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SC Restores Back Wages to Illegally Terminated Worker

illegal termination back wages

Case Details: Balaji Madhukar Konkanwar vs. Maharashtra State Road Transport Corporattion [2026] 185 taxmann.com 717 (SC)

Judiciary and Counsel Details

  • Sanjay Karol & Nongmeikapam Kotiswar Singh, JJ.
  • Varinder Kumar Sharma, Aor, Shantanu SharmaMs Deeksha Gaur, Advs. for the Petitioner.
  • Ms Mayuri Raghuvanshi, Aor, Vyom RaghuvanshiMs Akanksha Rathore, Advs. for the Respondent.

Facts of the Case

In the instant case, the appellant-employee was engaged as a Cleaner with the respondent-State Transport Corporation on a daily wage basis. He was orally terminated from service. The Labour Court held the termination to be illegal and directed reinstatement with continuity of service and payment of back wages.

The respondent filed a writ petition before the High Court, wherein interim relief against reinstatement was declined and the respondent was directed to deposit the back wages. Consequently, the appellant was taken back into service as a daily wager.

Thereafter, the appellant approached the Industrial Court seeking regularisation upon completion of 180 days of service. The Industrial Court directed regularisation from the date on which the appellant completed 180 days of service. However, despite the said direction, the respondent failed to comply with the order until 2011, when the appellant was finally regularised in service.

Subsequently, in IDA Case No. 10 of 2016, the Labour Court granted back wages for the period from October 1993 to 20 January 2011 along with interest at the rate of 12% per annum. The High Court, however, set aside the award passed by the Labour Court.

Supreme Court Held

The Supreme Court observed that the appellant had already completed 180 days of service prior to being unceremoniously relieved from employment and had continuously pursued legal remedies to secure what was rightfully due to him. Therefore, the doctrine of estoppel could not be invoked by the respondent to avoid payment of the appellant’s legitimate dues, which represented compensation for services rendered and not a gratuitous payment.

Accordingly, the Supreme Court held that the High Court erred in setting aside the order of the Industrial Court granting compensation of Rs. 8,09,218/- towards back wages for the period from October 1993 till 20 January 2011. However, considering the financial implications arising from grant of interest at 12% per annum from October 1993 onwards, the Supreme Court reduced the rate of interest from 12% to 8% per annum.

List of Cases Reviewed

  • Order of High Court of Judicature at Bombay at Nagpur in WP-299-2022, dated 01-08-2022 (para 7) set aside

List of Cases Referred to

  • Maharashtra State Road Transport Corporation v. Kisan Narayanrao Kale [ Writ Petition 3720 of 2011, dated 11-6-2013] (para 3).

The post SC Restores Back Wages to Illegally Terminated Worker appeared first on Taxmann Blog.

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SC Revives Reassessment Notices Issued by Jurisdictional AOs

reassessment notices

Case Details: Income Tax Officer vs. Tej Partap Singh [2026] 185 taxmann.com 1007 (SC)

