Bombay High Court orders for refund of over ₹1,100 crore in taxes to Vodafone Idea

The Bombay High Court on Wednesday directed income tax officials to refund an amount of over ₹1,100 crore in Tax Deducted at Source and Advance Tax for the Assessment Year 2016-17 to Vodafone Idea Ltd (Vi Ltd). [Vodafone Idea Ltd v. Central Processing Centre, Bengaluru & Ors.].A Bench of Justices KR Shriram and Dr Neela Gokhale recommended a detailed inquiry into the failure on the part of the Faceless Assessing Officer concerned to act in accordance with provisions of the Income Tax Act, the lack of diligence on the part of officials concerned and into the system of Faceless Assessment Mechanism.The Court also made observations about the complete apathy and negligent approach of the assessing officer in this case."Any dereliction and remissness on the part of officers entrusted with a duty to act within the strict contours of law affects the exchequer and has far-reaching consequences on the prosperity and economic stability of the nation. Laxity in this regard has a propensity to destroy and bring to naught any effective system put in place by the Government for efficient and transparent administration of taxation laws and its regulations. Such an adverse effect on the exchequer is revealed in the present case. Strict action should be taken against persons responsible for the laxity and lethargy displayed which has caused a huge loss to the exchequer and in turn to the citizens of this country.".The proceedings emerged from a return of income (ROI) filed by Vi Ltd for the Assessment Year 2016-17. The ROI disclosed a loss of ₹47,50,07,95,276 under normal provisions of the Act and loss of ₹292,80,62,889 under Section 115JB of the Act.Vi raised a claimed of refund of prepaid taxes amounting to ₹1,128.47 crore in TDSAT. The assessment was selected for scrutiny and notice under Section 143(2) of IT Act was issued. Since transactions of Vi involved international and specified domestic transactions with its associated enterprises, a reference was made to the Transfer Pricing Officer (TPO). The TPO passed an order proposing an adjustment to the value of the international transactions of Vi Ltd.The Assessing Officer (AO) then passed a draft order on December 29, 2019, against which Vi Ltd filed objections.The final directions by the Dispute Resolution Panel (DRP) were uploaded on the IT Business Application (ITBA) portal on the same date and the same was informed to Vi through an email. .Vi raised grievance that the AO failed to pass the final order in terms of the directions of the DRP within 30 days, which was the prescribed period of limitation.The petition by Vi prayed that the ROI as filed originally has to be accepted and that excess tax paid be refunded with interest. After the petition was filed on June 8, 2023, the AO passed the assessment order dated August 31, 2023..The Court deduced that the assessment order dated August 31, 2023, passed by the AO two years after the DRP directions, was time-barred and cannot be sustained. "Consequently, the ROI as filed has to be accepted. Vi is entitled to receive the refund together with interest, in accordance with law. The procedure to be completed within 30 days of this order being unloaded," the judgment stated. .Senior Advocate JD Mistri with Advocates Madhur Agrawal and Jitendra Singh appeared fo Vi Ltd.Additional Solicitor General Devang Vyas with Advocates Devvrat Singh, Sangeeta Yadav and Jagdish Choudhary appeared for the authorities..[Read judgment]