AI Hallucinations: ITAT Order Cites Non-Existent Cases

Artificial intelligence (AI) threatens to replace many jobs, especially in research and writing. However, the question of how reliable AI chatbots are remains.

- Shipra Singh

A recent tax order from the Bengaluru bench of the Income Tax Appellate Tribunal (ITAT), believed to have been based on ChatGPT research, is a case in point.

The tax order in question is Buckeye Trust vs PCIT-1 Bangalore (ITA No.1051/Bang/2024). The Bengaluru bench passed the order in December 2024 but later discovered that it relied on three Supreme Court and one Madras high court judgments that do not exist.

ChatGPT was used to generate the case law citations, which turned out to be totally fictitious, two persons close to the matter informed Mint.

The order was revoked one week later, and a new hearing date was set. Mint has seen the 7 January notice that cited "inadvertent errors" for recalling the order.

The case involving Buckeye Trust before the ITAT's Bengaluru bench was about 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, the lawyers for the assessee argued that interest in a partnership firm is no property within the meaning of the tax law, among other submissions.