I. NOTIFICATIONS
1. Government Notifies Rules for Foreign Assets of Small Taxpayers Disclosure Scheme, 2026
The Central Government has notified the Foreign Assets of Small Taxpayers Disclosure Scheme Rules, 2026 under Chapter IV of the Finance Act, 2026, effective from 16 August 2026. The Rules prescribe the manner for valuation of undisclosed foreign assets and income, determination of the amount payable, filing of declarations, payment procedures and issuance of certificates under the Scheme. They lay down detailed valuation methods for foreign bank accounts, immovable properties, jewellery, artistic works, shares and securities, partnership interests and other assets, and prescribe Forms 1 to 4 for declaration, determination of liability, payment intimation and certification of valid disclosure. The Scheme applies to eligible taxpayers seeking to disclose specified foreign assets or income within the prescribed monetary thresholds and conditions.
[NOTIFICATION NO. 114/2026, DATED 14-08-2026]
2. Other Notifications Issued in August 2026
During August 2026, several routine notifications were issued granting exemption under section 10(46) of the Income-tax Act, 1961 (and, where applicable, under Schedule III read with section 11 of the Income-tax Act, 2025) to bodies including the Haryana State Board of Technical Education, Panchkula, the District Legal Services Authorities of Charkhi Dadri and Panchkula, the Noida Special Economic Zone Authority and the Odisha Joint Entrance Examination Committee. Approvals for scientific research were also granted to the Center for Incubation Innovation Research and Consultancy and Sir Ganga Ram Trust Society, Delhi under section 45(3) of the Income-tax Act, 2025.
[NOTIFICATION NOS. 103/2026 TO 113/2026, DATED 03-08-2026 TO 11-08-2026]
II. PRESS RELEASE
1. Income Tax Department Verifies Suspicious Foreign Remittances
The Income Tax Department has launched a nationwide verification exercise concerning suspicious outward foreign remittances identified through intelligence inputs and data analysis. Investigations revealed several entities remitting substantial amounts abroad despite being non-filers or reporting minimal turnover, with little correlation between their declared business activities and the remittances made. A large number of Form 15CB certificates were found to have been issued by a relatively small group of professionals, and the remitted funds were received by a clustered group of entities, raising concerns over whether adequate due diligence, as required under Rule 220 of the Income-tax Rules, 2026 (corresponding to erstwhile Rule 37BB), was exercised before certification. The verification drive covers approximately 394 entities (including 117 in land-border States) and 36 professionals, and aims to identify shell entities and the persons behind them. The CBDT has reiterated that Accountants issuing Form 15CB/Form 146 certificates are expected to exercise due care, diligence and professional judgment while examining underlying transactions before certification.
[PRESS RELEASE, DATED 18-08-2026]
III. MISCELLANEOUS
1. Taxation and Other Laws (Amendment) Bill, 2026: CBDT FAQs
CBDT has issued FAQs explaining key proposals of the Taxation and Other Laws (Amendment) Bill, 2026, aimed at promoting investment and ease of doing business. Key proposals include:
- Extension of the tax exemption for foreign companies supplying capital goods/tooling to Indian contract manufacturers of specified electronic goods up to Tax Year 2040-41, along with a definition of “specified electronic goods”;
- Rationalisation of data centre-related exemptions through removal of notification requirements and permitting leased data centre models;
- Introduction of new tax exemptions for rough diamond trading in Special Notified Zones and storage of electronic components in customs bonded warehouses;
- Continuation of dividend exemption for business trust unit holders even where the SPV opts for the new tax regime; and
- Reduction of conditions for eligible investment funds from 13 to 5 to facilitate relocation of fund managers to India without creating a business connection for the foreign fund.
[CBDT FAQs on Taxation and Other Laws (Amendment) Bill, 2026]
2. FAQ on FAST-DS 2026: One-Time Opportunity to Disclose Foreign Assets
CBDT has issued FAQs clarifying the Foreign Assets of Small Taxpayers Disclosure Scheme (FAST-DS), 2026, a one-time voluntary compliance scheme operational from 16 August 2026 to 31 December 2026. The scheme enables eligible taxpayers to disclose specified undisclosed foreign assets and foreign income by paying the prescribed tax or fee, subject to specified monetary thresholds and conditions. A valid declaration provides immunity from further tax, penalty and prosecution under the Black Money Act, 2015, with the entire process to be carried out electronically.
