Where the rule said no, and the taxpayer still won
Tax rules read as absolutes. They are not. Every case below is a real decision where a taxpayer fell outside the plain wording and an exception carried them. 22 wins, 18 of them settled law, each with the exception it turned on and a link to the source so you can check it yourself.
These are other people's facts, not a forecast of yours. Each entry lists what the win actually turned on. If none of it describes your situation, the case will not carry you, and you should hear that before you spend anything on a fight.
“You work abroad and your NRE credits were taxed”
Tarun Kumar Sarkar v. ITO
Settled law
ITAT Kolkata
The rule said: The salary was credited to an Indian bank account, and the seafarer had even declared it in the ITR.
The exception: CBDT Circular 13/2017 states the department's own position that a non-resident seafarer's salary is not included merely because it was credited to an NRE account. A circular binds the department even where an officer disagrees.
What the win turned on
Services rendered outside India on a foreign ship
The foreign employer credited the NRE account directly
CBDT Circular 13/2017 states the department's own position on exactly this
A wrong entry in the return did not create a liability the law does not impose
How far this carries: Read together with Circular 13/2017 and the Arvind Singh Chauhan / Tapas Kumar Bandopadhyay line. The 'mistakenly shown in the ITR' point is useful, because a wrong return does not create a liability that the law does not impose.
The rule said: Section 5(2) taxes a non-resident on income received in India. The salary landed in an Indian bank account, so on a plain reading it was received here.
The exception: Receipt under section 5(2) means the FIRST receipt, where the right to the money arose. Salary already earned and receivable abroad is not received in India merely because the employee later routes it to an Indian account.
What the win turned on
The services were rendered wholly outside India
The employee had the legal right to receive the salary abroad; moving it to India was the exercise of that right, not receipt in India
How far this carries: Followed by later benches. See also Tapas Kumar Bandopadhyay (ITAT Kolkata, 2016) and a 2026 ITAT Ahmedabad decision on the same point.
“You reinvested in a house but it is in your spouse's name”
Ravinder Kumar Arora v. CIT
Won, authority both ways
[2012] 342 ITR 38 (Delhi High Court)
The rule said: Section 54F requires the assessee to purchase a residential house. The house was in the spouse's name, so the assessee did not.
The exception: Section 54F is a beneficial provision read purposively. Where the assessee funded the whole purchase, adding a spouse's name did not change who made the investment.
What the win turned on
The assessee funded the entire purchase and the trail proved it
The section is beneficial and was read purposively
NOTE: other courts have gone the other way on this exact point
Before you rely on this: There is authority the OTHER way. At least one High Court has held a husband cannot be treated as owner of a house bought in his wife's name even where he claimed s.54, and a Delhi ITAT decision has questioned whether investment must be in the assessee's own name. Present this as an arguable position with support, never as settled law.
The rule said: The new house stood in the wife's name, so the assessee did not buy a house.
The exception: Same purposive reading: the source of the funds decides the claim, not the name on the deed.
What the win turned on
Funding came from the assessee
The Tribunal's finding of fact was left undisturbed
Before you rely on this: Same caveat as Ravinder Kumar Arora: the question is contested and there is contrary High Court authority. Two supportive High Courts do not make it settled.
“Your bank or payer withheld 20% because you have no PAN”
DDIT v. Serum Institute of India Ltd
Settled law
ITAT Pune, 2015
The rule said: Section 206AA says that without a PAN, tax is deducted at the higher of the specified rate, the rate in force, or 20%. It reads as an override.
The exception: Section 90(2) gives the taxpayer the more beneficial of treaty or Act. Section 206AA is a collection mechanism and does not displace that entitlement.
What the win turned on
The payee was in fact entitled to treaty benefit
Section 90(2) gives the taxpayer the more beneficial of treaty or Act, and section 206AA does not displace it
How far this carries: Widely followed. Rule 37BC later gave statutory relief along the same lines for interest, royalty, FTS and capital gains where prescribed particulars are furnished.
“Your treaty claim was challenged as a shell or conduit”
Blackstone Capital Partners (Singapore) VI FDI Three Pte Ltd v. ACIT
Won, but stayed
Delhi High Court, decided 30 January 2023
The rule said: The department can look behind a TRC and deny treaty benefit if it considers the entity a shell.
The exception: A valid TRC was treated as sufficient evidence of residence and beneficial ownership.
