Facts of the Case

  • Petitioners filed declarations under Forms 1 and 2 on 26 March 2021.
  • While filing, they inadvertently excluded the interest component from the declared amount.
  • The department issued Form-3 on 22 April 2021, but denied credit of taxes already paid, citing mismatch issues.
  • Petitioners submitted representations requesting rectification and credit adjustment.
  • Their request was rejected on the ground that tax was deposited under minor head “200” instead of “400.”
  • Due to this mismatch, the system did not allow filing of Form-4, blocking completion of the scheme.

Issues Involved

  1. Whether credit of taxes paid can be denied due to a technical error in challan head classification?
  2. Whether procedural/technical defects override substantive rights under the DTVSV Scheme?
  3. Whether software limitations can be a valid ground to deny statutory benefits?

Petitioner’s Arguments

  • Taxes had already been deposited, and denial of credit was unjustified.
  • Error in challan head was inadvertent and purely technical.
  • Authorities failed to rectify Form-3 despite representations.
  • The system error prevented filing of Form-4, thereby defeating the objective of the DTVSV Scheme.

Respondent’s Arguments

  • The Assessing Officer faced technical limitations in correcting challan codes through the system.
  • If software did not permit correction, relief may not be feasible.

 Court’s Findings / Observations

  • There was no dispute that taxes were actually paid by the petitioners.
  • Denial of credit due to wrong minor head was hyper-technical, unfair, and contrary to the intent of the DTVSV Act.
  • The Court emphasized that:

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

  • Software constraints cannot override statutory rights of taxpayers.

 

Court Order / Final Decision

  • Respondents were directed to:
    • Correct challan/payment head entries
    • Grant credit of taxes already deposited
    • Issue revised Form-3 within four weeks
  • Petitioners were allowed to:
    • File Form-4 within two weeks thereafter
  • All writ petitions were disposed of with directions. 

Important Clarification

  • Substantive compliance prevails over procedural/technical defects.
  • Taxpayer rights cannot be curtailed due to software limitations.
  • The judgment reinforces the principle that beneficial legislation like DTVSV must be interpreted liberally.

Sections Involved

  • Direct Tax Vivad se Vishwas Act, 2020
  • Relevant provisions relating to:
    • Filing of Forms 1, 2, 3, 4 & 5 under DTVSV Scheme
  • Income Tax Act, 1961 (procedural compliance relating to tax payments & 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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