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TMI Blog2025 (1) TMI 1501X X X X Extracts X X X X X X X X Extracts X X X X ..... g, our attention was drawn to the subject matter of Writ Petition in the case of Lupin Ltd. [2024 (3) TMI 1406 - BOMBAY HIGH COURT] wherein the assessee was prevented from making the claim of deduction based on the Supreme Court decision since electronic mode of filing the return was not permitting the assessee to do so. On a writ petition being filed and on a direction by this Court, a manual return was permitted to be filed for making the said claim. We were informed that while processing the manual return, the claim of the assessee was accepted. We are referring to this decision for the limited purpose to bring our point in support of our analysis that certainly the utility cannot be designed to prevent an assessee from making a claim which subsequently by adjudication and appeal process may be found to be correct. As in the case of Tata Sons Pvt. Ltd. [2024 (3) TMI 1405 - BOMBAY HIGH COURT] also permitted the assessee to file paper return which came to be processed and thereafter an appeal against such processing was filed by the assessee. This decision is also relied upon to the limited extent that the online system did not provide to make a claim which was permitted by paper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the learned counsel for the parties. 2. This Court, led by the learned Chief Justice on 20 December 2024, granted interim relief by directing the Central Board of Direct Taxes to issue notification for extending the due date for e-filing of the income-tax return to ensure that taxpayers eligible for the rebate under Section 87A are allowed to exercise their statutory rights without facing procedural impediments. Pursuant to the said direction, the Board issued a notification on 31 December 2024 extending the last date for furnishing returns under Section 139(4)/139 (5) for the assessment year 2024-25 in the case of a resident individual from 31 December 2024 to 15 January 2025. Thereafter, on the matter being mentioned, an administrative order dated 10 January 2025 was passed assigning the said PIL to this Bench. PETITIONERS : 3. The Chamber of Tax Consultants files this Public Interest Litigation (PIL) against the respondents through its President and taxpayer assessees. Petitioner No. 1 is a society registered under the Societies Registration Act of 1860 and the Bombay Public Trusts Act of 1950. It has more than 3800 members comprising of Advocates, Chartered Accountants, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondents to modify the utilities for filing of the return of income under section 139 of the Act immediately, thereby allowing assessees to make a claim of rebate under section 87A of the Act read with the proviso to section 87A, in their return of income for the AY 2024-25 and subsequent years including revised returns to be filed under section 139 (5) of the Act. (b) that this Hon'ble Court be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, direction or order directing the Respondents to allow assesses to file a manual return of income for claiming rebate under section 87A of the Act in their return of income for the AY 2024-25 and subsequent years including revised returns to be filed u/s 139 (5) of the Act. [(c) that this Hon'ble Court be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, direction or order directing the Respondents to make the utilities for filing the return of income online flexible so as to allow an assessee to self-compute his/her income and there should not be any restriction on making of any claim whatsoever and to direct the Respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn of Income under section 139 of the Act immediately and forthwith allowing assessees to make a claim of rebate under section 87A of the Act in their return of income for the AY 2024-25 and subsequent years including revised returns to be filed u/s 139 (5) of the Act. (ii) To restore the utility which was available before 05.07.2024 for filing return of income which allowed assessees to make a claim of rebate under section 87A of the Act in their return of income for the AY 2024-25 and subsequent years including revised returns to be filed under section 139 (5) of the Act; (iii) Or in the alternate, to allow filing of a manual return of income for claiming rebate under section 87A of the Act in the return of income for the AY 2024-25 and subsequent years including revised returns to be filed under section 139 (5) of the Act. (g) that pending the hearing and final disposal of this petition the Respondents, their subordinates, servants and agents be restrained by an order and injunction of this Hon'ble Court from implementing the intimations already issued under section 143 (1) of the Act processing the return of income, denying the claim of rebate under section 87A of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declare that I am making this return in my capacity as and I am also competent to make this return and verify it. I am holding permanent account number." Thus, an assessee has to declare in the return that the return filed is to the best of his knowledge and belief and is correct and complete and is in accordance with the provisions of the Act. iv) Section 140A of the Act the heading of which is "Self-Assessment", requires an assessee to pay tax with interest payable under the Act before furnishing the return of income and the return is to be accompanied with the proof of payment of such self-assessment tax. Such furnishing of proof is now dispensed with under the e-filing regime. v) Without paying self-assessment tax, a return of income cannot be filed. Such return is also treated as defective in terms of section 139(9) of the Act. 2. The above provisions demonstrate that under the Act, an assessee is required to self-compute the income and the tax liability thereon as per his belief and understanding. Thus, the form of the return of income has to allow an assessee to declare and compute his income as per his belief and understanding. 