# VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED) v. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR

- **Citation:** [2020] 11 S.C.R. 200
- **Court:** Supreme Court of India
- **Decided:** 2020-04-29
- **Case number:** Civil Appeal No. 2377 of 2020
- **Bench:** Uday Umesh Lalit, Vineet Saran
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/vodafone-idea-ltd-earlier-known-as-vodafone-mobile-services-limited-v-assistant-34499
- **Pages:** 44

## Headnote

Income Tax Act, 1961: s.143(1) and s.143(2) - Exercise of
power under - Distinction between - Held: Under s.143(1), the
matter is processed, only to check whether any apparent
inconsistencies are evident on the face of the return and connected
material which may call for any adjustment while under s.143(2),
the matter is scrutinized after taking into account such evidence as
the assessee may produce - Exercise in s.143(2) is to ensure that
there is no understating of income or overstating of loss or underpayment of the tax in any manner - The power under sub-section
(1) of s.143 is summary in nature designed to cause adjustments
which are apparent from the return while that under sub-sections
(2) and (3) is to scrutinize the return and cause deeper probe to
arrive at the correct determination of the liability of the assessee -
Telecommunication.
Income Tax Act, 1961: s.143(1) and s.143(2) - In respect of
Assessment Years ending on 31st March 2017 or before, if a notice
was issued in conformity with the requirements stated in sub-section
(2) of s.143 of the Act, it shall not be necessary to process the refund
under sub-section (1) of s.143 of the Act and the requirement to
process the return shall stand overridden.
Income Tax Act, 1961: s.143(1) and s.143(2) - Whether any
intimation is required to be given to the assessee that because of
initiation of proceedings pursuant to notice under sub-section (2)
of s.143, processing of return in terms of sub-section (1) of s.143
of the Act, would stand deferred - Held: The processing of return
in terms of sub-section (1A) of s.143 is to be done through centralized
processing and the scope of processing under sub-section (1) of
s.143 of the Act is purely summary in character - Once deeper
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scrutiny is undertaken and the matter is being considered from the
perspective whether there is any avoidance of tax in any manner,
issuance of notice under sub-section (2) itself is sufficient indication
- Sub-section (1D) of s.143 of the Act does not contemplate either
issuance of any such intimation or further application of mind that
the processing must be kept in abeyance - It would not, therefore,
be proper to read into said provision the requirement to send a
separate intimation- Issuance of notice under sub-section (2) of
s.143 is enough to trigger the required consequence - Any other
intimation is neither contemplated by the statute nor would it achieve
any purpose.
Income Tax Act, 1961: s.241-A - Applicability of - Returns
filed in respect of assessment year commencing on or after the 1st
April, 2017 - s.241-A of the Act requires a separate recording of
satisfaction on part of the Assessing Officer that having regard to
the fact that a notice has been issued under sub-section (2) of s.143,
the grant of refund is likely to adversely affect the revenue;
whereafter, with the previous approval of the Principal Commissioner
or Commissioner and for reasons to be recorded in writing, the
refund can be withheld - Since the statute now envisages exercise
of power of withholding of refund in a particular manner, for
assessment year commencing after 01.04.2017 the requirements of
Section 241-A of the Act must be satisfied.
Income Tax Act, 1961: s.241-A - Withholding of refund -
Whether insofar as AY 2017-18 is concerned, the order dated
14.03.2019 u/s.241-A satisfies the required statutory parameters
or not - Held:In terms of second proviso to sub-section (1) of s.143
of the Act, the required intimation under said sub-section must be
given before the expiry of one year from the end of the financial
year in which the return is made - In respect of AY 2017-18, the
return having been filed on 25.11.2017, period available in terms
of said second proviso was upto 31.03.2019, without taking into
account the fact that revised return was filed on 13.07.2018 - In
this case, the exercise of power on 14.03.2019 was not only after
issuance of notice under sub-section

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VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE
MOBILE SERVICES LIMITED)
v.
ASSISTANT COMMISSIONER OF INCOME TAX
CIRCLE 26 (2) & ANR.
(Civil Appeal No. 2377 of 2020)
APRIL 29, 2020
[UDAY UMESH LALIT AND VINEET SARAN, JJ.]