What the win turned on
A valid TRC was held for the relevant period
Before you rely on this: STAYED BY THE SUPREME COURT on 3 January 2024. Separately, Tiger Global (SC, 15 Jan 2026) has since held that a TRC does not prevent the authorities examining whether an arrangement is tax-avoidant, which runs against the core of this ruling. Cite with both facts stated.
[2003] 263 ITR 706 (SC); Civil Appeals 8161-8164 of 2003, Supreme Court of India
The rule said: Treaty shopping is abusive, so treaty benefit should be refused.
The exception: CBDT Circular 789 bound the department, and treaty shopping is a matter for the legislature rather than the courts.
What the win turned on
A valid Mauritius TRC
CBDT's own Circular 789 supported the position
How far this carries: Narrowed by Tiger Global (SC, 15 Jan 2026), which held a TRC does not bar GAAR scrutiny. Also overtaken in part by GAAR (2017), the MLI Principal Purpose Test and the 2016/2024 Mauritius protocols. Do not cite Azadi Bachao alone for the proposition that a TRC is conclusive.
“You inherited or were gifted a property and are selling it”
CIT v. Manjula J. Shah
Settled law
[2013] 355 ITR 474 (Bombay High Court)
The rule said: You have held the property only since the date of the gift or the death, so it is short-term and taxed at slab rates.
The exception: The statutory fiction in Explanation 1(i)(b) to section 2(42A) adds the previous owner's holding period, and that fiction cannot be switched off when it reaches the computation in section 48.
What the win turned on
The statutory fiction in Explanation 1(i)(b) to section 2(42A) includes the previous owner's holding period
That fiction carries through to the computation in section 48 as well
How far this carries: The HOLDING-PERIOD point is what matters now and is unaffected. The INDEXATION point has largely lost its force: indexation was withdrawn for transfers on or after 23 July 2024, and non-residents cannot use the resident-only 20%-with-indexation election. Cite it today for holding period, not for indexation, unless the transfer predates the cutover.
“You returned to India and your foreign tax credit was denied”
Ms Brinda Rama Krishna v. ITO
Settled law
ITAT Bangalore; followed by ITAT Hyderabad, Delhi, Indore and Jaipur benches
The rule said: Rule 128(9) requires Form 67 by the return due date. Miss it and the foreign tax credit is disallowed.
The exception: The right to foreign tax credit comes from the treaty and is substantive. Rule 128(9) is subordinate legislation prescribing a form, and a procedural rule cannot extinguish a treaty right.
What the win turned on
Form 67 was on record before the assessment was completed
The foreign income had genuinely been offered to tax in India and the foreign tax genuinely paid
The right to credit is substantive and comes from the treaty; the form is procedural
How far this carries: Consistently followed across multiple benches. It is tribunal-level rather than High Court, so the department may still contest it at first instance, but the weight of authority is one way.
“You forgot to declare a foreign account or ESOP in Schedule FA”
ITAT Chennai and other benches on section 43 of the Black Money Act
Settled law
ITAT Chennai and concurring benches, a line of decisions rather than a single reported case
The rule said: Section 43 reads as a flat Rs 10 lakh penalty for each year a foreign asset is missing from Schedule FA, with no relief for an honest mistake.
The exception: The penalty is discretionary, not automatic. A technical or inadvertent lapse with no escaped income is not what section 43 was written to punish.
What the win turned on
The omission was inadvertent and technical, not concealment
No income had escaped tax
The asset was disclosed elsewhere, or by a spouse
Full cooperation once the department raised it, including bank statements
How far this carries: This is a line of tribunal decisions turning heavily on facts, not one binding precedent. Outcomes vary with conduct. Separately, the statutory de minimis was raised from Rs 5 lakh to Rs 20 lakh (excluding immovable property) with effect from 1 October 2024. Check that first, because it may remove the penalty without any argument.
“You sold property below the circle rate and were taxed on the circle rate”
ITAT decisions on section 50C(2): mandatory DVO reference
Settled law
ITAT, multiple benches, a settled line rather than one reported case
The rule said: Section 50C substitutes the circle rate for your actual sale price, and the officer simply applies it.
The exception: Section 50C(2) makes a DVO reference mandatory once the taxpayer objects, and section 50C(3) caps the outcome at the stamp-duty value, so the reference can only help.
What the win turned on
The assessee objected to the stamp-duty value, which makes a DVO reference mandatory under section 50C(2)
Section 50C(3) means a DVO figure higher than the circle rate still cannot be used, so asking has no downside
Where part consideration moved by banking channel on or before the agreement date, the agreement-date value applies
How far this carries: A line of decisions rather than a single binding authority. The statutory tolerance band is 10% (from AY 2021-22). Some older rulings applied different percentages, so do not quote a figure other than 10% as the current rule.
