Income Tax Updates August 2026: Key Tax & Judicial Rulings

• NOTIFICATION NO. G.S.R. 732(E) [NO. 114/2026/F.NO. 370142/18/2026-TPL], DATED 14-8-2026

In exercise of the powers conferred by section 143 of the Finance Act, 2026 (4 of 2026), the Central Government issues the Foreign Assets of Small Taxpayers Disclosure Scheme Rules, 2026 and FAQs, DATED 14-08-2026

• Income Tax Department Undertakes Verification Of Suspicious Foreign Remittances Press Release, Dated 18-8-2026

The Income Tax Dept. vide press release dated 18.08.2026; launches nationwide verification of suspicious foreign remittances; examines Form 15CB certifications.

• ICAI issues Revised 2026 Edition of Guidance Note on Tax Audit under Section 44AB

The Direct Taxes Committee of the ICAI has issued the Eleventh Edition (Revised 2026) of the Guidance Note on Tax Audit under Section 44AB of the Income-tax Act, 1961. The revised Guidance Note provides comprehensive and practical guidance to Chartered Accountants on the conduct of tax audits, preparation of audit reports and reporting requirements under Forms 3CA, 3CB and 3CD.

Important Judicial Precedents

Part-A.  Domestic Tax – Case Law

• No TDS obligation on estimated year-end provisions without identified payee or ascertained liability: ITAT

[2026] 189 taxmann.com 1007 (Mumbai – Trib.) DCIT (TDS) vs. Pfizer Ltd

Where assessee-company created year-end provisions for commission, brokerage, rent, contractor payments and professional fees, but reversed them in following year and deducted TDS upon crystallisation of liabilities, mere creation of estimated provisions without an identified payee did not trigger TDS obligation, thus, section 201(1) demand was to be deleted

Where assessee created year-end expense provisions without TDS and already disallowed 30 per cent of relevant expenditure under section 40(a)(ia) for non-deduction of TDS, same non-deduction default could not again trigger assessee-in-default status under section 201, thus, demand under section 201(1) was unsustainable

• Reassessment based solely on audit objection without new facts is invalid as mere change of opinion: ITAT

[2026] 189 taxmann.com 691 (Delhi – Trib.) Rajni Dua vs. Income-tax Officer

Where reassessment was initiated solely on basis of audit party objection with no new facts and on issues already examined in original assessment, and there was no failure by assessee in disclosing material facts, such initiation constituted a mere change of opinion and was invalid.

• SLP dismissed: provision for discount was an allowable expenditure and no substantial question of law arose from Tribunal’s order

[2026] 189 taxmann.com 327 (SC) PCIT vs. LTI Mindtree Ltd

SLP dismissed against order of High Court that where Tribunal following its earlier order in assessee’s own case held that provision for discount was an allowable expenditure, since it was not case of revenue that provision for discount had not been discharged fully in year subsequent to assessment year in question, no substantial question of law arose from Tribunal’s order.

• SLP granted: issue whether Revenue’s appeal involving only Rs.10 lakh penalty under Black Money Act was barred by CBDT’s Rs.2 crore monetary threshold admitted for consideration

[2026] 190 taxmann.com 40 (SC) PDIT (Investigation) v. Prakash Nimmagadda

SLP granted against order of High Court that where tax effect arising from penalty under section 43 of Black Money Act was only Rs. 10 lakhs, in view of CBDT Circular prescribing monetary threshold of Rs. 2 crores for departmental appeals, such appeal before High Court was not maintainable.

• Reassessment notices based on Shah Commission Report quashed as without jurisdiction: HC

[2026] 188 taxmann.com 1017 (Karnataka-HC) SSTA Logistics India (P.) Ltd. v. Assistant Commissioner of Income-tax

Where reassessment notices under section 148 were issued on basis of Justice M.B. Shah Enquiry Commission Report on illegal mining, in view of Sesa Sterlite Ltd. v. Asstt. CIT [2019] 107 taxmann.com 388/267 Taxman 275/417 ITR 334 (Bom.), impugned reassessment notices and consequential proceedings were liable to be quashed.

Part-B.  International Tax – Case Law

• No notional interest TP adjustment on delayed AE receivables as interest not charged from any party and pricing factors credit terms: ITAT

[2026] 189 taxmann.com 860 (Delhi – Trib.) ACIT v. Acme Cleantech Solutions (P.) Ltd.

Where assessee engaged in international transactions of sales to AEs and non-AEs did not charge interest on delayed payments from either party and established that agreed prices already factored in the credit terms, no notional interest adjustment was warranted for delayed realisation of receivables from AEs.

• Live broadcasting licence fee not taxable as royalty u/s. 9 or Art. 13 India-UK DTAA as it lacks enduring benefit: ITAT

[2026] 189 taxmann.com 1011 (Delhi – Trib.) England and Wales Cricket Board Ltd. v. Assistant Commissioner of Income-tax, International Taxation

Where UK-based assessee received release fees from IPL franchises for permitting English players to participate in IPL, Assessing Officer sought to tax them under Article 18(2) as income of entertainers/athletes, since release fee was received by assessee and not by players themselves, and represented 10 per cent of league fee paid by franchises to players, it was not taxable in India under Article 18 of India-UK DTAA.

• Penalty u/s. 271G deleted as assessee furnished TP study within statutory time & notice lacked specificity: ITAT

[2026] 189 taxmann.com 644 (Delhi – Trib.) Senatech India (P.) Ltd. v. DC/ACIT

Where assessee furnished its TP study report within 10 days of TPO’s notice under section 92D(3), but penalty notice under section 271G failed to specify information or documents allegedly not furnished, penalty levied at 2 per cent of international transactions was unsustainable and was to be deleted.

• Final assessment order passed before DRP directions quashed; AO to issue fresh order per DRP instructions: HC

[2026] 189 taxmann.com 387 (Punjab & Haryana-HC) UCWeb Mobile (P.) Ltd. v. Assessment Unit, Income-tax Department, NFAC New Delhi

Where AO passed final assessment, demand and penalty orders while assessee’s objections to DRP were pending and DRP later partly allowed objections resulting in TPO modifying original order, such final assessment, demand and penalty orders were to be set aside and matter restored for AO to pass fresh order as per revised DRP and TPO directions.