Income Tax Act, 1961: s.143(1) and s.143(2) - Exercise of
power under - Distinction between - Held: Under s.143(1), the
matter is processed, only to check whether any apparent
inconsistencies are evident on the face of the return and connected
material which may call for any adjustment while under s.143(2),
the matter is scrutinized after taking into account such evidence as
the assessee may produce - Exercise in s.143(2) is to ensure that
there is no understating of income or overstating of loss or underpayment of the tax in any manner - The power under sub-section
(1) of s.143 is summary in nature designed to cause adjustments
which are apparent from the return while that under sub-sections
(2) and (3) is to scrutinize the return and cause deeper probe to
arrive at the correct determination of the liability of the assessee -
Telecommunication.
Income Tax Act, 1961: s.143(1) and s.143(2) - In respect of
Assessment Years ending on 31st March 2017 or before, if a notice
was issued in conformity with the requirements stated in sub-section
(2) of s.143 of the Act, it shall not be necessary to process the refund
under sub-section (1) of s.143 of the Act and the requirement to
process the return shall stand overridden.
Income Tax Act, 1961: s.143(1) and s.143(2) - Whether any
intimation is required to be given to the assessee that because of
initiation of proceedings pursuant to notice under sub-section (2)
of s.143, processing of return in terms of sub-section (1) of s.143
of the Act, would stand deferred - Held: The processing of return
in terms of sub-section (1A) of s.143 is to be done through centralized
processing and the scope of processing under sub-section (1) of
s.143 of the Act is purely summary in character - Once deeper
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scrutiny is undertaken and the matter is being considered from the
perspective whether there is any avoidance of tax in any manner,
issuance of notice under sub-section (2) itself is sufficient indication
- Sub-section (1D) of s.143 of the Act does not contemplate either
issuance of any such intimation or further application of mind that
the processing must be kept in abeyance - It would not, therefore,
be proper to read into said provision the requirement to send a
separate intimation- Issuance of notice under sub-section (2) of
s.143 is enough to trigger the required consequence - Any other
intimation is neither contemplated by the statute nor would it achieve
any purpose.
Income Tax Act, 1961: s.241-A - Applicability of - Returns
filed in respect of assessment year commencing on or after the 1st
April, 2017 - s.241-A of the Act requires a separate recording of
satisfaction on part of the Assessing Officer that having regard to
the fact that a notice has been issued under sub-section (2) of s.143,
the grant of refund is likely to adversely affect the revenue;
whereafter, with the previous approval of the Principal Commissioner
or Commissioner and for reasons to be recorded in writing, the
refund can be withheld - Since the statute now envisages exercise
of power of withholding of refund in a particular manner, for
assessment year commencing after 01.04.2017 the requirements of
Section 241-A of the Act must be satisfied.
Income Tax Act, 1961: s.241-A - Withholding of refund -
Whether insofar as AY 2017-18 is concerned, the order dated
14.03.2019 u/s.241-A satisfies the required statutory parameters
or not - Held:In terms of second proviso to sub-section (1) of s.143
of the Act, the required intimation under said sub-section must be
given before the expiry of one year from the end of the financial
year in which the return is made - In respect of AY 2017-18, the
return having been filed on 25.11.2017, period available in terms
of said second proviso was upto 31.03.2019, without taking into
account the fact that revised return was filed on 13.07.2018 - In
this case, the exercise of power on 14.03.2019 was not only after
issuance of notice under sub-section (2) of s.143 and after recording
due satisfaction in terms of s.241-A of the Act, but was also well
within the period contemplated by sub-section (1) of s.143 of the
Act for causing due intimation.
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Dismissing the appeal, the Court
HELD: 1.1 Clause (a) of sub-section (1) of Section 143 has
six sub-clauses specifying the kinds of adjustments which are
required to be made for computing the total income or loss. Such
adjustments are in the nature of "arithmetical error in the return";
incorrect claim "apparent from any information in the return";
disallowance of loss if the return of the previous year with respect
to which such loss is claimed was furnished "beyond the due date";
disallowance of expenditure indicated in the audit report if it has
"not taken into account in computing the total income";
disallowance of deductions specified in sub-clause if the "return
is furnished beyond the due date"; and addition of income as
specified in sub-clause (vi) if it was not "included in computing
the total income". All these features deal with matters which are
apparent from the return and the inconsistency is evident on the
face of it. Upon causing such adjustments after due intimation or
notice to the assessee, the element of tax, interest and fee is to
be computed in terms of clause (b). Thereafter, in terms of clause
(c), due credit to the amount of tax paid and any relief that is
allowable is to be given and the net amount payable or to be
refunded, is to be computed. The intimation to be generated under
clause (d) is on the basis of such exercise and if any refund is
due, the same has to be granted in terms of clause (e). Thus, at
every stage in sub-section (1) the return submitted by the
assessee forms the foundation, with respect to which, if any of
the inconsistencies referred to in various sub-clauses of clause
(a) are found, appropriate adjustments are to be made. [Para
12][237-B-F]
1.2 On the other hand, the exercise of power under subsection (2) of Section 143 of the Act, leading to the passing of an
order sub-section (3) thereof, is to be undertaken, where it is
considered necessary or expedient to ensure that the assessee:
has not understated the income, or has not computed excessive
loss, or has not under-paid the tax in any manner. The issuance
of notice and consequent proceedings are premised on any of
the aforesaid three postulates. In other words, the return filed
by the assessee itself calls for or requires a further probe and
deeper consideration. The guiding principle is to ensure that the
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income is not under-stated or the loss is not over-stated, or the
tax is not under paid in any manner. Upon issuance of notice, the
assessee is entitled to produce evidence in support of his case.
