Income Tax Law Update: IT Act 2025 Forms, Major Tax Evasion Probe & Judicial Insights

1. Major Income Tax Forms – Quick Comparison of Income Tax Act, 1961 to Income Tax Act, 2025

• The enactment of the Income Tax Act, 2025 marks a significant shift in the compliance framework of direct taxation in India. One of the notable changes is the renumbering and rationalisation of statutory forms prescribed under the Act.
• Tax professionals, corporates, charitable institutions, and compliance teams must take note of the revised form numbers to ensure smooth filing, reporting, certification, and audit compliance under the new regime. From Tax Audit and Transfer Pricing documentation to TDS/TCS returns, charitable trust registrations, and foreign remittance reporting, several commonly used forms have been reassigned new numbers.
• The comparative table below provides a ready reference of Top 20 forms used
• on recurrent basis under the Income Tax Act, 1961 vis-à-vis their corresponding forms under the Income Tax Act, 2025.

2. Massive Tax Evasion Probe Linked to Hyderabad Biryani Chains

The Income Tax Department’s Hyderabad unit has uncovered what may be one of the largest tax evasion investigations in the restaurant sector, initially triggered by irregularities in the accounts of popular biryani chains. What began as a routine compliance check has now expanded into a nationwide billing manipulation and tax suppression probe involving tens of thousands of eateries.

How the Investigation Unfolded?

1. Initial raids were conducted in November 2025 at multiple outlets and residences linked to three well-known Hyderabad biryani brands after tax officials noticed inconsistencies between reported turnover and actual sales indicators. Digital records, including UPI transactions and point-of-sale (POS) data, were seized and subsequently analysed.

Identifications of the case:

1. Investigators analysed around 60 terabytes of billing data from a widely used restaurant billing software covering 1.7 lakh+ restaurant IDs across India.
2. Preliminary estimates indicate sales suppression of approximately ₹70,000 crore (about ₹700 billion) from FY 2019-20 onwards — through systematic deletion or alteration of billing records before filing GST and Income Tax returns.
3. Of this, ₹13,000 crore worth of deleted invoices has been digitally reconstructed so far, with on-ground verification in Telangana and Andhra Pradesh uncovering hundreds of crores in unreported sales.
4. Reports suggest misuse of a “bulk delete” function in the billing software, enabling deletion of large swathes of sales history — in some cases spanning weeks — after transactions were completed. Suppressed sales were detected most prominently in Karnataka, Telangana, Tamil Nadu, Maharashtra and Gujarat
5. Selective omission of cash sales, post-generation invoice modifications, and routing transactions through complex digital payment trails were also flagged as potential evasion tactics.
6. Similar patterns have emerged in restaurants nationwide, indicating a potential systemic issue across the hospitality sector.

Conclusion

1. The Income Tax Department has not issued an official statement yet, but authorities are continuing data reconstruction and verification. Future action is expected to include tax demands, penalties, and possible prosecution once final assessments are complete.
2. This case illustrates how digital billing systems and big data analytics are transforming tax enforcement by enabling detection of hidden transactions at scale. It underscores the need for internal compliance, transparent billing practices, and readiness for forensic data scrutiny in highly digitised sectors like hospitality and retail.

3. Bax India Ventures (P.) Ltd. v. Central Processing Centre

Issue

Whether CPC can deny concessional tax rate under section 115BAA while processing return under section 143(1)(a), without issuing prior intimation of proposed adjustment, on the ground that Form 10-IC was not filed within the due date under section 139(1)?

Facts of the case

1. The assessee filed a belated return under section 139(8A) on 28.03.2025.
2. It claimed concessional tax regime under section 115BAA.
3. Form 10-IC was filed along with the belated return.
4. CPC denied the concessional rate while processing under section 143(1)(a), on the ground that Form 10-IC was not filed within the due date prescribed under section 139(1).
5. No prior intimation of proposed adjustment was issued to the assessee before passing the intimation order
6. The adjustment was invalid as CPC failed to comply with the mandatory requirement under the first and second provisos to section 143(1)(a), which requires Prior intimation of proposed adjustment, and Consideration of assessee’s response before making adjustment.

Revenue’s Stand

1. Since Form 10-IC was not filed within due date under section 139(1), the benefit of section 115BAA was not allowable. Granting opportunity would be an “exercise in futility.”
2. No addition was made to income; only concessional rate was denied — hence opportunity was not required. Held by the Bombay High Court
3. The Court held that no adjustment can be made unless prior intimation is issued and the assessee’s response is considered. It can be concluded that, Provisos to section 143(1)(a) are mandatory.
4. In the present case, admittedly no such prior intimation was given. Hence, the intimation order was liable to be quashed.
   The Court rejected Revenue’s contention that issuing notice would be futile. The assessee could, for instance, seek condonation of delay under section 119(2)(b), and such response must be considered before adjustment

Conclusion

This judgment reinforces that:

1. Intimation under section 143(1)(a) denying benefit of section 115BAA was quashed. The principles of Natural justice are embedded within section 143(1)(a).
2. Revenue was granted liberty to issue fresh notice under the first proviso to section 143(1)(a) and thereafter pass a fresh order after considering the assessee’s response. Matter decided in favour of the assessee
3. Even seemingly automatic disallowances (like denial of section 115BAA due to delayed Form 10-IC) require prior intimation.
4. CPC cannot make adjustments without strictly complying with mandatory procedural safeguards.
5. The opportunity to respond is not an empty formality.

