TaxCorp Daily Digest

Your Professional Tax & Regulatory Intelligence Briefing | June 24, 2026

Quick Summary

• 🏦 RBI Regulatory Overhaul: Sweeping amendments across NBFCs, UCBs, RRBs, SFBs, Payments Banks, and Local Area Banks — covering capital adequacy, governance, customer protection, and FEMA compliance — all effective from June 24, 2026 or April 1, 2027
• ⚖️ GST Alert: Supreme Court limits Rule 86A ITC blocking; GSTAT appeal deadline extension urgently sought as portal failures leave ~3 lakh appeals unfiled
• 📋 Income Tax Jurisdiction: Three separate rulings (Calcutta HC, ITAT Kolkata, ITAT Cuttack) annul assessments for jurisdictional defects — Section 143(2) notice validity and pecuniary limits under CBDT Instruction No. 1/2011 in sharp focus
• 💼 EPFO & Labour Codes: Partial withdrawal rules simplified to three heads; Labour Codes effective November 21, 2025 — but high rejection rates persist due to KYC and record-keeping gaps

Category-wise Updates

🟦 Income Tax

1. Assessment Declared Null and Void: Mandatory Notice Under Section 143(2) Cannot Be Bypassed — Calcutta High Court Rules Against Revenue
The Calcutta High Court in PCIT Vs Nopany & Sons held that a Section 143(2) notice issued by the competent Assessing Officer within the prescribed time is a mandatory, non-waivable condition precedent for a valid scrutiny assessment. Section 292BB cannot rescue an assessment where the assessee raised timely written objections.
⚡ Action Item: Verify that all pending scrutiny assessments have a valid, timely Section 143(2) notice on record before the next hearing date.

2. ITAT Kolkata Annuls Assessment Where ACIT Exceeded Pecuniary Jurisdiction Under CBDT Instruction No. 1/2011
In Anderson Printing House Pvt. Ltd Vs ACIT, ITAT Kolkata quashed a Section 143(3) assessment because the ACIT issued the scrutiny notice for a corporate assessee whose returned income fell within the ITO's pecuniary jurisdiction. Section 292BB was held inapplicable to cure a notice issued by an officer lacking jurisdiction entirely.
⚡ Action Item: Cross-check the cadre of the Assessing Officer against CBDT Instruction No. 1/2011 thresholds for all open assessments — particularly metro and non-metro distinctions.

3. Reassessment Quashed: ITO Exceeded Pecuniary Jurisdiction Under CBDT Instruction No. 1/2011
ITAT Cuttack in Kshirod Kumar Pattnaik Vs ITO quashed reassessment proceedings where the assessee's income of ₹35.09 lakh exceeded the ₹15 lakh ceiling for ITOs in non-metro (mofussil) areas. CBDT instructions under Section 119 are binding on all subordinate authorities, and participation in proceedings without timely objection does not cure the jurisdictional defect.
⚡ Action Item: For reassessment notices received from ITOs in non-metro jurisdictions, immediately verify the pecuniary threshold compliance before responding.

4. Calcutta High Court Limits Income Tax Recovery to 20% of Disputed Demand When CIT(A) Appeal is Pending
In Gaurav Enterprises Vs Union of India, the Calcutta High Court reaffirmed that the Revenue cannot recover amounts exceeding 20% of a disputed demand — including through refund adjustment — while a CIT(A) appeal is pending, absent exceptional circumstances established under paragraph 4B of the CBDT OM dated February 29, 2016.
⚡ Action Item: Where demands are pending appeal and refunds for other years are due, file a written objection and Section 220(6) application immediately to prevent unauthorized adjustments.

5. Calcutta High Court Blocks Refund Set-Off Against Disputed Tax Demand When Stay Plea is Pending
In Bothra Shipping Services Pvt. Ltd. Vs Union of India, the Calcutta High Court quashed a refund adjustment for AY 2021-22 against a disputed demand for AY 2023-24, where a Section 220(6) stay application was undecided. The Court ordered release of the refund with Section 244A interest and restrained coercive recovery until the stay is resolved.
⚡ Action Item: File Section 220(6) stay applications proactively before any demand becomes due, and document all pending refund entitlements to create a protective legal record.