After hearing the assessee and considering the evidence so
produced, by an order in writing, assessment of total income or
loss is to be made. [Para 12][237-F-H; 238-A-B]
CIT v. Gujarat Electricity Board (2003) 260 ITR 84 -
referred to.
1.3 The power under sub-section (1) of Section 143 of the
Act is summary in nature designed to cause adjustments which
are apparent from the return while that under sub-sections (2)
and (3) is to scrutinize the return and cause deeper probe to
arrive at the correct determination of the liability of the assessee.
The exercise of power under Sub-sections (2) and (3) of Section
143 of the Act is thus premised on non-acceptance of what is
evident from the return itself and to ensure that there is no
avoidance of tax in any manner. The dimension of such power is
far greater and deeper than mere adjustments to be made in
respect of what is available from the return. Once such scrutiny
is undertaken and proceedings are initiated by issuance of a notice
under sub-section (2) of Section 143, it would be anomalous and
incongruent that while such proceedings so initiated are pending,
the return be processed under sub-section (1) of Section 143,
which may in a given case, entail payment of refund. Logically,
the outcome of the exercise initiated through notice under subsection (2) of Section 143, must determine whether any refund is
due and payable. If the return itself is under probe and scrutiny,
such return cannot be the foundation to sustain a claim for refund
till such scrutiny is not complete. Considering the nature of power
exercisable under these two limbs of Section 143, the inescapable
conclusion is that the processing of return under sub-section (1)
of Section 143 must await the further exercise of power of scrutiny
assessment under sub-sections (2) and (3) of Section 143. If the
power under sub-section (2) of Section 143 of the Act is initiated
in a manner known to law, there cannot be any insistence that the
processing under sub-section (1) of Section 143 be completed
and refund be made before the scrutiny pursuant to notice under
sub-section (2) of Section 143 is over. This conclusion is fortified
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and strengthened by clear stipulation to that effect in sub-section
(1D) of Section 143. Irrespective of some change in the text of
said provision which was sought to be introduced by Finance Act
2016 and not accepted by Finance Act, 2017, the legislative intent
is clear from the expression, "... the processing of a return shall
not be necessary, where a notice has been issued to the assessee
under sub-section (2)" and by use of non-obstante clause. Though
the period for which it would not be necessary to process the
return was sought to be specified by Finance Act, 2016, mere
absence of such period in the provision as it stands today, makes
no difference. The above quoted portion from the provision and
use of non-obstante clause indicate with sufficient clarity the intent
of the Parliament that in cases where notice under sub-section
(2) is issued and proceedings are initiated, the processing of a
return under sub-section (1) shall not be necessary. [Paras 1315][238-E-H; 239-A-E]
Mohd. Ibrahim v. The State Transport Appellate
Tribunal, Madras (1970) 2 SCC 233; Sohanlal and
others v. Amir Chand and sons and others (1973) 2
SCC 608 : [1974] 1 SCR 453; Upper India Cable Co.
and others v. Bal Kishan (1984) 3 SCC 462; Brij Kishore
Sharma and others v. Ram Singh and sons and others
(1996) 11 SCC 480 : [1996] 7 Suppl. SCR 152;
Rasammal Issetheerammal Fernandez etc. v. Joosa
Mariyam Fernandez and others (2000) 7 SCC 189 :
[2000] 2 Suppl. SCR 336 - referred to.
