Supreme Court Quashes HC’s Direction to Modify Tax Software in Income Tax Case

The Supreme Court quashed the Gujarat High Court’s Direction asking the CBDT to update its software in the case of Income Tax Assessing Officer (Baroda) Vs Shobhan Shantilal Doshi.

The Revenue filed an appeal related to a decision by the Gujarat High Court, where relief was granted to Shobhan Doshi, a taxpayer. However, the High Court had also issued directions to the Central Board of Direct Taxes (CBDT) to modify its software so that no demand would be raised in the future for similar cases.

The revenue opposed this decision, arguing that the software changes will result in wrongly ignoring the genuine tax demands. They stated that some cases require manual verification, especially when the TDS is deducted from payment but has not been deposited to the government. They argued that the software will not point out the cases where the wrong TDS claim has been made.

The Supreme Court agreed with the Income Tax Department’s concern that the “technology is only meant for assistance and data processing, and not for adjudication of cases“. Therefore, it set aside the software modification directions issued by the Gujarat High Court.

The Supreme Court also clarified that the merits of the case were not challenged by the revenue, and the relief given to the respondent-assessee will remain unaffected.