“Your builder missed the deadline and your exemption was denied”
ITAT and High Court decisions on delayed construction under sections 54 and 54F
Settled law
ITAT Bangalore and other benches; a consistent line rather than one reported case
The rule said: Sections 54 and 54F give you three years to CONSTRUCT the new house. Read literally, if construction is not finished in three years the exemption is gone, and assessing officers apply it that way.
The exception: The section is aimed at INVESTMENT, not completion. A builder's delay is outside the taxpayer's control and does not undo an investment already made in time.
What the win turned on
The capital gain was actually invested inside the statutory window. The money moved, and it can be traced
The delay was the builder's, not the taxpayer's; correspondence chasing the builder helps a great deal
A substantial part of the gain went in, not a token amount
Unutilised gain was parked in a Capital Gains Account Scheme account before the return due date
How far this carries: A line of tribunal and High Court decisions rather than a single binding authority, and it is fact-sensitive. It does not rescue someone who never invested the gain in time.
“Tax was deducted from your money but never reached the government”
ITAT Mumbai and other benches on section 205: credit despite the deductor's default
Settled law
ITAT Mumbai and concurring benches; recent decisions reported through 2026
The rule said: The portal gives you credit for what appears in Form 26AS. If your buyer, tenant or employer deducted tax but never deposited it, nothing shows, and the demand lands on you.
The exception: Section 205 is an absolute statutory bar on demanding the same tax again from the person it was deducted from. Form 26AS records the deductor's compliance and cannot override the bar.
What the win turned on
Primary evidence that deduction actually happened: the sale deed, the TDS certificate, the bank credit showing a net amount, or the payer's own confirmation
Showing the net-of-tax figure that was actually received, which proves the deduction on its face
CBDT's own Instruction of 1 June 2015 and Office Memorandum of 11 March 2016, which tell officers not to enforce such demands against the deductee
How far this carries: The section 205 bar is statutory and CBDT has itself instructed officers not to raise such demands. The obstacle is usually administrative rather than legal.
“You live in a zero-tax country and were told you cannot claim the treaty”
ADIT v. Green Emirate Shipping & Travels
Settled law
(2006) 100 ITD 203 (Mumbai ITAT)
The rule said: A treaty protects a person 'liable to tax' in the other country. The UAE charges no personal income tax, so on a plain reading a Dubai resident is not liable to tax anywhere and gets no treaty benefit.
The exception: 'Liable to tax' means the state has the RIGHT to tax you, not that it actually collected anything. A treaty guards against potential double taxation, not merely current double taxation.
What the win turned on
Residence in the UAE was genuine and could be evidenced
The argument turned on the RIGHT to tax, not on any tax actually paid
The treaty was read as protecting against potential, not just current, double taxation
How far this carries: Long-standing and widely followed, and recent tribunal decisions have restated it. Note that it settles the 'liable to tax' question only. It does not answer a GAAR or beneficial-ownership challenge, which is where Tiger Global now bites.
“You were denied section 54F because you own a share in the family house”
Kusum Sahgal v. ACIT and concurring benches on joint ownership under section 54F
Settled law
ITAT Delhi; supported by other benches and High Court authority
The rule said: The proviso to section 54F blocks the exemption if you own more than one residential house on the date of transfer. Your name is on the ancestral home, so you are out.
The exception: The bar is on INDEPENDENT, exclusive ownership of a residential house. A fractional or joint share in a co-owned family property is not full ownership and does not count towards the limit.
What the win turned on
The other property was CO-OWNED, not exclusively owned, so the share was fractional
It was typically ancestral or inherited, so the share arose by operation of law rather than purchase
The assessee did not exclusively own more than one independent house on the transfer date
How far this carries: The limit itself is real: exclusive ownership of more than one independent house does break eligibility. The exception is confined to fractional and joint holdings.
“You reinvested but never opened a Capital Gains Account”
ITAT decisions holding non-deposit in the Capital Gains Account Scheme is not fatal
Settled law
ITAT Mumbai and Hyderabad benches; a consistent line
The rule said: Section 54(2) says unutilised gain must be parked in a Capital Gains Account Scheme account before the return due date. Miss that and the exemption goes, and NRIs miss it constantly, because many bank branches will not open a CGAS account for a non-resident.
