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Supreme Court Summary 15th Oct, 2026

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Supreme Court Judgments Summey

15th Oct, 2026

Can Conversion Bridge Backward Class Reservation

This appeal addressed whether an individual belonging to a Backward Class, Most Backward Class, Denotified Community, or Scheduled Caste prior to converting from Hinduism to Islam can automatically claim the status and reservation benefits of a Backward Class Muslim. The Supreme Court upheld the Madras High Court’s decision, which declared unconstitutional the Government of Tamil Nadu’s G.O.(Ms.) No. 31 dated March 9, 2024, enabling such seamless transfers of backward status upon religious conversion. The Court ruled that conversion to Islam establishes religious affiliation but does not automatically confer membership into a historically or socially distinct notified Muslim backward community. Consequently, the State cannot use executive fiat to bridge pre-conversion social disadvantages into post-conversion community-based reservations without an independent, legally valid foundation.

2026 INSC 1129: Secretary to Government v. Sameer Ahamed N. and Others (D.O.J. 15.10.2026)

Supreme Court Decides Refund Mechanics in Delayed Construction Projects

These three cross-appeals arose from orders of the National Consumer Disputes Redressal Commission (NCDRC) regarding a consumer complaint filed by a homebuyer (Borrower) who sought a refund for a delayed residential apartment project (“Lodha Bellezza” in Hyderabad) funded partly by his own savings and partly through a tripartite housing loan from Housing Development Finance Corporation Limited (HDFC Bank). The Supreme Court modified the NCDRC’s order to prevent unjust enrichment, holding that the Borrower is only entitled in his own right to a refund of the exact amount he paid out of his pocket (along with contractual interest at 12% per annum and ₹15 Lakhs as composite compensation), while the remaining loan-disbursed funds deposited by the builder must be preserved pending the outcome of the Bank’s recovery appeal before the High Court.

2026 INSC 1131: Madhu Kudapa (formerly known as K. Madhusudhan Rao) v. M/s Lodha Healthy Constructions and Developer Private Limited (LHCPL) & Anr. (D.O.J. 15.10.2026)

Supreme Court’s Verdict on Yes Bank’s AT-1 Bonds Write-Down

This batch of civil appeals—filed by Yes Bank, the Reserve Bank of India (RBI), and the Union of India—challenged the Bombay High Court’s judgment dated January 20, 2023, which had set aside the Administrator’s March 14, 2020 decision to permanently write down Basel III compliant Additional Tier 1 (AT-1) Bonds worth over ₹8,400 crores. The Supreme Court dismissed the appeals, holding that the Administrator’s action was ultra vires the Master Circular, the Information Memoranda, and the final Yes Bank Limited Reconstruction Scheme, 2020. The Court ruled that once the Central Government consciously deleted the write-down clause from the final Reconstruction Scheme during the deliberative process, the Administrator lacked the authority to unilaterally dismantle that decision and write down the bonds. Furthermore, the power to activate the Point of Non-Viability (PONV) write-down vested solely with the RBI under the statutory framework, which the Administrator could not independently assume.

2026 INSC 1132: Yes Bank Limited & Anr. v. Axis Trustee Services Limited & Ors. (D.O.J. 15.10.2026)

Weaponizing Atrocity Laws: Criminal Prosecution Against Bank Officials Quashed

This criminal appeal arose from a High Court order refusing to quash criminal proceedings and an FIR initiated under the Scheduled Caste and Scheduled Tribes (Prevention of Atrocities) Act, 1989 against bank officials. The Supreme Court allowed the appeal and quashed the criminal proceedings, holding that a beleaguered business enterprise whose loan accounts turned into Non-Performing Assets (NPAs) cannot retaliate by filing false and frivolous atrocity complaints against bank officers over commercial disputes, non-compliance with RBI circulars, or the denial of rehabilitation packages. The Court ruled that civil or commercial grievances regarding loan recoveries and regulatory guidelines must be agitated before appropriate forums like the Debts Recovery Tribunal rather than being weaponized into criminal prosecutions under the SC&ST Act in the absence of specific caste-based denigration.

