E-filing utility blocking eligible taxpayers' s.87A rebate claim held unlawful; deadline extended to 15.01.2025 via s.119 notification

The dominant issue was whether the e-filing utility and departmental instructions could restrict eligible taxpayers from availing the statutory rebate under s.87A, and whether a separate "claim" was necessary. The HC held that entitlement to rebate flows from satisfaction of statutory conditions relating to total income and tax liability; executive or procedural mechanisms, including software utilities, cannot override or curtail this substantive right, and any such restriction is arbitrary and contrary to the rule of law. Consequently, as interim relief, the HC directed the tax authority to issue a notification under s.119 extending the due date for e-filing returns for the relevant class of taxpayers to at least 15.01.2025 to enable eligible assessees to obtain the rebate.

---

---

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.

---