3. The term "return" in the context ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finally assessed by the Income-tax Officer. It is clear that at the time when a person is required to file a voluntary return, no assessment has yet been made against him. He is thus to be guided by what he himself believes to be his income. It is possible and it happens very frequently that an assessee may not consider a particular item to be his income and yet the Income-tax Officer may hold otherwise. In such a case, if what he considers to be his income is less than the amount which is not chargeable to income-tax, he is not required to file a voluntary return even if the income finally assessed is more than the maximum amount which is not chargeable to income-tax. Of course, the belief of the assessee must be bona fide" 7. Similar view has been taken by the Hon'ble Supreme Court in case of CIT vs. Ranchhoddas Karsondas reported in [1959] 36 ITR 569 (SC). It has held as under: "It is a little difficult to understand how the existence of a return can be ignored, once it has been filed. A return showing income below the taxable limit can be made even in answer to a notice under section 22 (2). The notice under section 22 (1) requires in a general way what a notice under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the procedures, formats and standards for ensuring secure capture and transmission of data and shall also be responsible for evolving and implementing appropriate security, archival and retrieval policies in relation to furnishing the returns in the manners (other than the paper form) specified in column (iv) of the Table in sub-rule (3) and the report of audit or notice in the manner specified in proviso to sub-rule (2)." Thus, the role of Respondent No. 1 is to only "ensure secure capture and transmission of data and for evolving and implementing appropriate security, archival and retrieval policies" in relation to furnishing the returns. It can in no manner prescribe a utility which prohibits or debars an assessee from making any claim in the return of income. This is irrespective of the fact that the claim made by an assessee may not be in accordance with the interpretation placed by the Tax Department on a statutory provision. Thus, when Respondent No. 1 designs a utility in a manner which is not allowing an assessee to make a claim under the Act, then, the said action is clearly contrary to the provisions of the Act read with the Rules. 11. It is submitted that a return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make a claim in the return of income per se, would be violative of Article 265 of the Constitution of India. 15. If a return of income prohibits an assessee from making a claim, then, it would amount to deciding the issue at the stage of filing return of income itself. The validity of such claim can be tested at the stage of assessment proceeding and if rejected, by agitating the matter through various appellate stages. Because of an interpretation of the Tax Department, it would be imperssible to not allow an assessee to make a claim in the return of income. The validity of a claim can be tested by an adjudicating or appellate authority including courts and tribunals. If an assessee is not allowed to make a claim per se because the Tax Department feels such a claim is not correct as per their interpretation, then, there is no requirement for appellate courts to exist. In fact, reference is made to the following provisions which show that, there are provisions to ensure that an assessee has not understated his income: i) Section 143 (1) (a) empowers the Respondent to make adjustments in the total income as disclosed in the return of income. ii) Section 143 (2) empowers the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn of income and by no other mode. 17. It is submitted that by not allowing an assessee to raise a claim in return, an assessee is denied a fundamental right to agitate an issue. This clearly amounts to violation of Article 14, 19 (1) (g) and 265 of the Constitution of India. 18. It is submitted that in similar facts, this Hon'ble Court has allowed assessees to file a manual return by making a claim which was not available in the return to be filed online when the revenue refused to accede to the assessee's request to modify the utility. The Petitioners have relied upon the orders of this Hon'ble Court in the case of Samir Bhojwani (supra) and in case of Lupin Limited vs. DCIT in WP No. 3565 of 2023 (order dated 26.03.2024). In fact, similar view is taken by this Hon'ble Court in Tata Sons Pvt. Ltd. vs. DCIT [WP No. 3109 of 2022 and 1296 of 2023] vide order dated 26.03.2024. The Ld. ASG had submitted to the contrary that in case of Tata Sons (supra), the assessee therein had withdrawn the writ petition. 19. The Ld. ASG argued that the returns cannot be modified to suit particular assessees view and that if anyone has any problem in filing of return of income, then, he can com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is of utmost importance to note that the processing of return of income cannot be the guiding light to design the return of income. It is like the proverbial "putting a cart before the horse" concept. How the returns would be processed cannot be the basis to design the return. This itself shows the fundamental fallacy in designing the return of income. 