TaxTMI 
TaxTMI 
2020 (5) TMI 27
X X X X Extracts X X X X
X X X X Extracts X X X X
....: Vodafone Cellular Ltd., Vodafone Digilink Ltd., Vodafone East Ltd. and Vodafone South Ltd. got merged in VMSL. b) By second scheme of amalgamation, two other group entities: Vodafone Spacetel Ltd. and Vodafone West Ltd. got merged in VMSL w.e.f. 01.04.2012. c) While the proceedings in the instant case were pending, by scheme of arrangement Formulated by the Order dated 19.1.2018 passed by National Company Law Tribunal, Mumbai and order dated 11.1.2018 by National Company Law Tribunal, Ahmedabad. between VMSL and Idea Cellular Ltd. Vodafone Idea Ltd. - the resultant company assumed all the rights and liabilities of the amalgamating/transferor companies. Most of the factual developments in the matter, as set out hereafter, were before said scheme of arrangement. B] For AY The Assessment Year 2014-15, the appellant filed Income Tax Return (ITR, for short) on 30.09.2014 claiming refund of Rs. 1532.09 Crores. On 31.08.2015, a notice under Section 143(2) of the Act The Income Tax Act, 1961 was issued to the appellant in respect of AY 2014-15. On 01.11.2015, the appellant filed ITR for AY 2015-16 claiming refund of Rs. 1355.51 Crores. A notice under Section 143(2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) The case is under compulsory scrutiny for AY 2017-18 and as per section 241A of Income Tax, Act 1961: "For every assessment year commencing on or after the 1st day of April, 2017, where refund of any amount becomes due to the assessee under the provisions of sub-section (1) of Section 143 and the Assessing Officer is of the opinion, having regard to the fact that a notice has been issued under sub-section (2) of Section 143 in respect of such return, that the grant of the refund is likely to adversely affect the revenue, he may, for reasons to be recorded in writing and with the previous approval of the Principal Commissioner or Commissioner, as the case may be, withhold the refund up to the date on which the assessment is made." Considering, pending special audit, pending scrutiny, pending demands of amount of more than 4500 crore, it will prejudicial to the interest of revenue to process the returns without completion of the pending scrutiny cases. Therefore, exercising the powers under section 143(1D) of Income Tax Act, 1961 and under Section 241A of Income Tax Act, 1961, the undersigned decline the processing of returns under Section 143(1). The abo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....was contended that after the lapse of the one year period, by reason of second proviso to Section 143 (1), the right to claim refund is vested in any assessee. Counsel argued that this is independent of the Revenue's power to issue a scrutiny notice under Section 143 (2), for which the period of limitation is longer. However, if the Assessing Officer does not issue any notice, or intimation, if the assessee can claim refund, that right is a statutorily vested one if, within the said period of one year, a reasoned order is not made under Section 143 (1D) within the said one year period." J-2] On the other hand, the submissions on behalf of the respondents were :- "19. The revenue denies allegations of deliberate omission to refund amounts aggregating to Rs. 4759.74 crores along with applicable interest and states that income tax returns were not processed under Section 143(1). The assessment years under consideration were picked up for scrutiny under Section 143(3) and there is a prima facie likelihood of a substantial demand being raised by the Income Tax Department, as has been done earlier in Vodafone's earlier case. Further, the revenue submitted that in Voda....