1.4 As against the general principle which mandates an
action in a particular manner, when an exception is to be carved
out, the relevant provisions stipulate "it shall not be necessary"
to adhere to and follow the manner mandated by such general
principle; and if the contingency contemplated by such exception
arises, the general principle is to stand overridden.The intent to
have the general principle emanating from sub-section (1) of
Section 143 overridden, in case where the proceedings are
initiated pursuant to notice under sub-section (2) of the Act, gets
more pronounced and emphasized by use of non-obstante clause
in sub-section (1D). In the premises, in respect of Assessment
Years ending on 31st March 2017 or before, if a notice was issued
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in conformity with the requirements stated in sub-section (2) of
Section 143 of the Act, it shall not be necessary to process the
refund under sub-section (1) of Section 143 of the Act and that
the requirement to process the return shall stand overridden.
[Paras 16, 17, 18][240-B-D; 241-D]
Vaishali Abhimanyu Joshi v. Nanasaheb Gopal Joshi
(2017) 14 SCC 373; Union of India v. G.M. Kokil (1984)
Supp. SCC 196 : [1984] SCR 292 - referred to.
3.1 The issue whether any intimation is required to be given
to the assessee that because of initiation of proceedings pursuant
to notice under sub-section (2) of Section 143 of the Act
processing of return in terms of sub-section (1) of Section 143 of
the Act, would stand deferred. The processing of return in terms
of sub-section (1A) of Section 143 of the Act is to be done through
centralized processing and the scope of processing under subsection (1) of Section 143 of the Act is purely summary in
character. Once deeper scrutiny is undertaken and the matter is
being considered from the perspective whether there is any
avoidance of tax in any manner, issuance of notice under subsection (2) itself is sufficient indication. Sub-section (1D) of
Section 143 of the Act does not contemplate either issuance of
any such intimation or further application of mind that the
processing must be kept in abeyance. It would not, therefore, be
proper to read into said provision the requirement to send a
separate intimation. Issuance of notice under sub-section (2) of
Section 143 is enough to trigger the required consequence. Any
other intimation is neither contemplated by the statute nor would
it achieve any purpose.Consequently, the submission that the
intimation dated 23.07.2018 must be held to be invalid, inter alia
on the ground that it was issued well after the period within which
the return was required to be processed under sub-section (1) of
Section 143 of the Act, must be rejected. [Paras 19, 20][241-EH; 242-A-B]
3.2 Insofar as returns filed in respect of assessment year
commencing on or after the 1st April, 2017, a different regime
has been contemplated by the Parliament. Section 241-A of the
Act requires a separate recording of satisfaction on part of the
Assessing Officer that having regard to the fact that a notice has
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been issued under sub-section (2) of Section 143, the grant of
refund is likely to adversely affect the revenue; whereafter, with
the previous approval of the Principal Commissioner or
Commissioner and for reasons to be recorded in writing, the
refund can be withheld. Since the statute now envisages exercise
of power of withholding of refund in a particular manner, it goes
without saying that for assessment year commencing after
01.04.2017 the requirements of Section 241-A of the Act must
be satisfied. [Para 21][242-C-D]
4. In terms of second proviso to sub-section (1) of Section
143 of the Act, the required intimation under said sub-section
must be given before the expiry of one year from the end of the
financial year in which the return is made. In respect of AY 201718, the return having been filed on 25.11.2017, period available
in terms of said second proviso was upto 31.03.2019, without
taking into account the fact that revised return was filed on
13.07.2018. In the present case, the exercise of power on
14.03.2019 was not only after issuance of notice under sub-section
(2) of Section 143 and after recording due satisfaction in terms of
Section 241-A of the Act, but was also well within the period
contemplated by sub-section (1) of Section 143 of the Act for
causing due intimation. [Para 22][242-F-G]
Gujarat Poly Avx Electronics Ltd. v. Dy. Commissioner
of Income Tax (Asstt.) (1996) 222 ITR 140 Guj -
referred to.
Case Law Reference
(2003) 260 ITR 84
referred to
Para 8
(1996) 222 ITR 140 Guj.
referred to
Para 8
(1970) 2 SCC 233
referred to
Para 16 (i)
[1974] 1 SCR 453
referred to
Para 16 (ii)
(1984) 3 SCC 462
referred to
Para 16 (ii)
[1996] 7 Suppl. SCR 152
referred to
Para 16 (ii)
[2000] 2 Suppl. SCR 336
referred to
Para 16 (iii)
(2017) 14 SCC 373
referred to
Para 17
[1984] SCR 292
referred to
Para 17
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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2377
of 2020.
