInquiry by A.O.CIT v/s Gopal Sharma[2025] 482 ITR 226 (Cal)Issue:Whether invoking provisions of Section 263 is justifiedbased on allegation that AO had not conductednecessary enquiries?Held: Head NotesDismissing the appeal, the Commissioner invokedhis powers under section 263 of the Income Tax Act,1961, alleging that the Assessing officer hadcompleted the assessment in a hasty manner andhad accepted the return of income without makingnecessary enquiry. The exercise conducted by theAssessing Officer in the scrutiny assessment wasexamined by the Tribunal which found that due enquiryhad been conducted by the Assessing Officer andafter perusal of the documents, stock register, etc.,the assessment was completed. The Tribunal alsoreappreciated the factual position and found that theCommissioner while exercising the power undersection 263 of the Act had not recorded specificfinding that it was a case of no enquiry by theAssessing Officer rather the observation was thatthere could be a possibility of under statement of theclosing stock. Thus, the Tribunal rightly interfered withthe order passed by the Commissioner and set itaside.103104
980 Ahmedabad Chartered Accountant Journal February, 2026TMRevision u/s 263 in a limited scrutinyassessment.Principal of CIT v/s DineshchandraNarharishankar Upadhyay[2025] 482 ITR 359 (SC)Issue:Whether revision u/s 263 can be done for the viewtaken by CIT that there was lack of inquiry when theA.O. has made inquiry?Held: Head Notes“Where the Tribunal quashed the order of theprincipal commissioner under section 263 of theIncome-tax Act,1961, finding the Assessing Officerhad issued notice under section 143(2) of the Actspecifically for limited scrutiny to examine the sharecapital and deduction exemption from capital gainsand income return, that details and documents inrespect of the issue raised by the PrincipalCommissioner were called for by the AssessingOfficer that after going through the reply of theassessee, the Assessing Officer had applied hismind and held that the assessee was entitled to theexemption under section 54F of the Act, that withregard to claim of the assessee under section 54Fthe Assessing Officer got the details of the propertiesand examined the nature of properties beforepassing the assessment order under section 143(3),that none of the reasons given by the PrincipalCommissioner for invoking the jurisdiction undersection 263 were sustainable and that the order ofthe Assessing Officer sought to be revised wasneither erroneous nor prejudicial to the interests ofthe Revenue for lack of inquiry. The High Courtaffirmed the order of the Tribunal. (See Pr. CIT v.Dineshchandra Narharishankar Upadhyay [2025] 482ITR 350(Guj)). On a petition for special leave toappeal to the Supreme Court:The Supreme Court dismissed the petition.”Method of valuation of shares u/s 56(2)(viib).Principal CIT v/s Surana Metcast (India) Pvt.Ltd.[2025] 482 ITR 942 (Guj)Issue:Whether the method adopted to determine the FMVof shares at the option of the assessee under section56(2)(viib) of the Act is justified?Held: Head NotesHeld, dismissing the appeal, that the Tribunal hadafter considering the provision contained in section56(2)(viib) and rule 11UA(2) of the income taxRules,1962 had held that according to this rule thefair market value of the shares should be the valuedetermined under the prescribed formula oraccording to the discounted cash flow method whichwas at the option of the assessee. Therefore, thediscounted cash flow method adopted by theassesssee for determining the fair market value ofthe shares under rule 11UA (2) did not require anyinterference and the additions made under section56(2)(viib) were not sustainable in law. No questionof law arose. (para 7)Order Passed without giving opportunity ofbeing heardVKCN Realities LLP v/s. NFAC and Another(2025) 483 ITR 18 (Mad)Issue:When the notices etc were sent to registered email ofchartered accountant during COVID and he was unableto access the emails, whether assessment order wasinvalid?Held: Head NotesHeld, that all the notices that were sent to the assesseeunder section 142(1) of the Income Tax Act, 1961 wereto the registered e-mail of the assessee. Theregistered e-mail ID was operated by charteredaccountant of the assessee. The notices that wereissued under section 142(1) of the Act were during theFrom the Courts106107105
Ahmedabad Chartered Accountant Journal February, 2026 981TMperiod when the first wave of covid-19 was at its peakand during the period when the second wave hadalready started. The assessment order had beenpassed on April 26, 2021 again when the second wavewas at its peak. The order and the demand notice undersection 221(1) of the Act were not valid (Paras 9, 10,11).Re-opening of assessment after four yearspassed since the end of relevant assessmentyear.Mukund Ltd v/s. UOI and Another(2025) 483 ITR 24 (Bom)Issue:When it can be said that assessee has failed todisclose fully and truly all material facts for reopeningof assessment?Held:Head Notes:Where more than four years have expired since theend of the relevant assessment year the only basison which an assessment can be reopened is if therewas failure by the assessee to disclose fully and trulyall material facts. Whether it is a disclosure or notwithin the meaning of section 147 of the Income TaxAct, 1961 would depend on the facts andcircumstances of each case and the nature of thedocument and circumstances in which it is produced.The duty of the assessee is to fully and truly discloseall primary facts necessary forthe purpose ofassessment. It is not part of his duty to point outwhat legal inference should be drawn from the factsdisclosed.Held, that the assessee had filed all details and thesubject of brought forward unabsorbed depreciationwas also considered while passing the assessmentorder under section 143(3) of the Act. Therefore, theAssessing Officer had in his procession all primaryfacts and it was for him to draw proper inference asto whether the brought forward unabsorbeddepreciation should be adjusted against capital gainsor profits and gains from business or profession.There was nothing more for the assessee toFrom the Courtsdisclose. Not only were material facts disclosed bythe assessee truly and fully, but they were carefullyscrutinised and the figures of income as well asdeductions were worked out carefully by theAssessing Officer. The notice of reassessment wasnot valid. (Para 11, 12).Old is GoldIncome accrues only when an assesseeacquires an absolute right to receive it,E.D. Sassoon & Co. Ltd. v. CIT (1954) 26 ITR 27 (SC)Issue:What is the crucial test for income to have accrued toan assessee?Held: Head Notes:Held per S.R. DAS and Bhagwati JJ. (JagannadhadasJ. dissenting). answering the question in the negative,that on the construction of the Managing Agencyagreements, the contract of service between thecompanies and the Managing Agents was entire andindivisible, that the remuneration or commissionbecame due by the companies to the Managing Agentsonly on the completion of a definite period of serviceand at stated intervals, that it was a condition precedentto the recovery of any wages or salary in respectthereof that the service or duty should be completelyperformed, that such debt constituted a debt only atthe end of each period of serviceand that noremuneration or commission was payable to theManaging Agents for broken periods.The Sassoons had not earned any income for thebroken periods nor had any income accrued to themin respect of the same and what they transferred to thetransferees under the respective deeds of assignmentand transfer did not include any income which theyhad earned or had accrued to them during thechargeable accounting period and which thetransferees by virtue of the assignment in their favourwerein a position to collect.The true test under section 4(1)(a) of the Indian Incometax Act, for the purpose of ascertaining liability for108 109