[FAQs on FAST-DS, 2026]
IV. INCOME TAX CASE LAWS
1. An ITAT order cannot be faulted merely on the basis of a subsequent amendment introduced by the Finance Act, 2026, where the Tribunal’s order was passed, and was in accordance with the legal position and binding precedents, prior to the amendment
Case: Principal Commissioner of Income Tax-4, Hyderabad v. Vinod Ojha, ITTA No. 92 of 2026 (Telangana High Court)
Court: Telangana High Court
Verdict Date: 23 June 2026
Held: The Telangana High Court held that an ITAT order cannot be faulted on the basis of a subsequent amendment introduced by the Finance Act, 2026. The Tribunal’s order was passed in November 2025, before the amendment was enacted, and was in accordance with the legal position and binding jurisdictional precedents prevailing at the time. Accordingly, the Tribunal’s findings could not be regarded as contrary to law or the evidence on record merely because of a later legislative change. Holding that no substantial question of law arose, the Court dismissed the Revenue’s appeal.
2. A notice issued under section 148 in the name of a deceased person is void ab initio and all consequential reassessment proceedings are liable to be quashed; the defect cannot be cured under sections 292B or 292BB
Case: Smt. Asha Dubey v. Union of India & Others, (2026) 1 CTOCTR 1031 (Allahabad High Court)
Court: Allahabad High Court
Verdict Date: 23 July 2026
Held: The Allahabad High Court held that a notice issued under section 148 in the name of a deceased person is void ab initio and all consequential reassessment proceedings are liable to be quashed. Issuance of a valid jurisdictional notice is a condition precedent for reopening an assessment, and such a defect cannot be cured by invoking sections 292B or 292BB. However, reassessment proceedings may continue against legal representatives under section 159 only where the original notice was validly issued during the lifetime of the assessee.
3. Information already available with the Revenue prior to a search cannot be regarded as incriminating material for making additions under section 153A
Case: PCIT v. Arunkumar Ramniklal Mehta, (2026) 1 CTOCTR 914 (Bombay High Court)
Court: Bombay High Court
Verdict Date: 01 July 2026
Held: The Bombay High Court held that information already available with the Revenue prior to the search cannot be regarded as incriminating material for making additions under section 153A. The Court upheld the Tribunal’s finding that the Revenue had failed to establish that the assessee was the owner of funds lying in foreign bank accounts held by separate entities, and consequently deleted the additions made under section 69A.
4. Reassessment proceedings initiated on the basis of incorrect information regarding cash deposits reflected on the INSIGHT Portal, without independent verification by the Assessing Officer, amount to lack of application of mind and are invalid
Case: Ajit Shrirang Patil v. ITO, 1 CTOTTJ 2413 (Pune Tribunal)
Court: Income Tax Appellate Tribunal, Pune Bench
Verdict Date: 13 July 2026
Held: The Pune Tribunal quashed reassessment proceedings initiated on the basis of incorrect information regarding cash deposits reflected on the INSIGHT Portal. The Assessing Officer had failed to independently verify the information despite the assessee furnishing evidence showing a substantial mismatch in the alleged deposits. Reopening based on unverified and incorrect facts was held to amount to lack of application of mind and was therefore invalid in law.
5. Additions made in the final assessment order that substantially exceed the amount proposed in the show-cause notice, without granting the assessee an opportunity of hearing, violate the principles of natural justice
Case: KEM Hospital and G.S. Medical College Co-op Credit Society Ltd. v. NFAC, (2026) 1 CTOCTR 941 (Bombay High Court)
Court: Bombay High Court
Verdict Date: 07 July 2026
Held: The Bombay High Court set aside an assessment order where the final addition substantially exceeded the amount proposed in the show-cause notice without granting the assessee an opportunity of hearing. Additions made beyond the scope of the show-cause notice were held to violate the principles of natural justice and could not be sustained.
