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2023 Supreme(Bom) 1473
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
K.R. SHRIRAM, NEELA GOKHALE, JJ.
Vodafone Idea Limited – Petitioner
Versus
Central Processing Centre, Bengaluru – Respondent
Writ Petition (L) No. 15398 of 2023
Decided On : 08-11-2023
Advocate Appeared:
For the Petitioners: J.D. Mistri, Madhur Agrawal, Jitendra Singh.
For the Respondents: Devang Vyas, Devvrat Singh, Sangeeta Yadav, Jagdish Choudhary.
Failure of Assessing Officer to comply with statutory timelines under Section 144C(13) renders the assessment order invalid, entitling the taxpayer to a refund with interest.
Headnote:(A) Income Tax Act, 1961 - Sections 144C(1), 144C(2)(b), 144C(5), 144C(10), 144C(13) - Refund of excess tax paid for AY 2016-2017 - Failure of Assessing Officer to pass final order within statutory period as prescribed under Section 144C(13) - Directions of Dispute Resolution Panel (DRP) binding on Assessing Officer - Assessment order passed after two years deemed time-barred - Petitioner entitled to refund with interest. (Paras 3, 24, 25)
(B) E-assessment Scheme - The Faceless Assessment Mechanism requires strict adherence to timelines set out in the Act, failing which the assessment stands vitiated. (Paras 10, 22)
Facts of the case:
The Petitioner sought a refund of excess tax paid for AY 2016-2017, claiming the Assessing Officer failed to act on directions from the Dispute Resolution Panel within the statutory time limit. (Paras 2, 3)
Findings of Court:
The court held that the assessment order was time-barred and the Petitioner was entitled to a refund with interest. (Paras 24, 25)
Issues: Whether the failure to comply with Section 144C(13) invalidates the assessment order and entitles the Petitioner to a refund. (Paras 22, 24)
Ratio Decidendi: The court emphasized that the DRP's directions are binding on the Assessing Officer, and failure to act within prescribed timelines renders the assessment order invalid. (Paras 22, 24)
Result: Rule made absolute directing the refund along with applicable interest.
JUDGMENT :
NEELA GOKHALE, J.
1. Rule. Rule made returnable forthwith. By consent, the petition is taken up for final hearing at the admission stage.
2. Petitioner has called in question the failure of Respondent Nos. 1 & 2 to refund the amount paid by Petitioner for Assessment Year (“AY”) 2016-2017, which Petitioner claims to have paid in excess of the legitimate tax due on the returned income of Petitioner and seeks a refund of the said amount along with applicable interest.
3. The case of Petitioner is quite elementary and we are constrained to observe the complete apathy and negligent approach of the assessing officer concerned in discharging his duties, in accordance with the provisions of Income Tax Act, 1961 (“the Act”). 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.
4. The present proceedings emerge from a Return of Income (“ROI”) filed by Petitioner for Assessment Year (“AY”) 2016-2017. The ROI disclosed a loss of Rs. 47,50,07,95,276/- under the normal provisions of the Act and loss of Rs. 292,80,62,889/- under Section 115JB of the Act. There was a claim of refund of prepaid taxes of Rs. 1128.47 crores, comprising of Tax Deducted at Source and Advance Tax. The assessment was selected for scrutiny and notice under Section 143(2) of the Act was issued. Since transactions of Petitioner involved international and specified domestic transactions with its associated enterprises, a reference was made under Section 92CA(1) of the Act to the Transfer Pricing Officer (“TPO”) for determination of Arms Length Price for the relevant AY. There is a history of proceedings filed by Petitioner for refund of various AYs including the subject year before the Delhi High Court as well as the Supreme Court. The same, however, is not directly relevant to determine the issue under consideration in the present proceedings, save and except a direction of the Apex Court dated 29th April 2020 passed in Civil Appeal No. 2377 of 2020 directing the Revenue to conclude the assessment proceedings for AY 2016-2017 at the earliest.
5. In the meantime, the TPO passed an order proposing an adjustment to the value of the international transaction of Petitioner. The Assessing Officer (“AO”) passed a draft order dated 29th December 2019 under Section 144C(1) of the Act for the relevant AY and proposed various additions/disallowances. Petitioner filed objections under Section 144C(2)(b) of the Act before the Dispute Resolution Panel (“DRP”) on 27th January 2020. A notice was issued by the DRP and Petitioner responded by filing relevant documents/evidence in support of objections raised by it. Finally the DRP issued directions dated 25th March 2021 under Section 144C(5) of the Act. The directions of DRP were uploaded on the Income Tax Business Application (“ITBA”) portal on the same date and the said directions were served on Petitioner vide e-mail dated 6th April 2021. The grievance of Petitioner essentially is that the AO failed to pass the final order in terms of the directions of DRP within 30 days, the period of limitation prescribed by Section 144C(13) of the Act and consequently prays that the ROI as filed originally has to be accepted and excess tax paid be refunded with interest.
6. After the petition was filed on 8th June 2023, the AO passed the assessment order dated 31st August 2023. The same has been placed on record as an additional document.
7. Mr. Mistri for Petitioner raised various grounds to justify seeking a refund from the department. He emphasized the admitted fact that despite the DRP issuing