2026 INSC 1133: Chavan Dharmendar & Ors. v. The State of Telangana & Ors. (D.O.J. 12.10.2026)

The Hierarchy of Proof in Insolvency: SC Decodes Information Utilities and Default Thresholds under the IBC

These statutory appeals under Section 62 of the Insolvency and Bankruptcy Code, 2016 (IBC) challenged a common judgment of the National Company Law Appellate Tribunal (NCLAT) which affirmed the admission of Section 7 applications initiated by Omkara Asset Reconstruction Pvt. Ltd. against GSTAAD Hotels Pvt. Ltd. and Neo Capricorn Plaza Pvt. Ltd. (owners of the JW Marriott Hotel, Bangalore and Crowne Plaza Hotel, Pune respectively). The Supreme Court dismissed the appeals and upheld the initiation of the Corporate Insolvency Resolution Process (CIRP), holding that Section 7 proceedings require a summary ascertainment of a static historical default rather than a forensic accounting reconciliation. The Court formulated a clear evidentiary hierarchy—placing authenticated records of Information Utilities at the apex—and emphasized that profitability or positive EBITDA does not negate a corporate debtor’s legal liability when debt service obligations are unmet.

2026 INSC 1134: Deepak Raheja and Another v. Omkara Assets Reconstruction Private Ltd. and Another (D.O.J. 15.10.2026)

Contractual Bars on Pre-Reference and Pendente Lite Interest under the Arbitration Act

This civil appeal arose from a final judgment of the Division Bench of the High Court of Delhi which had dismissed an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, thereby upholding a Single Judge’s order setting aside an arbitral award of pre-reference and pendente lite interest. The Supreme Court dismissed the appeal, holding that Clause 26 of the Special Conditions of Contract (SCC), which concluded with the comprehensive residuary phrase “or otherwise,” operated as an absolute contractual bar under Section 31(7)(a) of the 1996 Act preventing the Arbitral Tribunal from awarding pre-reference and pendente lite interest. The Court ruled that such a clause is analogous to clauses explicitly prohibiting interest “in any other respect whatsoever,” and since party autonomy reigns supreme under Section 31(7)(a), an arbitrator cannot act contrary to explicit contractual exclusions.

2026 INSC 1135: M/s Sharma Enterprises v. National Building Construction Corporation (D.O.J. 15.10.2026)

Enhancing Compensation for Severe Motor Accident Disabilities

These civil appeals arose from a common judgment of the Kerala High Court modifying a Motor Accident Claims Tribunal award concerning a severe accident on October 22, 2016, involving two scooter riders. The first appellant (Sunil Kumar, a pillion rider) suffered debilitating head injuries resulting in total dependency, while the second appellant (Sreejith K.S., the driver) suffered multiple fractures and nerve injuries affecting his arm. Dissatisfied with the extent of enhancement granted by the High Court, both claimants approached the Supreme Court.

2026 INSC 1145: Sunil Kumar (Totally Disable Rep. by Wife) v. IFFCO Tokio General Insurance Company Ltd. (D.O.J. 15.10.2026)
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Supreme Court Summary 14th Oct, 2026

October 29, 2026 No Comments

Supreme Court Judgments Summary

14th Oct, 2026

Education: Supreme Court Restricts Midstream Fee Hikes for Professional Courses

The Supreme Court partially allowed the appeals filed by self-financing engineering and professional colleges while upholding the final relief granted by the Calcutta High Court’s Division Bench. The core legal question revolved around whether professional education fees in self-financing Higher Education Institutions (HEIs) could be altered midstream. The Supreme Court ruled that fee structures must provide financial certainty to students and parents at the threshold of a course, and fees determined at the commencement cannot be varied mid-course unless exceptional and unforeseen circumstances arise. The Court criticized the State Government and the fee fixation committees for administrative inefficiency in delaying the revision exercise for seven years (last revised in 2016-17, updated via notification on October 16, 2023). Consequently, while clarifying that the notification could not apply retrospectively to students whose admissions were already finalized before October 16, 2023, the Court affirmed the High Court’s directions requiring colleges to refund or adjust any excess fees collected from those students.

