HC halts processing of SC, HC judges’ Income Tax returns

New Delhi: The Delhi High Court has directed the Income Tax Department not to process income tax returns filed by Supreme Court and high court judges under the new tax regime, pending a legal challenge over the exemption of certain allowances.

A bench of Justices Dinesh Mehta and Rajneesh Kumar Gupta passed the directions on a petition filed by the Delhi Tax Bar Association.

The petitioner has argued that certain allowances provided to judges are excluded from income computation under Section 22D of the High Court Judges Act, 1954, and Section 23D of the Supreme Court Judges Act, 1958. It has challenged a September 2025 CBDT memorandum stating that such allowances would not be exempt under the new tax regime, which does not generally provide for deductions and exemptions.

Dispute centres on allowances such as rent-free official accommodation, conveyance allowance, sumptuary allowance and leave travel concession

The Income Tax Department told the court that returns are processed electronically and its software cannot automatically identify those filed by sitting judges. It said nearly 98 per cent of returns could be processed by the end of August without human intervention.

The court therefore directed private secretaries of judges to provide relevant details, including PAN numbers, to the authorities. Any tax demand raised after processing will remain in abeyance. Refunds will also be withheld, while amounts already refunded will remain subject to the outcome of the case.