Every year, the Income Tax Department provides online utilities for filing income tax returns. However, a system update implemented on 5-7-2024 inadvertently disabled taxpayers from claiming the rebate under Section 87A. This change meant that many taxpayers, who were eligible for the rebate, could not claim it due to technical issues created by the update.
In response, The Chamber of Tax Consultants (petitioner) filed a writ petition with the Bombay High Court, requesting the court to direct the Income Tax Department to modify the system for the 2024-2025 assessment year so taxpayers could fully benefit from the Section 87A rebate.
The Court explained that under the Income Tax Act, 1961, taxpayers are required to self-assess their income, calculate their tax liability, pay the tax, and file their returns. However, due to the system change on 5-7-2024, many taxpayers were unable to compute the rebate under Section 87A, especially when their income was subject to special tax rates under the new regime. As a result, some taxpayers may end up paying more tax than necessary because they could not claim the rebate.
The Court also clarified that taxpayers who had already filed their returns could file a revised return to include the Section 87A rebate and possibly receive a refund. Additionally, the last date to file a belated return, as per Section 139(4), is 31-12-2024, allowing taxpayers who missed the original deadline some extra time.
The Court emphasized that the Section 87A rebate is based on a taxpayer’s total income and tax liability, and it is the responsibility of the tax authorities to ensure that eligible taxpayers can claim this rebate. Changes to the system or technical issues should not prevent taxpayers from exercising their statutory rights. Any action or oversight by the tax authorities that limits taxpayers' ability to claim the rebate is unfair and goes against the principles of justice and the rule of law. Taxpayers should not be penalized due to administrative errors or procedural issues.
The Court further noted that statutory benefits like the Section 87A rebate must be provided to taxpayers in line with the lawmakers' intentions. Procedural hurdles that deprive taxpayers of these benefits must be addressed through judicial intervention to protect taxpayers' rights.
As a result, the Court directed the Central Board of Direct Taxes (CBDT) to issue a notification under Section 119, extending the deadline for e-filing income tax returns from 31-12-2024 to at least 15-1-2025. This extension ensures that taxpayers eligible for the Section 87A rebate can exercise their right to claim it without facing unnecessary technical difficulties, promoting fairness and transparency in the tax system.