21. It is submitted that if the electronic return does not allow an assessee to put forth his claim basis a perception of the revenue of the correctness of such claim, then, such return has to be categorized as arbitrary. It is a settled principle that humans cannot be made slaves of technology. Time and again, this Hon'ble Court and other Courts have come down heavily on the technological impediments causing harassment to assessees. 22. Here, the Petitioners are more concerned with the action of the Respondents in disabling an assessee from making a claim, which he feels he is entitled to. This is clearly a human action, as such claim was allowed to be made before 05.07.2024. The Petitioners only request that the utility that enables the returns to be filed should be designed in a fashion so that an assessee is at liberty t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that even if such a right is considered to be a statutory right then it is subject to statutory restrictions. It is submitted that the Ld. ASG did not refer to any provision of law or rules which provides for any such restriction. On the contrary, as mentioned earlier, the action of Respondent No. 1 to not allow an assessee to make a claim on the return of income is contrary to the provisions of the Act and Rules framed thereunder. 26. In light of the above submission, to avoid inconvenience to the assessees and Courts, the Petitioner prays that the Rule should be made absolute in terms of prayer clause (c). B. Allowability of rebate u/s 87A from tax levied at special rates, where new regime is opted for 27. The Respondents have, without prejudice to their contention on merits, allowed the assessees at large from claiming rebate as per the directions of this Hon'ble Court vide order dated 20.12.2024. The Ld. ASG has argued, in great detail, that the assessees are not allowed to make a claim of rebate under section 87A if some part of their total income is taxable at special rates. 28. It is submitted that, as noted by this Hon'ble Court in the order dated 20.12.2024, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income-tax payable on such total income is in excess of the amount by which the total income exceeds Rs.7,00,000/-. Thus, rebate under section 87A of the Act, is allowed from the tax on total income irrespective of the fact, whether the same is computed at special rates. 31. The term 'total income' is defined in section 2 (45) as total amount of income referred to in section 5, computed in the manner laid down in the Act. There can be only one total income which is the sum total of all income under various heads of income. There is no provision that income taxable at special rates are not to form part of total income or is to form a separate total income. Rebate is allowable on the tax on total income, which represents a summation of tax payable at special rates and tax payable in accordance with the rates provided for in the relevant Finance Act or section 115BAC (1A). Thus, a plain reading of section 87A shows that it does not restrict the claim of rebate only from income taxable at normal rates and prohibits the same being granted when income taxable at special rates. 32. The Ld. ASG argued that there are two total income viz., one taxable u/s 115BAC (1A) of the Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is any variation from total income. A formula is laid down for how to compute under-reporting of income where total income forms the starting point. While understanding total income, which income is to be seen? 35. It is submitted that wherever, the Legislature intended to not give any benefit to any category of income which forms part of total income or from tax at special rates, specific exceptions have been prescribed without violating the definition of the term "total income". For instance, see section 80AB, 111A (2), 112(2), 112A (5) and 112A (6). 36. It is thus submitted that; rebate is allowable from total income including tax levied at special rates. If the Legislative Intent were to deny the rebate, then, a specific provision would have to be made either in section 87A or the relevant provision of Chapter XII providing for a special rate. There is no provision in section 87A of the Act that rebate shall not be allowed in respect of tax computed at special rates, say section 111A or 112 etc. of the Act. The proviso to section 87A deals with allowability of rebate to an assessee who has opted for the new regime. The proviso has nothing to do with the section under w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1A) also gives the same interpretation that where a person opts for new regime rebate shall be allowed from tax on total income, irrespective of the fact that any income is taxable at special rates. 39. Section 115BAC (2) provides for conditions to fall within section 115BAC (1A). A person, to opt for a new regime, has to give up on various deductions / exemptions/ allowances etc. However, reference to rebate under section 87A is conspicuously absent in section 115BAC (2). In fact, vide Finance Act 2023, the Legislature provided for higher rate of rebate for a person opting for new regime. Thus, there is no express bar from claiming rebate from tax chargeable at special rates. 