1. Hon’ble Bombay High Court vide interim order dated 20/12/2024 directed CBDT to issue the requisite notification and extend the deadline for the revised and belated ITR filing date till 15/01/2025.
2. This deadline is being extended for those taxpayers who are eligible to claim Rebate U/S 87A . A resident individual whose income does not exceed Rs. 7,00,000 in the new regime and Rs. 5,00,000 in the old regime are eligible for Rebate u/s 87A.income
3. The benefit of Rebate U/S 87A can be availed for various special rate incomes, including short-term capital gains on equity shares or equity oriented mutual funds taxable at 15% under Section 111A.
4. A peculiar situation happened on July 5, 2024. Until 4th July 2024, Income Tax Utility correctly calculated the amount of rebate. However, an update to the Income Tax Utility on 5th July 2024 prevented new regime taxpayers from claiming rebate under 87A from Short Term or Long Term Capital Gain.
5. The modification of the utility for Assessment Year 2024-2025 midway through the assessment year has caused undue hardship to taxpayers, particularly those relying on the rebate under Section 87A,
6. The situation was not better even for taxpayers who filed ITR before 5th July 2024 . Once the ITR filing deadline was over, the tax department started sending defective notices under section 139(9) to taxpayers who claimed a rebate under 87A. A defective notice would mean that the original ITR will get accepted only if the defect is cured. Owing to this, the taxpayers were indirectly forced to give up on the claim of 87A and pay the difference amount of tax.
7. All over the country, taxpayers approached the courts in the hope of justice. The Chamber of Tax Consultants filed Public Interest Litigation (PIL). The Chamber of Tax Consultants argued before the Bombay High Court that the primary problem was the tax department modifying the logic of its own ITR filing utility software for AY 2024-25 (FY 2023-24) midway through the assessment year.
8. The Income Tax Department answering the allegations claimed that the modifications were required to align with the legal needs and avert the peculiarities in rebate claims.
9. But this reasoning has been dismissed by the court, saying that procedural amendments must not override the substantive rights granted through legislation. The principle behind Section 87A has always been to ensure that taxpayers in lower-income brackets are not burdened unduly, and the arbitrary disabling of the rebate through the modification of utility software undermines this legislative intent,
10. Now, thanks to Bombay High Court Judgement, taxpayers who filed an ITR by forgoing 87A in response to the defective notice can now file a revised ITR claiming the tax rebate under section 87A before the extended due date of 15th January 2025.
11. The issue still is not resolved for those taxpayers who took no action after getting the defective ITR notice to claim section 87A rebate. These taxpayers as of now seem to have only option of filing a belated ITR, the same as those who did not file any ITR, but they may be disadvantaged as they may have to forgo certain deductions and losses.
12. The High Court also directed in this interim order, that all taxpayers should be given the opportunity to exercise their rights without procedural impediments. A notification to this effect from CBDT is expected, and it is hoped that it brings some procedural clarity in such cases where the returns are invalidated as no response was filed to defective notices.”
13. This is only an interim relief as the final judgement will be pronounced on January 9, 2025. The court will analyze the wider implications of software changes and their impact on the rights of the taxpayer.
14. The decision of HC is a welcome step and relief to Tax Payers. Also, the extended date of 15th January will help in smooth filing of revised returns.
15. However, the CBDT has yet to release any official order on the extension of the deadline to file rebates under Section 87A. In light of the HC Judgement, the Income Tax Department is expected to bring a Notification soon.
Disclaimer : The article is for educational purposes only.
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