6. ITAT Mumbai on Goodwill Depreciation & CSR Donations: Impact on Opening WDV and Section 80G Claims
ITAT Mumbai in ACIT 7(1)(1) Vs Horizon Packs Pvt. Ltd. confirmed that once goodwill depreciation is allowed in a scrutiny assessment and remains undisturbed, the AO cannot reopen the opening WDV in subsequent years. Additionally, CSR payments ineligible under Section 37 may still qualify for Section 80G deduction, as Chapter VIA operates independently of income computation.
⚡ Action Item: Review CSR payment documentation for AY 2020-21 and later years to ensure Section 80G conditions are separately satisfied and claimed even where Section 37 is unavailable.

7. ITAT Delhi Deletes Addition Based on Unsigned Seized Loose Paper Treated as Dumb Document — Neeraj Goel vs ACIT
ITAT Delhi in Neeraj Goel Vs ACIT held that anonymous, unsigned loose papers recovered during search proceedings, lacking the assessee's name or transaction details, constitute "dumb documents" with no evidentiary value under Section 292C. Revenue cannot sustain additions based solely on such materials, especially in premises accessible to multiple persons.
⚡ Action Item: In search assessment proceedings, immediately challenge any addition based solely on unsigned or unattributed documents by building a factual record of the document's origin and the property's accessibility.

8. PF/ESI Employees' Contribution Disallowance Upheld by ITAT Ahmedabad; Form 26AS Revenue Mismatch Remanded for Fresh Assessment
ITAT Ahmedabad in Checkmate Services Pvt. Ltd. Vs DCIT reiterated the Supreme Court's binding position that employee PF/ESI contributions are deductible under Section 36(1)(va) only when deposited within statutory due dates — not merely before the ITR filing deadline. A Form 26AS revenue mismatch was remanded for a fresh, party-wise reconciliation with supporting documentation.
⚡ Action Item: Ensure all employee PF/ESI contributions are deposited by their respective statutory due dates for FY 2025-26, and maintain party-wise reconciliation records for all TDS-related income reflected in Form 26AS.

9. Commodity Trades via Client Code Modification: Only Profit Portion Taxable under Section 68, Says ITAT Ahmedabad
ITAT Ahmedabad in DCIT Vs Dharmdeep Commodities Pvt. Ltd. held that where commodity trades are executed through a recognised exchange via a registered broker and supported by contract notes and bank statements, client code modification alone does not render the entire transaction fictitious. Only the embedded profit element can be assessed under Section 68, and penalty under Section 271(1)(c) does not arise where profits were already disclosed.
⚡ Action Item: Maintain comprehensive broker ledgers, contract notes, and bank statements for all commodity exchange transactions to defend against Section 68 additions arising from code modification disputes.

🟩 GST

10. Supreme Court Upholds Limits on Negative Blocking of GST Input Tax Credit under Rule 86A
The Supreme Court in Union of India Vs K.K. Alloys dismissed the Revenue's SLPs, affirming that Rule 86A cannot be used to block ITC in excess of the balance available in the Electronic Credit Ledger or to create a negative balance restricting future credits. Rule 86A is a temporary, preventive measure — not a recovery mechanism.
⚡ Action Item: Where Rule 86A has been applied to create a negative ITC balance, file an immediate representation/writ citing this Supreme Court position and demand restoration of the credit ledger to zero or the actual available balance.

11. GSTAT Appeal Deadline Extension Sought: Technical Failures on E-Filing Portal Deny Assessees Their Statutory Right of Appeal
The Central Gujarat Chamber of Tax Consultants has formally requested an extension of the GSTAT appeal filing deadline from June 30, 2026 to December 31, 2026, citing systemic portal failures — server timeouts, Aadhaar authentication errors, DSC failures, and Bharatkosh payment breakdowns. Only ~23,500 appeals have been filed against an expected 3–3.5 lakh, underscoring the scale of the crisis.
⚡ Action Item: URGENT — Deadline: June 30, 2026. Document all portal error screenshots with timestamps today. If your GSTAT appeal filing is being obstructed, submit a written complaint to the GST Council and Finance Ministry immediately as evidence for condonation.

