Mumbai: In a significant relief to taxpayers, the Bombay High Court has directed the Central Board of Direct Taxes (CBDT) to extend the due date for e-filing income tax returns for taxpayers required to file by December 31, 2024.

The court has asked the CBDT to extend the deadline at least till January 15, 2025, ensuring all eligible taxpayers can claim the rebate under Section 87A of the Income Tax Act, 1961, without facing procedural hurdles.

A bench of Chief Justice DK Upadhyaya and Justice Amit Borkar passed the order while hearing a Public Interest Litigation (PIL) petition filed by The Chamber of Tax Consultants through its president Vijay Bhatt, challenging the Income Tax Department’s modifications to the utility software used for filing returns for the assessment year (AY) 2024-25.

Petitioner’s counsels Percy Pardiwala and Dharan Gandhi argued that the software update on July 5, 2024, arbitrarily disabled taxpayers from claiming the Section 87A rebate. This rebate, intended for individual taxpayers with income not exceeding Rs7 lakh, was significantly enhanced from the previous limit of Rs5 lakh under the Finance Act, 2019.

The PIL contended that the software modification violated statutory provisions and undermined the legislative intent of providing tax relief to lower and middle-income groups. It also deprived eligible taxpayers of their rights, creating confusion and eroding confidence in tax administration.

IT’s advocates Akhileshwar Sharma and Abhishek Mishra argued that the utility software aligns with statutory requirements and prevents anomalies.

However, the court questioned whether procedural changes in the software could override taxpayers’ substantive rights. It emphasized that the rebate is inherently linked to total income and tax liability and should not be restricted by administrative inefficiencies.

The court observed that statutory benefits must be implemented in line with legislative objectives. The bench directed the CBDT to issue a notification under Section 119 to extend the filing deadline observing that procedural changes that deprive taxpayers of such benefits ‘warrant judicial intervention to rectify the anomaly and ensure justice’.

“Tax authorities must act as facilitators to help taxpayers comply with the law rather than creating impediments through technical or procedural hurdles. Ensuring fairness, equity, and transparency in tax administration is crucial for upholding public confidence in the system,” the bench emphasised.

It also suggested allowing taxpayers who filed returns without claiming the rebate to file revised returns under Section 139(5) by December 31, 2024.