40. It is submitted that the sections providing for payment of tax at special rates also do not provide for non-allowability of rebate in terms of section 87A as a condition to be fulfilled for availing of the special rate. There are specific provisions made in sections 111A, 112 etc., which provide that a deduction under Chapter VIA would not be allowed if the special rate is applied. Likewise, section 115BAC provides that no set off of loss is also permissible. However, there is no specific mention of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under section 87A from Rs. 2,000 to Rs. 5,000. There are 2 crore tax payers in this category who will get a relief of Rs. 3,000 in their tax liability." iv) Explanatory memorandum to Finance Bill 2016 "Rationalization of limit of rebate in income-tax allowable under Section 87A The existing provisions of section 87A of Income-tax Act, provide for a rebate of an amount equal to hundred per cent of such income-tax or an amount of two thousand rupees, whichever is less, from the amount of income-tax to an individual resident in India whose total income does not exceed five hundred thousand rupees. With the objective to provide relief to resident individuals in the lower income slab, it is proposed to amend section 87A so as to increase the maximum amount of rebate available under this provision from existing Rs.2,000 to Rs.5,000." v) Budget Speech for Interim Budget for the FY 2019-20 "60. Reducing the tax burden on middle class has always been our priority ever since our Government took over in 2014. We increased the basic exemption limit from Rs. 2 lakh to Rs. 2.5 Lakh and gave tax rebate so that no tax was payable by persons having income up to Rs.3 lakh."89. Individual t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in India whose income is chargeable to tax under the proposed sub-section (1A) of section 115BAC, shall now be entitled to a rebate of 100 per cent of the amount of income-tax payable on a total income not exceeding Rs 7 lakh" Thus, from the above, it can be deduced, that the intention always was that rebate is to be allowed from tax on total income without any conditions, whether any income is taxable at a special rate or the normal rate. The purpose of the rebate is to provide reliefs to small taxpayers whose income does not exceed say Rs. 5,00,000/- or Rs. 7,00,000/-. Instead of increasing the basic exemption limit, rebate is provided, so that such assessees would get the benefit whereas the assessees whose income exceed such limit for claiming rebate, they do not get any relief, and they still have to pay tax on the income below such limit of Rs. 5,00,000/- or Rs. 7,00,000/-. The treatment of the Respondents of not providing rebate under section 87A from tax chargeable at special rate under the new regime, is neither flowing from the plain interpretation of section 87A, nor from the intention of the Legislature. Merely because some income is taxable at different rates, does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct to small taxpayers should be allowed to them without any fetters. 48. An intimation under section 143 (1) denying such claim of rebate, is in contravention of law, is invalid and, therefore, ought to be quashed and set aside. Further, the Respondents should be directed to not make any such disallowance in any future processing and to reverse the disallowance of claim already made by the Respondents. Consequential refunds to the assessees should be granted immediately with interest as per law. 49. In light of the above submission, the Petitioners humbly pray that the Rule should be made absolute in terms of prayer clause (a) and (d). SUBMISSIONS OF THE RESPONDENTS : 10. Mr. Venkatraman learned Additional Solicitor General (ASG) of India, vehemently defended the action of the respondents and has filed written submissions which read as under: 1. The main clause of Section 87A of the Income Tax Act, 1961 provided a tax rebate of Rs. 12,500 for such of those individuals whose income was below Rs. 5 Lakhs. The Section provided a maximum rebate of Rs. 12,500. The rationale behind this incentive is two-fold. There is a threshold exemption from Income-tax up to Rs. 2.5 lakhs. Bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid Section. 5. On the introduction of Clause 1A to Section 115BAC which was with effect from 01.04.2024, Parliament simultaneously introduced a proviso to Section 87A which also came into effect from 01.04.2024 extending the threshold rebate to a total income of Rs. 7 lakhs and doubling the quantum of rebate from Rs. 12,500 to Rs. 25,000, in line with the schedule of rates prescribed under Sub-clause 1A to Section 115BAC. 6. Therefore, post 01.04.2024, assessees whose income is less than 5L could claim a rebate of 12,500 in terms if the Main clause of Section 87A and those Notified under Section 115BAC (1A) would be entitled to a rebate of Rs. 25,000 upto an income of Rs. 7 Lakh by virtue of the proviso to Section 87A. 7. Sub-clause (b) to the proviso to Section 87A gives a reduced marginal rebate beyond Rs. 7 Lakhs and up to Rs. 7.4 Lakhs (this issue is inconsequential in this matter and therefore not elaborated further). 8. Following questions arises for consideration and interpretation by this Hon'ble Court: a. What does the expression "subject to the provisions of this chapter" in Clause 1A of Section 115BAC would mean and whether this rigor would apply even to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce this is clear, the second inference in natural and consequential. Only such of those total income which falls under clause (1A) will get the benefit of reduced rate of taxation while such of those total income falling under other provisions of Chapter 12 will continue to be taxed at the specified rates referred to in those respective provisions. 