982 Ahmedabad Chartered Accountant Journal February, 2026TMincome-tax in the case of transfer of ManagingAgency is not whether the transferor and thetransferees had worked for any particular periods ofthe year but whether any income had accrued to thetransferors and the transferees within the chargeableaccounting period.The word “profit” in section 4 of the Indian Income-taxAct has a well-defined legal meaning. The term impliesa comparison between the state of business at twospecific dates usually separated by an interval of ayear. The fundamental meaning is the amount of gainmade by the business during the year.“Income” connotes a periodical monetary return“coming in” with some sort of regularity or expectedregularity from definite sources. The source is notnecessarily expected to be continuously productive,but its object is the production of a definite returnexcluding anything in the nature of wind fall. The word“income” clearly implies the idea of receipt, actual orconstructive.The words “accrues”, “arises” and “is received” arethree distinct terms. The word “accrues” conveys thedistinct sense of growing up by way of addition orincrease or as an accession or advantage connotingthe idea of a growth or accumulation. The word “arises”means comes into existence or notice or presentsitself and conveys the idea of the growth oraccumulation with a tangible shape so as to bereceivable. Both the words “accrues” and “ arises”are used in contradistinction to the word “receive” andindicate a right to receive income.The accrual of income to an asseseee does not meanthe actual receipt of the same by him and it may bereceived later on its being ascertained. The wordearned” does not appear in section 4 of the IncomeFrom the Courtstax Act but it has been very often used in the course ofjudgments by learned Judges. It conveys the conceptof income accruing to the assesses,Receipt of funds earmarked for a specificpurpose.CIT v. Tollygunge Club Ltd.(1977) 107 ITR 776 (SC)Issue:Whether earmarked funds received by an assesseewould not constitute income?Held:“It is clear on the application of this test that in thepresent case, the surcharge being impressed with anobligation in the nature of trust for being applied tolocal charities was by this obligation diverted before itreached the hands of the assessee and at no stage, itbecame a part of the income of the assessee. Whenthe assessee received the amounts on account ofsurcharge, they were ‘impressed with a legal obligationto be applied for the benefit of local charities and theynever reached the assessee as part of its income.The case clearly fell within the rule in Raja Bijoy SinghDudhuria v. C.I.T. and the surcharge received by theassessee could not be regarded as incomeassessable to tax.”110
Ahmedabad Chartered Accountant Journal February, 2026 983TMSuzlon Gujarat Wind Park Lt v. DCIT 181Taxmann.com714 (Ahd)Order dated 8th October 2025, AssessmentYear 2017-18Basic FactsThe assessee filed its return of income under section139(1) on 13-10-2017 within the prescribed due date,claiming refund of about Rs. 10.93 crores on accountof tax deducted at source and tax collected at source.Subsequently, the assessee filed a revised returnunder section 139(5) on 25-5-2018 claiming additionalTDS credit of about Rs. 1.47 lakhs, out of which creditof about Rs. 1.11 lakhs was granted by way ofrectification under section 154 vide order dated 22-7-2020.Refund and interest aggregating to about Rs.11.81 crores (refund of about Rs. 10.94 crores andinterest of about Rs. 87.57 lakhs) were issued, withrefunds received on 1-10-2018 and 18-11-2020. Theassessee claimed short grant of interest under section244A of about Rs. 16.49 lakhs, contending that interestought to have been computed from 1-4-2017 till thedate of grant of refund. The Assessing Officer computedinterest under section 244A from 25-5-2018, being thedate of filing of the revised return, up to the date ofissue of the refund instrument, by applying section244A(1)(a)(ii). On appeal, the CIT(A) held that sincethe additional TDS credit was claimed only in therevised return, interest was rightly computed from 25-5-2018 under section 244A(1)(a)(ii) and not from 1-4-2017. The CIT(A) further observed that interest had beenallowed for about 16 months whereas, on correctcomputation, eligibility was only for about five months(May to September 2018) and accordingly directedthe AO to verify whether any excess interest had beengranted and to take remedial action in accordance withlaw. On appeal to the Tribunal:Issue:Whether interest u/s 244A was allowable from 1/4/2017 as the claim for TDS was made in the originalreturn of incomeHeld by Tribunal in Favour of the assessee :The Tribunal noted the provisions of section244A(1)(a) and the submissions made and found meritin the contention of the assessee that even assumingthat clause (ii) of section 244A(1)(a) applies, suchclause would be applicable only to the additional TDSclaim of Rs. 1.47 lakhs made in the revised return ofincome filed on 25-5-2018 and not to the entire refundamount of Rs. 10.93 crores, which includes TDS/TCScredits of Rs. 10.92 crores already claimed in theoriginal return of income filed under section 139(1).The act of filing a revised return to correct an omissionor error cannot be considered an act of delayattributable to the assessee so as to deny interestfrom the beginning of the assessment year in respectof the amount already claimed in the original return.For this the tribunal referred to the judgment of theGujarat High Court in Ajanta Manufacturing Ltd. v. DCIT[2017] 391 ITR 33 (Guj), wherein it was held that whenthe original return has been filed within the prescribeddue date, the assessee’s entitlement to interest undersection 244A cannot be curtailed merely because arevised return is subsequently filed. Accordingly,held that interest under section 244A(1)(a)(i) was tobe granted on the amount of Rs. 10.92 crores beingthe TDS/TCS credit claimed in the original return ofincome filed within the due date under section 139(1),for the period from 1-4-2017 till the date of grant ofrefund, and that interest under section 244A(1)(a)(ii)shall apply only in respect of the additional TDS claimof Rs. 1.47 lakhs made in the revised return ofincome filed on 25-5-2018. As regards the issue of65CA. Yogesh G. [email protected]. Aparna [email protected] News
984 Ahmedabad Chartered Accountant Journal February, 2026TMthe date of grant of refund, the Tribunal concurredwith the finding of the CIT(A) that the refund was issuedthrough a Demand Draft dated 25-9-2018, which wasdispatched on 28-9-2018 and received by theassessee on 1-10-2018. As per tribunal theexpression ‘’the date on which the refund is granted’’occurring in section 244A had to be construed inaccordance with the statutory scheme and thereasoning adopted by judicial authorities, includingthe decision of the Delhi High Court in Nokia Solutionsand Networks India Pvt. Ltd. v. ACIT [2024] 169taxmann.com 537 (Delhi). When the refund is issuedthrough an instrument such as a Demand Draft, thedate of issue of the Demand Draft constitutes the dateof grant of refund, since the Department would notreasonably be expected to compute interest up toan uncertain future date when the assessee presentsthe instrument or when the bank credits the amount.There was no inordinate delay or lapses on the partof the revenue in dispatching the Demand Draft, whichwas sent within three days of its preparation.Therefore, interest under section 244A was to becomputed up to the date of actual issue of the DemandDraft, i.e., 25-9-2018. The AO was directed torecompute the interest under section 244A inaccordance with the observations made by thetribunal.Vijay Mariappan Austin Prakash v. ACIT(International Taxation) 182 Taxmann.com285 (Visakhapatnam-Trib.), TS-1744-ITAT2025 (VIZ)Order dated 5th December 2025, AY 2022-23Basic Facts:The assessee, a non-resident individual, was aconsultant to ZBL, an Indian company and providedbusiness advisory services related to businessplanning and development. He filed his return ofincome claiming exemption on consultancy feesreceived from ZBL under the India-UAE DTAA andalso claimed refund of TDS deducted by ZBL. TheAO observed that the assessee was previously anemployee of ZBL and provided similar services. Heheld that the assessee had changed the source ofincome from salary to consultancy to avoid taxabilityTribunal Newsin India. The AO also invoked section 9(1)(i) statingthat the assessee is having a business connectionin India on account of significant economic presence(SEP) and held that the assessee was not coveredunder Article 14 of the India-UAE DTAA as his servicesdid not fall within the definition of professionalservices. He accordingly passed the draftassessment order proposing additions. Theassessee’s objections filed before the DRP wererejected as having been filed beyond the statutorylimitation period, and no directions on merits wereissued. The AO thereafter finalized the assessmentunder section 144C(13) by sustaining the addition.On appeal to the Tribunal:Issue:Whether Article 14 – Independent personnel servicesof India UAE DTAA was applicable to the assessee’scase and professional income earned by theassessee would not be taxable in India.Held by Tribunal in favour of the Assessee.The Tribunal noted that it was an undisputed fact thatthe assessee was a salaried employee with ZBL till30-9-2020 and after termination of employment he wasappointed as consultant from 1-10-2020. As per tribunalthe observations of the AO do not have any merit dueto the fact that change of employment to consultant iswith regard to the agreement between the concernedparties. As per the tribunal from the plain reading ofthe Explanation 2A(a) to section 9(1)(i) and proviso,the income shall deemed to accruing or arising in Indiato the assessee since he has a business income inIndia on account of Significant Economic Presencewith crossing the threshold limit of Rs. Two crores. Nowthe question as per tribunal was whether the Article 14of India-UAE DTAA covered the professional servicesrendered by the assessee or not. Article 14 to IndiaUAE DTAA defines professional services, it was aninclusive definition. The professional services providedby the assessee were covered under the termprofessional services as defined in Article 14(2) ofDTAA. It was therefore held that the assessee wasentitled to avail the benefit under section 90(2), wherethe income of the assessee shall not be taxable inIndia in the absence of permanent establishment in66
