Facts of the Case

The petitioners, including Celerity Infrastructure Pvt. Ltd. and other associated entities, filed declarations under the DTVSV Act through Forms 1 and 2 on 26 March 2021. However, while filing, they inadvertently excluded the interest component from the amounts paid through challans.

Subsequently, the respondents issued Forms 3 dated 22 April 2021, but did not grant credit for the taxes deposited, citing “mismatch” and, in certain cases, providing no reasons.

The petitioners made representations seeking rectification and attempted to file Form 4, but the system rejected the filings due to technical errors relating to deposit dates.

Later, the department rejected their request on the ground that taxes were deposited under minor head “200” instead of “400”, thereby denying credit.

Issues Involved

  1. Whether tax credit can be denied under the DTVSV Act due to incorrect minor head classification (200 instead of 400).
  2. Whether technical/system limitations can override substantive taxpayer rights.
  3. Whether the respondents were justified in rejecting rectification of Form 3 despite actual tax payment.

Petitioner’s Arguments

  • The petitioners had actually deposited the tax, and denial of credit was unjustified.
  • The error in minor head classification was inadvertent and procedural, not substantive.
  • The rejection of Form 4 due to system error was arbitrary.
  • The objective of the DTVSV Act is dispute resolution, and hyper-technical grounds defeat legislative intent.

 Respondent’s Arguments

  • The department contended that challan correction was not feasible at the Assessing Officer level due to software constraints.
  • It was argued that if the system does not permit correction, relief cannot be granted.

Court’s Findings / Judgment

  • The Court observed that there was no dispute regarding actual tax payment by the petitioners.
  • Denial of credit merely because of incorrect minor head classification was held to be:
    • Unfair
    • Illegal
    • Contrary to the objective of the DTVSV Act, 2020
  • The Court emphasized that:

Technology cannot be used to defeat legal rights of taxpayers.

  • It was held that procedural errors cannot override substantive compliance, especially in beneficial legislation.

 Court Order / Directions

    • Correct the payment heads (minor head correction)
    • Grant credit of taxes deposited
    • Issue revised Form 3 within four weeks
  • Petitioners were allowed to:
    • File Form 4 within two weeks thereafter
  • All writ petitions were accordingly disposed of with directions. 

Important Clarification by the Court

  • Software limitations cannot override statutory rights.
  • Taxpayer rights must guide system design—not vice versa.
  • Beneficial schemes like DTVSV must be interpreted liberally and purposively.

Sections Involved

  • Direct Tax Vivad se Vishwas Act, 2020 (DTVSV Act)
  • Forms 1, 2, 3, 4, and 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:2742-DB/MMH19052022CW85902022_175625.pdf

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