Buckeye Trust v. Principal Commissioner of Income Tax (ITAT Bengaluru, ITA No. 1051/Bang/2024)

Buckeye Trust is a private discretionary trust created in January 2018 under the Indian Trusts Act, 1882. Its settlor, Mr Anand Nadathur, transferred investments of about Rs 669.27 crore to it, and the trust filed a nil-income return in August 2018. The Assessing Officer completed a scrutiny assessment under Section 143(3) on 7 April 2021 and accepted the returned income.¹

The Principal Commissioner of Income Tax (PCIT-2), Bengaluru, issued a notice under Section 263 on 13 March 2024 and, by an order of 29 March 2024, held the assessment erroneous and prejudicial to the revenue. The main question was whether the receipt fell within Section 56(2)(x) of the Income-tax Act, 1961, or within the exclusion for trusts created solely for the benefit of relatives, and the PCIT relied on a clause of the trust deed that allowed non-relatives to be added as beneficiaries. The trust appealed to the Income Tax Appellate Tribunal as ITA No. 1051/Bang/2024.¹⁵

The appeal was heard by the "A" Bench in Bengaluru on 27 November 2024 and the order was pronounced on 30 December 2024. Shri Prakash Chand Yadav, Judicial Member, wrote the order for a bench with Shri Prashant Maharishi, Vice President.¹ It dismissed the appeal on the ground that the trust was not created solely for relatives, that partnership interests could be treated as "shares", and that the Assessing Officer had not enquired adequately. In doing so it cited fifteen authorities, including decisions attributed to the Supreme Court and to the Bombay, Madras and Rajasthan High Courts.¹

SpicyIP's analysis of the order, published in March 2025, reported that the Tribunal had relied on four judgments of the Supreme Court and the Madras High Court. Two had completely fabricated case names and citations, one had a fabricated case name accompanied by the citation of a different case, and one led to a case cited for an irrelevant proposition of law.² The article credited Livemint with reporting the errors as AI hallucinations.²³ A copy of the order remains available on Indian Kanoon, where several case names appear in garbled form (for example "Mansukh Dying"), and where paragraph numbers repeat or run out of sequence.¹

The sources reviewed do not say who first noticed the defective authorities. They also do not show that any tribunal member or court has stated which tool, if any, was used.

According to SpicyIP, the order was withdrawn from the public domain after the Tribunal recalled it on its own perusal under Section 254(2) of the Income-tax Act. The recall order, reproduced as an image from the Tribunal's website, states that there were "certain inadvertent errors in the order" and fixed the matter for a fresh hearing on 19 February 2025 with notice to both parties. The date of the recall order itself is not given in that article.²

The author of the SpicyIP piece argued that the recall was itself legally doubtful, because Section 254(2) allows a Tribunal to rectify a mistake apparent from the record but, on the Supreme Court's reading in CIT v. Reliance Telecom, does not permit a rehearing of the merits.² The piece distinguished Buckeye Trust from foreign cases where AI-fabricated citations were supplied by counsel, because here AI-generated authority formed part of the reasoning of a decision-maker.²

After the recall, certain members of the Tribunal recused themselves, but the Judicial Member who wrote the recalled order wished to hear the matter again. Buckeye Trust objected that this would raise an apparent bias and applied to the President of the ITAT for transfer to another bench. It also approached the Karnataka High Court under Articles 226 and 227 in Writ Petition No. 25280 of 2025 (T-IT) against the Registrar of the ITAT, the PCIT and the Faceless Assessment Unit.⁴

In an interim order of 19 August 2025, quoted in the later order, the High Court recorded that the Tribunal's order "prima facie indicates that it is Artificial intelligence driven" and that a later order had recalled it. It stayed further proceedings before the Tribunal, restrained the Judicial Member from hearing the matter, and clarified that this would not prevent the President from considering the transfer application. The President then assigned the matter to a different bench. On 18 September 2025 Justice M. Nagaprasanna recorded counsel's submission that the petition had become unnecessary and disposed of it as infructuous, with liberty to pursue remedies before the appropriate forum if an adverse order was passed. The order makes no final finding on AI use or on bias.⁴

A reconstituted bench of Shri Laxmi Prasad Sahu (Accountant Member) and Shri Keshav Dubey (Judicial Member) heard the appeal on 18 November 2025 and pronounced its order on 12 February 2026.⁵ The trust had filed a supplementary deed dated 13 May 2025 as additional evidence, which the Tribunal admitted but held did not change the central question of whether the Assessing Officer had made the necessary enquiries. The Tribunal found the one-paragraph assessment order cryptic and unreasoned, observed that the trust deed permitted the addition of non-relatives, held that the case was fit for revision under Section 263, and dismissed the appeal. It made no comment on the merits, leaving the assessee free to argue them in the reassessment.⁵

The two orders can be compared as follows.

The outcome for the assessee was therefore unchanged, but the reasoning was rebuilt on authorities that the new order lists in conventional form.⁵

The case matters less for its tax holding than for how the system handled a defective, apparently machine-assisted order. First, it showed that fabricated authority can enter a quasi-judicial decision and not only a lawyer's brief. That raises the problem later addressed by the Supreme Court in 2026, which held in Pooja Ramesh Singh v. Jammu and Kashmir Bank Ltd. that a decision resting on fake or hallucinated precedents is "no decision in the eyes of the law".⁶

Second, it exposed a process gap. The Tribunal used its power to rectify mistakes to withdraw an order, while the parties asked who would decide the matter afresh. The High Court's intervention to restrain the author of the recalled order from hearing the case shows that the cure for a flawed decision must itself respect the appearance of impartiality.²⁴

Third, the episode preceded any written judicial AI policy in India. Kerala issued the first one reported in India only in July 2025, and the Supreme Court's draft regulations came in June 2026. In March 2025, a Karnataka High Court judge ordered action against a Bengaluru city civil court judge who had cited two decisions "never decided by the Apex Court or any other Court", although the order as reported did not attribute the error to AI.⁷

As of 15 October 2026 the December 2024 order stands recalled and the appeal has been decided afresh by the order of 12 February 2026, which dismissed it. The sources reviewed did not show a further appeal to the Karnataka High Court under Section 260A, or any action against the members who passed the original order. The ITAT has not, in the sources reviewed, publicly stated how the defective authorities came to be included.