12. GST on Commercial Property Rentals Without ITC Should Align With 5% Concessional Rate
Where ITC on commercial building construction is blocked under Section 17(5) but full GST applies on rental income, the result is tax cascading — arguably inconsistent with the broader GST architecture and potentially arbitrary under Article 14. The article argues for a 5% GST (without ITC) rate on such rentals, aligning them with other concessional rate categories under Notification No. 11/2017.
⚡ Action Item: Identify commercial properties built on own account where ITC was blocked, and assess the GST rate implications on rental income. Consider filing representation with the GST Council for policy alignment.

13. Avoiding GSTR-9 & GSTR-9C Reconciliation Pitfalls for FY 2025-26: A Practical Pre-Filing Guide
A systematic guide to the most common errors in GSTR-9 and GSTR-9C filings for FY 2025-26 — including outward tax discrepancies between GSTR-1 and GSTR-3B, ITC exceeding GSTR-2B, missed RCM liabilities, unrecorded Rule 37/37A reversals, blocked credits under Section 17(5), and prior-period adjustments. Voluntary corrections through DRC-03 before filing can prevent Section 74A scrutiny notices.
⚡ Action Item: Begin GSTR-9/9C reconciliation workpapers immediately for FY 2025-26; run a structured "reported vs expected" check across all five risk areas before the annual return filing deadline.

🟧 Company Law & NBFC Regulation

14. RBI Grants Disclosure Exemption to Government-Owned Upper Layer NBFCs Under Scale Based Regulatory Framework
Effective June 24, 2026, the RBI's Second Amendment Directions, 2026 exempt Government-fully-owned-and-controlled NBFC-ULs from the disclosure obligations in paragraph 23 of the 2025 Directions. The exemption is premised on the inherent public accountability of Government entities. Private sector NBFC-ULs remain fully bound.
⚡ Action Item: Government-owned NBFC-ULs should document their ownership structure and confirm eligibility for this exemption in their compliance register with effect from today.

15. RBI Overhauls NBFC Upper Layer Classification: ₹1 Lakh Crore Asset Threshold Now Sole Criterion
Effective June 24, 2026, the RBI replaces the complex parametric NBFC Upper Layer identification methodology with a single, objective asset-size threshold of ₹1,00,000 crore, reviewed every three years. New Paragraph 36A further mandates that NBFCs which are group entities of Scheduled Commercial Banks comply with activity-specific banking regulations — directly targeting regulatory arbitrage within banking conglomerates.
⚡ Action Item: All large NBFCs should immediately self-assess their total asset position against the ₹1 lakh crore threshold and evaluate whether the new Paragraph 36A triggers any additional compliance obligations as an SCB group entity.

16. RBI Relaxes Governance Rules for Government-Owned Upper Layer NBFCs Under 2026 Amendment
Effective June 24, 2026, the RBI (NBFC – Governance) Amendment Directions, 2026 exempt fully Government-owned-and-controlled NBFC-ULs from specific provisions of paragraph 43 of the 2025 Governance Directions. All other NBFC-ULs, including privately owned, listed, or mixed-ownership entities, remain subject to the full governance framework.
⚡ Action Item: Government-owned NBFC-ULs should formally verify ownership and control status and update their governance compliance documentation to reflect the applicable exempted provisions from June 24, 2026.

17. EPF Partial Withdrawal Rules Revamped in 2025: Labour Codes Framework, Simplified Claim Heads, and Why Rejections Still Happen
EPFO's October 2025 reforms consolidate approximately 13 partial withdrawal provisions into 3 streamlined heads with a standardised 12-month service requirement and access to the employer's share. However, rejections remain frequent — almost always due to unresolved KYC, missing date-of-exit entries, or UAN-bank linkage failures, not eligibility issues.
⚡ Action Item: Proactively audit all employee UAN records for KYC approval status, accurate date-of-exit entries, and bank account linkage before any withdrawal claim is submitted to avoid rejection.

