Vodafone Idea Ltd Vs ACIT (Supreme Court)
Conclusion: Uptill AY 2016-17, if a scrutiny notice u/s 143(2) is issued, the return is not required to be processed u/s 143(1) for grant of refund to the assessee however, from AY 2017-18 & onwards, a different regime is prescribed by Parliament by inserting section 241-A which required separate recording of satisfaction on part of AO that having regard to the issue of notice u/s 143(2), the grant of refund was likely to adversely affect the revenue. The withholding of refund required the previous approval of the PCIT with reasons to be recorded in writing. Thus, demands in respect of earlier assessment years including the liability as a result of order dated 28.12.2019 being outstanding, the respondents would be entitled to invoke the requisite power under Section 245 to set off the amount of refund payable in respect of AY 2014-15 against tax remaining payable.
Held: Assessee contended that the Officer should be directed to process and grant refunds for the AYs 2014-15 to 2017-18, along with interest under Section 244A. Officer contended that the assessment years for which request had been made to process the return under Section 143(1) were already under scrutiny. Assessee contended that after the lapse of the one year period, by reason of second proviso to Section 143 (1), the right to claim refund is vested in any assessee which was 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 AO did 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. AO denied allegations of deliberate omission to refund along with applicable interest and stated 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 was 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. Also, proposal for withhold the refund for AY. 2017-18 was forwarded again to Pr. Commissioner of Income Tax-09, Delhi and same had been approved. Assessee was hereby intimated that refund of A.Y.2017-18 in the case of M/s Vodafone Mobile Service Limited had 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). It was held that till AY 2016-17, if a scrutiny notice u/s 143(2) is issued, the return is not required to be processed u/s 143(1) for grant of refund to the assessee. From AY 2017-18 & onwards, a different regime is prescribed by Parliament. S. 241-A requires separate recording of satisfaction on part of the AO that having regard to the issue of notice u/s 143(2), the grant of refund is likely to adversely affect the revenue. The withholding of refund requires the previous approval of the PCIT with reasons to be recorded in writing. 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, but was also well within the period contemplated by sub-section (1) of Section 143 for causing due intimation. There was nothing in the exercise of power that led to the passing of the order dated 14.03.2019 which could be said to have violated any statutory requirements. Insofar as AY 2014-15 was concerned, final assessment order passed under Section 143(3) indicated that assessee was entitled to refund of Rs.733 Crores; while for AY 2015-16 there was a demand of Rs.582 Crores. Thus, demands in respect of earlier assessment years including the liability as a result of order dated 28.12.2019 being outstanding, the respondents would be entitled to invoke the requisite power under Section 245 of the Act to set off the amount of refund payable in respect of AY 2014-15 against tax remaining payable. Since the requisite action was not even initiated, nothing could be said in that respect. In the premises, the amount of Rs.733 Crores was directed to be refunded to assessee subject to any proceedings that the Revenue might deem appropriate to initiate in accordance with law. Also. the respondents was directed to conclude the proceedings initiated pursuant to notice under sub-section (2) of Section 143 of the Act in respect of AY 2016-17 and 2017-18 as early as possible.
FULL TEXT OF THE SUPREME COURT JUDGEMENT