Judiciary and Counsel Details

  • Surya Kant | CJI., B.V. Nagarathna & Joymalya Bagchi, JJ.
  • Tushar Mehta, Solicitor General, N. VenkataramanRahjavendra P. ShankarS. DwarakanathRaghavendra P. Shankar, A.S.Gs., V. Chandrashekhara BharathiZoheb HussainBhuvan KapoorKaran LahiriMs Shilpi OhriUdit DedhiyaMs Pallavi MishraMrs. Prerna DhallAbhyudey KabraRajat VaishnawMudit BansalS. Vijay AdithiyaGaurang BhushanYogya RajpurohitMrs. Uma Prasunna BachuSandeep SapraUdai KhannaPraneet PranavPadmesh MishraShashank BajpaiChitvan SinghalShantanu BhowmickRanjeet K. RanjanGautam BaruaAbhaya Nath DasMs Monica GoelMohd YasinMs Sarita VermaMs Shubhangi PandeyNaresh JainMs Arati DebnathRishabh JainMahaveer JainAlok KumarMs KavyaAnkit DagaVaibhav Kulkarni, Advs., Sudarshan LambaVinay GargRaj Bahadur YadavSatish KumarVikash Chandra ShuklaRameshwar Prasad GoyalMs Kheyali SinghAniket Deepak Agrawal, AORs and Arijit Prasad, Sr. Adv. for the Petitioner.
  • Rupender SinhmarSamarvir SinghKartik BansalMrs. Reeta Dewan PuriMs Smriti PuriSrajan SinhaNitin KumarDushyant NayakShivam JainKrishan Kant KumarMonu KumarChanderRajasaheb S. PatilMs Supriya WankhedeSukhbir HoodaMs Pushpanjali SinghVipul KumarMs Gursimrat KaurManoj KumarSaurabh SharmaKaran SethJaiveer Singh BaliNithin K. RajMohd. Amaan DeewanGaurave BhargavMs Anshu GuptaShubham GuptaMs Siddhi GuptaSatyam AnejaAniket SinghMs Megha ShawAbhisek DasAmit MathurChandrashekhara BharathiVishnu Sharma A.S.Pratik ShahMs Tani MalikMs VidhatriSumit MangalMs Radhika SharmaD. ManmohanYashas R.K.Venkatram Reddy ManturPercy PardiwalaGunjan KakkadRaghav DeshpandeRushabh TripathiMadhur AgrawalSatyajit A. DesaiSachin SinghPratik Kumar SinghShashank UpadhyayParth JohriSanchit AgrahariMadhur DuggalDr. Rakesh GuptaSomil AggarwalGautam ThackerS. SukumaranBhupesh PathakMrs. Ruche AnandOm Sudhir VidyarthiAditya JainYogit KamatDr. Shine P. SasidharKamal Singh BishtV.R. RamanMs Aakriti GuptaMs Urvi KhannaJ.S. PrakyatNishant ThakkarHiten ThakkarMs Jasmin AmalsadvalaNikhil RanjanRahul HakaniRajesh Ranjan PrasadNihar MankadA. RaghuramMs Devyani MahraPoli Naidu VudamalaVivek SarinMs Divyanshi SinghDhruv Dev GuptaMs Nandita SinghalSatish C. KaushikMs Tamanna RohillaVibhu TiwariSaksham SinghalMs Priyanka JainSamrath ChoudharyViabhav KulkarniMs Mahima GoudMs Mahima ThakurBhanu ThakurMs Swati MishraAmit SangwanBharat MishraMs Sneha ChandnaMs Shivangi SinghMs Vaibhavi ParikhPranay BhardwajMs Pragya JaiswalSholab AroraMs Madhumitha KesavanKaran KhetaniMs Sriharshitha ChadaRam Avtar SharmaMs Ananya KapoorSalil KapoorMs Soumya SinghTarun ChananaSumit LalchandaniShivam YadavRavi KumarUtkarsa Kumar GuptaMs Nazuk SinghalRajat KhattryAman GuptaMs Srishti GhoshalMs Divya JainKshitij KumarTadimalla Bhaskar GowthamMs Shambhawi ShivaDinesh H. GodaraAmarnath MunjampalliMs Daggu PallaviS. SiddarthDevvrat SinghAnkit MidhaMs Komal MundhraRishay RajRahul TyagiRohit GuptaMohit SinghalMs Dhanshri S. MandhaleMs Surbhi SharmaSiddhant SharmaShubham SoniSatyen SethiMs Gargi SetheeAkshay SinghMs Sanjana JainVenkata Prasad PasupuletiAayush AgarwalaGaurav VermaKushal Kumar ChauhanMs Prapti ShrivastavaAmit Kumar SinghA. AnishaRavi SawanaMs Neha SharmaMs Neha ChoudharyMs Nitum JainSwastik MishraMs Medha SinhaL. Badri NarayananVishal KalraAnil KumarSaumyendra Singh TomarMs Suvandna KalraInder Paul BansalVivek BansalSanjay GoyalVamsikrishna ThotaSrikanth Varma MudunuruAditya DassaurSyed Ahmed SaudMohd. Parvez DabasDaanish Ahmed SyedUzmi Jameel HusainAqib BaigMohd. ShahibMohd. ShakimSeemab QayyumMohammad Aadil KhanKislay PandeyAnkur KhuranaArnav KumarMs Manya GuptaKeshav MittalMs Priya AgarwalMs Shardha ZutshiSiddharth Anil KhannaRitik AroraShivam MishraMs Gulshan JahanSewa SanghShashank ManishMs Pragati SinghB. Veera Swamy RajuMohammad MukhairuddinAkarsh GargMs Ritika AggarwalMs Abhipsa AnamikaMs Uditie AggarwalSaksham GargA.V.A. Siva KartikeyaNikhil SwamiMs Divya SwamiMahesh AgarwalRishi AgrawalaAnkur SaigalAlok YadavAnshuman SrivastavaAbhinabh GargMs Ameesha MalhotraMs Sayaree Basu MallikMs Madhur AgarwalRachit ThakurMs Jineshi ThakurMs Niharika SinghAneesh VempatiPartikRohit DhamijaPuneet DewanDharmesh ShahKapil HiraniDharan GandhiNishit GandhiDevendra JainKumar KaleTanzil PadvekarNalin BajajDhaval ShahKushagra GehlotAmar GahlotPrashantPravin GambhirRakesh AgarwalSubham KumarPriyanshuMs Krati AgrawalD. Bharat KumarAman ShuklaMs Yatika GuptaBhoumik NayyarMs Manasvi Reddy JakkaM. Chndrakanth ReddyThandra Sai Yeshwanth GoudMahipalJasdeep Singh DhillonJas SanghaviMs Aasavari KadamMihir MehtaSuyog BhaveMs R.K. BatraAbhay MannMs Amanat Kaur ChahalPrabhat ChaurasiaDaleep SinghAnirudh JamwalAditya BajajMs Kenisha SavlaMs Prerna PriyadarshiniSyed Faraz AlamAtharva GaurMs Ayesha ChoudharyPramothesh MukherjeeVed JainNischay KantoorSparsh KapoorVivek PunjabiJasmeet SinghMs Rusheet SalujaSaif AliPushpendra Singh BhadoriyaVijay SharmaPranav MenonSauravMs Rutuja N. PawarSaurabh UpadhyayMs Hardikaa KaliaManish ChaurasiaMs Hetal LaghaveMs Sneha MorePranaya RameshAdhyatamik KhannaMs Saloni SankheMs Khushi ChhetriPiyush GargSushant HaritSandeep GoelAbhishek GargMahesh GuptaBasa Mithun ShashankTanmay SadhDevaang SavlaVed P. SinghMs Ankita GuptaMs Shreya KaseraM. RamasamyMrs. K. BalambihaiMs Pooja LakshmiPrasad LotikarAnkur SavadikarSuyash GadreMs Srija SinghNishant SharmaKartik SharmaVachan BudkePiyush BhardwajShivam SenguptaBharat RaichandaniDeepak Kumar KhokharMahesh RaichandaniMs Komal MittalMaasir JavedRahul JainRahul SharmaDr. Saurab KapoorMrs. Vanita BhargavaSanjay SanghviAjay BhargavaAtul S. MathurPrabal MehrotraVishal ShrivastavaSarvapriya MakkarMs Tijil ThakurMs Shagun MishraVikrant KackriaS.K. VermaShailesh SharmaMs Nandita SharmaMs Alka GoyalKhubaib ShakeelPradyoth TadikondaShravan YammanurMs Pankhuri ShrivastavaAbhishek BhootAlekshendra SharmaDeepankar KumarMs Shradha NarayanMs Mallika AgarwalMohit Soni, Advs., Naman TandonP.N. PuriAyush AnandMs Alpana SharmaKaustubh ShuklaMs Shalu SharmaNiraj GuptaAayushmaan VatsyayanaSaurabh AgrawalD. Abhinav RaoK.R. SasiprabhuMayank PandeyMs Aditi Anil DaniKunal CheemaMs Anagha S. DesaiAmbhoj Kumar SinhaAnand SukumarParminder Singh BhullarAbhijit SenguptaMs Christi JainNaveen NagarjunaShibu Devasia OlickalPawanshree AgrawalRanjan Nikhil DharnidharManish PaliwalGunnam Venkateswara RaoSiddharth JainAakarshan AdityaKunal VermaDivyesh Pratap SinghMs Anushree Prashit KapadiaMs Madhulika UpadhyayNagarkatti Kartik UdayM.P. SrivigneshNiteen Kumar SinhaPraveen SwarupIvanSiddhartha IyerRavi RaghunathNikhil JainRam Naresh YadavSamrat Krishnarao ShindeSandeep SinghAnand Dilip LandgeRajiv TyagiAbhishek GautamArtatrana PandaY. Raja Gopala RaoPushkar Karni SinhaShashank SinghRahul GuptaMs Charanya LakshmikumaranNirmal GoenkaAnil Kumar GautamPrateek K. ChadhaMs Devina SehgalMs priyanjali SinghShakil Ahmad SyedMudit GuptaPulkit PrakashAshok MathurTushar GiriMs Nidhi SahayKaushik ChoudhuryMrs. Prabha SwamiPrabhat Kumar RaiE.C. AgrawalaRohit Anil RathiNaveen HegdeBharat BhushanRajat MittalGopal JhaKush ChaturvediSubodh S. PatilMs Shweta BhagchandaniDhananjay GargBhushan Mahendra OzaVikas MehtaAnuragMs Akanksha MehraKushagra PandeySahil TagotraAniruddha DeshmukhB. KarunakaranSandeep Sudhakar DeshmukhAbhinav AgrawalAneesh MittalMs QurratulainDeepak GoelManish K. BishnoiMs Mitali ChauhanMs Neelam SharmaAnantha Narayana M.G.Ms Anubha AgrawalDivyanshu SahayAkshay Sahay, AORs, Salil Dev Singh BaliJ.D. MistriS. GaneshPuneet JainSandeep GoyalT. SuryanaryanTushar HemaniSanjay BansalV. SridharanMs Radhika SuriBalbir SinghKavin GulatiVikram Pooserla and Prakash Shah, Sr. Advs. for the Respondent.

Facts of the Case

A large batch of reassessment matters arose under the Income-tax Act, 1961, after the Finance Act, 2021, overhauled Sections 147 to 151 with effect from 01.04.2021. Subsequently, on 29.03.2022, the CBDT notified the e-Assessment of Income Escaping Assessment Scheme, 2022 under Section 151A, providing that reassessment under Section 147 and issuance of notice under Section 148 would be carried out through automated allocation and in a faceless manner.

This gave rise to a dispute on whether, after this Scheme, the Jurisdictional Assessing Officer (JAO) or the National Faceless Assessment Centre/Faceless Units (NFAC) had authority to act at the pre-notice and notice stages under Sections 148A and 148.

In several cases, JAOs issued orders under Section 148A(d) and consequential notices under Section 148 without routing them through the faceless mechanism. Multiple writ petitions were filed before various High Courts. Divergent views emerged; some High Courts held that the JAO and NFAC had concurrent jurisdiction and that the Scheme did not displace the JAO, others quashed the notices and proceedings on the ground that they were not issued through the faceless mechanism, thereby rendering the subsequent reassessment steps invalid.

During the pendency of appeals arising from these judgments, Parliament enacted the Finance Act, 2026 (effective 01.04.2026), inserting Section 147A into the Act with retrospective effect from 01.04.2021 to clarify that the Assessing Officer, for purposes of Sections 148 and 148A, shall mean an Assessing Officer other than the NFAC or any assessment unit referred to in Section 144B(3).

Aggrieved-assessee filed the instant writ petition contending that the High Court quashed the reassessment notice only on the ground that it was not issued by the National Faceless Assessment Centre (NFAC) and the very foundation of that view now stands altered by the amending legislation, the impugned judgment in favour of the assessee should be set aside, and the matter should be remitted to the High Court for fresh consideration.

Supreme Court Held

The Hon’ble Supreme Court had to decide whether to quash the reassessment notices on the ground that the Jurisdictional Assessing Officers (JAOs) lacked competence to initiate such proceedings or not.

