IMPORTANT INCOME TAX CASE LAWS 16.01.2026

Relevant Act	Section	Case Law Title	Brief Summary	Citation
Income-tax Act, 1961	Section 14A / Rule 8D	Asia Investments (P.) Ltd. v. ACIT	[Nexus for Disallowance] Disallowance under Section 14A (Rule 8D) is restricted to expenditure having a proximate nexus with exempt income. Mechanical application of Rule 8D without recording satisfaction is invalid. Duplication of disallowance (treating expenses as both direct and indirect) is impermissible.	Click Here
Income-tax Act, 1961	Section 23(5)	SKZ Developers LLP v. ACIT	[Deemed Rent on Unsold Inventory] For a real estate developer, estimating deemed rent at 3% of FMV on unsold vacant flats is justified under Section 23(5) if the assessee fails to show efforts to let them out.	Click Here
Income-tax Act, 1961	Section 37(1)	Asia Investments (P.) Ltd. v. ACIT	[London Office Expenses] Expenditure on maintaining a London branch/guest house for strategic investment activities (due diligence, negotiations) is allowable business expenditure. The AO cannot substitute his judgment for the assessee’s commercial expediency.	Click Here
Income-tax Act, 1961	Section 68 / Loose Sheets	PCIT (Central) v. Rajan Rajesh Kumar	[Loose Sheets ≠ Evidence] Reopening based solely on loose sheets found during a search on a third party (alleging cash transactions) without independent corroboration or establishing a link is unjustified and liable to be quashed.	Click Here
Income-tax Act, 1961	Section 115BAC	Meenaben Maheshchandra Patel v. ITO	[New Regime Continuity] Once the option for the New Tax Regime (Section 115BAC) is exercised by filing Form 10-IE (e.g., in AY 2022-23), it applies to subsequent years (AY 2023-24) automatically. Denial of benefit for not filing the form again is unjustified.	Click Here
Income-tax Act, 1961	Section 144B / 151A	Gattula Lakshmi Madhavi v. ACIT	[JAO Jurisdiction Void] After the 2022 e-Assessment Scheme, Section 148 notices must be issued by the Faceless Assessing Officer (FAO). Notices issued by the Jurisdictional AO (JAO) are illegal and void, warranting the setting aside of the reassessment order.	Click Here
Income-tax Act, 1961	Section 151	PCIT (Central) v. Rajan Rajesh Kumar	[Sanction Refusal Finality] Once the competent authority refuses sanction for reassessment under Section 151, the AO cannot repeatedly re-present the proposal until approval is granted. Such conduct vitiates the entire proceeding.	Click Here
Income-tax Act, 1961	Section 199	Daiwa Capital Markets India (P.) Ltd. v. ACIT	[Unclaimed TDS Credit] If additional TDS appears in Form 26AS but was not claimed in the return (due to lack of intimation), credit must be granted by the AO if the corresponding income has been offered to tax. Procedural lapses cannot defeat substantive rights.	Click Here

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