18. Supreme Court Narrows Borrower Redemption Rights Under SARFAESI: Analysis of M. Rajendran v. KPK Oils and Proteins India Pvt. Ltd.
The Supreme Court in M. Rajendran v. M/s KPK Oils and Proteins India Pvt. Ltd. firmly holds that under amended Section 13(8) of the SARFAESI Act, a borrower's statutory right of redemption extinguishes the moment a valid auction or sale notice is published — reaffirming Celir LLP v. Bafna Motors. This substantially benefits secured creditors while significantly narrowing borrower protections compared to the pre-2016 position.
⚡ Action Item: Borrowers in SARFAESI enforcement proceedings must act immediately upon receiving possession/sale notices — do not wait for the auction date to negotiate or deposit outstanding dues.

19. Section 29A Mandate Extension: Supreme Court Rules Civil Court Has Jurisdiction, Not Appointing High Court
In Jagdeep Chowgule Vs Sheela Chowgule & Ors., the Supreme Court conclusively resolved that applications for extension of an arbitral tribunal's mandate under Section 29A(4) must be filed before the court defined under Section 2(1)(e) — the Principal Civil Court of original jurisdiction in the district — regardless of whether the tribunal was constituted by the parties or by a High Court/Supreme Court under Section 11(6).
⚡ Action Item: Review all pending Section 29A mandate extension applications — if filed before the appointing High Court, immediately consider re-filing before the correct Principal Civil Court to avoid jurisdictional invalidity.

🟥 FEMA & Foreign Exchange

20. RBI Withdraws Obsolete FEMA Circulars Under Regulatory Rationalisation Drive – June 2026
Via A.P. (DIR Series) Circular No. 18 dated June 24, 2026, the RBI has formally withdrawn a set of post-June 2000 FEMA circulars rendered inoperative by subsequent regulatory amendments or redundancy. Authorised Persons must communicate this withdrawal to their constituents. Existing approvals under other applicable laws remain unaffected.
⚡ Action Item: Immediately audit all internal FEMA compliance checklists, legal opinions, and standard operating procedures to remove references to the withdrawn circulars and update them to reflect the current operative framework.

21. RBI Streamlines FEMA Compliance & Reporting for Authorised Persons under New 2026 Framework
A.P. (DIR Series) Circular No. 17 dated June 24, 2026 overhauls reporting requirements for Authorised Persons and MTSS Indian Agents. FLM-8 is expanded to capture foreign currency note write-offs; FLM-1 to FLM-7 registers are discontinued; entities reporting via FETERS are exempted from FLM-8. Quarterly reporting of franchisees and Forex Correspondents is now mandatory, with a structured "Fit and Proper" declaration under Regulation 8(6)(c).
⚡ Action Item: Authorised Persons must immediately discontinue FLM-1 to FLM-7 registers, implement the expanded FLM-8 format, and schedule quarterly reporting for all franchisees and Forex Correspondents by the next quarter-end.

🟪 Banking & Financial Sector Regulation

22. RBI Revamps Foreign Exchange Risk Capital Framework for Local Area Banks: Key Changes Under 2026 Amendment Directions
Effective April 1, 2027, the RBI replaces Paragraph 29 of the LAB Capital Adequacy Directions with a comprehensive NOP-based methodology covering all on- and off-balance sheet foreign exchange and gold positions. A uniform 9% capital charge applies on the overall NOP computed via the shorthand method.
⚡ Action Item: Local Area Banks should begin gap analysis of current capital adequacy systems against the new Paragraph 29 requirements by Q3 2026 to allow sufficient implementation time before April 1, 2027.

23. RBI Updates Foreign Exchange Risk Capital Norms for Standalone Primary Dealers from 1 April 2027
Effective April 1, 2027, SPDs must compute forex capital requirements daily under a new standardised methodology — replacing paragraphs 92 and 93 of the 2025 Directions. A 15% capital charge applies on the overall NOP, with specific carve-outs for capital-deducted items and non-performing/matured securities.
⚡ Action Item: SPDs should initiate daily NOP computation capability assessments and IT system upgrades to accommodate the revised framework well before the April 1, 2027 effective date.