X X X X Extracts X X X X
X X X X Extracts X X X X
....evant statutory provisions and the decisions relied upon, the High Court observed:- "29. In the facts of the present case, the issue canvassed is on the interpretation of Section 143 (1D) of the Act. It is first necessary to refer to the statutory provisions and thereafter consider the effect of such provisions on Vodafone's request for refund for the said assessment years. On reading of the Section 143 of the Act, it is apparent that when returns are filed either under Section 139 or pursuant to a notice under Section 142(1), Section 143(1) mandates that the returns shall be processed in the manner prescribed in the clauses (a) to (e) thereof. The processing of a return thus involves determination of total income or loss, tax and interest, if any, payable and sum payable by, or the amount of refund due to the assessee. Section 143(1)(d) stipulates that an intimation shall be prepared or generated and sent to the assessee specifying the sum determined payable by, or the amount of refund due to the assessee under clause(C). Section 143 (1) (e) provides that the amont of refund due in pursuance of the determination under clause (C) shall be granted to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the facts and circumstances of the case, warrant some or all of the refund of the assessee's amounts, or if all of it needs to be withheld, whenever the assessee presses for refund. This exercise should be undertaken promptly, keeping in mind the time limit under the normal provision of Section 143(1) expires. This Court held in Tata Teleservices Ltd. (supra) and the Bombay High Court in case of Group M Media India (P) Ltd. (supra) that it would be wholly inequitable for the Assessing Officer to merely sit over the petitioner's request for refund citing the availability of time up to the last date of framing the assessment under Section 143 (3). The proper interpretation of the statute and the situation in such a case would be, the Assessing Officer should take up an expeditious disposal of the question once the assessee requests for release of the refund. ... ... ... 44. Now in this case, acknowledgement or intimation had not been sent by the Assessing Officer. There is no doubt that the period of one year indicated in the second proviso to Section 143 (1). However, Section 143 (1D) begins with a non-obstante clause that overbears that provision. Tata Teleservices (su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on of the Supreme Court in Deputy Commissioner of Income Tax v Zuari Estate Development & Investment Co Ltd. 2015 (15) SCC 248 which held that an intimation under Section 143 (1) is not to be considered as an assessment." K] On 27.12.2018 and 31.12.2018, Draft Assessment Orders in terms of Section 144 C of the Act were passed for AY 2014-15 and AY 2015-16 respectively. L] In the Special Leave Petition (from which this appeal arises) questioning the aforesaid decision of the High Court, notice was issued by this Court on 18.01.2019. In the affidavit in reply, the respondents asserted:- "7. That having extracted the relevant provisions, it would be relevant to state that the petitioner itself has made several averments before the High Court that is facing "precarious financial conditions" with an accumulated loss of Rs. 5,557 crores and debts amounting to Rs. 53,000 crores as on 31.03.2017". It is equally pertinent to state that the Respondent-Revenue had filed a counter affidavit on 3rd July, 2018 against the Writ Petition in the High Court of Delhi wherein it has been categorically averred that there are huge pending demands against the petitioner herein more than of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 1,65,14,76,430/- 1,65,14,76,430/- 2011-12 Corporate Tax Assessment u/s 143(3) 2,11,61,29,711/- 2,11,61,29,411/- Thereafter, it went on to state:- "It is also to be noted that earlier refund was withheld vide notesheet dated 23.07.2018 after due approval due to non-availability of proceeding of return facility in ITBA for AY 2017-18 which was intimated to the assessee vide letter dated 23.07.2018. In view of the above discussion there is sufficient reason to believe that issue of refund will negatively impact the interest of the revenue. Therefore, proposal for withhold the refund for AY.2017-18 was forwarded again to Pr. Commissioner of Income Tax-09, Delhi and same has been approved. Approval on note sheet was taken as well as procedure for approval through ITBA was also followed for withholding of refund which also involves approval from PCIT-09. The approval for withholding of refund u/s 241 was taken from PCIT-9 which was sent through proper channel through Addl. CIT Range 26. In view of the facts above you are hereby intimated that refund of A.Y.2017-18 in the case of M/s Vodafone Mobile Service Limited has been w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee, that is, [email protected] .. That it was in this background that the screen-shot relied upon by the assessee during the course of the hearing shows that the ITR was processed on 09.04.2019. The intimation under Section 143(1) was made on 09.04.2019 and the said intimation stated that refund determined under Section 143(1) in the said intimation has been withheld as per the proviso of Section 241A and that the refund if any will be released on completion of the assessment under Section 143(3)/144(4) as the case may be along with the interest under Section 244A and subject to adjustment of arrears demand, if any under Section 245. In view of the above, it is submitted that the CPC has adopted the due process prescribed by the ITBA-ITR Processing Instruction No.5 dated 14.12.2018. As per the said process, the refund determination is complete immediately after recommendation of the total income tax and matching of tax credits