The Supreme Court on Wednesday granted Vodafone-Idea, which is struggling under severe financial stress, relief of Rs 733 crore tax refund. The court directed the Income-Tax Department to refund the amount within 4 weeks.
The Supreme Court on Wednesday granted Vodafone-Idea, which is struggling under severe financial stress, a relief of Rs 733 crore tax refund. The court directed the Income-Tax Department to refund the amount within 4 weeks.
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However, the relief allowed by the apex court fell far short of Vodafone’s tax refund claims of more than Rs 4750 crore.
A bench headed by Justice UU Lalit upheld the conduct of the I-T Department for not issuing refunds as valid exercise of power, necessary for detailed scrutiny of Vodafone’s accounts and returns.
Subsequently, the court refused Vodafone’s plea for issuing refunds for Assessment Year 2015-16 to 2017-18.
The refund of 733 crore was allowed by the SC for Assessment Year 2014-15, for which the assessment had been finalised and refund already confirmed.
However, the Supreme Court said that the refund should be subject to any proceedings launched by Revenue Department. The I-T Department claimed it has freedom to initiate action, under section 245, to adjust the 733 crore refund against a pending demand of 582 crore. The demand for Rs 582 crore is currently under challenge and has been stayed by the Mumbai bench of Income Tax Appellate Tribunal (ITAT).
The apex court was hearing a plea by Vodafone, which had alleged delays in processing and issuing of tax refunds for the Assessment Year 2014-15 to 2017-18. Vodafone had sought tax refunds for all 4 assessment years.
In Dec 2018, after a disappointment from the Delhi high court, Vodafone moved the Supreme Court., They argued before the apex court that the tax department had acted casually, and had deliberately delayed the processing of returns and issuance of refunds.
Vodafone had argued that under section 143(1) of the I-T Act, the returns filed needed to be processed within a year’s time, which the department failed to do. Vodafone also claimed that it had not been intimated about any additional scrutiny under Sec 143(1D). Vodafone, thus, claimed a vested right to seek a tax refund.
The court, however, did not agree. The SC held that once additional scrutiny of accounts of Vodafone is initiated under Section 143(2), the tax department is not bound to issue any refunds till the scrutiny is completed. The SC also held that no right for refund can be claimed until the scrutiny under Section 143(2) is completed.
The court also clarified that that a notice to Vodafone, under Sec 143(2) for initiating scrutiny, was the only intimation that the department was required to share.
Appearing for Vodafone, Sachit Jolly, Partner with DMD, said, “The High Court had clearly held that mere issuance of a notice under section 143(2) is not enough to withhold refunds. Exercise of discretion by way of an intimation or an order was required. The revenue was not in appeal on this aspect.
Therefore, for the court to hold that once notice under section 143(2) is issued, refund need not be processed and that too when this was never argued, has come as a surprise. This will have large scale ramifications for every taxpayer.”
Zoheb Hossain, who appeared as Senior Standing Counsel for the I-T Department, said, “Revenue's actions to safeguard its interest and the public interest at large have been found to be in accordance with law by the SC. The Revenue's stand in withholding refunds of Vodafone for various assessment years pending scrutiny assessments has been completely vindicated by the Supreme Court."
"There is no need to read into section 143(1D) the requirement of the limitation for processing found in Section 143(1) since the non obstante clause in 143(1D) overrides the other provisions especially once scrutiny notice has been issued.”
First Published: Apr 29, 2020 6:03 PM IST