2026 INSC 1120: Dr. B.C. Roy Engineering College & Anr. v. The State of West Bengal & Ors. (D.O.J. 14.10.2026)

Supreme Court Dismisses IBC Appeal as Barred by Limitation

The Supreme Court sustained a preliminary objection raised by Respondent No. 2 and dismissed the civil appeal filed by the Central Tax Department under Section 62 of the Insolvency and Bankruptcy Code, 2016 (IBC) as time-barred. The appeal challenged an NCLAT order dated August 2, 2023, which had confirmed an NCLT-approved resolution plan. The apex court held that the IBC is a self-contained, special code that mandates strict timelines to preserve asset value and economic health, and its limitation periods cannot be defeated by indefinite or fluctuating interpretations of when a copy of an order is received. By computing the 35 days of pre-application inaction (which cannot be excluded under Section 12 of the Limitation Act) and factoring in the absolute 60-day statutory ceiling under Section 62 of the IBC (45 days plus a maximum 15-day condonable grace period), the Court ruled that the appeal—filed on November 21, 2023—exceeded its jurisdiction to condone delay.

2026 INSC 1121: The Assistant Commissioner of Central Tax, CGST Division v. Srinivasa Rao Ravinuthala and Another (D.O.J. 14.10.2026)

Third-Party Obstruction in Execution Proceedings: Supreme Court Sets Aside Dismissal and Remands Back

The Supreme Court allowed the civil appeal, setting aside the concurrent orders of the Executing Court and the High Court which had dismissed the appellant’s claim petition regarding a property execution decree. The dispute centered around execution proceedings filed by Respondent No. 1 for physical possession of property following an ex parte specific performance decree. The appellant, a third-party wakf claiming independent title and possession through historical grants and gazette notifications, resisted execution. Both lower courts dismissed the objection partly on technical grounds—holding that an application under Order XXI Rule 58 of the CPC was not maintainable against a warrant for possession (as opposed to attachment)—and faulted the appellant for failing to discharge the burden of proof. Relying on its recent precedent in Periyammal, the Supreme Court held that citing a wrong provision of law cannot defeat a third party’s substantive rights, and that obstruction or resistance by a stranger to a decree must be fully inquired into under Order XXI Rules 97 to 101 of the CPC. Consequently, the Court set aside the impugned judgments and remanded the matter back to the Executing Court for a fresh, comprehensive inquiry after permitting both parties to file additional pleas and evidence.

2026 INSC 1122: Alladin Charities and Zakat Wakf v. Mohammed Saleem Alias Mohd. Wajid Ali and Another (D.O.J. 14.10.2026)

Bail Granted in Multi-Crore PMLA Case: Prolonged Incarceration Overrides Twin Conditions

The Supreme Court allowed the criminal appeal filed by the appellant and set aside the Calcutta High Court’s order, thereby granting regular bail to the accused under the Prevention of Money Laundering Act, 2002 (PMLA). The appellant, accused of orchestrating a complex web of financial transactions and shell companies involving proceeds of crime amounting to over ₹6,210.72 crores, had already undergone approximately 20 months of incarceration. While the Court rejected the appellant’s contention that a 5-day delay in forwarding the arrest order to the Adjudicating Authority vitiated the arrest under Section 19(2), it nonetheless held that the stringent twin conditions under Section 45 of the PMLA cannot override the fundamental constitutional safeguards of Article 21. Emphasizing that the massive volume of evidence (97 accused, 48 witnesses, and 15,000 pages of documents) rendered a speedy trial impossible, the Court granted bail to prevent indefinite detention from becoming a pre-trial punishment.