Ahmedabad Chartered Accountant Journal February, 2026 985TMIndia. Accordingly, grounds raised by the assesseewas allowed.Sondex Wireline Ltd. v. ACIT InternationalTaxation 182 Taxmann.com 281 (Del), TS1753-ITAT-2025 (Del)Order dated 3rd December 2025, AssessmentYear 2022-23Basic Facts:The assessee was incorporated under the laws ofUnited Kingdom (UK) and was a tax resident of UK.The assessee was a part of Baker Hughes Groupand was engaged in the business of offshore supplyof equipment and standard software, provision ofservices in connection with and supplying plant andmachinery on hire basis to be used in prospectingfor, extraction, production of mineral oil, etc. For AY2022-23, it entered into contracts with Indian entitiesand received about Rs. 2.51 crores from offshoresupplies of goods and standard software. Thesupplies were on FOB basis and payments werereceived outside India. During draft assessment, theassessee stated that it had no PE in India under theIndia-UK DTAA and that the offshore receipts werenot taxable in India. The AO, in the draft assessmentorder, recorded that the assessee had a deemedPE in India under Article 5 of the India-UK DTAA andheld that a portion of profits from offshore supply ofequipment and standard software was taxable in India,and attributed 38.28% of the operating profit marginto the alleged Indian PE. The assessee filedobjections before the DRP challenging the AO’sfinding of a deemed PE and the profit attribution. TheDRP confirmed the AO’s findings, and the finalassessment order was passed under section 143(3)read with section 144C(13) in accordance with theDRP’s directions. On appeal:Issue:Whether the Assessee can be said to have deemedPE in India as per Article 5 of the India- UK DTAAHeld by tribunal in favour of the assessee.As per the Tribunal the onus to prove that the assesseehas PE/deemed PE in India is on the AO. The AO hadmerely assumed that the assessee has deemed PEin India as per Article 5 of India-UK DTAA. No reasoningwhatsoever has been given by the AO to come to aconclusion that the assessee had PE in India. Article 5of India-UK DTAA sets out certain conditions to holdthat the foreign entity has PE in India. No effort havebeen made by the AO to examine whether theconditions set out in Article 5 of India-UK DTAA aresatisfied before coming to the conclusion that theassessee has deemed PE in India. Moreover, the AOhas not identified or named the entity which accordingto him is PE/deemed PE of assessee. Thus, in lightof above observation, the tribunal held that that the AOhas failed to discharge its onus in proving PE ofassessee in India.In so far as provision of offshoresupply of equipment and standard software, thecontention of the assessee was that no activities inrespect offshore supply of equipment and standardsoftware were carried out in India. The payments forsupply of offshore goods were also received outsideIndia. It was no more res integra that where the entiretransaction of offshore supply of goods i.e., the transferof ownership of goods as well as the payments thereofare carried outside India, such transactions were nottaxable in India. In the result, appeal of the assesseewas partly allowed.SAIC Motor Corporation Ltd. v. ACIT182taxmann.com 163 (Del), TS-07-ITAT-2026 (Del)Order dated 7th January 2026, AssessmentYear 2022-23Basic Facts I:The assessee, a Chinese company, was engaged inthe business of research, production and sale ofpassenger cars and commercial vehicles. It wasengaged in automobile business under the brand‘MG’’. Its wholly owned subsidiary, MGMIPL wasengaged in assembling vehicles under the brand ‘’MG’’in India. During the year, the assessee entered intotwo types of agreements with MGMIPL viz. TechnologyLicense Agreement and KD (Knocked Down) PartsSupply Agreement, for granting of license to MGMIPLfor production of the Licensed Products and for offshoresupply of KD Parts to be used by MGMIPL formanufacture of motor vehicles. Further, six employeesTribunal News6768
986 Ahmedabad Chartered Accountant Journal February, 2026TMwere seconded to MGMIPL by the assessee.The AOheld that the assessee through the secondedemployees performed supervisory activities inconnection with manufacturing and assembling processof cars by Indian AE, thereby holding that theassessee had a Supervisory PE in India. The DRPupheld the action of the Assessing Officer in holdingthat the assessee company had a Supervisory PE inIndia.On appeal:Issue I:Whether Assessee had a supervisory PE in Indiabased on the fact that six employees were secondedto the Indian companyHeld I by tribunal in favour of the assessee:The tribunal referred to the fact that MGMIPL hadpurchased KD goods from the assessee companyamounting to Rs. 1189.20 crores which was estimatedto be 24 per cent of its total purchases. Further, theassessee also purchased other goods from otherthan assessee company amounting to Rs. 5054.94crores showing that substantial business activitieswere carried out by MGMIPL (sale of goods- Rs.4899.17 crores during the year) and it was quite logicalthat trained, and highly skilled manpower would bedeputed by the assessee company to MGMIPL inthe interest of its business because the business ofsupply of goods by the assessee company toMGMIPL would be directly related to the volume ofbusiness/ cars sold by MGMIPL. It was also viewedthat the volume of business/ cars sold by MGMIPLwould be more favourable to MGMIPL when it getsthe best skilled manpower to achieve the said targets.The tribunal also referred to the various emailsreproduced by the AO in the assessment order andas per Tribunal they did not show that the assesseewas carrying out its business through MGMIPL so asto constitute supervisory PE. As per Tribunals therewas not a single e-mail from the assessee companyto the six seconded employees or to MGMIPLshowing that it was controlling or directing as to howits subsidiary MGMIPL was to conduct its business.The tribunal noted that when the assessee companywas the holding company of the MGMIPL, such emails to keep its parent company informed about theactivities by its subsidiary cannot amount toSupervisory PE by the assessee company. Thus,as per Tribunal the evidence brought on record didnot show that the assessee company had operationalcontrol over the activities of MGMIPL and that therewas no operational independence to MGMIPL. Asper tribunal the finding of the DRP that thecircumstantial evidences also proved that theseconded employees were in full control of the parentSAIC and that the contractual agreement between theMGMIPL and the seconded employees was nothingbut a facade to layer the control extended by theparent SAIC under the secondment agreementthrough which the control of the parent was exercisedon MGMIPL were not supported by any documentaryevidence. The AO also referred to the employmentagreement wherein the job profile assigns‘supervisory responsibilities’’ but did not bring onrecord any material/ findings of the search conductedby the Investigation Wing to show that the secondedemployees were engaged in the supervisory activityby the assessee company. The above terms andconditions which have not been contradicted by therevenue clearly showed that the deployment of thesaid six seconded employees were in furtheranceof the business of MGMIPL with whom they areplaced/ employed. Thus, the tribunal held that theevidence on record did not show that the activitiescarried out by the six seconded employees weresuch nature to establish the supervisory PE of theassessee. Accordingly, Tribunal held that theassessee did not have a supervisory PE in India.Basic Facts II:The assessee, a Chinese company, was engagedin the business of research, production and sale ofpassenger cars and commercial vehicles. It wasengaged in automobile business under the brand‘MG’’. The assessee had set up a wholly ownedsubsidiary in India, namely, MGMIPL, which wasengaged in assembling vehicles under the brand‘’MG’’ in India.During the year, the assessee hadentered into two types of agreements with MGMIPLviz. Technology License Agreement and KD(Knocked Down) Parts Supply Agreement, forgranting of license to MGMIPL for production of theTribunal News