The Supreme Court has set aside the orders of various High Courts holding that the JAOs have no jurisdiction to issue notices for reassessment under Section 148A(d) and Section 148, and that such notices should be issued by the NFAC. The Apex Court held that the Parliament, from the outset, intended that while notices could be issued by either the Jurisdictional AO or the Faceless AOs, the subsequent quasi-judicial adjudication of such notices was to be undertaken by the FAOs.

The power to enact retrospective amendments is well settled in law, and fresh notices will now be issued to assessees in accordance with the clarified position, so that pending reassessment proceedings may be concluded in accordance with the law.

It is not necessary for the Supreme Court to examine the merits of the rival submissions concerning the correctness of the impugned judgments or the scope of the competing precedents at this juncture. The High Courts have primarily quashed the reassessment notices on the ground that the Jurisdictional AOs lacked competence to initiate such proceedings, and the very foundation of that view now stands altered by the amending legislation.

Thus, the impugned judgments in favour of the assessee were set aside on this limited ground. The matter was remitted to the respective High Courts for fresh consideration. The assessee was granted liberty to amend their writ petitions, if so advised, within a period of four weeks from the date of uploading of this order, so as to enable them to challenge Section 147A of the IT Act, as introduced by Act No. 4 of 2026, or to any other connected or consequential provision.

List of Cases Reviewed

The post SC Revives Reassessment Notices Issued by Jurisdictional AOs appeared first on Taxmann Blog.

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Customs Act Amendments – What They Mean for Indian Trade

Customs Act amendments

The Finance Act, 2026 which received Presidential assent and came into force on 30 March 2026 has made a set of targeted but consequential amendments to the Customs Act, 1962. Some of these are ease-of-doing-business reforms long sought by trade; others resolve legacy anomalies that had been producing unnecessary litigation and working-capital costs for importers, exporters, and the Indian shipping and fishing industries. This note walks through the nine substantive amendments, paragraph by paragraph, in the same sequence in which they appear in the CBIC's classification of the changes. Each amendment is cross-referenced to the 28th edition of Taxmann's Customs & Foreign Trade Policy Ready Reckoner by V.S. Datey, where the underlying section is analysed in full against the accompanying rules, circulars, and judicial authority.

Table of Contents

  1. Extension of the Customs Act to Indian-Flagged Fishing Vessels Beyond Territorial Waters
  2. Special Provisions for Fish Harvested by Indian-Flagged Fishing Vessels—New Section 56A
  3. Penalty Paid Before Adjudication Order—Deemed a Charge for Non-payment of Duty (No Stigma)
  4. Advance Ruling Validity Extended from Three Years to Five Years
  5. Warehouse-to-Warehouse Transfer Without Prior Officer Permission
  6. Custody of Goods Imported or Exported by Post or Courier
  7. Baggage Rules, 2026 and CBDPR, 2026
  8. Deferred Payment of Duty—Extended to Eligible Manufacturer Importers, on Monthly Cycles
  9. Courier Exports—No Upper Value Limit
  10. Summarisation of Finance Act 2026
  11. The Reference Work
Check out Taxmann's Customs & Foreign Trade Policy (FTP) Ready Reckoner which is now in its 28th Edition, is the standard single-volume treatise on India's cross-border indirect tax regime—covering the Customs Act, Customs Tariff Act, FT(D&R) Act, SEZ Act, IFSCA Act, and FTP 2023 with the HBP in one integrated work, updated to the Finance Act 2026 with the Baggage Rules 2026, CBDPR 2026, and CBIC Customs Manual 2025. Structured across 61 chapters in two Divisions (Customs Law and FTP) with a concept-to-compliance-to-enforcement progression, its defining feature is a four-layer citation density—statute → subordinate legislation → administrative guidance → judicial authority—at every paragraph, making it fit for direct use in advisory work, written submissions, and examination preparation.

1. Extension of the Customs Act to Indian-Flagged Fishing Vessels Beyond Territorial Waters

Section 1(2) of the Customs Act has been amended with effect from 30 March 2026 by inserting the words “fishing and fishing related activities by Indian-flagged fishing vessels beyond territorial waters of India” after “whole of India”.

Historically, an Indian-flagged fishing vessel that crossed the 200-nautical-mile limit to catch fish was treated, on its return, as if it were importing the catch into India—with all the attendant valuation, Bill of Entry, and duty exposure. Equally, a direct sale of the catch at a foreign port was not treated as an export, depriving the operator of export benefits. The amendment to Section 1(2), read together with a new Section 2(28A) defining “Indian-flagged fishing vessel” and the newly inserted Section 56A (discussed below), together resolve this anomaly.

In the Ready Reckoner, the full textual amendment, its legislative history, and the treatment of territorial waters under UNCLOS are analysed in Chapter 1 (Introduction to Customs Duty), Paras 1.1-1 and 1.1-3, with the Supreme Court’s observations on extra-territorial legislative competence in Union of India v. Mohit Minerals (P.) Ltd. cited at the relevant paragraph.

Taxmann's Customs & Foreign Trade Policy (FTP) Ready Reckoner

2. Special Provisions for Fish Harvested by Indian-Flagged Fishing Vessels—New Section 56A

A new Section 56A has been inserted with effect from 30 March 2026. In its operative part, it provides that notwithstanding anything in the Customs Act or any other law, fish harvested by an Indian-flagged fishing vessel beyond Indian territorial waters:

  • may be brought into India free of duty in the manner and subject to the conditions prescribed by rules [Section 56A(1)(a)]; and
  • where landed at a foreign port, may be treated as an export of goods in the manner and subject to the conditions prescribed by rules [Section 56A(1)(b)].

The CBIC has been empowered under Section 56A(2) to make regulations covering the form and manner of entry, declaration, custody, examination, assessment of duty, clearance, transit, and transhipment of such harvested fish. The net effect is a duty-free import regime for Indian fishing operations, coupled with export recognition when the catch is sold abroad—a two-way relief that directly addresses the commercial reality of the industry.

The Ready Reckoner discusses Section 56A in its chapter on warehousing and connected provisions, with cross-references to Chapter 10 on general procedures for import and export.

3. Penalty Paid Before Adjudication Order—Deemed a Charge for Non-payment of Duty (No Stigma)

Section 28(6)(i) of the Customs Act has been amended with effect from 30 March 2026. The earlier language—”be deemed to be conclusive as to the matters stated therein”—has been substituted with “be deemed to be conclusive as to the matters stated therein, and penalty so paid under section 28(5) on determination under section 28(6) shall also be deemed to be a charge for non-payment of duty”.

The consequence is significant. Where a person voluntarily pays both duty and penalty before the adjudication order is issued, the penalty so paid is treated as a charge for non-payment of duty—not as a penalty stricto sensu. This carries three direct benefits:

  • no stigma attaches to the assessee;
  • the amount is allowable as a deduction under the Income-tax Act; and
  • no reporting is required in the books of account or to the stock exchange (for listed companies), as it is not a “penalty” in the reporting sense.

The policy rationale is to encourage voluntary compliance and to remove the disincentive that attached to pre-adjudication payment under the earlier regime.

In the Ready Reckoner, the demand and adjudication framework under Section 28—including the three tracks of ordinary demand, undervaluation, and suppression/wilful misstatement/collusion—is analysed in Chapter 20 (Demands under Section 28), with the amended Section 28(6)(i) treatment set out at the relevant paragraph.

4. Advance Ruling Validity Extended from Three Years to Five Years

Section 28J(2) of the Customs Act has been amended with effect from 30 March 2026 to extend the validity of an Advance Ruling under Customs from three years to five years. A proviso has been added to permit the validity of an existing ruling to be extended to five years on a request by the applicant.

For importers and exporters structuring long-horizon supply chains, especially where classification, valuation, or exemption eligibility is the pivotal question, this doubles the period during which the ruling provides binding certainty. The relief is particularly material for capital-equipment imports under EPCG and for long-tail supply contracts where the five-year window now aligns more naturally with the export obligation period.

Chapter 21 of the Ready Reckoner (Adjudication and Advance Ruling) covers the Advance Ruling machinery end-to-end—application, bench composition, binding nature, and the now-extended validity period—with the amendment to Section 28J(2) set out at the relevant paragraph.