2026 INSC 1124: Sanjay Sureka @ Sanjay Kumar Sureka v. Directorate of Enforcement (D.O.J. 14.10.2026)

Arbitrary Cancellation of Sand Mining Tenders: SC Sets Aside Rejection of Highest Bids

The Supreme Court allowed the civil appeals filed by M/s Dhanlaxmi Merchandise Pvt. Ltd. and Sahakar Global Limited, setting aside the Madhya Pradesh High Court’s judgment and the State Mining Corporation’s decision to cancel the e-tender-cum-auction for the Katni and Shahdol sand groups. The Corporation had rejected the highest bids and cancelled the tenders primarily because the appellants—who had previously operated the same groups before lawfully surrendering their contracts under the rules then in force—returned to the fresh auction with bids that were substantially lower than their historical offers. The Supreme Court held that while an H1 bidder has no indefeasible right to an allotment, the rejection of an above-reserve highest bid must be supported by relevant material demonstrating current market inadequacy rather than merely pointing out a numerical drop from a past contract. The Court ruled that under the regulatory regime prevailing in September 2025, surrendering MDOs were not disqualified from participating, and a past bid cannot serve as an immutable minimum benchmark without proving that the fresh competitive auction failed to fetch the true current market value. Consequently, the Court restored the September 2025 tender process in favor of the appellants, subject to their reaffirming their final bids and completing necessary formalities.

2026 INSC 1125: M/s Dhanlaxmi Merchandise Pvt. Ltd. v. State of Madhya Pradesh & Ors. (D.O.J. 14.10.2026)

Family Property Dispute : SC Upholds Validity of Compromise Decree and Nullifies Unauthorized Gift Deed

The Supreme Court allowed the civil appeal, setting aside the concurrent judgments of the Telangana High Court and the trial court, and decreed the appellants’ suit for a declaration of title and to declare a gift deed null and void. The litigation originated from a 1959 family settlement and subsequent partition suits, during which a formal compromise (“Settlement of Dispute” dated February 24, 1986) was recorded in a high court appeal under Order XXIII Rule 3 of the CPC. Under this compromise—which received judicial imprimatur on September 7, 1990—Madhusudhan Reddy relinquished all claims over properties allotted to his mother (Manikyamma) in favor of Anasuyamma and her adopted son. Despite this binding settlement, Madhusudhan Reddy executed a gift deed in 2007 conveying lands that did not belong to his share and which he had expressly surrendered. Both lower courts erred by ignoring the binding effect of the compromise decree. The Supreme Court rectified these fundamental errors and decreed the suit, noting that the respondents chose not to contest the appeal despite service and an interim status quo order.

2026 INSC 1126: B. Anasuyamma (Died) Per LR and Another v. B. Madhusudhan Reddy (Died) Per LRs and Others (D.O.J. 14.10.2026)

SC Directs University to Verify Credentials and Release Government Employee’s Salary

The Supreme Court allowed the civil appeal filed by the appellant, setting aside the Himachal Pradesh High Court’s order which had relegated the appellant to approach a civil court. The appellant, a B.Tech graduate from Manav Bharti University, had been appointed as a Sub-Inspector in the State Taxes Department, Jammu and Kashmir, but his appointment could not be confirmed and he remained unpaid because the University failed to verify his credentials due to records seizure and administrative omissions. The Supreme Court held that the omission of the appellant’s name from the admission disclosure list was an inadvertent clerical error by the University’s previous administration, for which an innocent student cannot be penalized. Emphasizing that the appellant was a bona fide student who passed all examinations and that minor mark discrepancies in the 7th and 8th semesters still reflected a ‘pass’, the Court directed the State and the University to complete the verification, issue corrected mark sheets, and ensure the release of all salary arrears and consequential benefits to the appellant within specified timelines.