is completed at CPC system. At this stage the refund determination is communicated by CPC, Bangalore to AO through ITBA module. Once the refund is approved/withheld/blocked by the AO, CPC will complete the accounting of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on because on that date, neither the return of income was processed, nor a notice under Section 143(2) issued, warranting exercise of powers under Section 241A of the Act. On that ground alone, the Impugned Order insofar as Assessment Year 2017-18 is concerned should be set aside and the refund claimed for that year should be granted with interest...... Having admitted that the Order dated 23.07.2018 was without jurisdiction, the Respondent set up an alternate case that the time limit for processing the return of income expires on 31.03.2020 and, therefore, the proceedings for AY 2017-18 are inchoate and no direction may be issued for that year. When it was pointed out that processing has already been completed vide intimation dated 09.04.2019, the Respondent changed its stand and argued that a letter dated 14.03.2019 was issued after filing of the counter affidavit before this Hon'ble Court on 06.03.2019, seeking to again exercise powers under Section 241A of the Act. Admittedly, as per the e-filing portal of the Income Tax Department, and the intimation produced by the Respondent before this Hon'ble Court on 08.01.2020, the processing of the return for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thout prejudice to the submission that the merits of the order dated 23.07.2018 as well as order dated 14.03.2019 has never been assailed by the Petitioner before any forum, nor any arguments advance during the hearing before the High Court and that the same cannot be raised for the first time before this Hon'ble Court in an SLP, it is submitted that the AO had withheld refund in all these years for cogent and valid reasons, in the interest of the revenue, subject to final scrutiny assessment proceedings. It is submitted that the scope of judicial review against such an order where the AO has exercised his discretion would be limited and any interference can only be done if such an exercise of power is either wholly capricious or without any valid reasons." 8. The inter-relation between sub-sections of Section 143 of the Act, as the Section then stood, was subject matter of discussion by this Court in CIT v. Gujarat Electricity Board (2003) 260 ITR 84 which in turn referred to the decision of the Gujarat High Court in Gujarat Poly Avx Electronics Ltd. v. Dy. Commissioner of Income Tax (Asstt.) (1996) 222 ITR 140 Guj.. This Court observed: "5. The learned counsel appeari....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ew of several decisions including that of the apex Court. 3. As stated by the learned counsel, on filing of the return, the Assessing Officer (AO) under the new scheme for the assessment under Section 143 of the Act, had two options; i.e., (i) either to accept the return under s. 143(1) with necessary adjustments, if there is any, or (ii) to proceed to make assessment under Section 143(3) or under Section 144 by issuing notice under Section 143(2) of the Act. In the instant case, instead of accepting the return under Section 143(1) of the Act, undisputedly, the Assessing Officer issued notice under Section 143(2) of the Act on 1st December, 1994, vide Annexure C. It is contended in the petition that in continuation of the notice the Assessing Officer addressed a letter on 15th November, 1995 calling upon the assessee to attend on 27th November, 1995, vide letter Annexure C-1. The assessee's representative appeared before the Assessing Officer on 27th November, 1995 but the Assessing Officer adjourned the case to 1st December, 1995. On 1st December, 1995 there was a discussion between the representative of the assessee and the Assessing Officer. The assessee wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ions of sub-s. (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under Section 156 and all the provisions of this Act shall apply accordingly; (ii) If any refund is due on the basis of such return, it shall be granted to the assessee : Provided that in computing the tax or interest payable by, or refundable to the assessee, the following adjustments shall be made in the income or loss declared in the return, namely - (i) any arithmetical errors in the return, accounts or documents accompanying it shall be rectified; (ii) any loss carried forward, deduction, allowance or relief, which, on the basis of the information available in such return, accounts or documents, is prima facie admissible but which is not claimed in the return, shall be allowed : (iii) any loss carried forward, deduction, allowance or relief claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed. Provided further that where adjustments are made under the first p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced there, any evidence on which the assessee may rely in support of the return: Provided that no notice under this sub-section shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished. (3) On the day specified in the notice issued under sub-section (2) or as soon afterwards as may be, after hearing, such evidence as the assessee may produce and such other evidence as the AO may require on specified points, and after taking into account all relevant material which he has gathered, the AO shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him on the basis of such assessment. (4) Where a regular assessment under sub-section (3) of this section or Section 144 is made - (a) any tax or interest paid by the assessee under sub-section (1) shall be deemed to have been paid towards such regular assessment; (b) if no refund is due on regular assessment or the amount refunded under sub-sect....
