Section 10(26) of the Income Tax Act
Income-tax Act, 2025: s.11
Section 10(26) falls under section 10 of the Income-tax Act, 1961, which corresponds to section 11 (Incomes not included in total income) of the Income-tax Act, 2025.
Read section 11 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 10(26) is DHFL Venture Capital Fund v. ITO (358 ITR 471), cited in 66 of the 148 judgments on BharatTax that turn on this section.
Leading authorities on Section 10(26)
Reassessment proceedings cannot be initiated solely for the purpose of making a protective addition. Such proceedings are not valid in the eyes of law.
A protective assessment is permissible when the assessing officer has doubt regarding who is in receipt of income, but a recovery based on a protective assessment is not allowed. If an assessment is intended to be protective, it must be clearly stated as such.
When reopening an assessment, the assessing officer must provide the assessee with a copy of the superior officer's approval, including their comments, name, designation, and date, not merely state the reasons in a letter. This ensures transparency in the reassessment process.
A protective assessment is permissible only at the initial assessment stage, as higher appellate or revisional authorities can definitively determine the liable assessee.
A statement recorded under section 132(4) by a third party, without any corroborating incriminating material, cannot be the sole basis for making additions under section 153A or 153C.
A protective assessment must be expressly stated as such by the Income Tax Department. It is made out of abundant caution when there is doubt as to who has received the income.
Penalty under section 271B is not justified if the assessee provides a reasonable cause for the delay in submitting the Tax Audit Report, such as the unexplained absence of their accountant.