2026 INSC 1127: Mohd. Asad Choudhary v. State of Himachal Pradesh and Others (D.O.J. 14.10.2026)

Appealability of Contempt Orders and Intra-Court Appeal Scope

The Supreme Court disposed of a civil appeal filed by an alleged contemnor against an interim order of a Single Judge of the Allahabad High Court (Lucknow Bench) passed in a contempt application, which had rejected a compliance affidavit and threatened personal appearance and framing of charges. The apex court held that an intra-court appeal (Special Appeal) is maintainable against an order passed by a Single Judge in contempt proceedings where the court oversteps its jurisdiction by adjudicating on the merits of the underlying dispute or determining substantive rights, rather than merely imposing a punishment for contempt. Expressing respectful disagreement with the 3-Judge Bench decision in Ram Kishan Fauji v. State of Haryana—which held that writ proceedings originating from criminal law constitute the exercise of “criminal jurisdiction” and bar intra-court appeals—the Court formulated specific questions and referred the matter to the Chief Justice of India for constitution of a larger bench to reconsider Ram Kishan Fauji. Consequently, the appeal was disposed of with liberty to the appellant to file a Special Appeal before the High Court, staying the contempt proceedings for two months.

2026 INSC 1128: Sanjay Prasad v. Madhusudan Dwivedi & Ors. (D.O.J. 14.10.2026)

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Supreme Court Summary 13th Oct, 2026

October 29, 2026 No Comments

                        Supreme Court Judgment Summary

                                                   13th Oct, 2026

Service Law: Absorption: Supreme Court Sets Aside High Court Mandate While Granting Ex-Gratia Relief

In this case, the Supreme Court addressed the legal validity of a High Court order directing the State to absorb a terminated lecturer from a “no grant-in-aid” educational institution and award substantial compensation. The respondent-lecturer had been terminated in 1999 following a departmental inquiry, a decision initially upheld by the University and College Tribunal but later reversed by the Bombay High Court. The Supreme Court allowed the State’s appeal, holding that the High Court committed a fundamental procedural error by issuing a mandamus fastening financial and administrative liability upon the State without the State of Maharashtra ever being formally impleaded as a party respondent. On merits, the Court reiterated that teachers from unaided institutions are excluded from the State’s surplus absorption policies, and Article 14 cannot be invoked to claim negative equality based on inadvertent benefits granted to others. However, recognizing that the lecturer had fought litigation for decades and retired during the pendency of the appeal, the Supreme Court invoked its extraordinary powers under Article 142 of the Constitution to award a consolidated ex-gratia compensation of ten lakh rupees in full and final settlement.

2026 INSC 1118: State of Maharashtra v. Sudhir S/o Motiramji Hiwarkar & Ors. (D.O.J. 13.10.2026)

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Multiple Life Sentences Cannot Run Consecutively

October 29, 2026 No Comments

In this criminal appeal arising from the conviction of the appellant for the rape and murder of a 12-year-old victim, the Supreme Court examined whether multiple life sentences imposed in a single trial can be directed to run consecutively. A Bench led by Justice K.V. Viswanathan, relying on the Constitution Bench precedent in Muthuramalingam v. State, held that since a human being has only one life, life sentences awarded for multiple offences cannot run consecutively. Instead, multiple life sentences must run concurrently by being superimposed over each other. This ensures that any remission or commutation granted by the competent authority for one sentence does not ipso facto result in the remission of the other. Consequently, the Court set aside the consecutive nature of the sentences and modified them to superimposed life sentences.

