P&H High Court Overturns GST Notice Citing Improper Use of AI
The Punjab and Haryana High Court recently invalidated a show-cause notice issued by GST authorities in Amritsar due to its preparation involving Artificial Intelligence (AI) tools. This decision came in the case SRO India v. State of Punjab and Others. The notice, designated as DRC-01A, was directed at SRO India and included an annexure with AI-generated suggestions on enhancing the drafting of the document.
DRC-01A notices are typically issued for pending taxes, interest, or penalties. On July 7, the ruling was delivered by a bench comprising Acting Chief Justice Ashwani Kumar Mishra and Justice Rohit Kapoor. The bench emphasized that the competent authority must not only review the facts but also apply independent judgment before issuing such notices.
The bench clarified that the use of AI tools in drafting and issuing show-cause notices is not sanctioned by law. Justice Mishra and Justice Kapoor stated, “Since we find that the show-cause notice has been issued primarily relying upon the AI Tool, which does not have the requisite sanction in law, as such the said show-cause notice (DRC-01A) dated 02.02.2025 and the consequential proceedings thereof cannot be sustained in law and are quashed, accordingly.”
SRO India, the petitioner, argued that the tax officer failed to independently consider the facts and instead depended on AI-generated input to issue the notice. The court was informed that the AI tool’s suggestions were uploaded on the department’s portal alongside the notice.
In response, counsel for the State contended that the AI references were inadvertently uploaded at the end of the notice. However, the court found this explanation insufficient and subsequently annulled the show-cause notice.
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The court did allow for the possibility of a fresh order, instructing that it must be made in accordance with the law and with an independent assessment of the case facts. Advocates Muskan Gupta and Vivek Sharma represented SRO India, while Additional Advocate General Samdisha Kaur appeared on behalf of the State of Punjab.