14. Even though both sets of income, one falling under clause (1A) and the rest falling under other provisions of Chapter 12 would constitute elements of total income, the segregation and treatment for such total income falling under clause (1A) and rest of the provisions of Chapter 12 are distinct and different. 15. Once this interpretation passes the muster, let us turn our attention to the proviso to Section 87A. 16. The unambiguous expression employed in the proviso to Section 87A is as follows: "Provided that where the total income of the assessee is chargeable to tax under sub-section (1A) of section 115BAC, and the total income" 17. It is clear from the above that the benefit of rebate of Rs. 25,000 on a total income of Rs. 7 lakhs would only mean such total income which falls under clause (1A) of Section 115BAC and woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that clause (1A) is only with reference to rates and not total income is unsustainable. 22. Now coming to the proviso to Section 87A, here again the reference is only to total income falling under clause (1A) of Section 115BAC, whereas the assesses contended that the same should be read as total Income of the assessees chargeable to tax under Chapter 12. Such an interpretation goes contrary to the plain language of Section 87A, and an invitation to such an interpretation through a judicial order is nothing but suggesting a rewriting of a Parliamentary provision through a judicial pronouncement which is unacceptable in our jurisprudence. Judicial legislation is an impermissible exercise and a clear encroachment of the sovereign powers of the Parliament, and therefore such an interpretation needs to be eschewed by this Hon'ble Court. 23. Now coming finally to the omnibus prayer of the Petitioners that they are entitled to file a return as per their belief and choice, the same again is unsustainable for the following reasons: d. Canons of interpretation had reiterated the well settled principle as to when would a mandamus be issued. A mandamus would lie only when: i. A party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If every belief of an assessee becomes an automatic right under the Income Tax Act, 1961, it would be the end of era of Constitutional democracy and beginning of era of Constitutional anarchy. This whole attempt is to push a well-functioning digitised system into a stone age, make it dysfunctional, unworkable and meaningless, and all of this is at what price? only to nurture the belief of an assessee and not the right of an assessee. m. Upholding this plea would sabotage the existing farmwork of operation and implementation leading to disastrous consequences, more so when the Writ Petition is pursuing an academic exercise without any underlying issue in principle and wants to secure an omnibus open ended relief for times to come without any assessee being aggrieved in any manner. n. Such open ended mandamus is uncalled for and undesired. Constitutional courts should never decide academic questions nor should grant reliefs without an underlying issue to deal with. o. Weighing the options, grant of relief prayed for would collapse the digital operation and implementation when no one has found fault with it. p. With a sense of responsibility that this pursuit is not made anywh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, and whereas the same was also followed in the case of Lupin in Writ Petition No. 3565 of 2023 & Writ Petition No. 32741 of 2023 since assessments stood completed already. u. This Hon'ble Court did not recognise or approve the contentions of the petitioners for an open ended filing of returns after taking on record the detailed affidavit filed by the Revenue bringing out the operational mechanisms of the digitised systems. v. Knowing fully well that this Hon'ble court had not yielded, one more vexatious attempt is sought to be made seeking the same prayer and relief for the 3rd time. w. This attempt to frustrate a well performing digitised system needs to be rejected and its therefore most humbly prayed that this Writ Petition needs to be rejected. ANALYSIS AND REASONING: 11. Relevant provisions which arise for our consideration are Section 87A and Section 115BAC which read as under: Section 87A-Rebate of Income-tax in case of certain individuals:- An assessee, being an individual resident in India, whose total income does not exceed [five hundred thousand] rupees, shall be entitled to a deduction, from the amount of income-tax (as computed before allowing the deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30 per cent Following sub-section (1A) shall be substituted for the existing sub-section (1A) of section 115BAC by the Finance (No. 2) Act, 2024, w.e.f. 1-4-2025: (1A) Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, the income-tax payable in respect of the total income of a person, being an individual or Hindu undivided family or association of persons (other than a co-operative society), or body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2, other than a person who has exercised an option under sub-section (6),- (i) for any previous year relevant to the assessment year beginning on the 1st day of April, 2024, shall be computed at the rate of tax given in the following Table, namely:- TABLE Sr. No. (1) Total income (2) Rate of tax (3) 1. Upto Rs. 3,00,000 Nil 2. From Rs. 3,00,001 to Rs. 6,00,000 5 per cent 3. From Rs. 6,00,001 to Rs. 9,00,000 10 per cent 4. From Rs. 9,00,001 to Rs. 12,00,000 15 per cent 5. From Rs. 12,00,001 to Rs. 15,00,000 20 per cent 6. Above Rs. 15,00,000 30 per cent (ii) for any previo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-section (1) of section 139 for furnishing the return of income for such assessment year, in case of a person having