RNM Tax Alert – Direct Tax Part for May 2026

Important Judicial Precedents

• Addition u/s 69 based solely on sec. 132(4) statement without corroborative evidence was liable to be deleted: HC

[2026] 186 taxmann.com 143 (Madras-HC) PCIT v. M. Kiran Kumar

Where addition of undisclosed income was made solely on basis of statement recorded under section 132(4) without any corroborative evidence and statement did not relate to assessee in his individual capacity, deletion of addition by Tribunal was justified.

• Intra-group share transfer between wholly owned Indian subsidiaries held exempt under section 47(iv): ITAT

[2026] 186 taxmann.com 471 (Chennai – Trib.) Valeo Bayen vs. DCIT, International Taxation

Where assessee, French based company, transferred shares of its wholly owned Indian subsidiary to another wholly owned Indian subsidiary, since transaction involved reorganization of shareholding without any change in ultimate beneficial ownership and there was no material to suggest that arrangement was sham, transaction could not be treated as income from other sources merely due to perceived tax advantage and exemption under section 47(iv) was to be allowed.

• Reassessment u/s 147 quashed as AO failed to link Investigation Wing allegations with assessee’s transactions: HC

[2026] 186 taxmann.com 638 (Allahabad-HC) PCIT v. Nita Rastogi

Where Assessing Officer initiated reassessment solely on general information received from Investigation Wing regarding alleged bogus long-term capital gains, without any independent tangible material or independent application of mind, reasons recorded reflected borrowed satisfaction and, therefore, reassessment proceedings were liable to be quashed.

• Section 148 notice valid despite absence of signature if name and designation of officer provided: HC

[2026] 186 taxmann.com 313 (Delhi-HC) Asro Arcade vs. Income-tax Officer

Where notice under section 148 initiating reassessment was issued bearing name and designation of issuing officer without digital or handwritten signature, such notice fulfilled authentication requirements under section 282A(2), making notice valid and reassessment order sustainable.

• Penalty u/s 271D to remain in abeyance till disposal of appeal against sec. 147 reassessment: HC

[2026] 186 taxmann.com 486 (Bombay-HC) Yamaji Ramchandra Rithe vs. Union of India

Where appeal against assessment order passed under section 147 was pending before CIT(A), penalty proceedings under section 271D and consequential demand under section 156 were liable to be kept in abeyance till disposal of said appeal, and continuation thereof would depend upon outcome of assessee’s appeal before CIT(A).

• Assessment u/s 143(3) based on third-party search material invalid; AO must proceed under reassessment regime:ITAT

[2026] 186 taxmann.com 1169 (Delhi – Trib.) Ramesh Zalpuri vs. DCIT/ACIT, Central

Where Assessing Officer made addition under section 69A by treating salary cash component as unexplained money solely on basis of documents seized from a search on a third person, assessment framed under section 143(3) without initiating reassessment was invalid and was liable to be quashed.

• Addition of entire sale consideration for alleged accommodation entries unjustified as profit element already taxed: ITAT

[2026] 186 taxmann.com 1162 (Ahmedabad – Trib.) Vikramkumar Kishanlal Mehta vs. Deputy Commissioner of Income-tax

Where assessee made sales to a party alleged to be providing accommodation entries, but such sales were recorded in books, disclosed in GST returns, received through banking channels and profit therefrom had already been offered to tax, entire sale consideration could not be added as unexplained cash credit.

• Stamp duty value on date of original allotment to be adopted under sec. 56(2)(x)(b)(B); matter remanded for factual verification:ITAT

[2026] 186 taxmann.com 650 (Mumbai – Trib.) Maniti Jayesh Shah vs. Income-tax Officer

Where assessee purchased office premises pursuant to allotment and part consideration moved through banking channels, stamp duty valuation as on allotment date was to be adopted under provisos to section 56(2)(x)(b)(B); matter remanded for limited verification.

• Tax recovery notice quashed as Revenue failed to produce demand orders or proof of service: HC

[2026] 185 taxmann.com 941 (Bombay-HC) Capegemini Technology Services India Ltd vs. DCIT

Where petitioner-company received recovery notices for outstanding tax demands in name of erstwhile entity after amalgamation, but Revenue failed to produce underlying rectification/intimation orders or proof of service despite repeated opportunities, existence of valid orders giving rise to impugned demands remained unsubstantiated so such demands could not be sustained.

• AO can’t make additions contrary to binding directions of DRP: HC

[2026] 186 taxmann.com 267 (Delhi-HC) LX Pantos India (P.) Ltd. vs. Assessment Unit NFAC, Delhi

Where DRP directed Assessing Officer not to make addition under section 40(a)(i) if Department had not challenged Tribunal’s orders on same issue for earlier years and revenue admittedly had not filed any appeal, Assessing Officer was bound by such mandatory directions under section 144C(10) and addition made contrary thereto was unsustainable in law.

• Delay in filing Form 10E should not deny sec. 89 relief: ITAT

[2026] 186 taxmann.com 412 (Indore – Trib.) Chandrashekhar Jangde vs. Income-tax Officer

Where government employee filed return claiming relief under section 89 on salary arrears but Form 10E was filed belatedly, mere delay in filing Form 10E cannot result in denial of substantial relief if entitlement otherwise exists, and time limit for such form must be construed liberally allowing relief after due verification.