5. Warehouse-to-Warehouse Transfer Without Prior Officer Permission

Section 67 of the Customs Act has been amended with effect from 30 March 2026 to provide that the owner of any warehoused goods may remove them from one warehouse to another subject to such conditions as may be prescribed—dispensing with the earlier requirement of obtaining prior permission from the proper officer for each transfer.

This is a textbook ease-of-doing-business reform. Under the earlier regime, each inter-warehouse movement—including routine operational transfers between an importer’s own facilities—required an individual permission from the proper officer, creating a persistent friction cost. Post-amendment, the movement operates on a conditions-prescribed basis, aligning warehousing with the self-assessment philosophy that the Customs Act otherwise embraces.

The full warehousing regime—public and private warehouses, bonded manufacturing, the MOOWR scheme, period of warehousing, interest, and now the liberalised Section 67 transfer—is set out across Chapters 22 to 27 of the Ready Reckoner, with the amended Section 67 and the pre-amendment position both retained for transitional matters.

6. Custody of Goods Imported or Exported by Post or Courier

Section 84(b) of the Customs Act has been amended with effect from 30 March 2026. For the words “the examination”, the words “the custody, examination” have been substituted, enabling the CBIC to make regulations covering the custody of goods imported or exported by post or courier, in addition to their examination.

This is a structural enabling provision: it gives the CBIC the regulatory headroom to formalise custody arrangements for the rapidly expanding e-commerce and courier export traffic, including Dak Niryat Kendras and E-Commerce Export Hubs (ECEHs). The operational regulations flowing from this section will, in all likelihood, be issued separately.

The courier and post regime—including the CHAPTER-level changes for e-commerce consignments—is analysed in Chapter 14 of the Ready Reckoner, with Chapter 55 on Cross-Border Trade in the Digital Economy tracking the FTP 2023 / Handbook of Procedures provisions on ECEHs and Dak Niryat Kendras.

7. Baggage Rules, 2026 and CBDPR, 2026

The Baggage Rules, 2026 and the Customs Baggage (Declaration and Processing) Regulations, 2026 have been notified with effect from 2 February 2026, in supersession of the earlier regime. While the revised general free allowance, transfer-of-residence entitlements, and duty rates are not radically different from the pre-amendment position, the 2026 framework is better structured—the declaration and processing regulations now sit in a separate, dedicated instrument, and the substantive entitlements are consolidated cleanly in the Rules.

Chapter 13 of the Ready Reckoner on Baggage has been fully rewritten for the 2026 Rules and CBDPR, with the general free allowance, transfer-of-residence allowance, rates, and the control provisions set out as they now stand.

Taxmann's Guide to New Baggage Rules 2026

8. Deferred Payment of Duty—Extended to Eligible Manufacturer Importers, on Monthly Cycles

The deferred payment of duty regime has been extended to “Eligible Manufacturer Importers”, and the cycle has shifted from the earlier fortnightly basis to a monthly basis. This is a meaningful working-capital reform—the monthly cycle brings the duty payment cadence closer to the cash-conversion cycle of most manufacturing operations, and the extension to Eligible Manufacturer Importers widens the pool of beneficiaries beyond the earlier narrower set.

The Ready Reckoner tracks the deferred payment of duty framework in its chapter on Import Procedures (Chapter 11), with the new eligibility and cycle changes reflected at the relevant paragraphs.

9. Courier Exports—No Upper Value Limit

With effect from 1 April 2026, there is no upper value limit for export of goods through courier. The earlier value ceiling had been a binding constraint for D2C exporters, small-consignment exporters of jewellery and specialty goods, and MSMEs using courier as their primary export channel. The removal of the ceiling brings the courier channel structurally in line with the policy direction of the E-Commerce Export Hubs and Dak Niryat Kendras initiative under FTP 2023.

Chapter 14 of the Ready Reckoner, on courier and post imports/exports, reflects the removal of the value ceiling and its interaction with the FTP 2023 framework.

10. Summarisation of Finance Act 2026

Taken together, the nine amendments can be summarised in one line: they remove anomalies (fishing vessels, Section 67 transfers, courier value ceilings), reduce stigma and working-capital friction (Section 28(6)(i), deferred payment), and extend certainty (Advance Ruling validity). None of the changes is a headline-grabbing structural overhaul. All of them matter at the ground level of day-to-day compliance.

For the practitioner, the challenge is that each amendment lands in a different section of the Act, interacts with a different set of rules and regulations, and carries its own case-law history. That is precisely why a single-volume reference that sets out the amended provision, the subordinate legislation, the administrative circular and manual, and the relevant judgment together at the paragraph is where most day-to-day Customs advisory work actually gets done.

11. The Reference Work

Taxmann’s Customs & Foreign Trade Policy Ready Reckoner, 28th Edition (2026), by V.S. Datey, is the single-volume treatise in which the Finance Act, 2026 amendments—together with the Baggage Rules, 2026, CBDPR, 2026, and CBIC Customs Manual, 2025—have been integrated section by section, paragraph by paragraph, with the relevant case-law cited at the point of discussion.

The book runs to 61 chapters across two Divisions—Division A on Customs Law (Chapters 1–41) and Division B on Foreign Trade Policy (Chapters 42–61)—and moves from the conceptual framework through transactional compliance to the full enforcement and appellate cycle. Its defining feature is a four-layer citation density at every paragraph: statutory text, then subordinate legislation, then administrative guidance (CBIC circulars, Customs Manual 2025, DGFT policy circulars, MCI-DC(SEZ) instructions, RBI circulars), and finally the leading judicial authority—a citation architecture that allows the book to be used directly in written submissions, replies to Show-Cause Notices, and appellate pleadings.

For a practitioner, in-house team, or officer working through the Finance Act, 2026 amendments and their operational consequences, the Reckoner is the primary desk reference—and has been so, in its continuously maintained series, for nearly three decades.

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Undisclosed Income in Block Assessment—IT Act 2025

Undisclosed Income in Block Assessment

Undisclosed income in block assessment is no longer a grey area—it is a precisely defined, legally structured concept that carries serious tax and penalty consequences. When the Income Tax authorities conduct a search and seizure operation, any income that was not reported, not recorded in books, or concealed through layered transactions becomes subject to a special taxation regime under Chapter XVI-B of the IT Act 2025.
Unlike regular assessments, block assessment consolidates undisclosed income across an entire block period and taxes it decisively—on the basis of cash found, documents seized, digital records recovered, and logical inferences drawn from incriminating material. From unaccounted jewellery and suppressed sales to bogus expenditure and on-money property deals, the Assessing Officer has wide powers to bring hidden income to tax.

Authored by D.C. Agrawal – Advocate

 Table of Contents

  1. Introduction
  2. Major Areas of Addition of Undisclosed Income
  3. Specific Areas of Additions in Block Assessment
  4. Statutory Exclusions and Safeguards
  5. General Defence
  6. Specific Defence
  7. Special Computational Rules
  8. Jurisprudential Significance
  9. Conclusion
Check out Taxmann's Law Relating To Block Assessment which is the leading contemporary treatise on India's revived block assessment regime under Chapter XVI-B of the Income-tax Act 2025, as amended by the Finance Act 2026 and effective from 1st April 2026. Authored by D.C. Agrawal and Ajay Kumar Agrawal, the 2026 Edition uniquely reads the new Code against three decades of Chapter XIV-B jurisprudence—asking, provision by provision, which doctrines survive, evolve or stand displaced. It reproduces every key provision verbatim with clause-by-clause analysis, integrates over 2,500 judicial precedents, and offers a comprehensive 1961 ↔ 2025 section mapping. Distinguished by its Manner-of-Operation/Example/Defence treatment for forensic chapters, a case-by-case Section 65B digital evidence taxonomy, and a dual-lens approach covering both assessing-authority and taxpayer-defence perspectives, it is the definitive working manual for litigators, chartered accountants, assessing officers and tribunal members.