X X X X Extracts X X X X
X X X X Extracts X X X X
....voked and when the claim is prima facie inadmissible or prima facie admissible, as the case may be, adjustment is to be made. The word prima facie clearly indicates that it must be first evidenced. A decision on the debatable issue is not envisaged. Issuance of notice under s. 143(2) of the Act suggests that the Assessing Officer has determined to make assessment under Section 143(3) of the Act. It is clear, looking to the language used in different sub-sections that order under Section 143(1) is a summary one and the Assessing Officer on perusal of the return, that is, computation of income, is able to accept it as it is or with necessary adjustments as indicated in sub-clause (a) of sub-section (1) of Section 143 of the Act. The submission made by learned counsel for the Revenue is that even after issuance of notice under Section 143(2) of the Act, it is permissible for the Assessing Officer to assess under Section 143(1) of the Act. One has to examine the claim on account of results of adjustments made in the income shown in the return whether it results into increase or loss declared in the return is reduced or is converted into income. If that is so it would ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n (2)." Nonetheless, the basic distinction that was noted was: the procedure under sub-section (1) was summary in nature whereas that under sub-section (2) was a regular assessment. 10. Section 143 of the Act has since then undergone considerable change. Sub-section (1) stands modified and now specifies with clarity the nature of adjustments. Sub-section (1A) contemplates processing of returns through Centralized Processing. Since we are principally concerned in the present matter with the effect and applicability of subsection (1D), the legislative history relating to said sub-section (1D) is dealt with in detail hereunder:- A) Sub-section (1D) was inserted vide Finance Act, 2012 as under:- "(1D) Notwithstanding anything contained in subsection (1), the processing of a return shall not be necessary, where a notice has been issued to the assessee under sub-section (2)" The explanatory Note to the Finance Act, 2012 relevant to the proposed insertion of sub-section (1D) was:- "Under the existing provisions, every return of income is to be processed under sub-section (1) of Section 143 and refund, if any, due is to be issued to the tax payer. Some returns....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a notice has been issued to the assessee under sub-section (2): Provided that the provisions of this sub-section shall not apply to any return furnished for the assessment year commencing on or after the day of April 2017." The concerned explanatory Note to Finance Act, 2017 was:- "59. Processing of return within the prescribed time and enable withholding of refund in certain cases. 59.1 Before amendment by the Finance Act, 2016, the provisions of sub-section (1D) of Section 143 of the Income Tax Act specify that the processing of a return shall not be necessary, where a notice has been issued to the assessee under sub-section (2) of the said section. 59.2 The said sub-section was amended vide Finance Act, 2016 and it was provided that with effect from assessment year 2017-18, processing under Section 143(1) of the Income Tax Act is to be done before passing of assessment order. 59.3 In order to address the grievance of delay in issuance of refund in genuine cases, a proviso has been inserted in Section 143(1D) of the Income Tax Act specifying that the provisions of the said subsection shall cease to apply in respect of returns furni....
X X X X Extracts X X X X
X X X X Extracts X X X X
....section (1) of Section 139; (iv) disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under Sections 10-AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or Section 80-IE, if the return is furnished beyond the due date specified under sub-section (1) of Section 139; or vi) addition of income appearing in Form 26-AS or Form 16-A or Form 16 which has not been included in computing the total income in the return: Provided that no such adjustments shall be made unless an intimation is given to the assessee of such adjustments either in writing or in electronic mode: Provided further that the response received from the assessee, if any, shall be considered before making any adjustment, and in a case where no response is received within thirty days of the issue of such intimation, such adjustments shall be made: Provided also that no adjustment shall be made under sub-clause (vi) in relation to a return furnished for the assessment year commencing on or after the 1st day of April, 2018; (b) the tax, interest and fee, if any....