A number of taxpayers have taken to X (formerly Twitter) to express frustration over receiving Income Tax intimation orders for demands from the Income Tax Department despite the online filing utility tool permitting the rebate under Section 87A on special rate incomes.
The issue came to light when several individuals reported discrepancies between the rebate calculations in the e-filing system and the final processing by the Centralized Processing Center (CPC) of the Income Tax Department leading to the disputed orders.
Read More: Budget 2025: New S. 87A Rebate Threshold Limit, Proposed Changes, Applicability and the Catch
CA Himank Singla (@CAHimankSingla) posted a detailed thread questioning the Income Tax Department’s stance on the Section 87A rebate for Assessment Year (AY) 2024-25. According to his tweet, many taxpayers received demand intimations on February 24, 2025, where the rebate under Section 87A, despite being applied in the utility tool, was not considered during processing.
Urging the Income Tax Department to clarify whether the rebate is applicable to special rate income or whether the orders are the result of an issue in the processing system, CA Himank Singla’s concerns were resonated by other X users as well.
The ambiguity was recently addressed by the Bombay High Court in the case of “The Chamber of Tax Consultants v. Director General of Income Tax (Systems)“, where the court explicitly upheld that the rebate applies to total tax liability, including special rate income, unless expressly excluded by law. The court further directed the Central Board of Direct Taxes (CBDT) to ensure the e-filing utility reflects the correct interpretation and that previously disallowed claims are reviewed for refunds.
Despite this ruling, users have reported that the Income Tax filing system continues to allow rebate claims during submission, but later disregards them in final processing, leading to tax demands. Many affected taxpayers are now left in limbo, unsure whether to challenge the demand orders or wait for a potential rectification by the authorities. Some users in the thread pointed out that they had raised grievances with the Centralized Processing Center (CPC) and Central Board of Direct Taxes (CBDT), but responses remained unclear.
A contrary opinion was shared by X User @rajat_solanki who stated that the High Court Ruling merely averred that the CPC cannot deny filing of rebate in Income Tax Returns but Courts have still required the matter to be discussed in terms of both sides.
There is no doubt that the Income Tax Department should align its processing mechanism with the judicial ruling to prevent unnecessary tax disputes. If the issue is left unaddressed, it could lead to a barrage of appeals and rectification applications.
While the system undertakes another burden, we are required to wait and watch whether the CBDT will issue a clarification or corrective action to resolve the matter.
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