Facts of the Case

The petitioners filed declarations under Forms 1 and 2 on 26 March 2021 under the DTVSV Act but inadvertently excluded the interest component while declaring the tax paid.

Subsequently, the department issued Form 3 on 22 April 2021, but denied credit of taxes already deposited citing “mismatch” and, in certain cases, without assigning reasons.

The petitioners made representations seeking rectification and attempted to file Form 4, but the system rejected the same due to a technical error indicating inconsistency in dates of deposit.

Later, the authorities rejected the request on the ground that tax had been deposited under minor head ‘200’ instead of ‘400’, thereby refusing to grant credit.

Issues Involved

  1. Whether tax credit can be denied under DTVSV Act due to technical error in challan head classification.
  2. Whether procedural/technical defects in filing forms can defeat substantive rights of taxpayers.
  3. Whether the department is obligated to rectify Form 3 and facilitate filing under the scheme.

Petitioner’s Arguments

  • Taxes had actually been deposited, and denial of credit was unjustified.
  • The error in challan (minor head 200 instead of 400) was inadvertent and technical in nature.
  • The purpose of the DTVSV Act is to resolve disputes and not to reject claims on technicalities.
  • System-generated errors should not prejudice the substantive rights of taxpayers.

Respondent’s Arguments

  • The department contended that credit could not be granted due to incorrect challan classification.
  • It was submitted that software limitations prevented correction of the challan code at the Assessing Officer level.
  • Relief could be difficult if system constraints did not permit modification.

Court’s Findings / Order

  • The Court held that there is no dispute regarding payment of taxes by the petitioners.
  • Denial of credit on the basis of wrong minor head (200 instead of 400) was held to be:
    • Unfair
    • Illegal
    • Contrary to the objective of the DTVSV Act
  • The Court emphasized that technical errors cannot override substantive rights.
  • Key Direction:
    • Authorities directed to correct payment heads and grant credit
    • Issue revised Form 3 within four weeks
    • Petitioners allowed to file Form 4 thereafter within two weeks

Important Clarification by the Court

  • The Court strongly observed:

Technology is meant to facilitate and not defeat legal rights.

  • It further clarified that:
    • Software systems must be adapted to legal requirements
    • Taxpayer rights cannot be subordinate to technical limitations
  • Reliance was placed on:
    Shalu Nigam & Anr. vs. Regional Passport Officer (2016 SCC OnLine Del 3023)

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:2743-DB/MMH19072022CW85902022_175937.pdf

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