Ahmedabad Chartered Accountant Journal February, 2026 987TMLicensed Products and for offshore supply of KDParts to be used by MGMIPL for manufacture of motorvehicles.The AO held that the assessee did notconduct any offshore sales, had a Supervisory PE,DAPE and Fixed Place PE on supply of goods inIndia and proposed to add the income attributable tothe PE in India. On appeal, the DRP upheld the actionof the Assessing Officer in holding that the assesseecompany constituted Fixed Place PE in India.Onappeal to the Tribunal:Issue II:Whether the assessee had a fixed place PE in Indiain terms of Article 5 of the India- China DTAAHeld II by tribunal in favour of the assessee:The Tribunal noted that the AO in view of the factsstated in DAO held that the assessee had a FixedPlace PE of the assessee in India in the assemblyunit owned by MGMIPL. The DRP held that theassessee exercised reasonable control over the dayto-day administration of the MGMIPL through itsseconded employees. The DRP noted that theassessee’s subsidiary, i.e., MGMIPL, which was onlyengaged in assembling of parts acquired from theassessee company and without assembly of suchparts MGMIPL. did not have any value or any sourceof income. Thus, the DRP noted that until the partssold by the assessee to MGMIPL are assembled,the activities undertaken by the assessee andMGMIPL directly contributes towards the earning ofassessee’s income from its cohesive businessactivities. The DRP held that these facts clearly showthat the revenue earned by the assessee companyis through a business connection in India and hadtaken place through the Indian subsidiary in India.Further, the DRP noted that findings as a result ofsearch under section 132 revealed that theassessee’s business is carried in India with the helpof its seconded employees as well as the employeesof MGMIPL who regularly work on behalf of theassessee company. In view of the facts, the DRPconfirmed the action of the AO in holding that theassessee company constitutes Fixed Place PE inIndia. The Tribunal noted that the assessee suppliedTribunal Newsthe goods in KD condition which is assembled/manufactured in India and sold to the Indiancustomers. This was an arrangement which generallyspeaking was followed by all the multinationals whoset up their shop/subsidiary companies to sell theirproducts in India. Such an arrangement cannot betermed as ‘’Fixed Place PE’’ unless it was establishedby the revenue that the assessee has a fixed placeof business in India which is at disposal where theassessee has the right to use the said place and hascontrol thereupon. No such evidence was broughton record either by the AO or in the DRP proceedingsthat the assessee satisfied the said conditions. TheTribunal has held that the assessee has noSupervisory PE in India through the six secondedemployees. Therefore, the submissions of theRevenue that Fixed Place PE of the case of theassessee is linked to Supervisory PE through itspersonnel and the assessee through its six secondedemployees got access to the office premises ofMGMIPL was not acceptable to the Tribunal. Further,as tribunal merely the fact that the manufacturingactivity of KD products by its subsidiary cannot amountto Fixed Place PE without satisfying the above twoconditions. No evidence was brought on record bythe revenue that the assessee had access toit, i.e.,business premises of MGMIPL from where thebusiness of the assessee company was carried out.Further, as noted the DRP in its order had taken notethat an affidavit was submitted by the DeputyManaging Director of MGMIPL on a Non-JudicialStamp Paper that even though, the agreementprovided for the procedure of inspection of the KDParts there were no employees or other personnelof the SMCL present in India for the financial year2021-22 and hence no inspection was conducted byany employee/personnel of the SMCL during thesubject year. Therefore, this fact did not support thecase of the AO that designated personnel of theassessee will have a permanent place in the officeof MGMIPL Further, as per tribunal if the view of therevenue that the assessee company earns income,when the car is assembled in India to establish aFixed Place PE is acceptable, then, it would createhuge disruptions in the taxability of the incomes ofthe parent/subsidiary set-up in a multinational set-up
988 Ahmedabad Chartered Accountant Journal February, 2026TMdriven economies in the entire world wherein suchan arrangement like in the case of the assessee isthe norm. In view of the above, the tribunal held thatthe assessee did not have a Fixed Place PE in Indiaas held by the Assessing Officer and confirmed bythe DRP. In view of the fact in appeal being allowed,it was held that there was no permanent establishmentof the assessee in India either by way of SupervisoryPE or Fixed Place PE.Binny Bansal v. DCIT182 taxmann.com 226(Bang), TS-18-ITAT-2026 (Bang)Order dated 9th January 2026, AssessmentYear 2020-21Basic Facts I:The assessee was an Indian citizen who co-foundedFlipkart and later migrated to Singapore foremployment. He filed his return of income for theassessment year 2020-21 claiming non-resident status,arguing that he was ‘being outside India’ as perExplanation 1(b) to section 6(1)(c). The AO treated theassessee as a resident of India under section 6(1)(c),citing his stay of 141 days in India during the relevantyear and over 365 days in the preceding four years.The AO denied the benefit of Explanation 1(b), holdingthat it applied only to non-residents, not to someonewho was a resident in the immediately preceding year.On appeal, the DRP upheld the AO’s decision, statingthat Explanation 1(b) applies only to non-residents andnot to ordinarily resident Indians. On the assessee’sappeal to the Tribunal:Issue:Whether Explanation 1(b) to section 6(1)(c ) of theAct is applicable to the assesseeAs tie breaker test of Article 4 of DTAA between India& Singapore whether the assessee was resident ofSingapore.Held by tribunal against the assessee:Explanation 1(b) provides a concession for Indiancitizen or PIO who, being outside India, come on avisit to India in any previous year. The objective behindTribunal Newsthis relaxation is to enable non-resident Indians whohave made investments in India and who find itnecessary to visit India frequently and stay here forthe proper supervision and control of their investmentsto retain their status as non-resident.ITAT relied upon the Circular No. 684 dated 10 June1984 which clarifies that relaxation of 182 days criterionunder Explanation 1(b) is applicable to Non-residentbeing citizen of India or POI while being outside Indiacomes on a visit to India.ITAT further relied upon the judgment of the BombayHigh Court in Principal CIT vs. Binod Kumar Singh[2019] 107 taxmann.com 27 (Bombay HC), wherein itwas held that an individual who has migrated outsideIndia and is engaged in business abroad, whentravelling to India, is regarded as being on a visit, andaccordingly, the explanation 1(b) is applicable and 182-day criterion is applicable to determine residentialstatusITAT further relied upon the judgment of the DelhiTribunal in Additional Director of Income-tax vs. SudhirChoudhrie [2017] 88 taxmann.com 570 (Delhi - Trib.) /[2017] 55 ITR(T) 681which held that when an assesseeafter taking up employment abroad, continues to beregarded as being outside India in later years for thepurpose of applying the 182 days criteria.ITAT further highlighted that subsequent amendmentto Explanation 1(b) (i.e., introducing the clause on 120days) was introduced to prevent individuals who hassubstantial economic activities in India from maintainingnon-resident status indefinitely by managing their staybelow 182 days. This clearly indicates that clauseExplanation (1)(b) applies only to non-residents.ITAT further noted that assessee had come on a visitto India during FY 2019-20 and left for employmentduring FY 2018-19. Hence, Explanation 1(a) does notapply in this case as assessee did not leave India inFY 2019-20.After citing above, ITAT agreed with AO & DRP that:Explanation 1(b) applies only to non-residents visitingIndia, not to individuals who were residents in thepreceding year.69
Ahmedabad Chartered Accountant Journal February, 2026 989TMThe phrase “being outside India” cannot be interpretedas “anyone physically outside India;” it is meant forthose who are already non-residents.ITAT relied on the arguments of AO and upheld theAO’s order and concluded that assessee is a residentand ordinarily resident of India for FY 2019-20.Further, ITAT held that assessee’s major investmentsare in India and not in Singapore and concluded thatAssessee’ s major economic interest is closer to Indiathan to Singapore. Hence, applying the tie-breaker testas per India-Singapore DTAA, ITAT holds that theAssessee is a resident of India.Assessee’s claim for non-resident status in the incometax return was rejected, and assessee was assessedas Resident of India for FY 2019-20.Gunmala Jain v. ITO182 taxmann.com 451(Jaipur - Trib.)Order dated 22nd December 2025,Assessment Year 2019-20Basic Facts:The assessee originally filed return of income for theimpugned year claiming deduction on account ofdonations made to political parties under section80GGC. Subsequently, on the basis of information inthe possession of the department, which emanatedfrom search action conducted in the case ofRegistered Unrecognized Political Parties (RUPPs)group, it was revealed that there was a racket ofproviding bogus donation to unrecognized politicalparties involving the nexus of RUPPs, bogusintermediary entities and exit providers. As per theinformation, the assessee was found to have obtainedan accommodation entry from RSP party in the formof political donation of Rs. 80,000 made during theimpugned year. Accordingly, the case of theassessee was reopened by issuing notice undersection 148. In response to the said notice, theassessee filed return of income withdrawing its claimof deduction under section 80GGC, contendingbefore the AO that the claim was withdrawn to buypeace of mind. Assessment thereafter was framedaccepting the income returned by the assessee inTribunal Newsresponse to the notice issued under section 148,which was higher than the income originally returnedby the assessee by the amount of deduction claimedunder section 80GGC. The Assessing Officer initiatedpenalty proceedings for misreporting of income as aconsequence of underreporting of income, onaccount of misrepresentation of facts pertaining toalleged bogus donation made to political parties andlevied penalty to the tune of 200 per cent of the taxsought to be evaded on the same as per theprovisions of section 270A(9). On appeal to theTribunal:Issue:Whether assessee was liable to penalty undersection 270A(9) of the Act even though the claimfor deduction u/s 80GGC was withdrawn in thereturn of income filed in response to the noticeu/s 148Held by tribunal against the Assessee:The tribunal noted that originally the returned incomeby the assessee was accepted under section 143(1)and in the reassessment framed under section 147,the income reassessed was greater than that originallyreturned by the assessee to the extent of deductionclaimed originally under section 80GGC withdrawn inthe return filed in response to notice under section148. Therefore, as per tribunal the case clearlyqualifies as under reporting of income in terms ofclause (c) of section 270A sub-section (2). Whilerejecting the assessee’s contention that the incomereturned by the assessee in response to the noticeunder section 148 was accepted by the AO andtherefore, there was no case of underreporting ofincome, the tribunal held that the said contention doesnot stand the test of law since law provides that if theincome reassessed is greater than the incomeoriginally assessed, it qualifies as a case of underreporting of income on this basis alone, and the factthat the assessee suo moto had withdrawn any claimof deduction in the return of income filed undersection 148 is of no consequence as per law fordetermining whether it is a case of under reporting ofincome. The Tribunal further held that even as per asub-clause (3) of section 270A, for computing under70
990 Ahmedabad Chartered Accountant Journal February, 2026TMreported income, what is to be considered only isthe income assessed and the income determinedunder section 143 (1)(a), which in the facts of thepresent case reveal an underreporting of income tothe tune of deduction claimed by the assessee undersection 80GGC since, the income assessed undersection 147 was higher to this extent as opposed tothe amount of income determined under section 143(1)(a). Therefore, even as per the machinery provisionof section 270A for determining the quantum of underreported income, the assessee’s case clearlyqualifies for the same. The tribunal also held that theassessee’s case did not fall in the exclusionsprovided under sub-section (6), since there was noexplanation offered by the assessee for withdrawalof claim of deduction under section 80GGC, exceptfor stating that it was withdrawn to buy peace of mind.However, the assessee at no point of time hadexhibited that her claim of deduction of donation tothe political party was a bona fide claim. The saidexercise was not been carried out either during theassessment proceedings nor during penaltyproceedings. At no juncture has the assesseedemonstrated with facts and evidence that her claimof deduction of donation made to political party wasgenuine. Having not done so, the explanation thatshe is withdrawing the claim in the return filed inresponse to notice under section 148 to buy peaceof mind does not appear to be a bona fide claim. Inrespect of the assessee’s contention that assesseewas never specified the charge for which penalty wasinitiated, the tribunal noted that in the assessmentorder, AO had clearly mentioned initiation of penaltyfor underreporting of income in consequence ofmisreporting ‘under section 270 A (9) (a)(a)_misrepresentation or suppression of facts’. Thetribunal therefore rejected assessee contention thatspecified charge as per section 270A (9) whileinitiating penalty was not mentioned. In respect ofthe assessee contention that the notice issued toassessee initiating penalty proceedings undersection 270A did not specify the charge, the tribunalnoted that the notice issued by the AO had specifiedthat penalty proceedings were being initiated forunderreporting of income as a consequences ofmisreporting as per details given in the assessmentorder, and the assessment order, clearly specifiessub-clause (a) of section 270A (9) to be the specificcharge of misreporting of income in the present case,i.e., of suppression and misrepresentation of facts.The contention of the assessee was thereforedismissed as it was found to be factually incorrect.Tribunal News
Ahmedabad Chartered Accountant Journal February, 2026 991TMIn this issue, we are giving gist of the decision renderedby ‘A’ Bench of I.T.A.T., Ahmedabad in the case ofDharmendra Rikhavchand Shah (HUF), wherein theissue was when the assessee had originally filed returnof income u/s.139(1) and had paid the required amountof tax but had not filed return in response to subsequentnotice u/s.148. Whether the CIT(Appeals) can dismissthe appeal in limine invoking the provisions of section249(4)(b) of the Act?We hope the readers would find the same useful.In the Income Tax Appellate Tribunal“A” Bench, AhmedabadBefore Smt. Annapurna Gupta, Accountant MemberandShri Siddhartha Nautiyal, Judicial MemberITA No.2680/Ahd/2025Assessment Year: 2016-17Dharmendra Rikhavchand Vs.NFAC, DelhiShah (HUF) (now presentHimatnagar. Jurisdiction: Income Tax(PAN: AAEHD6246F) Officer, Ward-1,(Appellant) Himatnagar(Respondent)Appellant by : NoneRespondent by : Shri Rajendrakumar M. Vasavada,Sr. DRDate of hearing : 05.02.2026Date of pronouncement : 19.02.2026GIST Only1. The grounds raised by the assessee were mainlyin respect of dismissal of appeal by CIT(Appeals)by invoking the provisions of section 249(4)(b) ofthe Act as well as dismissal of appeal withoutdiscussing merits of the case, which was inviolation of principles of natural justice.CA. Sanjay R. [email protected] of the Case2. The assessee, a Hindu Undivided Family wasengaged in the business of wholesale trading oftyres and allied goods under the name DarshanTyres & Tools, who had originally filed its return ofincome for the Assessment Year 2016-17 undersection 139(1) of the Act on 16.10.2016 declaringa total income of Rs.4,05,580/-. The said returnwas processed under section 143(1) of the Act on16.11.2016 and the returned income was acceptedwithout any adjustment. Subsequently, on thebasis of search at third party, the Assessing Officerhad believed that the assessee had entered intotransactions with M/s Mehta Finance and with M/sMehta Corporation during the year underconsideration, who were engaged in providingaccommodation entries, and therefore, the samewere treated as undisclosed money. TheAssessing Officer, therefore, invoked heprovisions of section 148A of the Act and also 148of the Act to reopen the assessment calling forcertain details from the assessee. However, theassessee did not respond to those notices andas a result, the ex-parte assessment came to bemade. Against the ex-parte assessment, theassessee preferred appeal before CIT (Appeals),which was dismissed by the CIT (Appeals) byinvoking the provisions of section 249(4)(b) onthe reasoning that the assessee had not filed areturn of income in response to notice undersection 148 of the Act and had also not paid anamount equal to the advance tax payable on theassessed income, and therefore, the appeal wasnot maintainable. The assessee filed secondappeal before the Tribunal against the saiddismissal of appeal by CIT (Appeals). Theassessee also relied on various decisions tocontend that dismissal of appeal u/s.249(4)(b) is
