Court flags AI in tax orders

A tax officer in Gujarat wrote a Goods and Services Tax order that cited case law which either did not exist or said the opposite of what the officer claimed, and the Gujarat High Court said that pattern looked like blind use of artificial intelligence output. The court was hearing a petition by Marhabba Overseas Private Limited against an order dated September 26, 2025, and recorded its concern on February 20, 2026. (taxcode.in) The case was not about a chatbot in the abstract. It was about a real tax demand under the Goods and Services Tax system, where an adjudicating officer has to answer a company’s defenses with actual law and actual facts. (taxcode.in) One disputed point was a show-cause notice dated June 29, 2025, that the company said was defective because relied-upon documents were not attached on the Goods and Services Tax portal. The officer rejected that defense by citing a Supreme Court case with a citation number the petitioner said was wrong and a subject the High Court said was not even remotely connected to missing documents. (taxcode.in) Another disputed point was whether Form Goods and Services Tax DRC-01A had to be issued before the formal demand. The officer relied on what the petitioner told the court was a non-existent Madras High Court judgment, while the actual case the lawyers found was a Jharkhand High Court ruling that supported the taxpayer’s side. (taxcode.in) That is the legal danger with artificial intelligence in government paperwork. A model can produce something that looks like a clean footnote, the same way autocomplete can finish a sentence, but an adjudication order is not a draft email and a fake citation can change a tax bill. (economictimes.indiatimes.com) The Gujarat High Court did not say artificial intelligence must be banned everywhere. It said a quasi-judicial officer cannot outsource reasoning to a machine and then sign the result as if human judgment happened. (taxmann.com) That line matters because a Goods and Services Tax adjudication order is not just clerical work. It decides liability, penalties, and procedure under Section 75 of the Central Goods and Services Tax Act, so the officer has to show why each defense fails on law that actually exists. (taxmann.com) The court’s warning now fits into a bigger shift inside India’s legal system. On April 4, 2026, the Gujarat High Court unveiled a policy that bars artificial intelligence from judicial decision-making, reasoning, evidence evaluation, and drafting substantive orders or judgments, while still allowing limited administrative and research use with human verification. (indianexpress.com) At almost the same moment, Chief Justice of India Surya Kant said on April 10, 2026, that artificial intelligence in arbitration should be regulated, not shunned, and that cybersecurity and confidentiality rules have to keep pace. That puts the emerging rule in plain terms: artificial intelligence can assist the lawyer or the court system, but the human decision-maker still owns the decision. (theweek.in) For tax departments and other regulators, this is a warning shot. If an order contains invented authorities, mismatched precedents, or machine-written reasoning that no officer actually checked, the problem is no longer just bad drafting; it is a due process defect that can pull the whole order into court. (timesofindia.indiatimes.com)