income from business or profession, and such option once exercised shall apply to subsequent assessment years; or (ii) along with the return of income to be furnished under sub-section (1) of section 139 for such assessment year, in case of a person not having income referred to in clause (i): Provided that the option under clause (i), once exercised for any previous year can be withdrawn only once for a previous year other than the year in which it was exercised and thereafter, the person shall never be eligible to exercise the option under this sub-section, except where such person ceases to have any income from business or profession in which case, option under clause (ii) shall be available. ISSUES BEFORE THE COURT: A) The issue that requires our consideration is whether respondents are justified in modifying their utility, whereby an assessee is debarred at the threshold from making a rebate claim under Section 87A while uploading his return of income online. B) To examine the above issue, we must adjudicate whether the claim proposed to be made under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear. Section 2 (43) defines 'tax' to mean income-tax chargeable under the provisions of this Act. Section 2 (45) defines 'total income' to mean 'the total amount of income referred to under Section 5, computed in the manner laid down in this Act'. 15. Section 4 is the charging section which provides that where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions (including provisions for the levy of additional income-tax) of this Act in respect of the total income of the previous year of every person. 16. Section 5 defines the scope of total income and Section 5(1) provides that subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived. Insofar as Section 5(2) is concerned, it provides in the case of a non-resident to include all income from whatever source derived, which is received or is deemed to be received in India, or accrues or arises or is deemed to accrue or arise to him in India. 17. Chapter IV of the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under Section 87A and / or 88E should not exceed the amount of income-tax computed before calculating such rebate. We may, however, observe that the provisions of Section 88E are not applicable after 1 April 2009 and therefore, what remains in Chapter VIII is only Section 87 and 87A. 22. Chapters IX, X and X-A deal with anti-avoidance provisions. 23. Chapter XII comprising of Sections 110 to 115BBJ deal with determination of tax in certain special cases. On a reading of various provisions of Chapter XII, it indicates that Chapter XII provides for rates of tax with respect to certain special income which is dealt with in the said Chapter. For example, Section 111A deals with rate of tax on short-term capital gains and it provides for rate of tax of 15% on such short-term capital gains. Section 112 (1) (a) provides for rate of tax on long-term capital gains at the rate of 12.5% if the transfer takes place after 23 July 2024 and 20% if it is before 23 July 2024 (in the case of an individual or an HUF). Sections 112 (1) (b) and 112 (1) (c) provides for different rates of tax based on whether an assessee is a domestic company or a non-resident etc. Section 112A deals with rate of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the computer resource or the electronic record to which the return in electronic form may be transmitted. 26. Various forms are prescribed for different types of assessees namely ITR-1 for individuals with income less than Rs.50 Lakhs and not having business or capital gain. Other forms are ITR-2 to ITR-7. The return of income is mandatorily required to be filed online. Respondent No. 1 annually releases utilities for filing income-tax returns online, which utilities are generally released before the end of the financial year. At the same time, return forms are also notified separately. The purpose of releasing the utility is to enable filing of returns online. 27. There are various types of assessments namely self-assessment, intimation, scrutiny assessment, best judgment assessment, etc. 28. Section 140A deals with Self-assessment and it provides that where any taxes are payable on the basis of any return required to be furnished under the sections specified therein after taking into account the amount of tax already paid, any tax deducted or collected at source, any relief of tax claimed under Section 89 or Section 90 or Section 91 or Section 90A, any credit claimed to be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due to the assessee. 33. Therefore, on a conjoint reading of Articles 265 and 300A of the Constitution of India read with Sections 139, 140, 140A, 142 and 143 of the Income-tax Act, the assessee, based on his belief, has to compute his income in accordance with the provisions of the Act and arrive at the tax payable which the assessee has to pay along with his return of income. This is known as self-assessment. The correctness of self-assessment is examined under Section 143 (1) and / or Section 143 (3). Therefore, in our view, although the filing of return of income is a statutory duty under the provisions of the Act, determination/ computation of income on which tax is payable and computation of tax thereon by an assessee at the time of filing the return of income must abide by the Constitutional mandate in Article 265 read with Article 300A of the Constitution of India. This is because the tax can only be recovered in accordance with the authority of law. There is a distinction between the statutory duty of filing the return and computation of income by an assessee and tax payable thereon