Bombay High Court directed the Central Board of Direct Taxes (CBDT) to extend the deadline for revised and belated ITR filings to January 15, 2025. This extension applies to taxpayers eligible for the section 87A rebate.
Bombay High Court’s Order to Extend ITR Filing Deadline: Fighting for justice often requires challenging authorities instead of passively accepting their decisions. A recent example is the section 87A tax rebate issue, where eligible taxpayers who filed their Income Tax Returns (ITR) after July 5, 2024, were denied their rightful rebate. This led to a nationwide uproar, with taxpayers approaching courts. The Bombay High Court responded by granting interim relief.
High Court’s Interim Order
In an order dated December 20, 2024, the Bombay High Court directed the Central Board of Direct Taxes (CBDT) to extend the deadline for revised and belated ITR filings to January 15, 2025. This extension applies to taxpayers eligible for the section 87A rebate. The court emphasized that procedural barriers should not prevent taxpayers from exercising their statutory rights.
The court stated: “By way of interim relief, the respondent, Central Board of Direct Taxes is hereby directed to forthwith issue requisite notification under Section 119 of the Act extending the due date for e-filing of the income-tax returns in relation to the assessees who are required to file a return of income by December 31, 2024, at least to January 15, 2025. This extension is to ensure that all taxpayers eligible for the rebate under Section 87A are afforded the opportunity to exercise their statutory rights without facing procedural impediments.”
The Section 87A Tax Rebate Controversy
The issue arose when, post-July 5, 2024, the Income Tax Department modified its ITR filing software. This change disabled taxpayers from claiming the section 87A rebate for specific income categories, including short-term capital gains taxed at 15% under section 111A. This unilateral modification contradicted the legislative intent of section 87A, which aims to provide relief to lower-income taxpayers.
The Finance Act, 2019, enhanced the section 87A rebate to:
- ₹12,500 for taxpayers with income up to ₹5 lakh under the old tax regime.
- ₹25,000 for taxpayers with income up to ₹7 lakh under the new tax regime.
The Chamber of Tax Consultants argued that this software modification caused undue hardship by preventing eligible taxpayers from claiming their rightful rebate.
Key Arguments Against the Utility Changes
The Chamber of Tax Consultants highlighted:
- Annual ITR filing utilities are released in advance to ensure compliance.
- The mid-year utility modification for AY 2024-25 imposed an unjust additional tax burden on taxpayers.
- Notices under section 139(9) labeled returns claiming the rebate as defective, indirectly forcing taxpayers to forego the rebate.
Kinjal Bhuta, Secretary of the Bombay Chartered Accountants’ Society (BCAS), explained, “Post-July 5, 2024, taxpayers who filed ITRs using the official utility were denied the section 87A rebate for certain special rate incomes. This led to defective notices, compelling taxpayers to either pay the additional tax or face rejection of their returns.”
Interim Relief and Next Steps
Taxpayers who responded to defective notices by filing revised ITRs without claiming the rebate can now refile, claiming the section 87A rebate by January 15, 2025. However, taxpayers who failed to respond to defective notices or did not file any ITR may face limitations. The High Court’s directive ensures that procedural barriers will not obstruct taxpayers from claiming their rights. A notification from the CBDT is expected soon to provide procedural clarity.
Experts’ Take
Chartered Accountant Ashish Niraj emphasized, “The modification in the Income Tax Utility was unjustified and caused significant distress to taxpayers. The Bombay High Court’s decision is a welcome relief, allowing taxpayers to file revised returns and claim their rightful rebate under section 87A.”
Sweta Upadhyay, Senior Associate at ALMT Legal, stated, “Procedural changes, such as utility software updates, cannot override taxpayers’ substantive rights. This interim order reaffirms the principle of fairness in tax administration.”
Limitations of the Judgment
Not all taxpayers will benefit from the judgment:
- Taxpayers who filed their returns correctly before July 5, 2024.
- Taxpayers who revised their returns without claiming the section 87A rebate.
- Taxpayers who did not use the updated software.
Conclusion
The Bombay High Court’s decision to extend the ITR filing deadline is a significant relief for taxpayers denied the section 87A rebate due to software changes. This ruling underscores the importance of safeguarding taxpayers’ rights and ensuring procedural fairness. Taxpayers should utilize the extended deadline to file or revise their returns and claim their rightful rebate under section 87A.
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