992 Ahmedabad Chartered Accountant Journal February, 2026TMnot justified when the assessee had already filedthe original return of income.(i) Russell Adrian Rodrigues v. ITO (ITA No. 98/Mum/2025 dated 14.02.2025),(ii) Nine Globe Industries Pvt. Ltd. No. 3889/Mum/2023 dated 16.04.2024) and(iii) Ramdas Yadav v. ITO (ITA No. 163/Ind/2024dated 27.06.2024),Held:3. The Tribunal, after considering the legal position,held as under:“8. We have considered the rival submissions andperused the material available on record. It isan undisputed fact that the assessee had filedits original return of income under section139(1) of the Act, which stood processed undersection 143(1) of the Act. Even the AssessingOfficer has acknowledged this fact in the orderpassed under section 148A(d) of the Act. Insuch circumstances, invocation of section249(4)(b) of the Act by the CIT(Appeals) onthe premise that no return of income was filedis clearly erroneous. The condition of paymentof advance tax under section 249(4)(b) of theAct applies only where no return of incomehas been filed at all. Once an original return ison record, the appeal cannot be dismissed fornon-payment of advance tax merely becausethe assessee did not file a return in responseto notice under section 148. This position issupported by the decisions of the coordinatebenches in Russell Adrian Rodrigues, NineGlobe Industries Pvt. Ltd. and RamdasYadav supra, wherein it has been consistentlyheld that section 249(4)(b) of the Act cannotbe mechanically applied in such cases.9. We also find force in the contention of the ld.counsel that it is a well settled law that there isno requirement to pay advance tax on disputedincome. Advance tax is payable on estimatedand admitted income and not on additions madeby the Assessing Officer, particularly when suchadditions are disputed and the assessment hasbeen framed ex parte. The Hon’ble Supreme Courtin CIT v. Hindustan Electro Graphites Ltd. (243ITR 48) has held that interest and advance taxprovisions operate only on income which isaccepted or admitted and not on income whichis ultimately found not chargeable. In the case ofBalwinder Singh vs. ITO [2024] 163taxmann.com 599 (Amritsar - Trib.), the ITATheld that where assessee had no taxable incomeand there was no obligation on assessee to payadvance tax under section 208, Commissioner(Appeals) should have admitted appeal foradjudication on merits and the Commissioner(Appeals) could not have refused to admit appealfor hearing for non-payment of tax as perprovisions of section 249(4)(b) of the Act. In thecase of Vishnusharan Chandravanshi vs.Income-tax Officer [2024] 161 taxmann.com803 (Raipur - Trib.) [10-04-2024], the ITAT heldthat where assessee had no taxable income, thereis no obligation cast upon assessee to compute/pay ‘advance tax’ under sections 208 and 209 ofthe Act. Thus, insisting upon payment of advancetax on disputed additions as a pre-condition foradmission of appeal is contrary to law.10. Considering the fact that the assessment orderhas been passed ex parte without properopportunity and that the first appellate authorityhas dismissed the appeal on a technical groundwithout examining the merits, we are of theconsidered view that the matter deserves to berestored to the file of the Assessing Officer forde novo consideration. The Assessing Officershall reframe the assessment in accordancewith law after affording adequate opportunity ofbeing heard to the assessee and afterconsidering all submissions and evidences thatmay be produced. The assessee shall cooperateand furnish all requisite details as called for.11. In view of the above discussion and in theinterest of justice, the impugned order of theCIT (Appeals) is set aside and the assessmentis restored to the file of the Assessing Officerfor fresh adjudication.12. In the result, the appeal of the assessee isallowed for statistical purposes.”Unreported Judgements
Ahmedabad Chartered Accountant Journal February, 2026 993TMSr. Advocate Tushar [email protected] AnalysisMaterial found from third party search would resultinto proceedings u/s 153C and not u/c 147 of theAct.Paras Chandreshbhai Koticha v.ITO [2026]182 taxmann.com 204 (Gujarat)xxx…40. The twin issues, which arise for our considerationin the present group of writ petitions, are namely:(a) Whether the jurisdictional Assessing Officer,upon receipt of incriminating materialpertaining to an assessee (other person)from the Assessing Officer of the searchedperson, can reopen the assessment underSections 147/148 of the Act without therebeing any satisfaction recorded on suchmaterial by the Assessing Officer of thesearched person and without resorting to theprovisions under Section 153C of the Act ornot ; and(b) Whether the searched person (under Section153A) can be subjected to reopening ofassessment under Sections 147/148 of theAct on the basis of incriminating material foundduring the search or not.xxx…45. Thus, the use of the expression “the AssessingOfficer is satisfied” in Section 153C mandates therecording of satisfaction on the incriminatingmaterial sent to him/her by the Assessing Officerof the searched person. The law relating to therecording of satisfaction by the Assessing Officerof the searched person and its transmission tothe jurisdictional Assessing Officer is no longerres integra. The Supreme Court in the case ofManish Maheshwari v. Asstt.CIT [2007] 159 Taxman37258 (SC)/[2007] 289 ITR 341 (SC) 2007 (3) SCC794, on a similar issue arising of non-recording ofsatisfaction note in the old provision of section158BD(153C) of the Act has held thus:xxx…46. Subsequently, the Supreme Court in the case ofCIT v. Calcutta Knitwears [2014] 43 taxmann.com446 (SC)/[2014] 223 Taxman 115 (SC)/[2014] 362ITR 673 (SC), has recognized three stages ofrecording such satisfaction, namely:(a) at the time of or along with the initiation ofproceedings against the searched personunder Section 158BC of the Act;(b) along with the assessment proceedingsunder Section 158BC of the Act; and(c) immediately after the assessmentproceedings are completed under Section158BC of the Act in respect of the searchedperson.Accordingly, the Central Board of Direct Taxesissued Circular No.24/2015 dated 31.12.2015,clarifying the procedure to be followed forinitiation of proceedings under Section 153C ofthe Act.47. The Supreme Court, in the case of Super MallsPrivate limited v. Pr. CIT (2020) 4 SCC 581, hasreiterated the aforesaid proposition of law. It isheld thus:xxx…48. The aforesaid decisions of the Supreme Court andthe Circular issued by the CBDT have beenconsidered in numerous judgments.Unequivocally, the law mandates the recording of
994 Ahmedabad Chartered Accountant Journal February, 2026TMJudicial Analysissatisfaction by the Assessing Officer of the‘searched person’ (under Section 153A of the Act)at the stage of transmission of seized material tothe jurisdictional Assessing Officer of the ‘otherperson’ before assuming jurisdiction underSection 153C.49. When incriminating material pertaining to a ‘third/other person’ is found during the course of a searchconducted under Sections 132/132A of the Act andsuch material is transmitted to the jurisdictionalAssessing Officer of such ‘other person’, thestatute obliges the Assessing Officer to recordsatisfaction on such material before proceedingfurther. The legislative scheme does not carveout any exception permitting the jurisdictionalAssessing Officer of the third person to assumejurisdiction under Section 153C of the Act in theabsence of satisfaction recorded by the AssessingOfficer of the searched person in the first place,and, as a necessary corollary, unequivocally notunder Sections 147/148 of the Act as a secondinstance on the same material.50. In other words, the absence of satisfactionrecorded by the Assessing Officer of thesearched person does not vest jurisdiction inthe Assessing Officer of the third person to directlyinvoke the provisions of Sections 147/148 of theAct on the incriminating material found duringsearch, more particularly when the provisions ofSection 153C of the Act are not followed. Suchsatisfaction is a statutory requirement and ajurisdictional pre-condition, and not a mereprocedural formality. This position stands fortifiedby binding judicial precedents and theclarificatory Circular issued by the CBDT, whichis binding on the Department.xxx…54. The Supreme Court, while discussing theinterplay between the provisions of Sections153A and 147/148, has held that, in case, duringthe search no