when the return of income is filed and the duty of the revenue to assess and recover tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc. Therefore, looking at the scheme of the Act, restraining/prohibiting an assessee from making a bona fide claim based on his reading of the said provisions of the Act would be unfair and arbitrary. In any event, it cannot be left to the utility to determine whether a claim is legal and valid and, therefore, should be allowed to be raised at all. 37. The parties are ad idem insofar as the transition from manual filing and processing of returns to the electronic form of filing and processing of returns. Undoubtedly, technology must be harnessed for the efficient administration of the Act by making the administration easier, faster and with the least interference of human interaction between the assessees and the authorities under the Act. It is with this intention and objective that the provisions of Section 144B dealing with Faceless Assessment is introduced. However, the transition for better administration by harnessing and adopting technology should not override the scheme of the Act by which, at the starting point of filing the return of income under Section 139, an assessee is prohibited from making a claim since, at that stage, it is he who estimates his income based on h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income, which would consist of income covered by provisions of Chapter XII other than Section 115BAC, and the total income referred to in Section 115BAC. The total income is the aggregate of the income referred to in Section 115BAC and the other incomes referred to in Chapter XII and it is the aggregate of the two on which taxes are to be determined, and such total taxes are to be determined by applying the provisions of special rates provided in Chapter XII and Section 115BAC or the Finance Act. It is the contention of the petitioners that Chapter XII provides for special rates of tax in respect of certain types of income and rates of tax with respect to income other than those specified in other sections of Chapter XII. The phrases "subject to the provisions of this Chapter" and "notwithstanding anything contained in this Act" used in Section 115BAC (1A) only override the 'rate of tax' provisions and do not split the total income into two parts. This would also be contrary to the definition of 'total income' under Section 2 (45) of the Act. The learned senior counsel submits that wherever the legislature wanted to deny the benefit of Section 87A to a particular type of income sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that sub-section (1A) of Section 115BAC is an overriding provision but subject to the provisions of Chapter XII and, therefore, it is his contention that rebate under Section 87A cannot be granted from the tax specified in other sections of Chapter XII other than Section 115BAC. Therefore, it is his contention that the form prescribed is in accordance with the provisions of the Act and there is no need to seek prayer for modification of the utility. 42. In our opinion, whether a rebate under Section 87A can be granted only from the tax arrived at under Section 115BAC or also from the tax computed under other provisions of Chapter XII is a highly debatable and arguable issue. This would require interpreting various provisions of Chapter XII and Section 87A of the Act. In our view, after hearing the arguments of the learned senior counsel and the learned ASG, we cannot say that the provisions of the Act are so crystal clear as to arrive at a definite conclusion that a rebate under Section 87A cannot be granted from the tax computed under other provisions of Chapter XII. Though the learned senior counsel for the petitioners and the learned ASG argued the matter for four hours each, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted by the law, cannot ordinarily be disposed of by the executive acting in its executive capacity. This is more so when the executive is itself a party to the Lis. One of the foundations of our Constitution is the Rule of Law. This posits that all three organs of governance, the Legislature, the Executive, and the Judiciary function under and in accordance with the law as enshrined in our Constitution. 45. Technology is meant to eliminate the interface between the tax authority and the assesses. Technology quite admirably reduces the scope of arbitrariness and abuse of discretion in choosing cases to be scrutinized. The shift to a system where face value or other extraneous considerations are attempted to be eschewed is undoubtedly welcome. Still, this cannot eliminate an assessee's right to raise a claim for some benefit that she bona fide believes the law has granted her or about which a debate is possible. By doing this, the assessee is merely insisting that the Revenue recovers tax in accord with the law and under the authority of the law. Any such inhibition would be violative of Article 265 read with Article 300A of the Constitution of India and of the holistic reading o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XII would require interpretation of the interplay of Section 87A and Section 115BAC. To what extent the overriding provisions contained in Section 115BAC (1A) would result in allowability or denial of rebate under Section 87A will have to be examined by interpretative process. Similarly, the impact of the phrase 'subject to the provisions of this Chapter' would also have to be examined along with other provisions for adjudicating the claim under Section 87A of the Act. 50. What is the purport of the proviso to Section 87A on the claim proposed to be made will have to be interpreted in conjunction with the provisions of Section 115BAC (1A) and other connected sections. How the phrase 'total income' should be construed for Section 87A and Section 115BAC along with the definition sections, charging sections and scope of total income and the scheme of the Act, will have to be examined. Whether the provisions of Section 115BAC restrict itself only to tax rates or computation of total income will also have to be examined. 