Facts of the Case

  • The petitioners are private discretionary trusts.
  • They were earlier filing returns as individual assessees using ITR-2.
  • From Assessment Years 2021–22 and 2022–23, they were required to switch to ITR-5.
  • Due to this change, deductions and rebates previously available were no longer reflected or accessible in the new form.
  • The petitioners approached the Court challenging this systemic issue affecting their tax liabilities. 

Issues Involved

  1. Whether the mandatory shift from ITR-2 to ITR-5 deprived trusts of legitimate deductions and rebates.
  2. Whether such denial due to technical/systemic limitations is legally sustainable.
  3. Whether the remedy suggested by the Revenue (appeal or CBDT application) is adequate.

Petitioner’s Arguments

  • The change in ITR form resulted in loss of statutory deductions and rebates.
  • The issue arises due to a technical glitch in the e-filing system, not due to any fault of the assessees.
  • Filing appeals is not an effective remedy for systemic errors.
  • The deductions should be inherently available within the Return of Income itself.

Respondent’s Arguments

  • The Revenue acknowledged the issue but suggested:
    • The trusts may seek remedy through appellate forums, or
    • Approach CBDT under Section 119 of the Act.
  • The Revenue indicated that administrative remedies exist for redressal. 

Court’s Findings / Observations

  • The Court held that the response of the Revenue was not satisfactory.
  • It observed that deductions should ordinarily be embedded in the Return of Income.
  • The issue was recognized as a recurring and systemic problem affecting multiple assessees.
  • The Court noted that earlier assurances were given by the Revenue to fix the glitch, which remained unresolved.

Court Order / Directions

  • The writ petitions were disposed of with directions to CBDT.
  • CBDT was directed to:
    • Treat the writ petitions as applications under Section 119.
    • Examine and resolve the issue comprehensively.
    • Pass a reasoned (speaking) order.
  • The matter was listed for compliance 

Important Clarification

  • The Court emphasized that technical limitations in tax filing systems cannot override substantive rights of taxpayers.
  • It highlighted the responsibility of tax authorities to ensure that procedural systems do not result in denial of lawful benefits. 

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS24082023CW150052022_124134.pdf

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