24. RBI Overhauls Customer Protection Framework for Urban Co-operative Banks in Electronic Banking Fraud Cases
The RBI (UCBs – Responsible Business Conduct) Third Amendment Directions, 2026 introduce precise definitions for Fraudulent EBT, Shadow Reversal, Third-Party Breach, and customer/UCB negligence, creating a clear liability matrix. Zero-liability applies where fraud is attributable to UCB negligence or timely-reported third-party breaches. A small-value compensation mechanism (up to ₹25,000 or 85% of net loss) is introduced for individual victims.
⚡ Action Item: UCBs must implement 24×7 fraud-reporting channels and update their customer grievance policy to reflect the new zero-liability triggers and mandatory compensation timelines.

25. RBI Issues 2026 Framework on Customer Liability and Compensation for Fraudulent Electronic Banking in RRBs
Parallel to UCBs, the RBI (RRBs – Responsible Business Conduct) Third Amendment Directions, 2026 impose structured fraud liability, zero-liability protections, and a small-value compensation mechanism (up to ₹25,000 or 85% of net loss, once in a lifetime) on Regional Rural Banks. RRBs must maintain 24×7 reporting facilities and resolve complaints within 45/60-day outer timelines.
⚡ Action Item: RRBs should review and update their fraud-reporting technology infrastructure, internal policies, and customer communication frameworks to comply with the new definitions and timelines effective immediately.

26. RBI Tightens Customer Protection Rules for Payments Banks Against Digital Banking Fraud: Second Amendment Directions, 2026
The RBI (Payments Banks – Responsible Business Conduct) Second Amendment Directions, 2026 introduce legally defined categories of electronic banking transactions, negligence, and third-party breaches for Payments Banks. Zero-liability provisions protect customers in PB-negligence cases; the small-value fraud compensation mechanism (up to ₹25,000 or 85% of net loss) extends to individual and sole proprietor victims of customer-negligence-related frauds.
⚡ Action Item: Payments Banks must update their customer liability policies and ensure instant alert systems and 24×7 complaint channels are fully operational to meet the new framework's requirements.

27. RBI's 2026 Directions on Fraudulent Digital Banking: Complete Guide for Small Finance Banks and Customers
The RBI (SFBs – Responsible Business Conduct) Third Amendment Directions, 2026 reinforce customer safeguards for SFBs with precise definitions of EBT, Fraudulent EBT, Unauthorised EBT, customer and SFB negligence, and shadow reversal. The burden of proving customer fault rests with the SFB. Complaint resolution timelines of 45/60 days are mandated, and the small-value compensation framework applies to eligible individual victims.
⚡ Action Item: SFBs should conduct an immediate audit of their current fraud complaint handling process against the new mandatory timelines and zero-liability triggers, and train front-line staff on the revised liability matrix.

28. RBI Amends Capital Adequacy Framework for Rural Co-operative Banks: New Rules on Forex and Gold Open Position Risk
Effective April 1, 2027, the RBI introduces a detailed step-by-step NOP methodology for Rural Co-operative Banks covering spot, forward, derivative, gold, and off-balance sheet exposures. Authorised Dealer RCBs must compute full forex and gold NOP; non-AD RCBs are limited to gold NOP computation only.
⚡ Action Item: RCBs should determine their Authorised Dealer status and begin system readiness assessment for the new NOP computation methodology by Q3 2026.

29. RBI Overhauls Capital Rules for UCBs' Forex & Gold Exposure from April 1, 2027
Effective April 1, 2027, UCBs must compute NOP at every close of business day using the mandated shorthand method, with a 9% capital charge on the overall NOP in addition to existing credit and interest rate risk capital. Full forex NOP risk weights apply only to Authorised Dealer UCBs; non-AD UCBs focus primarily on gold-related NOP.
⚡ Action Item: Authorised Dealer UCBs must plan for daily end-of-business NOP computation capability and integrate the 9% capital charge into their ICAAP framework ahead of April 1, 2027.