1. Factual Matrix & Background

  • Arrest & Trial: The appellant was arrested on April 30, 2010, for the rape and murder of a 12-year-old victim committed on April 29, 2010. He faced trial in Sessions Case No. 282/2010 before the Additional Sessions Judge, Thane.
  • Trial Court Conviction: On September 27, 2013, the Trial Court convicted the appellant under Section 302 IPC (imprisonment for life with a fine of ₹5,000) and under Section 376 read with Section 342 IPC (imprisonment for life with a fine of ₹5,000). Crucially, the Trial Court ordered that these substantive life sentences run consecutively (one after the other).
  • High Court Confirmation: On June 10, 2016, the Bombay High Court confirmed the conviction and the consecutive nature of the sentences.
  • Appeals Before the Supreme Court: The appellant approached the Supreme Court challenging both the High Court’s refusal to direct concurrent sentences via a writ petition and the substantive legality of imposing consecutive life sentences.

2. Key Legal Issues & Supreme Court Findings

  • legality of Consecutive Life Sentences:
    • Holding: Multiple sentences of imprisonment for life awarded in a single trial cannot be directed to run consecutively.
    • Reasoning: Relying on the Constitution Bench ruling in Muthuramalingam v. State Represented by Inspector of Police, the Court reiterated that life imprisonment means imprisonment for the remainder of the offender’s natural life. Because human beings have only one life to live, any direction requiring an offender to undergo life imprisonment “twice over” is legally impossible, anomalous, and irrational.
  • Concept of “Superimposition” of Life Sentences:
    • Holding: When multiple life sentences are awarded, they do not run consecutively; rather, they superimpose over each other.
    • Reasoning: Superimposition means that the life sentences run concurrently in practice, but with a crucial legal caveat: if the prisoner is granted the benefit of remission or commutation by a competent authority for one sentence, that benefit does not ipso facto extend to the other sentence.
  • Disposal of Connected Matters:
    • Since the main appeal challenging the sentence was entertained and heard on merits, the separate criminal appeal (arising from SLP (Crl.) No. 8535 of 2025) seeking a direction from a writ court for concurrent sentences was disposed of as having become infructuous.

3. Final Operative Directions

  1. Partial Allowance: The criminal appeal is partly allowed. The lower court directions ordering the life sentences under Section 302 and Section 376/342 IPC to run consecutively (or concurrently) are set aside.
  2. Superimposition Ordered: The dual life sentences shall superimpose over each other, ensuring that remission or commutation granted for one does not automatically apply to the other.
  3. Sentence Integrity Maintained: The conviction, fine defaults, and statutory set-off (under Section 428 CrPC for the period already undergone since April 30, 2010) remain intact.

2026 INSC 1161

Raju Shantaram Koli v. The State of Maharashtra (with Criminal Appeal No. 5073 of 2026) (D.O.J. 27.10.2026)

2026 INSC 1161 click here to view full text of judgment

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Unpaid Excise Duty on Bonded Closing Stock Cannot Be Added to Taxable Income

October 29, 2026 No Comments

The Supreme Court of India allowed the civil appeal preferred by the assessee (M/s. Lakshmi Sugar Mills Co. Ltd.), setting aside the judgment of the Delhi High Court and restoring the concurrent findings of the CIT (Appeals) and the Income Tax Appellate Tribunal (ITAT). A Division Bench comprising Hon’ble Mr. Justice S.V.N. Bhatti and Hon’ble Mr. Justice N.V. Anjaria held that unpaid excise duty on uncleared closing stock remaining inside a bonded warehouse—which was neither debited to the Profit & Loss account nor claimed as an allowable expenditure by the assessee—cannot be added back to the value of closing stock or added to taxable income under Section 43B read with Section 145A of the Income Tax Act, 1961. The Court highlighted that the High Court proceeded on an erroneous factual assumption that the goods had been removed, and emphasized that disallowing an expense which the assessee never actually claimed as a deduction is legally impermissible under the Act.

1. Factual Matrix & Background

  • Assessee & Business: The appellant manufactures crystal sugar via the vacuum pan process, producing molasses as a by-product. It follows the standard mercantile accounting system and the exclusive method under Accounting Standard (AS)-2.
  • Assessment Year 2005-06: The assessee filed its return declaring a net loss of ₹28,36,167/-. The Tax Auditor’s Report (Form 3CD, Annexure-A) noted that total excise duty leviable on closing stock was ₹2,80,56,430/-, of which ₹2,10,64,447/- was paid by the due date, leaving an unpaid balance of ₹69,91,983/-.
  • Assessee’s Stand: The assessee explained that under the Central Excise Act, 1944, liability to pay excise duty crystallizes only upon the removal/clearance of goods from factory/bonded premises. Since the sugar stock remained in bonded godowns under Government control, duty had not accrued or become payable. Furthermore, because it followed the exclusive method and did not debit the ₹69,91,983/- to its P&L account, it never claimed any deduction.
  • Assessing Officer (AO) Addition: The AO rejected the assessee’s explanation and added ₹69,91,983/- to the returned taxable income under Section 43B read with Section 145A of the Income Tax Act.
  • Appellate History:
    • CIT (Appeals): Deleted the addition, holding that since no expenditure was claimed in the P&L account and the net profit impact under Section 145A was Nil, Section 43B was inapplicable.
    • ITAT Delhi Bench: Affirmed the CIT(A) order, noting that both opening and closing stocks would have to be adjusted on the same basis, giving a Nil impact on profit, and duty arises only upon removal.
    • Delhi High Court: Reversed the CIT(A) and ITAT orders, holding that Section 145A overrides other provisions, and erroneously assumed that the goods were “admittedly removed”.

2. Key Legal Issues & Supreme Court Findings

A. Erroneous Factual Finding by the High Court
  • Finding: The High Court erred fundamentally by proceeding on the premise that the goods were “admittedly removed”.
  • Reasoning: The records, including the AO’s Remand Report and the findings of CIT(A) and ITAT, explicitly confirmed that the uncleared closing stock remained inside the assessee’s bonded warehouse. The High Court’s core premise for duty payability was contrary to the record.
B. Interplay Between Section 43B and Section 145A
  • Finding: Section 43B regulates disallowances of unpaid statutory liabilities claimed as deductions/expenses. It cannot be invoked to disallow an amount that was never claimed as an expense or debited to the P&L Account.
  • Reasoning:
    1. Under Section 43B, statutory payments are allowable as deductions in the year paid (or if paid before the tax return filing date for accrued liabilities).
    2. If an assessee routes indirect taxes through the balance sheet without charging them to the P&L Account (exclusive method under AS-2) and does not claim any deduction for unaccrued excise duty, there is no “allowance” or “deduction” to disallow.
    3. Disallowing an amount that the assessee never claimed as a deduction/allowance in its books of account is legally impermissible under the Income Tax Act, 1961.
C. Impact of Valuation on Taxable Income
  • Finding: When opening and closing stocks are valued consistently by inclusive tax adjustments under Section 145A, the net effect on the assessee’s profitability is Nil.
  • Reasoning: The Revenue failed to demonstrate how the books of account or return of income were negatively impacted or how taxable income was reduced by the entry. The Tax Auditor had duly certified a Nil impact on profitability. Relying on the Bombay High Court precedent (CIT v. Loknete Balasaheb Desai S.S.K. Ltd.), the Court affirmed that unaccrued excise duty on bonded closing stock cannot enhance taxable income.

3. Conclusion

The Supreme Court held that the AO’s addition was illegal and that the High Court erred in reversing the well-reasoned orders of the CIT(A) and ITAT. The High Court judgment was set aside, and the assessee’s Civil Appeal was allowed. All pending applications were disposed of.

2026 INSC 1162

M/s. Lakshmi Sugar Mills Co. Ltd. v. Commissioner of Income Tax, Delhi-II (D.O.J. 27.10.2026)

2026 INSC 1162 click here to view full text of judgment

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