1. Introduction

The law relating to block assessment represents one of the most important instruments in the hands of the Assessing Officer to address undisclosed income detected through search and seizure operations. Conceived as a special and self-contained code, the chapter XVI-B containing block assessment framework departs from the conventional year-wise assessment system and instead adopts a consolidated approach, bringing to tax the total undisclosed income of a defined block period. Its legislative foundation rests on the principle that income unearthed during a search—whether in the form of cash, assets, documents, or digital evidence—must be assessed swiftly, decisively, and on the basis of incriminating material. A defining feature of this regime is the wide and inclusive scope of the expression “undisclosed income,” under section 301(e) of IT Act 2025,  which not only covers unreported receipts and assets but also extends to false claims of expenditure, deductions, and allowances. Correspondingly, the powers of the Assessing Officer assume considerable significance, as additions in block assessment are not confined to direct discoveries alone but also encompass income logically inferred from seized material and related information.

It is emphasised in this write-up, a prelude to the book “LAW RELATING TO BLOCK ASSESSMENT”, that block assessment under Chapter XVI-B is not a substitute for regular assessment, but a special, self-contained code meant exclusively for taxing income that has escaped disclosure and is detected through search operations. Here various areas in which additions are made in block assessment are described in brief along with general defence against such additions.

Taxmann's Law Relating To Block Assessment

2. Major Areas of Addition of Undisclosed Income

The Assessing Officer may identify several core areas where additions generally arise, reflecting common patterns of tax evasion. These may be grouped as follows:

  1. Unexplained Assets and Investments – Additions frequently arise from cash, bullion, jewellery, and immovable property found during search. Where such assets are not recorded in books or cannot be satisfactorily explained, they are treated as undisclosed income under deeming provisions.
  2. Unaccounted Business Transactions – Suppressed sales, unrecorded turnover, parallel books, and off-the-record dealings detected through seized documents form a major category. These are often reconstructed using loose papers, diaries, or digital records.
  3. Bogus Expenditure and False Claims – The scope of undisclosed income is not confined to receipts; it also includes inflated or fictitious expenses, false deductions, and manipulated allowances, which artificially reduce taxable income.
  4. Unexplained Cash Credits and Financial Entries: Entries in books without satisfactory explanation—such as unsecured loans, share capital, or accommodation entries—are brought to tax under the principles akin to Sections 68–69C (102 to 105 of IT Act 2025).
  5. On-Money and Real Estate Transactions – Unaccounted consideration in property deals, often evidenced through parallel agreements or cash components, forms a recurring basis for addition.
  6. Digital and Documentary Evidence-Based Additions – With the evolution of search techniques, digital data, emails, spreadsheets, and electronic records have become critical sources of undisclosed income.
  7. Benami and Layered Transactions – Income routed through third parties or benami entities, where beneficial ownership is established through seized material, is also included.

3. Specific Areas of Additions in Block Assessment

  1. Unexplained Cash Found During Search – The modus operandi typically involves accumulation of unrecorded cash generated from suppressed sales, unaccounted services, or diversion of business receipts outside books. Such cash is often kept physically to avoid audit trails
  2. Unaccounted Bullion, Jewellery, or Valuable Articles – Tax evasion is structured by converting undisclosed income into bullion or jewellery, frequently held in lockers or in names of family members. This acts as a store of unaccounted wealth.
  3. Undisclosed Investments (Movable or Immovable) – Assessees often channel unaccounted funds into real estate, shares, or other assets through layered or benami transactions to conceal true ownership. Additions arise when such investments are not recorded in books.
  4. Unrecorded Business Transactions Detected from Seized Documents – Parallel books, loose sheets, or digital records are maintained to suppress real turnover and profits. During search, such materials are used to reconstruct undisclosed income.
  5. Suppressed Sales or Turnover Revealed During Search – A common modus operandi involves maintaining parallel sales records or under-reporting turnover to reduce taxable income, often supported by kachcha books or digital trails. Search operations expose discrepancies between actual and recorded sales.
  6. Bogus Purchases or Inflated Expenditure – Tax evasion is executed by booking fictitious purchases or inflating expenses through accommodation bills to suppress profits. Such claims are often unsupported by actual delivery of goods or services.
  7. False Claims of Deductions or Allowances – Assessees may claim inadmissible deductions or inflate allowable expenses to reduce taxable income. During search, such claims are tested against supporting evidence.
  8. Unexplained Cash Credits in Books (Section 68/102 Cases) – The modus operandi includes introducing unaccounted money into books as loans, share capital, or deposits using accommodation entries. These credits lack genuine identity or source.
  9. Unrecorded Loans or Advances Given/Received – Unaccounted funds are circulated as loans or advances outside books to disguise ownership and avoid taxation. Such transactions may surface through seized documents or statements.
  10. On-money Transactions in Property Deals – The common modus operandi involves understating consideration in registered documents while receiving or paying additional “on-money” in cash. Such parallel consideration is often evidenced through loose papers or statements.
  11. Undisclosed Income Based on Loose Papers/Diaries/Digital Evidence – Assessees maintain informal records such as diaries, slips, or digital files to track unaccounted transactions. During search, these are relied upon to infer undisclosed income.
  12. Benami Transactions Detected During Search – Unaccounted income is routed into assets held in the names of third parties to conceal real ownership. Search may reveal beneficial ownership through documents or statements.
  13. Unaccounted Stock or Excess Stock Found – Tax evasion is carried out by suppressing production or sales while physically holding excess stock not recorded in books. During search, stock discrepancies lead to additions.
  14. Undisclosed Foreign Assets or Bank Accounts – Assessees may park unaccounted income in foreign bank accounts or assets to evade domestic taxation. Such information may emerge from documents or international data exchange.
  15. Income from Undisclosed Sources (General Residuary Category) – This category covers income which does not fall into a specific head but is inferred from incriminating material, such as unexplained receipts or unidentified financial inflows. The modus operandi involves diversifying concealment methods to avoid traceability.
  16. Unrecorded Professional or Consultancy Receipts – Professionals may suppress fees by collecting cash or routing receipts outside books. Such income is often evidenced through diaries, digital records, or client confirmations during search.
  17. Accommodation Entries or Hawala Transactions – Tax evasion is structured through layered transactions using entry operators to introduce unaccounted funds as legitimate credits. These transactions lack real economic substance.
  18. Undisclosed Capital Gains from Property or Shares – Assessees may understate sale consideration or completely omit transactions involving capital assets. Search operations reveal such gains through agreements or financial records.
  19. Unaccounted Expenditure (Section 69C/105 Additions) – The modus operandi involves incurring expenses from undisclosed income without recording them in books, such as unaccounted purchases or personal expenditure. During search, such spending is inferred from seized material.
  20. Income from Unrecorded Contracts or Agreements – Assessees may execute parallel or informal agreements, especially in construction or service sectors, to conceal actual receipts. Such contracts are often discovered through seized documents or digital correspondence.
  21. Undisclosed Commission or Brokerage Income – The modus operandi involves earning commission in cash or routing it through intermediaries without recording it in books. Such income is often reflected in diaries or third-party confirmations.
  22. Income Detected Through Seized Electronic Data (Emails, Spreadsheets, etc.) – Modern tax evasion frequently relies on digital records maintained outside formal accounting systems. Emails, spreadsheets, or cloud data may reveal concealed transactions.
  23. Income Relating to Other Persons (Section 295) – Undisclosed income detected during search may belong to persons other than the searched entity, often through layered or benami arrangements. Proceedings are initiated against such persons based on seized material
  24. Any Other Income Inferred from Incriminating Material Relatable to Search Evidence – This residuary category captures income logically inferred from seized evidence, even if not directly quantified. The modus operandi includes complex structuring to avoid direct detection

4. Statutory Exclusions and Safeguards

Section 293(2) specifically excludes:

  • Income Already Assessed – Income assessed under regular provisions prior to search cannot be re-included, preventing double taxation and reassessment of concluded matters.
  • Income Declared in Returns Filed Before Search – Even if assessment is pending, disclosure in a valid return prior to search protects the income from being treated as undisclosed.
  • Income Recorded in Books in the Normal Course – Entries made in regular books before the date of search—whether relating to completed years, ongoing years, or even the search period—are excluded, provided they are genuine and contemporaneous.
  • Income Under Special Tax Regimes – Certain incomes governed by special provisions are kept outside block computation, preserving the integrity of those regimes.
  • Transfer Pricing Adjustments – Income relating to international or specified domestic transactions is excluded and assessed separately under transfer pricing provisions, recognising their specialised nature. These exclusions emphasise that block assessment is confined to truly undisclosed income emerging as a result of search, not income merely awaiting assessment or already disclosed.
  • Powers of the Assessing Officer and Their Limits – The powers vested in the Assessing Officer include:
    1. Re-computation of income claimed as excluded;
    2. Reliance on material available beyond seized evidence;
    3. Application of deeming provisions for unexplained income.

