AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (5) TMI 27
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....ne 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) of the Act was issued by the Department on 16.03.2016 in respect of AY 2....
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.... "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 above decision has been taken after taking into cognizance the order of Honorable High Court of Delhi in TATA TELESERVICES LIMITE....
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....l 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 Vodafone's own case for the AY 2011-12 wherein the returned loss was Rs. 33,93,397 and subsequently, the income determined by the Assessing Officer was Rs. 546,64,25,250/-. .....
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..... 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 the assessee. A reading of proviso to Section 143 (1) reveals that it mandates that the intimation as provided in Section 143 (1) (d) should be issued before the expiry of one year from the end of the financial year in whi....
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....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 (supra) and the Bombay High Court ruling in Group M Media India (supra) state that the fact that a regular assessment is resorted to, does not ipso facto mean that in every case, the Assessing Officer has to refuse refunds or there is an automatic bar to r....
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....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 Rs. 5000 Crores. The contents of the Counter Affidavit before the High Court may be treated as a part and parcel of the present Affidavit. It has been stated that multiple issues on which addition have been made giving rise to the demand liabilities, and several of such issues are also recurr....
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.... 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 withhold u/s 241A of the Income Tax Act, 1961 till the completion of scrutiny proceedings u/s 143(3) or 144C r.w.s. 143(3) of the Income Tax Act, 1961." N] Objections raised by the appellant against the Draft Assessment Orders issued on 27.12.2018 and 31.12.2018 were disposed of on 20.09.2019. Thereafter, Final Assessment Orders under Section 143 (3) of the Act were passed on 31.10.2019 for A....
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....tion 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 the record and act according to other processes involved like Section 245 of I.T. Act i.e. adjustment of refund determined against tax arrears due." 5.1 One more development must also be adverted to. In the hearing dated 08.01.2020, reliance was placed on the order dated 28.12.2019 passed in connection with M/s Idea Cellullar Ltd. It was therefore observed by this Court: "During the course of hearing, Mr. Zoheb Hossain, learn....
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....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 AY 2017-18 was completed only on 09.04.2019 and, therefore, the alleged exercise of power under Section 241A on 14.03.2019 is without jurisdiction since it suffered from the same vice as the Order dated 23.07.2018, i.e. refunds could not have been withheld under Section 241A prior to processing of the return of income...... Without prejudice to the submission that the Order dated 23.07.2018 issued for the AYs 2014-15 to 2016-17 was without jurisdiction, having been issued beyond limitation and the Orde....
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.... 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 appearing for the respondent have pointed out that in a number of judgments several High Courts have consistently taken the view that once regular assessment proceedings have commenced under Section 143(2) of the Income Tax Act, 1961, it is a limitation on the jurisdiction of the assessing officer to commence proceedings under Section 143(1)(a) of the Act. 6. Even, otherwise, the view taken by the Gujarat High Court seems to be correct on principle. There is no dispute that Section 143(1)(a) of the Act enacts a summary procedure for quick collection of tax and ....
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....er 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 was called upon to make clarifications regarding various points and was also asked to clarify as to how the depreciation as claimed should not be disallowed and why interest should not be taxed as receipt on the revenue account. It is contended by the assessee that the Assessing Officer was in the midst of the proceedings under Section 143(3) of the Act. However, Assessing Officer issued intimation/order under Section 143(1)(a) of the Act, vide Annexure D, rejecting the return of income as computed by the assessee resulting in disallowing depreciation as claimed and by taxing the interest inc....
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....arried 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 proviso, an intimation shall be sent to the assessee, notwithstanding that no tax or interest is found due from him after making the said adjustments : Provided also that an intimation for any tax or interest due under this clause shall not be sent after the expiry of two years from the end of the assessment year in which the income was first assessable....... xxx xxx xxx xxx (1A)(a) Where as a result of the adjustments made under the first proviso to clause (a) of sub-section (1) - (i) the income declared by any person in the return is increased; or (ii) the loss declared by such person in the return is reduced or is converted into income, The Assessing Officer shall....
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....ome 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-section (1) exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply accordingly........." 8.1.2 Thereafter, the issue was considered thus:- "8. It is thus clear that the Assessing Officer even after issuing intimation after making adjustments as per provisions of s. 143(1) of the Act can call upon the assessee, if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner. Once this opinion is formed then the Assessing Officer will have to serve on the assessee a notice under Section 143(2) of the Act requiring him to produce evi....
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....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 entail further tax at the rate of 20% on the income so increased or a further tax of 20% on the loss so reduced as if it is income and assessee will be charged as per sub-section (1A) of Section 143 of the Act. With a view to see that taxpayers in the return furnish details with accuracy and correctness this provision is made. The assessee is aware about the provision and should take care that no incorrect statement is made with a view to save additional tax which may be imposed on him. However, when the Assessing Officer is not assessing the correctness about the claim which is either prima facie admissible or prima facie inadmissible, and Assessing Officer with a view to ensure that the assessee has not computed excessive loss or has not underpaid tax in any manner has issued notice under Section 143(2) of the....
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....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 of income are also selected for scrutiny which may lead to raising a demand for taxes although refunds may have been issued earlier at the time of processing. It is therefore proposed to amend the provisions of the Income Tax Act to provide that processing of return will not be necessary in a case where notice under sub-section (2) of Section 143 has been issued for scrutiny of the return." B) Finance Act, 2016 contemplated substitution of sub-section (1D) and insertion of a proviso with effect from 01.04.2017 as follows: "(1D) Notwithstanding anything contained in subsection (1), the processing of a return shall not be necessary before the expiry of the period specified in the second proviso to sub-section (1), where a notice has been issued to the assessee under sub-section (2): Provided that such return shall not be processed before the issuance o....