incriminating material is found orin the case of completed/unabated assessments,the only recourse available to the Revenue wouldbe to initiate reassessment proceedings underSections 147/148 of the Act, subject to fulfillmentof the conditions mentioned in Sections 147/148,as in such a situation, the Revenue cannot beleft without any remedy. The Supreme Court hasmade these observations in relation to the“searched person” under Section 153A of the Act,and has carved out an exception for resorting tothe provisions of Sections 147/148 of the Act,subject to fulfillment of the conditions envisagedtherein, in cases where no incriminating materialis found.55. “Incriminating material” would mean any evidenceor proof which connects the assessee withinvolvement in a delinquency or any deliberateact of concealment/ misdeclaration/ diversion offunds/income. The Supreme Court has renderedthe decision in the context of the provisions ofSection 153A of the Act, which does not stipulaterecording of a satisfaction note in the case of thesearched person, since the incriminating materialwhich directly involves the searched person isrecovered, whereas it is mandatory to note thenature/details of incriminating material found havinga link with the “other person/third person” forenabling the Assessing Officer of such otherperson/third person to assume jurisdiction underSection 153C of the Act, which is not a requirementunder Section 153A of the Act. The Supreme Courthas clarified that the provisions of Sections 147/148 of the Act can be resorted to if there is anyother material available other than the incriminatingmaterial, which can suggest that the income hasescaped assessment.56. In the case of an “other person”, the substratumof the reassessment/assessment is the materialsupplied by the Assessing Officer of the“searched person” only. Thus, the upshot of thediscussion is that the jurisdictional AssessingOfficer of the “other person”, in a searchproceeding under Sections 132/132A of the Actof a “searched person”, does not have theprivilege to assume jurisdiction under Sections147/148 of the Act on the basis of the incriminatingmaterial sent to him. Thus, there are twinconditions which restrict the jurisdictional
Ahmedabad Chartered Accountant Journal February, 2026 995TMAssessing Officer from exercising powers underSections 147/148 in the case of an “other person”,i.e., firstly, by relying on incriminating materialbereft of a satisfaction note, and secondly, byplacing reliance exclusively on such incriminatingmaterial.57. In the case of most of the petitioners, it is noticedby us that the Assessing Officer has not recordedsatisfaction on the material recovered from theentities, i.e. the searched persons, and withoutrecording such satisfaction on the incriminatingmaterial, proceedings under Sections 147/148of the Act have been resorted to, which, in ourconsidered opinion, is in direct conflict with theprovisions of Section 153C of the Act. Thejurisdictional Assessing Officer of the petitionerscannot directly invoke the provisions of Sections147/148 of the Act for reopening of theassessment unless he/she is in receipt of thesatisfaction note on the incriminating materialwhile exercising power under Section 153C ofthe Act. Apart from the material sent to thejurisdictional Assessing Officer, if such officer hasknowledge or information from other sourceswhich tends to establish escapement of income,then, in such a case, the provisions of Sections147/148 of the Act can be resorted to, subject tofulfillment of the conditions.58. When the legislature has provided a specialmechanism for assessment or reassessmentbased on search material, having a specificlimitation period, the same must be followedstrictly and exclusively, and recourse to the generalprovisions of Sections 147/148 is impermissiblein respect of matters falling within the domain ofthe special provisions unless there are specialcircumstances carved out, as discussedhereinabove.xxx…69. We do not endorse the submission of theRevenue expressing its predicament forbypassing the statutory provisions of Sections153A and 153C of the Act and directly invokingthe provisions of Sections 147/148 of the Act incases where the names of numerous assesseessurface during search. The statute does notprovide such shortcuts. Merely because theRevenue faces numerous assessees whosenames have been unearthed during search andwhom it believes have evaded tax, the statutoryprovisions cannot be bypassed. The Latin maxim“Quando a liquid prohibetur ex directo,prohibetur et per obliquum” deciphers to mean“What cannot be done directly cannot be doneindirectly.” This legal principle is a foundation ofthe legal system, as it safeguards the interestsof citizens. The law cannot be bypassed throughincidental means if such actions are directlyforbidden by law. It is trite that when a statutevests certain power in an authority to beexercised in a particular manner, that authorityhas to exercise such power by following themanner prescribed in the statute, and anyexercise of power by statutory authoritiesinconsistent with the statutory prescription isinvalid.xxx…Shyam Sunder Khandelwal v. ACIT [2024]161 taxmann.com 255 (Rajasthan)xxx…23. The reasons supplied in case in hand for initiationof proceedings under section 147/148 are basedon the incriminating material and documentsincluding Pen Drives seized during the searchcarried out of the Manihar Group and thestatements recorded during proceedings. Fromthe information received the AO noticed that theloan advanced and interest earned thereon wereunaccounted. In other words the basis forinitiation of section 148 proceedings is thematerial seized relating to or belonging to thepetitioner, during the search conducted ofManihar Group.24. In the case where search or requisition is made,the AO under section 153A mandatorily is requiredto issue notices to the assessee for filing ofincome-tax return for the relevant preceding years.38Judicial Analysis
996 Ahmedabad Chartered Accountant Journal February, 2026TMThe AO assumes jurisdiction to assess/reassess‘total income’ by passing separate order for eachassessment.25. In cases of the person other than on whom searchwas conducted but material belonging or relatingsuch person was seized or requisition, the AOhas to proceed under section 153C. The two prerequisites are that the AO dealing with theassessee on whom search was conducted orrequisition made, being satisfied that seizedmaterial belongs or relates to other assessee shallhand over it to AO having jurisdiction of suchassessee. Thereafter, the satisfaction of AOreceiving the seized material that the materialhanded over has a bearing for determination oftotal income of such other person for the relevantpreceding years. On fulfillment of twin conditionsthe AO shall proceed in accordance with theprovisions of section 153A.26. Special procedure is prescribed under section153A to 153D for assessment in cases of searchand requisition. There cannot be a quibble withthe proposition that the special provision shallprevail over the general provision. To say itdifferently the provisions of section 153A to 153Dhave prevalence over the regular provisions forassessment or reassessment under section 143& 147/148.27. Section 153A and 153C starts with non-obstanteclause. The procedure for assessment/reassessment in section 153A, 153C in cases ofsearch or requisition has an overriding effect tothe regular provisions for assessment orreassessment under sections 139, 147, 148, 149,151 & 153.28. The language of explanation 2 to new section 148is akin to section 153A and section 153C. Corollarybeing that after seizing of operational period ofsection 153A to 153D, the cases being dealtthereunder were circumscribed in the scope ofnewly substituted section 148.29. The Department has not set up a case that forinitiating proceedings under section 148 it hadmaterial other than the material seized during thesearch of Manihar Group. The contention was thatthough the material with regard to unaccountedloan advanced by the petitioner was received,the earning of interest on unaccounted loan wasderivation of the AO from the material received.The submission is that the derived conclusioncannot be acted upon under section 153C. Thesubmission lacks merit and shall defeat theconcept of single assessment order for each ofrelevant preceding years for assessing ‘totalincome’ in case of incriminating material foundduring search or requisition.30. The argument that by enactment of section 153Ato 153D has not eclipsed section 148 does notenhance the case of respondent to initiate theproceedings under section 148. On fulfillment oftwo conditions for invoking section 153C theproceeding in accordance with section 153A areto be initiated. The operating fieldof and section153A to 153D and section 148 are different.Applicability of section 153C in cases where theseized material related to or belonged to personother than on whom search is conducted orrequisition made does not render section 148otiose. Section 148 shall continue to apply to theregular proceedings and also in cases where noincriminating material is seized during the searchor requisition.31. The other aspect of the matter is that under section153A and 153C, ‘the total income’ is to beassessed. The total income includes returnedincome (if any), undisclosed income unearthedduring the search or requisitioning and informationpossessed from the other sources.For Illustration:- An assessee had returned incomeof Rs.100, undisclosed income of Rs.200 isunearthed during search and there is informationfrom annual information statement of non-disclosureof income of Rs.150/-.The AO under section 153A and 153C shall passorder dealing with income ofRs.100+Rs.200+Rs.150, the total income beingRs.450/-. In cases where there is no unearthingof undisclosed income of Rs.200/-, theJudicial Analysis
