Assessment Order not passed within 30 days of DRP directions in

Assessment Order not passed within 30 days of DRP directions in time barred, Vodafone entitled for a refund of Rs 1128 Crores: Bombay HC

Vodafone Idea Limited Versus CPC (Writ Petition (L) No. 15398 Of 2023)

Facts:

1. A Return of Income (ROI) was filed by the petitioner, Vodafone Idea for AY 2016–2017. The ROI disclosed a loss. It was a claim for a refund of prepaid taxes of Rs. 1128.47 crore, comprising tax deducted at source and advance tax.

2. The assessment was selected for scrutiny, and notice under Section 143(2) of the Income Tax Act was issued. Since the transactions of the petitioner involved international and specified domestic transactions with its associated enterprises, a reference was made under Section 92CA(1) to the Transfer Pricing Officer (TPO) for the determination of the arm’s length price for the relevant AY.

3. In the meantime, the TPO passed an order proposing an adjustment to the value of the international transaction for the petitioner. The AO passed a draft order and proposed various additions and disallowances.

4. The petitioner filed objections before the Dispute Resolution Panel (DRP) on January 27, 2020. A notice was issued by the DRP, and the petitioner responded by filing relevant documents and evidence in support of the objections raised by it. Finally, the DRP issued directions dated March 25, 2021, under Section 144C(5).

5. The directions for DRP were uploaded on the Income Tax Business Application (ITBA) portal on the same date, and the said directions were served to the petitioner via email dated April 6, 2021.

6. The Faceless Assessing Officer (FAO) passed the order two years after the Dispute Resolution Panel (DRP) directions.

7. The grievance of the petitioner 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), and consequently the ROI as originally filed has to be accepted and excess tax paid be refunded with interest.

Hon Bombay HC held as below:

1. The assessment order passed by the department in August this year against the beleaguered telecom operator was time barred and hence cannot be sustained.

2. The petitioner is entitled to receive the refund together with interest, in accordance with the law. The procedure is to be completed within 30 days of this order being unloaded.

3. This would, however, not preclude revenue, should the need arise, from reopening the assessment by following due process and in accordance with the law.

4. A detailed inquiry be initiated on the failure on the part of the Faceless AO concerned to act in accordance with the provisions of the Income Tax Act and the lack of diligence on the part of officials concerned and the system itself insofar as it relates to the present assessment.

5. Strict action should be taken against persons responsible for the laxity and lethargy displayed, which have caused a huge loss to the exchequer and, in turn, to the citizens of this country.