IT dept directed by Bombay HC to refund over ₹833 crore to Vodafone Idea within 2 weeks

In a huge relief to Vodafone Idea Limited, the Bombay High Court has directed the income tax department to refund Rs. 833 crore to the telecom operator within two weeks "without fail", LiveLaw.in has reported.

A Division bench of Justice RD Dhanuka and Justice Madhav Jamdar pronounced a 14-page oral order via video conference granting relief after hearing the petitioner Vodafone Idea and the Assistant Commissioner as well as the Principal Commissioner of Income Tax along with the Union of India.

The court observed that there is no power vested in the respondent tax authorities to adjust self-admitted refund amount against the tax dues "which are not even adjudicated upon by the respondents and may arise in future as contemplated/visualized by the respondent."

Case Background

The petitioner filed the petition seeking directions for refund of ₹1009,43,88,63 (over ₹1000 cr) from the IT department quantified by its own rectification order dated May 28, 2020.

Vodafone Idea filed its return of income on September 30, 2014 in the name of Vodafone Mobile Services Limited. The said income tax return was revised on March 31, 2016 and further revised on February 22, 2017. Thereafter, on October 31, 2019, the Assistant Commissioner of Income Tax passed an assessment order under Section 143(3) read with Section 144C of the Income Tax Act, 1961 determining the refund of Rs.733.80 crore payable to Vodafone Idea on November 7, 2019.

Following this, Vodafone Idea filed an application for rectification under Section 154 of the Income Tax Act seeking rectification of certain mistakes apparent from the record. Another rectification application was filed before the Assistant Commissioner on December 3, 2019 in view of the case of petitioner having been transferred from Delhi to Mumbai by order under Section 162 of the Act.

Since the respondents did not grant any refund in favour of the petitioner, the petitioner filed a writ petition in 2018 before the Delhi High Court. By the judgment dated December 18, 2018, Delhi High Court dismissed the said writ petition. Being aggrieved by the said judgment, Vodafone Idea filed a special leave petition before the Supreme Court.

In a judgment dated April 29, 2020, the Supreme Court held that the final assessment order passed under Section 143 of the Income Tax Act indicated that the petitioner was entitled for refund of ₹733 crore insofar as assessment year 2014- 2015 is concerned, while in assessment year 2015-16 there was a demand of ₹582 crore.

The respondent authorities were accordingly directed to refund the amount of ₹733 crore within four weeks from the date of the said order subject to any proceedings that the Revenue may deem appropriate in accordance with law. The respondents were directed to conclude the proceedings initiated pursuant to the notice under sub-section (2) of Section 143 of the Act in respect of assessment year 2016-2017 and 2017-2018 as early as possible.

Pursuant to the said judgment the assistant IT-commissioner issued an intimation order under Section 245 of the Act. In the said intimation, it was the case of the assistant commissioner that as per their records, a sum of ₹864 cores was outstanding against Vodafone Idea, in respect of various assessment years i.e. 2000-01, 2004-05, 2005-06, 2006-07, 2007-08, 2012-13 and 2018-19. By the said intimation, the commissioner proposed to adjust the outstanding demand against the refund for the assessment year 2014-2015 ordered in the case of the petitioner.

Finally, in an order dated May 28, 2020, the assistant commissioner held that Vodafone Idea was entitled to refund of ₹1009.43 crore. However, ₹176.39 crore was deducted out of the refund amount and the net refundable amount was determined at ₹833.04 crore.