2024 (12) TMI 1277 - HC - Income Tax

Statutory right to claim rebate - PIL petition - direction to the respondents to modify the system developed and put in place by the Tax Department for filing income-tax returns for AY 2024-2025 so as to allow the assessees at large to take complete benefit of the rebate available u/s 87A of the Income Tax Act, 1961 - whether the utility in the form of software can take away the statutory right to claim rebate as per the proviso to Section 87A and is it necessary for an assessee to make a claim for seeking rebate? HELD THAT - The rebate u/s 87A is inherently linked to the total income and tax liability of the taxpayer. The responsibility lies with the tax authorities to ensure proper implementation of the rebate, as long as the taxpayer fulfills the statutory criteria. Procedural changes, such as those in utility software or instructions issued by the tax department, cannot override the substantive right to the rebate. Any action or inaction on part of the tax authorities that limits the ability of taxpayers to avail of this statutory benefit is arbitrary and violative of the rule of law. Taxpayers should not bear the consequences of administrative inefficiencies or unilateral executive actions that undermine the legislative intent behind Section 87A. It is well-settled that statutory benefits must be extended in a manner that aligns with the objectives of the legislature. In this regard, procedural changes that deprive taxpayers of such benefits warrant judicial intervention to rectify the anomaly and ensure justice. Tax authorities must act as facilitators to help taxpayers comply with the law rather than creating impediments through technical or procedural hurdles. Ensuring fairness, equity, and transparency in tax administration is crucial for upholding public confidence in the system. By way of interim relief, the respondent Central Board of Direct Taxes is hereby directed to forthwith issue requisite notification u/s 119 of the Act extending the due date for e-filing of the income-tax returns in relation to the assessees who are required to file a return of income by December 31, 2024, at least to January 15, 2025. This extension is to ensure that all taxpayers eligible for the rebate u/s 87A are afforded the opportunity to exercise their statutory rights without facing procedural impediments.

Summary

Issues:
1. Unilateral modification of the utility software for filing income-tax returns affecting the rebate under Section 87A.
2. Complications arising from the implementation of Section 115BAC in conjunction with Section 87A.
3. Violation of legislative intent behind Section 87A due to disabling of rebate functionality.
4. Impact of changes in utility software on timely compliance with statutory deadlines.
5. Deprivation of entitlements to rebate under Section 87A due to technical modifications.
6. Statutory right to claim rebate under Section 87A and the necessity of making a claim for seeking the rebate.
7. Grant of interim relief to rectify procedural impediments affecting taxpayers' ability to avail statutory benefits.

Analysis:

The Chamber of Tax Consultants filed a PIL petition challenging the unilateral modification of the utility software for filing income-tax returns, which disabled assessees from claiming the rebate under Section 87A post-5 July 2024. The petitioner argued that this arbitrary action deprived eligible taxpayers of statutory benefits and violated principles of fairness and transparency. The court noted that the modification caused undue hardship, especially for those relying on the rebate, and sought directions to restore the functionality to ensure compliance with statutory provisions.

The introduction of Section 115BAC in conjunction with Section 87A led to unintended complications due to changes in the utility software. The petitioner highlighted the legislative intent behind Section 87A to provide relief to small taxpayers and promote equitable taxation. The court emphasized the importance of aligning procedural changes with legislative objectives to avoid undermining statutory benefits and public confidence in the tax administration system.

The court examined whether the utility software could take away the statutory right to claim rebate under Section 87A and whether an assessee needed to make a claim for seeking the rebate. It noted that procedural changes limiting taxpayers' ability to avail statutory benefits were arbitrary and violative of the rule of law. The court stressed that tax authorities must facilitate compliance with the law and ensure fairness, equity, and transparency in tax administration.

As an interim relief measure, the court directed the respondent Central Board of Direct Taxes to extend the due date for e-filing income-tax returns, ensuring all taxpayers eligible for the rebate under Section 87A could exercise their statutory rights without facing procedural impediments. The court listed the petition for final disposal to address the issues comprehensively on 9 January 2025 at 2.30 p.m.