Facts of the Case

The petitioners, including Celerity Infrastructure Pvt. Ltd. and various ATS group entities, filed declarations under the Direct Tax Vivad se Vishwas Act, 2020 (DTVSV Act) through Forms 1 and 2 on 26th March 2021. However, while filing, they inadvertently declared amounts excluding the interest component.

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

The petitioners filed representations seeking rectification of Forms 3 and attempted to file Forms 4. However, the system rejected the filings due to technical errors such as incorrect deposit dates.

Later, the authorities rejected the petitioners’ request on the ground that taxes were deposited under the wrong minor head (“200” instead of “400”).

Issues Involved

  1. Whether credit of taxes paid can be denied under the DTVSV Act due to technical errors such as incorrect minor head classification.
  2. Whether procedural or software limitations can override substantive rights of taxpayers.
  3. Whether the Income Tax Department is obligated to rectify Forms 3 to reflect actual tax payments.

Petitioner’s Arguments

  • The petitioners contended that taxes had already been duly deposited, and denial of credit was unjustified.
  • The error in mentioning the minor head was inadvertent and purely technical.
  • The objective of the DTVSV Act is to resolve disputes and not to deny legitimate claims on hyper-technical grounds.
  • The system-generated errors should not prejudice the substantive rights of the taxpayers.

Respondent’s Arguments

  • The Revenue submitted that correction of challan codes was not feasible at the Assessing Officer level due to software limitations.
  • It was argued that unless the system permits such correction, granting relief would not be possible.

Court’s Findings / Order

The Delhi High Court held:

  • There was no dispute that the petitioners had actually deposited the taxes.
  • Denial of credit solely on the ground that payment was made under an incorrect minor head is unfair, illegal, and contrary to the objective of the DTVSV Act.
  • Technical or software-related limitations cannot override legal rights.

The Court emphasized that:

Technology is meant to facilitate legal rights, not defeat them.

Accordingly, the Court directed:

  • The respondents to correct the payment heads.
  • Grant credit for taxes deposited.
  • Issue revised Forms 3 within four weeks.
  • Petitioners to file Forms 4 thereafter within two weeks.

Important Clarification

The Court clarified that:

  • Procedural or technical defects, including incorrect challan head classification, cannot be used to deny substantive tax relief.
  • Software constraints cannot be a valid ground to deny statutory benefits.
  • Authorities must adapt systems to ensure compliance with taxpayer rights.

Sections Involved

  • Direct Tax Vivad se Vishwas Act, 2020
  • Forms 1, 2, 3, 4 & 5 under DTVSV Scheme
  • Principles of Natural Justice
  • Administrative Law – Doctrine against arbitrariness

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

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