However, these powers are not unfettered. They are subject to critical limitations:

  1. Additions must be linked to evidence.
  2. Opinion must be formed on objective material.
  3. No roving or fishing inquiries are permissible.
  4. The burden of proof shifts to the assessee only in specific circumstances.

5. General Defence

In general, following defence are available to the taxpayer:

  1. Proof of Prior Disclosure – The taxpayer can demonstrate that income was already disclosed in returns or recorded in books prior to search, thereby excluding it from block computation.
  2. Challenge to Evidentiary Link – Additions can be contested on the ground that they are not based on incriminating material found during search, a principle repeatedly upheld in judicial precedents.
  3. Explanation of Entries and Transactions – Where entries exist in books, the taxpayer may provide explanations supported by documentation, thereby rebutting the presumption of undisclosed income.
  4. Jurisdictional Challenge – Improper invocation of block assessment, or inclusion of income beyond statutory scope, can be challenged as ultra vires the special code.
  5. Segregation of Regular and Block Income – The taxpayer can argue that certain income falls within the domain of regular assessment and not block assessment.
  6. Protection Against Double Taxation – Where income has already been assessed or disclosed, its inclusion can be resisted based on statutory exclusions.
  7. Defence in Penalty Proceedings – Where voluntary disclosure is made in the block return and taxes are paid, immunity provisions may apply, limiting penalty exposure.

6. Specific Defence

Following defence in specific cases can be considered by the assessee:

  1. Unexplained Cash Found During Search – To establish cash flow statements, linkage with disclosed withdrawals, or proving that the cash was already recorded or pertains to explained sources.
  2. Unaccounted Bullion, Jewellery, or Valuable Articles – To explain acquisition through disclosed income, inheritance, customary holdings, or disputing valuation and ownership presumptions.
  3. Undisclosed Investments (Movable or Immovable) – To demonstrate proper recording, explaining funding sources, or contesting valuation differences.
  4. Unexplained Money Under Deemed Provisions – To Prove identity, genuineness, and source of funds, or linking the money to accounted transactions or earlier disclosures.
  5. Unrecorded Business Transactions Detected from Seized Documents – To challenge the evidentiary value of documents, proving they are incomplete or dumb, or reconciling entries with recorded transactions.
  6. Suppressed Sales or Turnover Revealed During Search – To reconcile stock, demonstrating estimation errors, or proving that entries represent projections rather than actual sales.
  7. Bogus Purchases or Inflated Expenditure – To prove genuineness through supplier confirmations, delivery records, and banking channels, or challenging assumptions drawn from third-party statements.
  8. False Claims of Deductions or Allowances – To demonstrate legal admissibility, proper documentation, and bona fide interpretation of law, or distinguishing between concealment and debatable claims.
  9. Unexplained Cash Credits in Books (Section 68 Type Cases) – To establish identity, creditworthiness, and genuineness of transactions, supported by documentation and banking trails.
  10. Unrecorded Loans or Advances Given/Received – To prove that transactions are recorded elsewhere, are mere noting without execution, or are sourced from disclosed funds.
  11. On-money Transactions in Property Deals – To challenge corroboration, disputing valuation assumptions, or proving that noting represent estimates or negotiations rather than actual transactions.
  12. Undisclosed Income Based on Loose Papers/Diaries/Digital Evidence – To demonstrate that such documents are “dumb documents,” incomplete, or lacking independent corroboration, and hence cannot form sole basis for addition.
  13. Benami Transactions Detected During Search – To disprove beneficial ownership, establishing independent financial capacity of the ostensible owner, or challenging evidentiary linkage between assessee and asset.
  14. Unaccounted Stock or Excess Stock Found – To reconcile with stock registers, valuation disputes, or proving that excess stock represents accounting or timing differences rather than undisclosed income.
  15. Undisclosed Foreign Assets or Bank Accounts – To prove disclosed status, taxability in earlier years, or jurisdictional and evidentiary limitations in linking such assets to undisclosed income of the block period.
  16. Income from Undisclosed Sources (General Residuary Category) – To challenge nexus with seized material, proving lawful source, or arguing absence of concrete evidence linking such income to the assessee.
  17. Unrecorded Professional or Consultancy Receipts – To reconcile entries with declared income, proving duplication, or demonstrating that entries represent estimates or pending transactions rather than actual receipts.
  18. Accommodation Entries or Hawala Transactions – To establish genuineness through banking trails, identity of parties, and business purpose, or challenging reliance on third-party statements without cross-examination.
  19. Undisclosed Capital Gains from Property or Shares – To prove that transactions were already disclosed, contesting valuation adopted by authorities, or demonstrating exemptions and lawful computation under capital gains provisions.
  20. Unaccounted Expenditure (Section 69C Type Additions) – To prove that expenditure is recorded, funded from disclosed income, or disputing estimation methods used by the Assessing Officer.
  21. Income from Unrecorded Contracts or Agreements – To prove that agreements were not executed, amounts were tentative, or income was already accounted in regular books.
  22. Undisclosed Commission or Brokerage Income – To reconcile entries with disclosed income, disputing attribution, or proving that amounts represent gross receipts without corresponding liability adjustments.
  23. Income Detected Through Seized Electronic Data (Emails, Spreadsheets, etc.) – To challenge authenticity, completeness, and authorship of digital evidence, or demonstrating that such data is provisional, unverified, or already incorporated in regular accounts.
  24. Income Relating to Other Persons (Triggering Proceedings Akin to Section 158BD) – To contest jurisdiction, absence of proper satisfaction, or lack of direct nexus between material and alleged income.

7. Special Computational Rules

The computation of undisclosed income u/s 293 is based on the following statutory rules:

  1. No set-off of brought-forward losses or depreciation against undisclosed income, reinforcing the penal nature of the regime.
  2. However, such losses may be carried forward for future years, preserving long-term tax attributes.
  3. In the case of firms, computation is made before partner-level deductions, ensuring entity-level neutrality.
  4. Anti-avoidance provisions and deeming fictions are applied to maintain substantive taxation.

8. Jurisprudential Significance

Following judicial principles evolved under earlier law are applicable under new law also:

  1. Block assessment must be confined to search-related evidence.
  2. It cannot be used for review or reassessment of concluded issues.
  3. Additions must have a clear nexus with seized material.

Section 293 codifies these principles, thereby reducing litigation uncertainty and strengthening legal predictability.

9. Conclusion

Chapter XVI-B represents a refined and disciplined approach to search-based taxation. It transforms block assessment from a broad enforcement tool into a precise computational mechanism grounded in evidence, statutory safeguards, and judicial discipline.

It is demonstrated above that while the law empowers the tax administration to bring to tax undisclosed income detected during a search, it simultaneously ensures that such power is bounded by exclusions, evidentiary requirements, and procedural fairness. The identification of specific areas of addition, coupled with clearly articulated taxpayer defences, reflects a mature legal framework that seeks to balance revenue interests with constitutional principles of fairness and natural justice.

Thus, block assessment is not merely about taxation of concealed income; it is about ensuring that the process of taxation itself remains just, rational, and legally sustainable—a principle that lies at the heart of modern tax jurisprudence.

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SEBI Issues AI Cybersecurity Advisory for Market Entities

SEBI AI cybersecurity advisory

Circular No. HO/13/19/12(1)2026-ITD-1_CIMGI/10873/2026, Dated 05.05.2026

The Securities and Exchange Board of India (SEBI) has issued an advisory highlighting emerging cybersecurity risks associated with AI-driven vulnerability detection tools, such as Mythos.

