In a recent turn of events, the Bengaluru bench of the Income Tax Appellate Tribunal (ITAT) retracted an order after discovering it was based on non-existent case law. The case, involving Buckeye Trust v PCIT-1 Bangalore (ITA No. 1051/Bang/2024), initially ruled in December 2024 that the transfer of an interest in a partnership firm to a trust worth Rs 669 crore was taxable. This ruling was based on judgments that, upon verification, turned out to be fictitious.
The bench had initially ruled that an interest in a partnership firm was akin to a stock market share, making it taxable under laws that apply to transfers above Rs 50,000 to non-relatives. The ruling was unusual as such cases typically favor the assessee, in this case, the Trust.
However, complications arose when it was revealed that the order cited three Supreme Court judgments and one from the Madras High Court that were later found not to exist in the official archives. These included supposed decisions from the cases of K. Rukmani Ammal v. K. Balakrishnan (1973), S. Gurunarayana v. S. Narasinhulu (2004), and Sudhir Gopi v. Usha Gopi (2018), alongside another cited as 57 ITR 232(SC), none of which pertained to the matter at hand or existed at all.
The erroneous references were reportedly generated by ChatGPT, used by some tax department representatives to bolster their case. The ITAT’s failure to verify these citations independently led to the initial ruling, which was retracted a week later upon the discovery of these errors.