This ruling strengthens procedural safeguards during return processing and may provide relief in cases where concessional regime claims are mechanically denied at CPC stage.

4. Mr. Nateshan Sampath v. DCIT – Penalty under Section 270A – Necessity of Clear Charge between Under-Reporting and Misreporting

The Bangalore Bench of the Income Tax Appellate Tribunal has delivered an important ruling clarifying the statutory framework governing penalty under section 270A of the Income-tax Act, 1961. The decision reinforces that penalty proceedings must strictly adhere to the structured requirements of the provision and that ambiguity in invoking “under-reporting” vis-à-vis “misreporting” renders the penalty unsustainable.

Facts of the case:

1. The assessee, an individual, had not originally filed a return of income for A.Y. 2018-19. Based on information available with the Department regarding receipt of contractual income, interest income, and sale of immovable property, reassessment proceedings were initiated under section 148.
2. In response, the assessee filed a return declaring business loss and long-term capital gains arising from sale of property. The Assessing Officer (AO) disallowed the claim of cost of improvement relating to the property on the ground that the assessee failed to substantiate the expenditure with supporting bills, vouchers, and documentary evidence.
3. Subsequently, the AO initiated penalty proceedings under section 270A, alleging under-reporting of income in consequence of misreporting, and levied penalty at 200% of the tax payable on the disallowed amount.
4. The notice and order did not clearly specify the exact statutory limb invoked; and
5. The AO appeared to conflate “under-reporting” with “misreporting,” ultimately imposing penalty at the higher rate applicable to misreporting.

Judgement

1. The Tribunal noted that misreporting attracts a significantly higher penalty of 200% of tax payable, whereas ordinary under-reporting attracts 50%. Therefore, clear identification of the applicable limb is not a procedural formality but a substantive requirement.
2. In the present case, the AO recorded that there was under-reported income but imposed penalty at 200%, which is applicable only in cases of misreporting. However, neither the show-cause notice nor the penalty order clearly specified which clause of section 270A(9) was attracted. The Tribunal observed that this lack of clarity demonstrated confusion on the part of the authorities as to whether the charge was one of under-reporting simpliciter or misreporting.
3. The Tribunal further held that failure to clearly communicate the specific charge deprived the assessee of a meaningful opportunity to defend the case. Unless the precise statutory limb is specified, the assessee cannot effectively respond or rebut the allegation. Such ambiguity amounts to violation of principles of natural justice.

Conclusion

In view of the absence of a clear finding regarding the specific limb of section 270A invoked and the inconsistency between the nature of charge and the quantum of penalty imposed, the Tribunal held the penalty proceedings to be legally unsustainable. The penalty levied at 200% of tax was accordingly deleted, and the assessee’s appeal was allowed.

This ruling serves as a significant precedent in cases involving defective penalty notices and mechanical invocation of section 270A, particularly where the distinction between under-reporting and misreporting is blurred. It underscores that statutory precision and adherence to procedural safeguards are indispensable in penalty jurisprudence.

5. 
   

   Abhishek Jayketu Joshi v. ACIT- ITAT Mumbai – Reassessment u/s 147 & Deduction u/s 80GGC

The Mumbai Bench of the Income Tax Appellate Tribunal examined the validity of reassessment proceedings initiated under sections 147/148A and the disallowance of deduction claimed under section 80GGC in respect of a political donation.

Facts of the case:
The assessee claimed deduction of Rs. 5,00,000 under section 80GGC for donation made through banking channels to Kisan Party of India, a political party registered under section 29A of the Representation of the People Act, 1951. Based on investigation inputs alleging that certain political parties were engaged in providing accommodation entries, the Assessing Officer initiated proceedings under section 148A and completed reassessment under section 147 by disallowing the deduction. The CIT(A) confirmed the addition.
Judgement
1. The notice issued under section 148A(b) contained factual inaccuracies, including reference to an unrelated entity. The Assessing Officer later admitted this error. The Tribunal held that reassessment based on incorrect factual premises reflects non-application of mind and vitiates jurisdiction.
2. Further, the Assessing Officer relied on third-party statements without furnishing copies to the assessee despite specific request. Following the Bombay High Court decision in Anurag Gupta v. ITO, the Tribunal held that failure to supply the material relied upon renders proceedings under section 148A invalid, as it deprives the assessee of a meaningful opportunity of being heard.
3. On merits, the Tribunal held that the assessee had discharged the initial onus by furnishing donation receipt, bank statements evidencing payment through account payee cheque, and proof of valid registration of the political party. No evidence was brought on record to show that the donation amount was returned to the assessee. Mere suspicion or generalized investigation findings cannot justify denial of a statutory deduction.

Conclusion
The reassessment proceedings were quashed as invalid. Without prejudice, the Tribunal also held that disallowance of deduction under section 80GGC was unsustainable on merits. The appeal of the assessee was allowed.

Key Principle
Reassessment must strictly comply with section 148A procedure, and statutory deductions cannot be denied solely on generalized allegations in the absence of cogent evidence linking the assessee to any accommodation entry arrangement.