1. Constitution of Dedicated Task Force

SEBI has constituted a specialised task force named cyber-suraksha.ai

The task force comprises:

  • Market Infrastructure Institutions (MIIs)
  • SEBI-regulated entities

2. Objective of the Task Force

The initiative aims to:

  • Examine AI-related cyber risks in securities markets
  • Develop:
    1. Risk mitigation strategies
    2. Best practices for cybersecurity resilience

3. Key Areas Covered in the Advisory

The circular prescribes measures relating to:

3.1 Vulnerability Assessment

Regular identification and testing of:

  • System vulnerabilities
  • AI-enabled attack surfaces

3.2 API Security

Strengthening:

  • Authentication
  • Access controls
  • Monitoring of APIs

3.3 SOC Monitoring

  • Enhanced monitoring through Security Operations Centres (SOC)
  • Focus on real-time detection of AI-enabled threats

3.4 AI-Based Risk Management

  • Adoption of AI-aware cybersecurity governance frameworks
  • Managing risks arising from Automated threat discovery tools

4. Objective of the Advisory

The advisory seeks to:

  • Improve preparedness against sophisticated AI-driven cyber threats
  • Strengthen cyber resilience of financial market infrastructure
  • Promote coordinated industry response mechanisms

5. Conclusion

SEBI’s advisory reflects growing regulatory focus on the intersection of AI and cybersecurity, aiming to ensure that securities market institutions remain resilient against rapidly evolving digital threats.

Click Here To Read The Full Circular

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SEBI Defines ‘Significant Indices’ Under 2024 Regulations

SEBI significant indices regulations

Circular No. HO/47/17/12(8)2025-MRD-POD2, Dated 05.05.2026

The Securities and Exchange Board of India (SEBI) has issued a circular laying down the framework for identification of ‘Significant Indices’ under the SEBI (Index Providers) Regulations, 2024.

1. Criteria for Significant Indices

An index shall qualify as a ‘Significant Index’ where:

  • The average cumulative mutual fund AUM linked to the index
  • Exceeds ₹20,000 crore
  • During the preceding six months

2. Registration Requirement for Index Providers

  • The circular also prescribes registration requirements applicable to index providers associated with such indices

This aims to ensure:

  • Proper regulatory oversight
  • Enhanced transparency and governance

3. Initial List of Significant Indices

The initial list notified by SEBI includes:

  • Sensex-based indices
  • Nifty-based indices
  • Other eligible indices meeting the prescribed threshold

4. Objective of the Framework

The framework seeks to:

  • Identify indices with significant investor exposure and market impact
  • Strengthen accountability and standardisation among index providers
  • Enhance market integrity and investor confidence

5. Regulatory Impact

The framework will:

  • Bring key index providers under a structured regulatory regime
  • Improve transparency in index construction and administration
  • Align Indian practices with evolving global regulatory standards

6. Conclusion

SEBI’s framework for Significant Indices marks an important step towards formal regulation of index providers, recognising the growing importance of benchmark indices in investment products and capital markets.

Click Here To Read The Full Circular

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Audit File Quality Under SA 230 – Checklist Compliance

Audit File Quality

Audit file quality under SA 230 is no longer a back-office concern — it is a frontline professional responsibility that separates compliant auditors from credible ones. A file may contain every checklist, schedule, confirmation, and representation letter and still fail the most important test – does it show the auditor's thinking? Regulators today are not counting documents; they are tracing logic — from risk assessment to audit response, from evidence obtained to judgement exercised, from exceptions identified to conclusions reached. A file that records activity but not evaluation, that states "found satisfactory" without explaining why, that ticks boxes without capturing reasoning, does not defend the auditor — it exposes the audit as a mechanical exercise. Under SA 230, the audit file is not your memory or your after-the-fact explanation. It is your counsel in the room when you are not there.

CA. Pranav Jain – Chartered Accountant

 Table of Contents

  1. Why Audit Documentation is Now a Frontline Issue
  2. The Dangerous Comfort of a Complete File
  3. What SA 230 Really Demands
  4. The Real Failure – Activity Without Judgement
  5. Checklists are Useful. Checklist Thinking is Dangerous
  6. Where Documentation Failures Hurt the Most
  7. The Regulatory Message is Blunt
  8. From File Completion to Audit Architecture
  9. The Question Every Firm Must Now Ask
Check out Taxmann's Audit of Financial Statements which is an inspection-aware practitioner's manual that translates the Standards on Auditing, the Companies Act 2013, CARO 2020 and Indian Accounting Standards into a single, risk-driven audit methodology. The 5th Edition maps AQMM v2 documentation expectations and operationalises NFRA's toolkits, RoMM templates and the January 2026 Circular on SA 260 & SA 265 into procedures, checklists and working papers. Every audit step is linked to an identified risk through the SA 315 → SA 330 chain, with CARO 2020 reporting and Schedule III (Division 1) disclosures integrated within each substantive chapter, alongside new Labour Code implications, model accounting policies and illustrative audit reports. Authored by CA. Pranav Jain, the book equips chartered accountants, engagement teams and audit committees to build defensible, inspection-ready audit files.

1. Why Audit Documentation is Now a Frontline Issue

For years, audit documentation was treated as the administrative end of an audit. The audit team completed fieldwork, discussed issues with management, obtained schedules and confirmations, signed the report, and then “completed” the audit file.

In many firms, that phrase still means something very limited. Checklists are filled. Schedules are attached. Ledger printouts are ticked. Management representations are obtained. Review notes are cleared. Standard conclusions are inserted.

That approach is no longer safe.

In the present audit environment, the audit file is not merely a record of work performed. It is evidence of the auditor’s thinking. It is the place where risk assessment, professional scepticism, judgement, supervision, review and conclusion must become visible.

If the file does not show the auditor’s reasoning, the file does not defend the auditor. Worse, it may expose the audit as a mechanical compliance exercise.

The uncomfortable truth is simple – a complete audit file is not necessarily a quality audit file.

Taxmann.com | Research | Accounts & Audit

2. The Dangerous Comfort of a Complete File

An audit file may look complete and still fail the test of audit quality.

It may contain every checklist, schedule, invoice, confirmation, and representation letter. Yet, when a reviewer asks why a matter was considered reasonable, why an estimate was accepted, why a fluctuation was ignored, or why a control deficiency was not significant, the file may go silent.

That silence is the real issue.

Audit documentation is not about creating volume. It is about creating clarity. A well-documented file is one where an experienced auditor, having no previous connection with the audit, can understand what was done, what evidence was obtained, what significant matters arose, what judgements were made, and how the final conclusion was reached.

This “experienced auditor” test is not an abstract technical requirement. It is the auditor’s ultimate defence in a regulatory review.

The file is not your memory. It is not your explanation after the event. In a regulatory review, the file becomes your counsel. It speaks when the engagement team is not in the room. It explains the logic when oral explanations are no longer enough.

If the file needs a partner or manager to sit next to the reviewer and explain what was “actually done”, the documentation has already failed its first stress test.

3. What SA 230 Really Demands

SA 230, Audit Documentation, requires documentation to provide a sufficient and appropriate record of the basis for the auditor’s report and evidence that the audit was planned and performed in accordance with Standards on Auditing and applicable legal and regulatory requirements.

In simple language, the file must prove two things.

First, that the auditor had a basis for the opinion.

Second, that the audit was performed properly.

This means the audit file must show the relationship between assessed risks, audit procedures, evidence obtained, exceptions identified, evaluation made and conclusions reached. Documentation is therefore not separate from audit quality. It is the visible expression of audit quality.

The work may have been done. But if it is not documented with sufficient clarity, the file may not demonstrate that it was done with professional rigour.

4. The Real Failure – Activity Without Judgement

The problem in many audit files is not absence of work. Audit teams often verify samples, inspect invoices, obtain confirmations, perform analytical procedures, and discuss issues with management.

The problem is that the file records activity, but not judgement.

