Refund: V-I wins Rs.1,128 crores battle as Bombay HC pulls up I-T for laxity

Virendra Pandit 

New Delhi: The Bombay High Court has directed the Income Tax department to refund Rs. 1,128 crores to Vodafone Idea Ltd which the telecom firm paid in taxes for the assessment year 2016-2017.

I-T’s assessment order, passed in August 2023, was “time-barred and hence cannot be sustained,” the HC ruled on Wednesday.

A division bench of Justices K.R. Shriram and Neela Gokhale also took a strong view against the assessing officer for showing “laxity and lethargy” in not passing the final order within the mandated 30-day time and thus causing a huge loss to the exchequer and public.

The HC’s ruling came on a petition the company filed, stating that the I-T department failed to refund the amount it paid for the assessment year 2016-2017 which was more than the legitimate tax due on its income.

The bench noted the case of Vodafone Idea was “quite elementary” and that it was “constrained to observe the complete apathy and negligent approach of the assessing officer concerned in discharging his duties” by provisions of the Income Tax Act.

“Any dereliction and remissness on the part of the 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, it added.

The court recommended a detailed inquiry into the failure on the part of the assessing officer concerned to act by provisions of the Income Tax Act.

“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,” the HC said, directing that its order be circulated to the Union Ministry of Finance.

As per the petition, the assessing officer passed a draft order about the assessment year in December 2019 against which the company filed objections before the Dispute Resolution Panel (DRP) in January 2020.

In March 2021, the DRP issued certain directions.

The company said the assessing officer ought to have passed the final order in the case within 30 days as mandated in the Act. Since the officer failed to pass the final order, it was entitled to a refund with interest.

The company also said after it filed the petition in HC in June 2023 seeking a refund of the amount, the assessing officer passed the final assessment order in August. The tax department claimed it did not receive the DRP’s directions because of the “Faceless Assessment Regime.”

The High Court, however, refused to accept it and said the DRP’s directions were always accessible on the Income Tax Business Application (ITBA) portal.

There was also no “whisper of any explanation” as to why the assessing officer remained inactive and silent for two long years in the case and swung into action only when he received information of the petition filed, it said.

“We have no hesitation in holding that the assessment order dated August 31, 2023, passed by the assessing officer two years after the DRP directions, is time-barred and cannot be sustained,” the bench said.

Hence, Vodafone Idea Ltd was entitled to receive the refund together with interest, the HC said.