2016 (12) TMI 670 - HC - Income Tax

Failure of the technology employed by IT department to process the returns - Communication from the DCIT expressing his helplessness to process the return of income under Section 143(1) - return of income filed for Assessment Years 2014-15 and 2015-16 - Held that - Assessing Officer is unable to process the return of income not of his volition but because the technology employed by the Income Tax Department fails him and the Act. On being asked the Revenue, on instructions, states that the systems difficulty continues till date even though the Commissioner of Income Tax has taken up the issue with the System Administrator, it is not possible to state how much longer it would take to fix the problem. Where the computer system, as operating, is an hindrance to the discharge of statutory obligations, then the least that would be expected is that the senior most Officers of the Department would address this issue on warfooting. This inability to process a return of income would cause tremendous hardship to a large number of assessees, particularly retired individuals and others similarly placed who would be entitled to refund of taxes as a large quantum of amounts received by them would be subject to Tax Deducted at Source, when the tax payable by them is minimal. Thus we direct the Chief Commissioner of Income Tax to examine and attempt to resolve the issue on warfooting to ensure that the computer system runs in accord with the Act. In case, it is not possible to resolve the issue, then come up with an alternative so that the return of income can be processed and grant of refund be considered by the Assessing Officer. We direct a responsible and senior Officer of the Revenue to file an affidavit setting out the steps taken by it so far to rectify the system, including the time within which the system would be rectified and the alternative method by which the return of income could be processed under Section 143(1) of the Act.

Summary

Issues:
Challenge to Communication from Deputy Commissioner of Income Tax regarding processing of income tax return for Assessment Years 2014-15 and 2015-16 under Section 143(1) of the Income Tax Act.

Analysis:
1. The petitions challenge a communication from the Deputy Commissioner of Income Tax expressing inability to process the income tax returns for the mentioned assessment years due to technical reasons. The Assessing Officer is required to process returns under Section 143(1) of the Act within a specified time frame, but in this case, the system's failure hinders the processing. The Revenue is uncertain about when the issue will be resolved, causing hardship to taxpayers expecting refunds.

2. The court highlighted that modern technology should aid, not impede, the statutory duties of Income Tax Officers. The inability to process returns affects numerous taxpayers, especially retirees and others with minimal tax liabilities but entitled to refunds. The court directed the Chief Commissioner of Income Tax to address the system issue promptly or propose an alternative method for processing returns and considering refunds. A senior Revenue Officer must file an affidavit detailing the steps taken to rectify the system and provide a timeline for resolution.

3. The court emphasized the importance of resolving the system failure promptly due to its significant impact on taxpayers. The Department was instructed to prioritize this issue, given its potential adverse effects on a large number of taxpayers. The matter was adjourned to allow time for the Department to address the concerns raised and provide a progress report on the system rectification efforts by the specified date.

This detailed analysis covers the challenge to the communication from the Deputy Commissioner of Income Tax regarding the processing of income tax returns for the mentioned assessment years under Section 143(1) of the Income Tax Act, outlining the court's directives and concerns regarding the system failure and its implications on taxpayers.