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....rievance 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 furnished for assessment year 2017-18 and onwards. 59.4 However, to address the concern of recovery of revenue in doubtful cases, a new section 241A has been inserted in the Income Tax Act to provide that, for the returns furnished for assessment year commencing on or after 1st April, 2017, where refund of any amount becomes due to the assessee under Section 143(1) of the Income Tax Act and the Assessing Officer is of the opinion that grant of refund may adversely affect the recovery of revenue, he may, for the reasons recorded in writing and with the previous approval of the Principal Commissioner or Commissioner, withhold the refund up to the date on which the assessment is made. 59.5 Applicability: These amendments take effect from 1st April, 2017 and accordingly apply to returns furnished for assessment year 2017-18 and subsequent years." D) Finance Act, 2017 also inserted Section 241A in the Act as under:- "241A. Withholding of refund in certain case....
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....ished for the assessment year commencing on or after the 1st day of April, 2018; (b) the tax, interest and fee, if any, shall be computed on the basis of the total income computed under clause (a); (c) the sum payable by, or the amount of refund due to, the assessee shall be determined after adjustment of the tax, interest and fee, if any, computed under clause (b) by any tax deducted at source, any tax collected at source, any advance tax paid, any relief allowable under an agreement under Section 90 or Section 90-A, or any relief allowable under Section 91, any rebate allowable under Part A of Chapter VIII, any tax paid on self-assessment and any amount paid otherwise by way of tax, interest or fee; (d) an intimation shall be prepared or generated and sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to, the assessee under clause (c); and (e) the amount of refund due to the assessee in pursuance of the determination under clause (c) shall be granted to the assessee: Provided that an intimation shall also be sent to the assessee in a case where the loss declared in the return by the assessee is adjusted but no tax, interest ....
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....ction 139, or in response to a notice under sub-section (1) of Section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it 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, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer 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 six months from the end of the financial year 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 Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total in....
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..... The guiding principle is to ensure that the income is not under-stated or the loss is not over-stated, or the tax is not under paid in any manner. Upon issuance of notice, the assessee is entitled to produce evidence in support of his case. After hearing the assessee and considering the evidence so produced, by an order in writing, assessment of total income or loss is to be made. 13. The nature of exercise of power under sub-section (1) as against that under sub-sections (2) and (3) is thus completely different. In the former case, the matter is processed, only to check whether any apparent inconsistencies are evident on the face of the return and connected material which may call for any adjustment while in the latter case, the matter is scrutinized after taking into account such evidence as the assessee may produce. The exercise in the latter case is to ensure that there is no understating of income or overstating of loss or underpayment of the tax in any manner. In other words, the veracity of the return is checked threadbare rather than considering mere apparent inconsistencies from the return. Thus, the nature of power under these two provisions, as found by this Court in ....
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....a notice has been issued to the assessee under sub-section (2)" and by use of non-obstante clause. Though the period for which it would not be necessary to process the return was sought to be specified by Finance Act, 2016, mere absence of such period in the provision as it stands today, makes no difference. The above quoted portion from the provision and use of non-obstante clause indicate with sufficient clarity the intent of the Parliament that in cases where notice under sub-section (2) is issued and proceedings are initiated, the processing of a return under sub-section (1) shall not be necessary. 16. The expression "shall not be necessary" is used in various statutes and even in the Constitution of India. This expression is used in the first proviso to Article 311(2) and in proviso to Article 320(3) of the Constitution of India. Some of the cases in which similar expression occurring in statutes was taken into account and effect was given to its plain language are:- i) Proviso to Section 63(3) of the Motor Vehicles Act, 1939 - in Mohd. Ibrahim v. The State Transport Appellate Tribunal, Madras. (1970) 2 SCC 233 ii) Order XXX Rule 4 of the Code of Civil Procedure in Sohan....
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.... "11. ... It is well known that a non obstante clause is a legislative device which is usually employed to give overriding effect to certain provisions over some contrary provisions that may be found either in the same enactment or some other enactment, that is to say, to avoid the operation and effect of all contrary provisions. Thus the non obstante clause in Section 70, namely, "notwithstanding anything contained in that Act" must mean notwithstanding anything to the contrary contained in that Act and as such it must refer to the exempting provisions which would be contrary to the general applicability of the Act...." 18. In the premises, we hold that in respect of Assessment Years ending on 31st March 2017 or before, if a notice was issued in conformity with the requirements stated in sub-section (2) of Section 143 of the Act, it shall not be necessary to process the refund under subsection (1) of Section 143 of the Act and that the requirement to process the return shall stand overridden. 19. We must now deal with the issue whether any intimation is required to be given to the assessee that because of initiation of proceedings pursuant to notice under sub-section (2) of Sec....
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....b-section (1) of Section 143 of the Act, the required intimation under said sub-section must be given before the expiry of one year from the end of the financial year in which the return is made. In respect of AY 2017-18, the return having been filed on 25.11.2017, period available in terms of said second proviso was upto 31.03.2019, without taking into account the fact that revised return was filed on 13.07.2018. In the present case, the exercise of power on 14.03.2019 was not only after issuance of notice under sub-section (2) of Section 143 and after recording due satisfaction in terms of Section 241-A of the Act, but was also well within the period contemplated by sub-section (1) of Section 143 of the Act for causing due intimation. Whether the satisfaction recorded in terms of said Section 241-A of the Act was otherwise correct or not and whether case for withholding of refund was made out or not, are not the issues that arise for our consideration. For the present purposes, whether exercise of power is facially in conformity with the statutory provisions is the issue and we are satisfied that there is nothing in the exercise of power that led to the passing of the order dat....