The Supreme Court recently addressed the imposition of an incorrect surcharge on the petitioner’s income tax liability. The case arose from a demand made by the Central Processing Centre ( CPC ) for Assessment Year ( AY ) 2022-2023, where the petitioner was charged a surcharge of ₹2.01 crore on an income of ₹1.57 crore, which led to a dispute.
However, during the proceedings, it was revealed that a similar issue had arisen in the previous Assessment Year ( AY 2021-2022 ), where the High Court had ruled in favor of the petitioner. In that case, the Revenue had agreed to remit ₹1.33 crore of excess surcharge, thus resolving the dispute.
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In the current case for AY 2022-2023, the learned counsel for the Revenue informed the Court that the excess surcharge had been rectified, and the amount was remitted to the petitioner on June 6, 2024, effectively resolving the ongoing litigation. However, while this resolved the dispute for AY 2022-2023, a new demand was raised during the proceedings for AY 2023-2024, where a similar surcharge issue occurred, demanding ₹62.85 lakh.
The counsel for the Revenue admitted that the persistent error was due to a technological flaw in the CPC’s system, which automatically calculated and raised the demand based on an incorrect surcharge rate. The Court expressed its concern that this technological issue could not serve as a justification for harassing taxpayers repeatedly.
The bench, comprising Justice Pamidighantam Sri Narasimha and Justice Sandeep Mehta, directed the Revenue to immediately address the technological error by upgrading the CPC software or taking other necessary actions to prevent such mistakes in the future.
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The Supreme Court also emphasized that taxpayers should not suffer due to recurring administrative or technological lapses.
The Supreme Court disposed of the Special Leave Petition, noting that the issue for AY 2022-2023 had been resolved. However, it directed the Revenue to withdraw the incorrect surcharge for AY 2023-2024 within six weeks and urged the Central Board of Direct Taxes ( CBDT ) to take necessary steps to rectify the software to avoid similar errors in the future.
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