A Public Interest Litigation ( PIL ) has been filed before the Gujarat High Court to address the concerns raised by taxpayers and Chartered Accountants regarding the rebate under Section 87A in the new tax regime. Due to an issue with the government’s tax utility, which allowed the rebate until July 5th, many demand notices were issued, causing confusion and unnecessary hardship.
The PIL, now before the Gujarat High Court, challenges the arbitrary disallowance of the rebate and the issuance of demand notices, deeming these actions illegal. The case is expected to have its first hearing soon.
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This petition, filed under Article 226 of the Indian Constitution, is a public interest litigation. The petitioner, having no personal interest, represents a class of taxpayers, mainly from the middle class, who stand to benefit from the potential outcome. These taxpayers are eligible for the Section 87A rebate under the Income Tax Act, 1961, but face difficulties due to financial constraints that make legal recourse impractical for small tax demands.
From July 5, 2024, the authorities began denying the rebate under Section 87A, which had previously been available. The petition challenges this action as arbitrary, illegal, and unjust, as it denies the rebate on income subject to special tax rates, contrary to law, for returns filed for the assessment year 2024-25.
Section 87A, introduced by the Finance Act, 2013, provides a tax rebate for certain individuals meeting specified conditions. The petition argues that the arbitrary denial of this rebate violates the law, particularly affecting middle-class taxpayers.
Despite several representations, the authorities have ignored the economic harm and injustice caused to affected taxpayers. The petition argues that taxpayers are being forced to accept wrongful tax demands, as they cannot afford prolonged litigation for small amounts. Therefore, the petition seeks an immediate stay on the respondents’ actions to prevent further financial loss.
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Additionally, the petition notes that some taxpayers are still filing returns after the July 31, 2024, deadline. The denial of the rebate for these returns would also result in economic hardship, necessitating a stay on the government’s actions. Without a stay, taxpayers could face small tax demands, and if the court later rules in their favor, refund claims would become administratively burdensome.
1. Declare the respondents’ actions, including the denial of the Section 87A rebate for tax calculated at special rates, as illegal and unconstitutional under Article 14 of the Constitution.
2. Quash the demand notices issued due to the disallowance of the rebate under Section 87A of the Income Tax Act.
3. Direct the respondents to modify the tax filing utility to allow the rebate under Section 87A as per the law.
4. Allow affected taxpayers to rectify their tax returns if the time limit expires during the petition’s pendency.
5. Mandate that the respondents publish details of the pending petition on their website for public awareness.
The petitioner also requested that any orders passed by the court be disseminated publicly for the benefit of affected taxpayers.
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A scanned copy of the petition can be accessed by clicking the blue button below.
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