Facts of the Case

The petitioners, being private discretionary trusts, filed writ petitions challenging the action of the Income Tax Department mandating a shift from ITR-2 to ITR-5 filing format from Assessment Years 2021–22 and 2022–23.

Due to this transition:

  • Deductions and rebates previously available when treated as individual assessees were no longer accessible.
  • The e-filing system failed to accommodate such claims within the new return format.
  • The issue was acknowledged by the Revenue but not effectively resolved.

The Revenue suggested that:

  • Petitioners may seek remedy through appellate forums, or
  • Approach CBDT under Section 119.

However, the petitioners argued that such remedies were inadequate given the systemic nature of the issue.

Issues Involved

  1. Whether the mandatory shift from ITR-2 to ITR-5 resulted in denial of lawful deductions and rebates.
  2. Whether such denial due to technical/system limitations violates taxpayer rights.
  3. Whether directing assessees to appellate remedies is appropriate in cases involving systemic glitches.
  4. Scope and applicability of Section 119 of the Income Tax Act for resolving such grievances.

Petitioner’s Arguments

  • The change in return format led to loss of statutory deductions and rebates, which were otherwise legally available.
  • The e-filing utility itself was defective, preventing correct filing.
  • The issue was systemic and recurring, not individual.
  • Remedies suggested by Revenue (appeal/CBDT application) were ineffective and burdensome.
  • Deductions should be embedded within the Return of Income, not pursued separately

Respondent’s Arguments

  • Petitioners could:
    • Approach the regular appellate forum, or
    • File an application before CBDT under Section 119.
  • The Revenue indicated attempts were being made to resolve the technical glitch.

Court Findings / Order

  • The response of the Revenue was unsatisfactory.
  • The issue is systemic and recurring, affecting multiple assessees.
  • Deductions and rebates should ordinarily be available within the return filing mechanism itself.
  • Past submissions of the Revenue showed assurance to resolve the glitch, which remained unresolved.

Final Directions

  • CBDT was directed to:
    • Treat the writ petitions as applications under Section 119.
    • Examine and resolve the grievance comprehensively.
    • Pass a reasoned (speaking) order.
  • Matter listed for compliance on 09.11.2023.

Important Clarifications

  • Technical limitations in tax filing systems cannot override substantive taxpayer rights.
  • Courts may intervene where administrative inefficiency results in denial of lawful benefits.
  • Section 119 serves as a remedial mechanism, but cannot substitute proper system functionality.
  • The judgment emphasizes system-level accountability of tax authorities.

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

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools