Facts of the Case

The petitioners, including Celerity Infrastructure Pvt. Ltd. and various ATS group companies, filed declarations under the Direct Tax Vivad Se Vishwas Act, 2020 (DTVSV Act) through Forms 1 and 2 on 26th March 2021. However, while submitting the declarations, the petitioners inadvertently excluded the interest component from the amounts paid through challans.

Subsequently, the respondents issued Forms 3 on 22nd April 2021, but did not grant credit for the taxes deposited, citing a “mismatch” and, in some cases, without assigning any reasons.

The petitioners filed representations seeking rectification of Forms 3 and attempted to file Forms 4. However, the system rejected the filing due to a technical error stating that the “date of deposit cannot be before the filing date of Forms 1 and 2.”

Later, the respondents rejected the representations on the ground that the tax had been deposited under minor head ‘200’ instead of ‘400’, thereby denying credit.

Issues Involved

  1. Whether tax credit can be denied under the DTVSV Act due to an incorrect minor head classification in challans.
  2. Whether technical/system limitations can override substantive rights of taxpayers.
  3. Whether the rejection of rectification requests was arbitrary and contrary to the object of the DTVSV Act.

Petitioner’s Arguments

  • The petitioners had actually deposited the taxes, and denial of credit was unjustified.
  • The error in mentioning the minor head (‘200’ instead of ‘400’) was inadvertent and procedural, not substantive.
  • The rejection of Forms 4 due to system errors was arbitrary and beyond the control of the petitioners.
  • The objective of the DTVSV Act is to resolve disputes and grant relief, not to deny benefits on technical grounds.

Respondent’s Arguments

  • The respondents contended that correction of challan codes was not possible at the Assessing Officer level due to software limitations.
  • It was argued that if the system does not permit correction, granting relief would not be feasible.

Court’s Findings / Order

  • The Court observed that there was no dispute regarding payment of taxes by the petitioners.
  • The denial of credit merely due to incorrect minor head classification was held to be:
    • Unfair
    • Illegal
    • Contrary to the objective of the DTVSV Act, 2020
  • The Court emphasized that substantive rights cannot be defeated by technical or procedural errors.
  • It further held that software limitations cannot override legal rights, relying on the principle that technology must facilitate, not obstruct justice.

Final Directions

  • Respondents were directed to:
    • Correct the challan payment heads
    • Grant credit for taxes deposited
    • Issue revised Forms 3 within four weeks
  • Petitioners were permitted to:
    • File Forms 4 within two weeks thereafter

Important Clarification

The Court clarified that:

  • Technical defects in tax payment classification cannot deprive taxpayers of legitimate benefits.
  • Administrative or software constraints must be rectified to uphold taxpayer rights.
  • The DTVSV Act must be interpreted in a purposive manner to achieve dispute resolution rather than defeat claims on hyper-technical grounds.

Sections / Law Involved

  • Direct Tax Vivad Se Vishwas Act, 2020
  • Forms 1, 2, 3, 4 & 5 under DTVSV Scheme
  • Income Tax Act, 1961 (procedural compliance relating to tax payments and challans)

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

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