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble by, or the refund due to, the assessee as required under the said sub-section. (1B) Save as otherwise expressly provided, for the purpose of giving effect to the scheme made under sub-section (1A), the Central Government may, by notification in the Official Gazette, direct that any of the provisions of this Act relating to processing of returns shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in that notification; so, however, that no direction shall be issued after the 31st day of March, 2012. (1C) Every notification issued under sub-section (1B), along with the scheme made under sub-section (1A), shall, as soon as may be after the notification is issued, be laid before each House of Parliament. (1D) Notwithstanding anything contained in subsection (1), the processing of a return shall not be necessary, where a notice has been issued to the assessee under sub-section (2): Provided that the provisions of this sub-section shall not apply to any return furnished for the assessment year commencing on or after the 1st day of April, 2017. (2) Where a return has been furnished under Sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n terms of clause (b). Thereafter, in terms of clause (c), due credit to the amount of tax paid and any relief that is allowable is to be given and the net amount payable or to be refunded, is to be computed. The intimation to be generated under clause (d) is on the basis of such exercise and if any refund is due, the same has to be granted in terms of clause (e). Thus, at every stage in sub-section (1) the return submitted by the assessee forms the foundation, with respect to which, if any of the inconsistencies referred to in various sub-clauses of clause (a) are found, appropriate adjustments are to be made. On the other hand, the exercise of power under sub-section (2) of Section 143 of the Act, leading to the passing of an order sub-section (3) thereof, is to be undertaken, where it is considered necessary or expedient to ensure that the assessee: • has not understated the income, or • has not computed excessive loss, or • has not under-paid the tax in any manner. The issuance of notice and consequent proceedings are premised on any of the aforesaid three postulates. In other words, the return filed by the assessee itself calls for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... through notice under sub-section (2) of Section 143, must determine whether any refund is due and payable. If the return itself is under probe and scrutiny, such return cannot be the foundation to sustain a claim for refund till such scrutiny is not complete. Considering the nature of power exercisable under these two limbs of Section 143, the inescapable conclusion is that the processing of return under sub-section (1) of Section 143 must await the further exercise of power of scrutiny assessment under sub-sections (2) and (3) of Section 143. If the power under sub-section (2) of Section 143 of the Act is initiated in a manner known to law, there cannot be any insistence that the processing under sub-section (1) of Section 143 be completed and refund be made before the scrutiny pursuant to notice under sub-section (2) of Section 143 is over. 15. The afore-stated conclusion is fortified and strengthened by clear stipulation to that effect in sub-section (1D) of Section 143. Irrespective of some change in the text of said provision which was sought to be introduced by Finance Act 2016 and not accepted by Finance Act, 2017, the legislative intent is clear from the expression, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vincial Small Cause Courts Act, 1887 this Court observed in Vaishali Abhimanyu Joshi v. Nanasaheb Gopal Joshi (2017) 14 SCC 373 as under: "33. "Notwithstanding anything contained elsewhere in this Act" as used in Section 26(1) of the 1887 Act are words of expression of the widest amplitude engulfing the contrary provisions contained in the Act. The suit in question has been filed by the plaintiff for enforcement of his right as a licensor after allegedly terminating the gratuitous licence of the appellant. On a plain reading, Item 11 of Schedule II covers determination or enforcement of any such right or interest in immovable property. But by virtue of Section 26 sub-section (1) as applicable in the State of Maharashtra, Item 11 of Schedule II has to give way to Section 26(1) and a suit between licensor and licensee which is virtually a suit for recovery of immovable property is fully maintainable in Judge, Small Cause Court that is why the suit has been instituted by the plaintiff in the Judge, Small Cause Court claiming the right and interest in the immovable property. 35. A statutory provision containing non obstante clause has to be given full effect. This Cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ose. 20. Consequently, the submission that the intimation dated 23.07.2018 must be held to be invalid, inter alia on the ground that it was issued well after the period within which the return was required to be processed under sub-section (1) of Section 143 of the Act, must be rejected. 21. However, insofar as returns filed in respect of assessment year commencing on or after the 1st April, 2017, a different regime has been contemplated by the Parliament. Section 241-A of the Act requires a separate recording of satisfaction on part of the Assessing Officer that having regard to the fact that a notice has been issued under sub-section (2) of Section 143, the grant of refund is likely to adversely affect the revenue; whereafter, with the previous approval of the Principal Commissioner or Commissioner and for reasons to be recorded in writing, the refund can be withheld. Since the statute now envisages exercise of power of withholding of refund in a particular manner, it goes without saying that for assessment year commencing after 01.04.2017 the requirements of Section 241-A of the Act must be satisfied. 22. We will, therefore, have to see whether insofar as AY 2017-18 ....