The exception: Section 54(1), actually investing in the house, is the substantive and mandatory condition. Section 54(2), the CGAS deposit, is procedural and directory. Where there was no unutilised gain left because the whole amount had already gone into the property, there was nothing for the CGAS route to do.
What the win turned on
The entire capital gain was actually invested in the new house, not merely intended
The investment happened before the return was filed
Nothing was left unutilised at the filing date, so there was no sum the CGAS deposit could have covered
How far this carries: A line of tribunal decisions. It rescues completed investments, not intentions. Advise clients to open the CGAS account anyway. This is a repair, not a plan.
“You were left out of ancestral or family property”
Vineeta Sharma v. Rakesh Sharma & Ors
Settled law
(2020) 9 SCC 576, Supreme Court of India, decided 11 August 2020
The rule said: After Prakash v. Phulavati, a daughter had coparcenary rights only if her father was alive on 9 September 2005.
The exception: Coparcenary vests by BIRTH, so the amendment operates on a right that already existed. The father's survival on 9 September 2005 is irrelevant.
What the win turned on
Coparcenary is acquired by BIRTH, so the father's survival on the amendment date is irrelevant
Partitions by registered instrument or court decree before 20 December 2004 remain protected
How far this carries: Three-judge bench, settled. Note the saving for partitions effected by registered instrument or court decree before 20 December 2004.
“You received a reassessment notice under section 148”
Hexaware Technologies Ltd v. ACIT
Won, under appeal
Bombay High Court, Writ Petition, decided 3 May 2024
The rule said: A notice under section 148 was validly issued by your assessing officer, so the reassessment proceeds and you argue the merits.
The exception: Once the section 151A faceless scheme is notified, the jurisdictional officer loses the power to issue the notice at all. It is a jurisdiction point, so the merits never arise.
What the win turned on
The notice came from the jurisdictional officer, not through the faceless mechanism the section 151A scheme requires
Some notices also lacked a Document Identification Number
Before you rely on this: The Revenue has pursued the issue further and the position has been carried to the Supreme Court. Some benches have granted interim relief pending that outcome. Present it as a strong, live ground, not as settled law.
“You found out about a notice long after it was issued”
ITAT decisions quashing reassessment for defective notice, service or sanction
Settled law
ITAT Delhi, Visakhapatnam and other benches; a line of decisions through 2025-26
The rule said: A notice was issued, you did not reply, and an ex parte order followed. On its face the assessment stands and the demand is enforceable against your Indian bank account.
The exception: A reassessment stands on a valid jurisdictional notice. Defective service, an expired limitation window or sanction from the wrong authority destroys the foundation, and everything built on it falls.
What the win turned on
Proof that the department had been told the correct address or email, and used the old one anyway
The exact issue date against the limitation window for that assessment year. The windows changed in 2021 and again in 2024, so the year matters
Who signed the sanction, and whether that officer was the authority the section required
Whether the notice came from a jurisdictional officer instead of the faceless system, which is the separate Hexaware ground
How far this carries: These are fact-specific wins on procedure, not a general rule that ex parte orders are void. Each turns on the actual defect in that record. Delay in challenging can also hurt, so this is time-sensitive.
The rule said: Section 69A lets the officer treat money you cannot explain as your income, taxed at 60% plus surcharge and penalty with no deduction and no set-off. The burden is on you.
The exception: Section 69A needs money the taxpayer cannot explain. Once the overseas source is documented the section has nothing to bite on, and reconciliation gaps alone are not 'unexplained'.
What the win turned on
A traceable link from the foreign employer or foreign account to the NRE credit: statements on both sides, not just the Indian one
Reconciliation gaps alone were not enough for the department; it needed positive material suggesting undisclosed income, and had none
Documentation produced during the proceedings rather than after them
How far this carries: In the same matter a much larger addition of about Rs 2.49 crore was remanded for fresh verification rather than deleted, so the principle protects documented credits, not undocumented ones. Do not present it as blanket immunity for NRE money.
Send us the notice, the order or the assessment. A chartered accountant will read it against these exceptions and tell you three things: whether your facts fit, what evidence you would need, and what contesting it would cost. If the answer is that you do not have a case, that is what you will be told.
A chartered accountant can represent you through assessment, the Commissioner (Appeals) and the Income Tax Appellate Tribunal under section 288 of the Income-tax Act. Matters that go to the High Court or Supreme Court need an advocate, and we will say so rather than take them on. Nothing on this page predicts your outcome.
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