HC asks I-T dept to refund ₹1,128.47 cr to VI within 30 days

The Bombay High Court has upheld Vodafone Idea's claim of overpaying taxes in 2016-17 and ordered the Income Tax Department to refund the excess amount with interest within 30 days. The court deemed the assessment order issued by the department in August 2023 as time-barred and unsustainable.

MUMBAI: The Bombay high court on Wednesday upheld Vodafone Idea (VI) Ltd’s claim of having paid ₹1128.47 crore in excess of its legitimate tax dues in the assessment year 2016-17 and directed the Income Tax (I-T) department to refund the said amount with interest to the company within 30 days.

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The company had filed the claim for refund after filing returns for assessment year 2016-17, wherein it disclosed a loss of ₹5,042.87 crore. The excess amount was comprised of tax deducted at source and advance tax.

The telecom major’s claim for refund went through different levels as it involved some international transactions, eventually reaching the Dispute Resolution Panel (DRP) set up under the Income Tax Act. On March 25, 2021, the panel issued an order which was uploaded on the Income Tax Business Application portal the same day.

Section 144C(13) of the I-T Act mandates that the assessing officer must complete the assessment in conformity with the panel’s directions within one month. But in this case, the assessing officer issued the final order two years later, on August 31, 2023.

In a writ petition filed before the high court on June 8, 2023, VI argued that when no order was passed pursuant to the directions of DRP within the statutory period, the income declared by the company was deemed to be accepted by the department and the company was entitled to a refund of the amount paid in excess of its legitimate tax dues.

The I-T department, on the other hand, contended that directions given by the DRP were not received by the assessment officer owing to commencement of the Faceless Assessment Regime. It claimed that the assessing officer received the DRP directions only on August 23, 2023, and he passed final assessment order in seven days – i.e., within the statutory time limit.

The division bench of justices K R Shriram and Neela Gokhale, however, noted that the DRP’s directions are automatically visible to the assessment officer once they are uploaded on the Income Tax Business Application portal. Officers can also see if any assessment work item is pending related to a particular PAN.

“There is no whisper of any explanation as to why the FAO (faceless assessment officer), who was seized with the pending assessment of Petitioner, remained inactive and silent for two long years and swung into action only when information about filing of this writ petition was uploaded on the CHN (case history noting),” the bench stated.

The court said the assessment order of August 31, 2023 was time-barred and unsustainable, and the company was entitled to receive the refund with interest.