Ahmedabad Chartered Accountant Journal February, 2026 997TMdepartment can resort to proceeding undersection 147/148.32. The argument that section 153C can be invokedin case there is incriminating material for all therelevant preceding years and otherwise section148 is to be resorted to, is misplaced. Onsatisfaction of the twin condition for proceedingsunder section 153C, the AO has to proceed inaccordance with section 153A. Notice is to beissued for filing of the returns for relevantpreceding years and thereupon proceed toassessee or reassessee the ‘total income’. It isnot obligatory on the AO to make assessmentfor all the years, the earlier orders passed maybe accepted. But once there is incriminatingmaterial seized or requisitioned belonging orrelatable to the person other than on whomsearch was conducted, section 153C is to beresorted to.33. Before concluding, it would be fair to deal with thecase law cited by both the parties.34. Reliance of respondents on decision of M/s. M.R.Shah Logistics Pvt. Limited (supra) is of no avail.The issue of interplay of provisions of section 147/148 vis-a-vis section 153C in the case of seizedmaterial relating or belonging to the person otherthan on whom the search was conducted orrequisition made was not the issue before theSupreme Court.35. The Supreme Court in the case of AbhisarBuildwell (P.) Ltd. (supra) while dealing with theprovisions of section 153A held that in case ofabsence of incriminating material seized duringthe search, the department is not remediless forreassessing the unabated assessment on thebasis of material received from the other sourcesand can proceed under section 148. The decisiondoes not support the contentions raised thatsection 148 is rendered redundant if section 153Cis to be resorted to in the facts of the presentcase.36. The Single Bench of this Court in the case of VijayKumar Mehta (supra) held that if the Departmenthas chosen not to proceed under section 153C,no right is created to the petitioner for getting thenotice under section 148 quashed. Moreover,learned Single Judge was not having the benefitof the decision of the Supreme Court in the caseof Abhisar Buildwell (P.) Ltd. (supra). The appealagainst the order was dismissed having renderedinfructuous in view of the subsequentdevelopments that the assessment order waspassed.37. The decision of the Madras High Court in thecase of Saloni Prakash Kumar (supra) is of nohelp to the respondents. The High Court heldthat section 153C does not preclude issuance ofnotice under section 148. The field of applicabilityof two sections was not the issue before theCourt.38. The petitioner relied upon the decision of theKarnataka High Court in the case of Sri DinakaraSuvarna (supra). It would be relevant to quote Para10:10. Admittedly no proceedings were initiatedunder section 153C of the Act. Thus, there ispatent non-application of mind. It is relevantto note that the author of the diary Smt.Soumya Shetty had passed away prior to thedate of search. It was argued on behalf of theRevenue that Shri. Ashok Kumar Chowta hadoffered tax on lump-sum income.39. Further reliance was placed upon the decision ofthe Bombay High Court in the case of M/s. AditiConstructions (supra). The para-9 is quoted:-“9. We find that the jurisdictional conditions forinvoking section 147-148 are not satisfiedas there is no failure to disclose materialfacts fully and truly. It is not in dispute that bythe letter dated 11th September 2015 (ExhibitH) the Petitioner have submitted all theparticulars along with supporting documentsto the Respondent No.1. Hence the reasonsto believe and a presumption based on thestatement of Shri Bhanwarlal Jain (a thirdparty) in the course of a search, that the loansof the entities were bogus oraccommodation entries was clearlyJudicial Analysis
998 Ahmedabad Chartered Accountant Journal February, 2026TMdispelled. Moreover, the specific provisionsof S. 153C would prevail over the generalprovisions of section 147 in the case ofsearch on 3rd party.”40. In view of above discussion the notices issuedunder section 148 and the impugned orders arequashed. However, the respondents shall be atliberty to proceed against the petitioners inaccordance with law.xxx…Sejal Jewellary v. UoI [2025] 171taxmann.com 846 (Bombay)12. We have heard learned counsel for the partiesand with their assistance, we have perused therecord. At the outset, we may observe that thejurisdiction of the Assessing Officer to issue theimpugned notice would be required to beconsidered on the basis of the departmental recordand on such basis, the relevant provisions of lawwhich would govern the facts and circumstancesof the case in the hands of the Assessing Officer.In the present case, the impugned notice underSection 148 of the I.T, Act was issued to thepetitioner on 29 March, 2019. The petitionerreceived a copy of ‘reasons to believe’ furnishedby respondent no. 3 on 11 September, 2019,which wereobjected by the petitioner. On suchobjection, an order was passed by the Assessingofficer rejecting the objections as raised by thepetitioners, so as to proceed to reassess theincome of the petitioner under Section 147 of theAct.13. As clearly seen from the record, to which, wehave made a reference in the aforesaidparagraphs, it appears to be quite clear that therewas a search and seizure action on 4 October,2018 on the business premises of one ‘ShilpiJewellers Pvt. Ltd.’, which has been the basisfor the reopening of the petitioner’s assessment,as also recorded in the reasons for reopening,which inter alia state that there were certainincriminating evidences, in the form of variousloose papers and data back-ups of variouselectronic devices, as found and seized. Thesearch action was against Shilpi Jewellers Pvt.Ltd., its associate concerns, as well as the keyindividuals of the Group. The department assertsthat the materials elicited during the search actionrevealed, that all these persons had acceptedlarge unsecured loans from various shell/papercompanies/entities during the year ended on 31March 2012. On further enquiries being made,the profiling of the loan creditor companies inITD application, indicated that the loan creditorcompanies/entities who advanced huge loansto Shilpi Jewellers Pvt. Ltd. and its associateconcerns, as well as the key individuals of thisgroup, did not have any creditworthiness forextending such huge loans. It was, particularly,recorded that the petitioner/ assessee was partof said group, which had shown loan receiptsduring the year ended on 31 March, 2012 from acompany, viz. M/s. Green Valley Gems Pvt. Ltd.,which was reported to be a shell/paper company,engaged in providing accommodation entries tothe beneficiary parties. The reasons for reopeningof the assessment were set out in detail, referringto such material and further enquiry which wasundertaken in that regard, including materialsbeing gathered in regard to M/s.Green ValleyGems Pvt. Ltd. from whom the petitioners hadalleged to have taken accommodation entries. Itis on the basis of such information, which wascertainly not the information borne out or gatheredfrom the return of income, which was filed and/orany material thereunder, the Assessing Officerreached toa conclusion to reopen theassessment, on the ground that the assesseehad not explained such loan receipt transactions.Such opinion was formed by the AssessingOfficer on the basis that M/s. Green Valley GemsPvt. Ltd. was a shell/paper company. It is on suchpremise that the Assessing Officer was of theview that income had escaped assessment withinthe purview of Clause (c) of Explanation 2 ofSection 147 of the I.T. Act and such escapementhad occurred due to the assessee’s failure todisclose true, proper and complete facts in thereturn of income, filed for the subject assessmentJudicial Analysis39