MUMBAI: In a win for Vodafone Idea Limited, Bombay high court on Wednesday held that an assessment order of August 31, 2023 passed by the Faceless Assessing Officer (FAO) two years after directions issued by a dispute resolution panel (DRP) were “time barred’’ and unsustainable. The HC thus directed Income Tax authorities to refund to Vodafone Idea, over Rs 1128 crore in taxes paid in the assessment year 2016-17, with interest. The process has to be completed in 30 days, a division bench of Justices K R Shriram and Neela Gokhale directed.
Pulling up the FAO, the HC held, “If the provisions of Section 144C—requiring final orders in 30 days-- as mandated by the Statute are not strictly adhered to, the entire object of providing for an alternate redressal mechanism in the form of DRP stand defeated’’ .
The Judgment pronounced on Wednesday and authored by Justice Gokhale also strongly recommended a detailed inquiry against the FAO for failure to abide by the legal mandate and the :lack of diligence on part of officials concerned…in the present assesment’’.
“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,’’ added the judgment directing that a copy be circulated to the CBDT and Principal Secretary, Union Finance Ministry.
Vodafone Idea Ltd had on June 8, 2023 this year, as successor of Vodafone Mobile Services Ltd, petitioned the HC against the Central Processing Centre, Bengaluru, Assistant Commissioner of Income-Tax, Mumbai and others. Through its senior counsel J D Mistri, the cellular operators called in question the failure of CPC and IT officials to refund the amount it paid for 2016-17, in excess of legitimate tax due on returned income.
The HC said, “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.’’ It added, “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.’’
The AO passed a draft order in this case on December 29, 2019, against which the company filed an objection before the DRP on January 27, 2020. On March 25, 2021 the DRP issued directions which were uploaded the same day on the Income Tax Business Application (ITBA) portal.
The grievance of Vodafone Idea essentially was 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 said it is entitled to refund with interest. Mistri said once DRP order is uploaded and is available, when no order is passed in a month, the income declared by Vodafone Idea is deemed to be accepted by the Income Tax Department and petitioner, entitled to refund of excess tax.
After the petition was filed, the FAO passed its order on August 31, 2023, the HC noted. Defending the actions of the department, advocate Devvrat Singh for the Revenue said the FAO received the 2021 order only on August 23, 2023 in the ‘case history noting’ and then within a month passed the order.
The HC after analysing the law and the assessment proceeding scheme under e-assessment scheme said, “any notice, summons, order is deemed to have been received by the FAO once it is available to the NeAC.’’
Also highlighting the scheme of the Act was to ensure speedy disposal of disputes under, the HC held, “Once the statute has prescribed a limitation period for passing the final order, it is expected that the internal procedure of the department should mould itself to give meaning to and act in aid of the provision. Any procedural defect (there is none in this case) in the internal mechanism of the working of E-assessment Scheme, cannot operate against the interest of assessee. Hence, the FAO cannot be, believed that the DRP direction was received by him only on 23rd August 2023 despite being uploaded on the ITBA portal on 25th March 2021. The failure on the part of department to follow the procedure under Section 144C of the Act is not merely a procedural irregularity, but is an illegality and vitiates the entire proceeding.’’
The HC after hearing the IT counsel and going through two affidavits, one by Chief Commissioner of Income Tax (International Taxation and Transfer Pricing) West Zone, Mumbai and another by JCIT, Ratlam noted that both officials agree that the DRP directions once uploaded on the ITBA portal are automatically visible to the FAO, if any assessment work item is pending related to a particular PAN.
The HC said, “Admittedly assessment proceedings of Petitioner were pending. Thus, undoubtedly the DRP directions uploaded on the ITBA portal were readily and clearly visible and accessible to the FAO of assessee.’’
The HC said, “There is no whisper of any explanation as to why the FAO, 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.’’
What Bombay HC said:
• It is important to note that the entire assessment proceedings are governed by the Faceless Assessment Mechanism under the scheme known as the e-Assessment Scheme (“eAS”), 2019 as notified by the Ministry of Finance (Department of Revenue) on 12th September 2019.
• The salient features of the scheme include defining the scope of scheme, jurisdiction of e-Assessment Centre, procedure for assessment, penalty proceedings for non-compliance amongst other features.
• The Central Government amended the FAS of 2019 and the first amendment came into effect on 17th February 2021.
• All communication among the assessment unit, review unit, verification unit or technical unit or with the assessee or with any other person with respect to the information or documents or evidence or any other details, as may be necessary for the purposes of making an assessment under the scheme shall be through the National e-Assessment Centre.”
• Thus, any notice, summons, order is deemed to have been received by the FAO once it is available to the NeAC
• Section 144C of the Act is a self contained provision which carves out a separate class of assesses-- ‘eligible assessee’.
• Section 144C of the Act was inserted in the Finance Act of 2009 and came into effect from 1st October 2009.
• The aim of section 144C as mentioned in the finance bill of 2009: With a view to provide speedy disposal, it is proposed to amend the Income-tax Act so as to create an alternative dispute resolution mechanism within the income-tax department and accordingly, section 144C has been proposed to be inserted so as to provide inter alia the Dispute Resolution Panel as an alternative dispute resolution mechanism.”
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