6. Reassessment proceedings cannot be sustained where the alleged escaped income does not result in any additional tax liability, and an assessment order passed in violation of a judicial stay can be revised or set aside under section 264
Case: Ahmedabad South Indian Association Charitable Trust v. DCIT (Exemption), SCA No. 9731 of 2024 (Gujarat High Court)
Court: Gujarat High Court
Verdict Date: 03 August 2026
Held: The Gujarat High Court held that reassessment proceedings cannot be sustained where the alleged escaped income does not result in any additional tax liability. Even after the proposed disallowance of ₹3.01 crore, the charitable trust continued to apply more than 85% of its income towards charitable purposes and remained eligible for exemption under section 10(23C)(vi). The notice issued under sections 148A(d)/148 and the consequential reassessment order were accordingly quashed. The Court also observed that an assessment order passed in violation of a judicial stay can be revised or set aside under section 264.
7. ITAT Benches must strictly adhere to Rule 34 of the Income-tax (Appellate Tribunal) Rules, 1963 and pronounce orders within 60 days, extendable to 90 days in exceptional cases, without compelling litigants to reargue appeals
Case: Rajesh R. Hemrajani v. Income Tax Appellate Tribunal & Anr., Writ Petition (L) No. 10271 of 2026 (Bombay High Court)
Court: Bombay High Court
Verdict Date: 31 July 2026
Held: The Bombay High Court directed the ITAT to strictly adhere to Rule 34 of the Income-tax (Appellate Tribunal) Rules, 1963, which requires pronouncement of orders within the prescribed period after conclusion of hearing. Expressing concern over repeated release of matters without pronouncement of orders, the Court held that litigants should not be compelled to repeatedly reargue appeals, and directed all ITAT Benches to pronounce orders within 60 days, and in exceptional cases within the extended period of 90 days permitted under Rule 34.
8. Assessment orders passed in the name of a non-existent entity following its conversion from a private limited company to an LLP are void ab initio and cannot be saved by section 292B
Case: Cyberstar Infocom LLP (formerly M/s. Cyberstar Infocom Pvt. Ltd.) v. ITO, ITA Nos. 1923, 1924, 1925 & 1927/Bang/2025 (ITAT Bangalore)
Court: Income Tax Appellate Tribunal, Bangalore Bench
Verdict Date: 05 August 2026
Held: The Bangalore ITAT held that assessment orders passed in the name of a non-existent entity are void ab initio and cannot be saved by section 292B. The assessee had converted from a private limited company into an LLP and had duly informed the Department, yet notices under section 143(2) and reassessment orders continued to be issued in the name of the erstwhile company. Following the Supreme Court’s decision in Maruti Suzuki India Ltd., the Tribunal quashed the reassessment orders, holding that assessment on a non-existent entity is a substantive jurisdictional defect.
9. A two-partner firm stands automatically dissolved upon the death of one partner, notwithstanding any contrary clause in the partnership deed, and legal heirs do not automatically become partners
Case: M/s. New Praveen Trailers v. M/s. Shiva Steel Supplies, W.P. No. 6219 of 2022 (Karnataka High Court)
Court: Karnataka High Court
Verdict Date: 30 July 2026
Held: The Karnataka High Court held that a partnership firm consisting of only two partners stands automatically dissolved upon the death of one partner, notwithstanding any contrary clause in the partnership deed. Partnership is founded on contract and not status, and legal heirs of a deceased partner do not automatically become partners; continuation of the business can only be through a fresh partnership agreement, and clauses providing for automatic induction of legal heirs are unenforceable. Proceedings could not, therefore, be continued against a firm dissolved by operation of law.
10. Interest paid to a builder on delayed instalment payments, being intrinsically linked to acquisition of the property, forms part of the cost of acquisition under section 48
Case: Shalini Kanwar Chand v. ACIT, ITA No. 1083/Del/2025 (Delhi ITAT)
Court: Income Tax Appellate Tribunal, Delhi Bench
Verdict Date: 12 August 2026
Held: The Delhi ITAT considered whether interest paid to a builder on delayed instalment payments for acquisition of a residential property forms part of the cost of acquisition under section 48. The Assessing Officer had treated a payment of ₹1.48 crore as penal in nature and excluded it while computing long-term capital gains, but the assessee contended the payment was intrinsically linked to the acquisition, including the additional area ultimately allotted by the builder. Following its earlier decision in ACIT v. Sadhna Aggarwal, the Tribunal accepted in principle that such interest forms part of the cost of acquisition, but remanded the matter to the Assessing Officer for reverification as per the DRP’s direction, with a direction to give a categorical finding. The appeal was partly allowed.
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