BREAKING: PIL filed to challenge Section 87A rebate denial and unfair demand raised by Government

A Public Interest Litigation (PIL) has been filed to address the critical concern raised by numerous taxpayers and CAs regarding the rebate under Section 87A under the new tax regime. Due to a flaw in the government’s tax utility, which enabled the rebate until July 5th, numerous demand notices were issued, generating confusion and excessive hardship.

The PIL, which has now been filed before the Gujarat High Court, claims that the arbitrary disallowance of the rebate and the issue of demand notices are illegal. The matter in question will soon be scheduled for its first hearing.

This PIL, filed by CA Chintan N. Patel and represented by Advocate CA Rutvij Patel, seeks to provide relief to thousands of impacted taxpayers.

Facts of the Case

The present petition under Article 226 of The Constitution of India is being filed by way of public interest litigation and the petitioner has no personal interest in the same except the fact that some of the persons at large of the nation, including the clients of the petitioner, may also comprise of the class of persons deriving benefits from this petition and who are going to be benefited due to effective orders that may be passed in this petition. The petition is being filed in the interest of the class of the assessees, residing all over India, who are eligible to obtain the benefit of the rebate u/s 87A of the Income Tax Act, 1961. Such assessees are mainly persons belonging to the middle-class segment of the nation, for whom it is difficult to undertake a recourse under law due to financial constraints qua an amount of demand likely to be lesser than the expenses to be incurred.

It is stated that w.e.f. 5th July, 2024 the respondents have denied the benefit of rebate u/s 87 A which is otherwise available to the people at large. By this petition the petitioner seeks to challenge the impugned action; which is completely high handed, illegal, arbitrary, irrational, illogical and unjust; of the respondents of not allowing the rebate u/s 87A of the Act, on the income attracting special rates of tax, to the people at large/affected assessees in contravention of the law for the Income Tax Returns filed for A. Y. 2024-25 relevant to the F. Y. 2023-24.

In the Income Tax Act, 1961 (Hereinafter referred to as “the Act”), section 87 has been amended w.e.f. 01/04/2014 vide Finance Act, 2013 enabling the rebate to be allowed in computing Income Tax.

It is also stated that in furtherance thereof, Section 87A was also inserted w.e.f. 01/04/2014 vide Finance Act, 2013 under the title “Rebate of income­tax in case of certain individuals.”.

It is stated that section 87 A aims to provide relief, from paying taxes to the assessees who are resident individuals and who fulfil other conditions of the said section.

Grounds of Interim Relief

In spite of representations made by multiple people/organisations/institutes/ICAI, the respondents have chosen not to pay any heed towards the economic loss, sense of injustice and hardship being caused to the people at large/affected assessees. The people at large/affected assessees cannot engage in to lengthy litigation even up to the stage of CIT(A) for the meager amount of demand raised by the respondent department. Hence, the impugned action of the respondent is causing the people at large/affected assessees to accept their fate as it is which is against the spirit of the law. Thus, the impugned action of the respondents is required to be stayed with immediate effect.

It is stated that though the due date of filing Income Tax Returns for certain Resident individuals was 31/07/2024, there are many assessees who are filing their Income Tax Returns belatedly. Due to the impugned action of the respondents, they will be put to face economic loss, a sense of injustice and hardship as well. Thus, the impugned action of the respondents is required to be stayed with immediate effect.

It is also stated that the due date for filing income tax Returns was of 30/09/2024 for certain Resident Individuals. If the respondents are allowed to continue processing Returns of Income as per their impugned decision, these taxpayers will also be put to face economic loss, a sense of injustice and hardship. Thus, the impugned action of the respondents is required to be stayed with immediate effect.

It is stated that if the impugned action is not stayed, there will be tax demand of small amounts and if this Hon’ble court holds the action of respondents as illegal, being contrary to statutory provisions etc., it will be very difficult for an ordinary common man /citizen to claim refund and even for allowing that refund, the government machinery will be involved and there will be waste of public money and time which is against the national interest and hence prima facie case appears.

Request made by Petitioner

That this petition may kindly be admitted and allowed.

That it may be held that the impugned action of the respondents, of not allowing the rebate u/s 87 A of the Act on the tax calculated at special rates of income (Other than tax calculated on the income referred to section 112A), is absolute high handed, illegal, arbitrary, irrational and illogical, in violation of the Article 14 of the Constitution of India and hence, untenable in law.

That the impugned action of the respondents; of modifying the Income Tax Return filing utility in such a manner that it denies the rebate u/s 87A on the tax calculated at special rates of income (Other than tax calculated on the income referred to section 112A); be held as absolutely high handed, illegal, arbitrary, irrational and illogical and further, such action be quashed and set aside.

That the impugned action of the respondents; of issuing demand notices to the people at large /affected assessees by disallowing the rebate u/s 87 A on the tax calculated at special rates of income (Other than tax calculated on the income referred to section 112A); be held as absolutely high handed, illegal, arbitrary, irrational and illogical, in violation of the Article 14 of the Constitution of India and further, such action be set aside and quashed.

This Hon’ble Court may be pleased to issue a writ of mandamus or any other appropriate writ, order and direction to the respondents directing them to grant the benefit of the rebate u/s 87A on the tax calculated at special rates of income (Other than tax calculated on the income referred to section 112A) to all of the assessees whose Returns of Income are to be processed in future.

That this Hon’ble court may be pleased to issue a writ of mandamus or any other appropriate writ, order and direction to the respondents directing them to grant the benefit of the rebate u/s 87 A; on the tax calculated at special rates of income (Other than tax calculated on the income referred to section 112A); to all of the assessees who have been issued intimations u/s 143(1) raising demand due to the subject matter, on their request to reprocess the Income Tax Return.

That this Hon’ble Court may be pleased to issue a writ of mandamus or any other appropriate writ, order and direction to the respondents directing them to modify the tax filing utility in such a manner that the benefit of the rebate u/s 87 A; on the tax calculated at special -rates of income (Other than tax calculated on the income referred to section 112A); is made available as per the law.

This Hon’ble Court may be pleased to issue a writ of mandamus or any other appropriate writ, order and direction to the respondents directing them to allow people at large/affected assessees to rectify their Income Tax Returns in accordance with the provision of law interpreted by this Hon’ble Court if, during the pendency of this petition, the time limit to rectify the Income Tax Return has passed.

Pending admission, hearing and final disposal of this petition, respondents be directed to declare the pendency of this petition and order, if any, passed by this Hon’ble Court, on their website for the knowledge of the people at large/affected assessees.

Your Lordships may kindly be pleased to pass any such other and/or further orders that may be deemed fit, just and proper, in the facts and circumstances of the present case and in the interest of justice of people at large/ affected assessees.

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