The author, Kunal Sharma, is in the final semesters of the Law program at Modern College of Law, Ghaziabad.
While emphasizing that the Revenue Department cannot introduce a prohibition by simply tweaking the online utility, the Bombay High Court, in the case of The Chamber of Tax Consultants vs. Director General of Income Tax [PIL (L) No.32465 of 2024], has held that any attempt by revenue officials which restricts or prohibits an assessee from making a particular claim concerning the determination of income and/or tax payable thereon would be contrary to the scheme of the Income Tax Act, 1961 (hereinafter referred to as “IT Act”) and would also be unconstitutional.
Explaining in detail, the Division Bench of Justice M S Sonak and Justice Jitendra Jain observed that the IT Department could not restrain/ prohibit taxpayers from claiming Section 87A benefits by modifying their utility, by which such taxpayer is forbidden at the threshold itself from making such claim.
Facility to raise a claim, which was very much available till a specific date, can’t be abruptly discontinued simply because revenue officials, acting in their administrative capacities, felt that such a claim was untenable, added the Bench.
At the same time, the Bench also clarified that the Department cannot resolve ambiguity in provisions by adopting interpretation favouring itself through the device of simply tweaking utility and preventing the assessee from even raising claims.
Going by the background of the case, the assessee i.e., the Chamber of Tax Consultants, is a society registered under the Societies Registration Act of 1860 and the Bombay Public Trusts Act of 1950, with the objectives (i) to spread education in matters relating to tax laws and other laws and accountancy and allied subjects of professionals' interest; (ii) to carry on activities for the extension of knowledge in the fields of tax laws and other laws, accountancy and allied subjects of professionals' interest; (iii) to make representations to any government or non-government authority, committees, commissions and study teams, or at conferences or similar gatherings, (iv) to seek representation and appear before the tax and other law enforcement authorities, tribunals and courts in matters of public interest and in cases of importance to professionals.
On July 05, 2024, an online utility provided by the Revenue denied the assessees (who are clients of the members) the benefit of claiming a rebate under Section 87A of the Income Tax Act for the assessment year 2024-25 while filing online return against tax computed under various sections of Chapter XII of the Act. Before 5 July 2024, the Revenue’s utility permitted the assessees to make such a claim. The assesses and various other associations made multiple representations to Revenue on the issue of utility not providing for making a claim under Section 87A but, having failed to get justice, have approached this Court for redressal of their grievances. It is this denial on account of the modification of the utility on and from 5th July 2024, which the assessee had challenged before the High Court.
After considering the submissions from both parties, the Division Bench observed that while filing the income return of income, the Revenue cannot restrain or prohibit an assessee from taking a particular stand on taxability or determination of tax thereon. At least the IT Act does not contain any such prohibition. Such a prohibition, therefore, cannot be introduced by simply tweaking the utility.
The utility, that is, to aid tax governance should not overtake tax governance and decide which claim an assessee may make or not. The facility to raise a claim, which was very much available till 5 July 2024, could not have been abruptly discontinued simply because the revenue officials, acting in their administrative capacities, felt that such a claim was untenable, added the Bench.
The High Court emphasized that any such attempt which restricts or prohibits an assessee from making a particular claim concerning the determination of income and/or tax payable thereon would be contrary to the scheme of the Act and would also be unconstitutional since by the said prohibition or restriction an assessee is prohibited not only from making a claim but would also be denied his right to access justice by not permitting him to test such claim by the process provided under the Act i.e., assessment, appeal, etc.
The Bench elaborated that 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, and undoubtedly, technology must be harnessed for the efficient administration of the IT Act by making the administration easier, faster and with the least interference of human interaction between the assessees and the authorities under the IT Act. It is with this intention and objective that the provisions of Section 144B dealing with Faceless Assessment are 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 his reading of the provisions of the Act, clarified the Bench.
The High Court went on to observe that 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.
Thus, the revenue would not be justified in assuming that its interpretation is open and shut, and based upon such a conclusion, shut out bona fide claims for rebate under Section 87A, added the Court.
The Bench questioned that when the Revenue Department did not show any provision under the Income Tax Act which expressly debars an assessee to raise or make a claim under Section 87A qua the tax computed at the rates specified in the provisions of Chapter XII other than Section 115BAC, how can they reject the claim at the threshold.
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, and thus, the High Court concluded that the Department is not justified in modifying the utility, by which an assessee is debarred at the threshold from making a claim, which claim, is, at best, a contentious or debatable claim.
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