It records that a document was seen, but not what was evaluated. It records that management gave an explanation, but not how that explanation was corroborated. It records that a balance was verified, but not which assertion was tested. It records that a matter was “found satisfactory”, but not why it was satisfactory.

There is a major difference between writing “management explanation was found satisfactory” and documenting why the explanation was considered reasonable in the context of the audit evidence obtained.

The first is a conclusion.

The second is audit documentation.

5. Checklists are Useful. Checklist Thinking is Dangerous

Checklists have a legitimate role. They bring discipline, consistency, and coverage. Used properly, they strengthen audit methodology.

But checklists become dangerous when they replace professional thinking.

A tick mark on a ledger printout is not substantive testing. Attaching an invoice is not evaluation. Marking “verified” against a balance does not explain what was verified, how it was verified, what exceptions were identified, and how those exceptions were resolved.

A checklist can support the audit process. It cannot become the audit process.

A quality audit file must tell a coherent story. It should show the audit objective, assertion tested, procedure performed, sample selected, evidence examined, exceptions noted, explanation obtained, corroboration performed and conclusion reached.

Without this chain, the file becomes a warehouse of documents. It does not become evidence of audit quality.

6. Where Documentation Failures Hurt the Most

Documentation failures are most damaging in areas involving professional judgement.

This includes accounting estimates, impairment, going concern, provisions, revenue cut-off, related party transactions, journal entries, management override, contingent liabilities and unusual transactions. These areas rarely have simple yes-or-no answers. They require challenge, evaluation and judgement.

In an impairment assessment, it is not enough to attach management’s valuation workings and state “checked and found reasonable”. The file must show which assumptions were significant, how they were tested, whether evidence supported them, whether sensitivities were considered, and how management optimism was challenged.

Similarly, in related party transactions, obtaining a list from management is not enough. The auditor must document how completeness was assessed, whether minutes were reviewed, whether unusual transactions were identified, whether terms were examined, and whether disclosures were complete.

In these areas, weak documentation does not merely create a file deficiency. It raises a more serious question: was professional scepticism exercised at all?

7. The Regulatory Message is Blunt

The regulatory direction is clear. Reviewers are not merely asking whether a form exists in the file. They are asking whether the file demonstrates a logical audit trail from risk assessment to audit response, from evidence obtained to conclusion reached, and from professional judgement to final reporting.

Regulators are no longer looking only for individual mistakes. Increasingly, they are looking for evidence of a deeper issue – a systemic inability to exercise, evidence and document professional judgement.

That is a far more serious finding. An isolated omission may be corrected. A systemic weakness questions the firm’s audit methodology, supervision, review culture and quality control environment.

Documentation deficiencies are rarely only documentation deficiencies. They often indicate deeper weaknesses in planning, risk assessment, supervision, and professional scepticism.

When judgement is not documented, regulators do not assume that judgement was exercised.

That is the hard reality.

8. From File Completion to Audit Architecture

The solution is not to add more checklists blindly. The solution is to build better audit architecture.

Audit firms need working paper templates that force teams to record the objective, procedure, evidence, exception, evaluation and conclusion. They need risk tables that connect SA 315 risk assessment with SA 330 audit responses. They need review disciplines that challenge generic phrases such as “verified”, “noted”, “satisfactory” and “as explained by management”.

Partners must insist that significant judgements are visible in the file. Managers must review not only whether a checklist has been completed, but whether the file explains the audit logic.

Most importantly, documentation must happen during the audit, not after the audit. A defensible audit file cannot be manufactured at the end. It has to be built while the audit is being performed.

9. The Question Every Firm Must Now Ask

The real question is no longer whether the audit file is complete.

The real question is whether the audit file is defensible.

Does it show why risks were identified? Does it show how procedures responded to those risks? Does it show how evidence was evaluated? Does it show where management was challenged? Does it show how significant judgements were made? Does it show how the audit opinion was reached?

The future of audit does not belong to box-tickers. It belongs to professionals who can demonstrate judgement.

The audit file is no longer a back-office record. It is the auditor’s defence, the firm’s quality signature, and the profession’s credibility document.

A file that only shows ticking may satisfy a checklist.

A file that shows thinking protects the audit.

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SEBI Proposes Early Pay-In Benefit for Commodity Options

SEBI early pay in commodity options

Consultation Paper Dated 05.05.2026

The Securities and Exchange Board of India (SEBI) has issued a consultation paper proposing the extension of the early pay-in facility to options contracts in the commodity derivatives segment.

1. Current Position

The early pay-in facility is presently available only for Futures contracts in commodity derivatives

2. Proposed Change

SEBI proposes to extend the facility to options contracts in the commodity derivatives market

3. Background of the Proposal

The proposal is based on:

  • Representations received from market participants and stakeholders
  • Recommendations of:
    1. Working Group
    2. Commodity Derivatives Advisory Committee (CDAC)

4. Objective of the Proposal

The move aims to:

  • Streamline settlement mechanisms
  • Provide greater operational flexibility
  • Improve efficiency in margin and settlement processes

5. Expected Benefits

The extension may:

  • Enhance ease of participation in commodity options
  • Reduce settlement-related operational constraints
  • Improve overall market efficiency and liquidity

6. Conclusion

SEBI’s proposal reflects an effort to modernise settlement infrastructure in commodity derivatives by extending operational conveniences already available in futures contracts to the options segment as well.

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RBI Draft Norms Require Banks to Sell NPA Assets in 7 Years

RBI SNFA norms NPA recovery assets

Press Release 2026-2027/208, Dated 05.05.2026

The Reserve Bank of India (RBI) has issued draft guidelines on Prudential Norms for Specified Non-Financial Assets (SNFAs), permitting regulated entities to acquire certain non-financial assets in settlement of stressed exposures.

1. Purpose of the Framework

The draft norms aim to:

  • Facilitate recovery of Non-Performing Assets (NPAs)
  • Provide a structured mechanism where conventional recovery options are not viable

2. Acquisition of Non-Financial Assets

  • Regulated entities may acquire specified non-financial assets, including immovable property
  • Such acquisition can be:
    1. In full settlement, or
    2. Partial settlement of NPAs

3. Treatment of Residual Exposure

Where settlement is partial remaining exposure shall be treated as restructured exposure

4. Timeline for Disposal

  • Banks are required to sell properties acquired for NPA recovery
  • Within 7 years from acquisition

5. Valuation and Accounting Norms

  • SNFAs must be valued at the lower of Net Book Value (NBV) or applicable valuation amount
  • Appropriate disclosures must be made in the financial statements

6. Objective of the Draft Guidelines

The framework seeks to:

  • Improve recovery flexibility for lenders
  • Ensure prudent handling of non-financial assets acquired during recovery
  • Maintain transparency and prudential discipline

7. Conclusion

The proposed SNFA framework provides a regulated mechanism for acquisition and management of non-financial assets in NPA settlements, balancing recovery objectives with safeguards relating to valuation, disclosure, and timely disposal.

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SEBI Proposes Relaxed Compliance Officer Norms for Bond Platforms

SEBI online bond platform

Consultation Paper Dated 05.05.2026

The Securities and Exchange Board of India (SEBI) has proposed an amendment to the regulatory framework governing Online Bond Platform Providers (OBPPs) to align compliance requirements with those applicable to stock brokers.

1. Existing Requirement

Currently, Online Bond Platform Providers are required to appoint a Company Secretary as the Compliance Officer

2. Proposed Change

SEBI proposes to:

  • Align the requirement with the framework applicable to stock brokers
  • Move towards a principle-based compliance framework

3. Objective of the Proposal

The amendment aims to:

  • Promote regulatory harmonisation across intermediaries
  • Enhance ease of doing business
  • Provide greater operational flexibility to OBPPs

4. Regulatory Impact

The proposed framework would:

  • Reduce rigid role-specific requirements
  • Allow entities greater flexibility in structuring compliance functions
  • Maintain regulatory accountability while simplifying implementation

5. Conclusion

The proposal reflects SEBI’s broader approach towards streamlined and harmonised regulation, balancing effective compliance oversight with operational practicality for online bond platform providers.

Click Here To Read The Full Update

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