30. RBI Tightens Net Open Position Norms for Small Finance Banks to Match Global Forex Risk Standards
Effective April 1, 2027, SFBs operating as Authorised Dealer Category-I banks must calculate NOP daily using the new Annex VII framework. The framework comprehensively covers single-currency positions, forwards, swaps, options, gold, and mandates use of authorised benchmark spot rates with a standardised end-of-day cut-off.
⚡ Action Item: AD Category-I SFBs must review their treasury management systems for Annex VII compatibility and initiate daily NOP reporting capability testing by Q4 2026.

31. RBI Tightens Rules on Recovery of Excess Pension Payments by Agency Banks: Key Amendments Explained
The RBI First Amendment Directions, 2026 introduce a mandatory notice-and-consent framework for recovery of excess government pension payments by Agency Banks, bifurcated by error attribution (bank-caused vs. government-caused). For bank-caused errors, banks must credit the Government account upfront and recover from pensioners only through prioritised, consent-based methods. Board-level governance over recovery policies is now required.
⚡ Action Item: Agency Banks must immediately review and restructure their pension overpayment recovery SOPs to incorporate the notice-and-consent framework, and place a Board-approved policy on record.

32. RBI's 2026 TReDS Master Direction: A New Opportunity To Ease MSME Working Capital Stress
The RBI (TReDS) Directions, 2026 remove the requirement for compulsory platform-level due diligence of MSME sellers, significantly accelerating onboarding. Financiers now have access to credit guarantee cover from NCGTC and may insure TReDS exposure, with the condition that insurance premiums cannot be recovered from MSME sellers.
⚡ Action Item: Tax and financial advisors to MSME clients should benchmark current CC/OD rates against TReDS discount rates and proactively introduce pilot TReDS transactions for clients supplying to registered buyers.

🟫 Insolvency (IBC)

33. Commercial Wisdom of CoC Under IBC: Striking the Right Balance Between Creditor Autonomy and Judicial Oversight
A comprehensive analysis of the CoC's commercial wisdom doctrine under the IBC — tracing its evolution from Swiss Ribbons through K. Sashidhar, Essar Steel, DHFL, and Kalyani Transco v. Bhushan Power and Steel Ltd. The NCLT's role is compliance verification, not commercial supervision; however, the doctrine is not a shield against decisions that are arbitrary, mala fide, or in violation of the Code's mandatory provisions.
⚡ Action Item: Resolution professionals and CoC members should ensure that all commercial decisions are documented with contemporaneous reasoning to withstand the limited but real judicial review permissible under Sections 30(2) and 31 of the IBC.

Key Deadlines & Action Items

Professional Takeaways

1. Jurisdictional Defects Are Fatal — Not Curable
Three separate rulings this week — from the Calcutta High Court, ITAT Kolkata, and ITAT Cuttack — converge on a single, powerful message: Section 143(2) notice validity and CBDT Instruction No. 1/2011 pecuniary jurisdiction limits are not procedural formalities that can be glossed over by Section 292BB. Tax professionals must build a proactive jurisdiction verification step into every new assessment response workflow. A notice from the wrong officer — at the wrong pecuniary level — is, in law, no notice at all.

2. The RBI's Regulatory Rationalisation Wave Demands Immediate Compliance Framework Audits
Today's notifications represent the most concentrated single-day RBI regulatory output in recent memory — spanning FEMA circular withdrawals, NBFC reclassification, capital adequacy overhauls for six categories of financial institutions, and four separate customer protection frameworks for UCBs, RRBs, SFBs, and Payments Banks. Financial sector compliance teams must treat this as a trigger for a full-scale compliance framework audit rather than a series of isolated updates. The April 1, 2027 effective date for capital adequacy changes should not create complacency — systems overhauls take time.

3. GST Practitioners Face a Perfect Storm — GSTAT Deadlines, ITC Blocking, and Annual Return Season Converge
The GSTAT e-portal crisis (only 23,500 of an expected 3–3.5 lakh appeals filed), the Supreme Court's Rule 86A clarification, and the imminent GSTR-9/9C filing season together create a uniquely high-risk environment for GST practitioners this week. The strategic priority must be threefold: document and file all GSTAT appeals by June 30 (or immediately represent for extension), challenge any negative ITC blocking using the K.K. Alloys ruling, and commence GSTR-9 reconciliation workpapers now to avoid scrambling under Section 74A scrutiny later.

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