Facts of the Case

The petitioners filed declarations under the Direct Tax Vivad Se Vishwas Act, 2020 through Forms 1 and 2 on 26 March 2021. However, while filing, the amounts paid through challans were inadvertently declared excluding the interest component.

Subsequently, the respondents issued Forms 3 on 22 April 2021 but denied credit for the taxes already deposited, citing “mismatch” issues. In certain cases, no reasons were provided for such denial.

The petitioners submitted representations seeking rectification of Forms 3 and requested that credit for taxes already paid be allowed. Attempts to file Forms 4 were unsuccessful due to a system-generated error indicating that the “date of deposit cannot be before the filing date of Forms 1 and 2.”

Later, the respondents rejected the representations by communication dated 7 April 2022 on the ground that tax had been deposited under minor head “200” instead of “400.”

Issues Involved

  1. Whether credit of taxes deposited can be denied under the DTVSV Act due to technical errors such as incorrect minor head classification.
  2. Whether procedural or software-related limitations can override substantive rights of taxpayers.
  3. Whether the rejection of credit on technical grounds defeats the object of the DTVSV Scheme.

Petitioner’s Arguments

  • The petitioners contended that taxes had been duly deposited and the denial of credit was purely on technical grounds.
  • It was argued that incorrect selection of minor head (200 instead of 400) was a bona fide mistake.
  • The respondents had already accepted Forms 1 and 2, and therefore denial of credit later was arbitrary.
  • The system error preventing filing of Forms 4 was unjust and beyond the control of the petitioners.
  • The object of the DTVSV Act is to resolve disputes, not to reject claims on hyper-technical grounds.

Respondent’s Arguments

  • The respondents submitted that the Assessing Officer was attempting to correct the challan code but faced technical limitations due to software restrictions.
  • It was argued that if the system does not permit correction, granting relief would be difficult.

Court’s Findings / Order

  • The Court observed that there was no dispute that the petitioners had deposited the taxes.
  • Denial of credit merely because of incorrect minor head classification was held to be unfair, illegal, and contrary to the objective of the DTVSV Act.
  • The Court emphasized that technicalities cannot defeat substantive rights.
  • It held that software limitations cannot be used as a ground to deny legitimate relief.
  • The Court directed the respondents to:
    • Correct the payment heads
    • Grant credit for taxes deposited
    • Issue revised Forms 3 within four weeks
    • Allow petitioners to file Forms 4 thereafter

Important Clarification by Court

The Court made a significant observation:

Technology is intended to facilitate transactions and cannot be used to defeat legal rights.

It further clarified that software must be adapted to legal requirements, not vice versa, reinforcing taxpayer protection against procedural rigidity.

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

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