Did Hallucinating AI Mess With a Tax Tribunal Order?

A recent tax tribunal order that cited fictitious court judgments before it was hastily withdrawn has raised suspicions about the potential use of Generative AI—a transformative technology that has swept the world but has occasionally made up stuff.

- Shipra Singh

NEW DELHI: In December, the Bengaluru bench of the Income Tax Appellate Tribunal (ITAT) passed an order citing three Supreme Court judgments and one Madras high court judgment that do not exist. In just a week, the order was withdrawn, citing "inadvertent errors".

The case involving Buckeye Trust before the ITAT's Bengaluru bench pertained to the taxability of a transaction in which a person settled (created) a trust worth ₹669 crore, mainly by transferring interest in a partnership to the trust. Normally, transfers without consideration to non-relatives above ₹50,000 are taxable in the hands of the recipient. However, Buckeye's lawyers argued that interest in a partnership is not property within the meaning of the tax law, among other submissions.

After hearing the argument, the tribunal held that an interest in a partnership is indeed a type of "share" (like a stock market share) and hence taxable. The tribunal's order in the case—Buckeye Trust vs PCIT-1 Bangalore (ITA No. 1051/Bang/2024)—cited similar past judgments from the Supreme Court and high courts. Interestingly, the judgments quoted do not exist.