51. In our view, if the above exercise is required to be undertaken before coming to a definite conclusion as to whether the rebate under Section 87A is to be grante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e being arguable is apparent and obvious from reading of the written submissions of the petitioners and respondents, which we have reproduced earlier. After going through the same, we have no iota of doubt that this is not a case where, at the threshold, an assessee should be shown the door. Still, it is a case where the assessee and revenue should enter the arena, fight with equal might, and leave it to the Umpire to decide who is right and the winner of the game. 55. Section 139D of the Act provides for filing of return in electronic form and authorises the Board to make rules for class of persons who are required to file return in electronic form, the form and manner in which such returns are to be furnished, documents which are not required to be furnished along with return and computer resource to which such return may be transmitted. Pursuant to this, under Rule 12 of the Income-tax Rules various forms are prescribed. In our view, Section 139D, read with Rule 12, does not empower the authorities to design the form on the basis of their reading of law or provisions which debar an assessee from making a claim at the threshold itself. 56. The importance of making a claim in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on a correct processing his income may be found to be above the exempted limit. No doubt, it is futile for a person not liable to tax to rush in with a return, but the return in law is not a mere scrap of paper. It is a return, such as the assessee considers represents his true income. (b) In the case of 'Samir Narain Bhojwani Vs Deputy Commissioner of Income Tax' (2020) 115 taxmann.com 70 (Bombay), the Co-ordinate bench of this Court had an occasion to consider whether electronic filing of return of income can deny an assessee to reflect his claim in the online return form, under Section 72 of the Act. In Para 8, the Court observed as under ; 8. The purpose and object of e-filing of return to have simplicity and uniformity in procedure. However, the above object cannot in its implementation result in an assessee not being entitled to make a claim of set off which he feels he is entitled to in accordance with the provisions of the Act. The allowability or dis-allowability of the claim is a subject matter to be considered by the Assessing Officer. However, the procedure of filing the return of income cannot bar an assessee from making a claim under the Act which he feels he is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Tribunal has found that the surrender was made because the assessee found itself unable to produce evidence which could satisfy the Income-tax Officer. In these circumstances it cannot be said that the assessee itself should have treated the cash credits to be its income. As has been rightly pointed out by the Tribunal the fact that the Inspecting Assistant Commissioner of Income-tax had absolved the assessee of the charge of concealment with respect to the cash credits during the course of proceedings for levy of penalty under section 271(1)(c) goes a long way to show that the belief of the assessee that cash credits were not items of taxable income was bona fide one. Thus, the sum of Rs. 40,000 must be deducted out of the income assessed to find out if the balance was still more than the maximum amount not chargeable to income-tax. Now, after deducting Rs. 40,000 the balance is less than Rs. 25,000 which is the maximum amount not chargeable to income-tax in the case of a registered firm. Clearly, the assessee was under no obligation to file any voluntary return under section 139 (1) of the Act, and, as such, was not liable to any penalty under section 271 (1) (a). (d) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not permitting the assessee to do so. On a writ petition being filed and on a direction by this Court, a manual return was permitted to be filed for making the said claim. We were informed that while processing the manual return, the claim of the assessee was accepted. We are referring to this decision for the limited purpose to bring our point in support of our analysis that certainly the utility cannot be designed to prevent an assessee from making a claim which subsequently by adjudication and appeal process may be found to be correct. 60. The co-ordinate bench in the case of Tata Sons Pvt. Ltd. Vs DCIT in Writ Petition No.3109 of 2022 also permitted the assessee to file paper return which came to be processed and thereafter an appeal against such processing was filed by the assessee. This decision is also relied upon to the limited extent that the online system did not provide to make a claim which was permitted by paper return and processed accordingly. 61. Therefore, it is not that an assessee can be debarred from making a claim in the return of income whether online or manual. 62. We may, however, clarify that if any such claim is made, the revenue would certainly be free ..... X X X X Extracts X X X X X X X X Extracts X X X X
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