Delhi HC Sets Strict Boundaries: No Automatic IT Presumptions or AI-Generated Fake Cases in GST Disputes
- Independent Scrutiny of Income Tax Evidence
The Delhi High Court clarified that while GST authorities can independently examine material seized during Income Tax searches to issue Show Cause Notices (SCN), they cannot automatically apply the legal presumptions of the Income Tax Act (Sections 132(4A) and 292C) to GST proceedings.
- Rejection of Automatic Guilt Presumptions
The Court ruled that presumptions regarding the ownership and truthfulness of seized documents under the Income Tax Act are specific to that statute and are rebuttable. These presumptions do not confer automatic evidentiary value under GST laws and cannot be the sole basis for alleging tax evasion without independent verification.
- Strict Warning Against AI-Generated Fake Judgments
In a significant observation, the Court reprimanded the Department for citing non-existent or inaccurately cited judgments in their notices, which were likely generated by Artificial Intelligence tools. The Bench emphasized that “hallucinated” or fake legal precedents cannot substitute verified judicial records.
- Mandatory Verification of Legal Citations
Government departments were explicitly warned to exercise due diligence and verify all legal citations before using them in official proceedings. The Court held that authorities must take full responsibility for the accuracy of the case laws they rely upon to ensure fair adjudication.
- Adherence to Legal Safeguards in SCNs
While the Court dismissed the challenge to the SCN as premature and directed the petitioner to file a reply, it instructed the department to decide the matter strictly according to law. The ruling reinforced that Show Cause Notices must be based on tangible evidence and clear legal grounds, not just borrowed presumptions or unverified data.
Source :- Judgement