Vodafone Idea has received relief from the Bombay High Court, which has instructed the Income Tax authorities to reimburse the prepaid taxes amounting to Rs. 1128.47 crores. Additionally, the court invalidated the assessment order dated August 31, 2023, issued by the Faceless Assessing Officer (FAO) on the grounds of being time-barred.
A division bench of Justice K. R. Shriram and Justice Neela Gokhale mentioned that they have no hesitation in holding that the assessment order dated 31st August 2023 passed by FAO two years after the DRP directions, is time barred and cannot be sustained. Also, recommended a detailed investigation against the FAO on its failure.
The case revolves around a Return of Income (ROI) filed by the petitioner, Vodafone Idea, for the Assessment Year 2016–2017, indicating a loss and claiming a refund of prepaid taxes amounting to Rs. 1128.47 crore.
The assessment, subjected to scrutiny, involved international and specified domestic transactions with associated enterprises, leading to a reference under Section 92CA(1) to the Transfer Pricing Officer (TPO). The TPO proposed an adjustment to the value of the international transaction, and the Assessing Officer (AO) subsequently proposed additions and disallowances.
Mr. Mistri, representing the petitioner, presented several grounds justifying a refund from the department. He highlighted the undisputed fact that, despite the Dispute Resolution Panel (DRP) issuing directions on March 25, 2021, the Assessing Officer (AO) failed to pass the required order within the legally specified timeframe.
In such cases, as per Section 144C(13) of the Income Tax Act, the income declared by the petitioner is deemed accepted by the department, entitling the petitioner to a refund of the excess amount paid beyond the legitimate tax due. Mr. Mistri submitted the pertinent documents, including affidavits from key tax officials and order sheet details supporting the Deputy Commissioner of Income Tax’s affidavit.
Mr. Devvrat Singh, representing the Revenue, defended that the DRP’s directions, dated March 25, 2021, were only received by the FAO on August 23, 2023, and the assessment, in accordance with the DRP’s directions, was completed within the one-month timeframe prescribed by Section 144C(13) of the Act. He emphasised that the limitation period runs from the date of receipt by the FAO, not the date of uploading on the ITBA portal. Mr. Singh urged the dismissal of the petition based on these grounds.
The Court ruled that “we have no hesitation in holding that the assessment order dated 31st August 2023 passed by FAO two years after the DRP directions, is time barred and cannot be sustained. Consequently, the ROI as filed has to be accepted. Petitioner 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. This would, however, not preclude revenue, should the need arise, from reopening the assessment by following due process and in accordance with law.”
Further added that “we strongly recommend that a detailed enquiry be initiated on the failure on the part of the Faceless Assessing Officer concerned to act in accordance with the provisions of the Act and the lack of diligence on the part of officials concerned and the system itself insofar as it relates to the present assessment. 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.”
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