NEW DELHI
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Artificial intelligence (AI) threatens to replace many jobs, especially in research and writing. However, the question of how reliable AI chatbots are remains.
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 judgements 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The order was revoked one week later, and a new hearing date was set.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.
What is the case?
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.
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 ITAT order was one of its kind, as typically, such cases get a ruling in favour of the assessee, i.e., the Trust. However, here, the ITAT ruled in favour of the tax department, citing similar past judgements from the Supreme Court and high courts.
Interestingly, the judgements quoted do not exist. Mint’s research found that the original orders of four judgements listed on page 28 of the ITAT tax order are not to be found in archives of either the Supreme Court or the Madras high court.
Three of these judgements—CIT Vs Raman Chettiar 57 ITR 232(SC), K. Rukmani Ammal v. K. Balakrishnan (1973) 91 ITR 631 (Madras High Court) and S. Gurunarayana v. S. Narasimhulu (2004) 7 SCC 472 (Supreme Court of India)—do not have any records at all. Whereas the citation of the fourth one—Sudhir Gopi v. Usha Gopi (2018) 14 SCC 452 (Supreme Court of India)—leads to a different case altogether.
Who used ChatGPT?
One of the two persons quoted above told Mint that the tax department’s representative (DR) relied on ChatGPT to pull out past case laws in favour of the tax department and used them in his argument. “The bench also just copied and pasted the case laws on the submission of the DR without carrying out due diligence on their end,” the person added.
Mint could not verify this claim independently as the queries sent to the Central Board of Direct Taxes (CBDT) and the ITAT head office about who had originally found these Supreme Court and Madras high court judgements did not get a response.
Questions sent directly to one of the bench members who overlooked this matter also did not receive a response.
Several chartered accountants who take up litigation cases in tribunals informed Mint that using ChatGPT has become a common practice for guidance when preparing arguments. “But it can’t be fully relied upon in legal contexts, and hence everyone must carry out due diligence in legal research even if using ChatGPT,” a chartered accountant said on the condition of anonymity.
While it is true that tribunals typically pass orders based on the arguments, which include relevant past judgements made by the assessee and the DR, it is not uncommon for the tribunal members to pick up the right verdict and quote them in their orders when either of the two parties fails to give the exact citations.
So, it’s possible that the ChatGPT error occurred at the tribunal bench’s end rather than DR’s.
Mint also couldn’t ascertain if the tax order was recalled because of reliance on these fictitious case laws or for any other reason, as the ITAT didn’t clarify what the “inadvertent error” was that caused the order to be recalled.
Counsels representing the assessee, Buckeye Trust, refused to comment when asked if they knew the tribunal bench’s reasons for recalling the order.