From the Judgment and Order dated 14.12.2018 by the High Court
of Delhi at New Delhi in W.P. (C) No. 2730 of 2018.
J.D. Mistri, Sr. Adv., Ms. Anuradha Dutt, Ms. Fereshte D. Sethna,
Sachit Jolly, Rohit Garg, Siddharth Joshi, Ms. B. Vijayalakshmi Menon,
Zoheb Hossain, Saurabh Mishra, Piyush Goyal, Vivek Gurnani, and
Mrs. Anil Katiyar, Advs. for the appearing parties.
The Judgment of the Court was delivered by
UDAY UMESH LALIT. J.
1. Leave granted.
2. This appeal arises out of the final judgment and order dated
14.12.2018 passed by the High Court1 in Writ Petition (Civil) No.2730
of 2018 preferred by the appellant herein.
3. The facts leading to the filing of this appeal, in brief, are as
under:-
A] The appellant-Vodafone Idea Ltd. (earlier known as Vodafone
Mobile Services Ltd or VMSL for short) is engaged in providing
telecommunication services in different circles.
a) By amalgamation which came into effect on 01.04.2011, four
group entities: Vodafone Cellular Ltd., Vodafone Digilink Ltd.,
Vodafone East Ltd. and Vodafone South Ltd. got merged in VMSL.
b) By second scheme of amalgamation, two other group entities:
Vodafone Spacetel Ltd. and Vodafone West Ltd. got merged in
VMSL w.e.f. 01.04.2012.
c) While the proceedings in the instant case were pending, by
scheme of arrangement2 between VMSL and Idea Cellular Ltd.
Vodafone Idea Ltd. - the resultant company assumed all the rights
and liabilities of the amalgamating/transferor companies.
Most of the factual developments in the matter, as set out hereafter,
were before said scheme of arrangement.
1 High Court of Delhi at New Delhi
2 Formulated by the Order dated 19.1.2018 passed by National Company Law Tribunal,
Mumbai and order dated 11.1.2018 by National Company Law Tribunal, Ahmedabad.
VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE
SERVICES LTD.) v. ACIT CIRCLE 26 (2)
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B] For AY3 2014-15, the appellant filed Income Tax Return (ITR,
for short) on 30.09.2014 claiming refund of Rs.1532.09 Crores. On
31.08.2015, a notice under Section 143(2) of the Act4 was issued to the
appellant in respect of AY 2014-15. On 01.11.2015, the appellant filed
ITR for AY 2015-16 claiming refund of Rs.1355.51 Crores. A notice
under Section 143(2) of the Act was issued by the Department on
16.03.2016 in respect of AY 2015-16. A revised return was filed by the
appellant on 31.03.2016 in respect of AY 2014-15. The appellant entered
into an Advanced Pricing Agreement with the CBDT5 under Section 92
CC of the Act. Thereafter, further revised return was filed on 25.11.2016
for AY 2015-16 and a modified return in terms of Section 92 CD of the
Act was filed by the appellant on 22.02.2017 for AY 2014-15.
C] For AY 2016-17, the appellant filed ITR on 30.11.2016 claiming
refund of Rs.1128.47 Crores. A notice under Section 143(2) of the Act
was issued to the appellant on 03.07.2017 for AY 2016-17.
D] For AY 2017-18, ITR was filed by the appellant on 25.11.2017
claiming refund of Rs.743 Crores.
E] Submitting that there was complete inaction on part of the
respondents in processing the ITRs filed by the appellant and in issuing
appropriate refund to the appellant, Writ Petition (Civil) No.2730 of 2018
was filed by the appellant in the High Court, praying for following principal
relief.
"a. Writ of Mandamus or Writ, Order or Direction in the nature of
Mandamus, or any other appropriate Writ, Order or Directiion
under Article 226 / 227 of the Constitution of India directing the
Respondents to process and grant refunds for the AYs 2014-15
to 2017-18, along with interest under Section 244A of the Act;"
F] On 03.07.2018, the respondent No.1 filed an affidavit in reply
submitting inter alia that the ITRs of the appellant raised multiple issues
like Transfer Pricing Adjustment, Capitalization of Licence Fees, 3G
Spectrum Fees, Asset Restoration Cost Obligation including the effect
of amalgamation of group entities which required thorough scrutiny and
determination.
3 The Assessment Year
4 The Income Tax Act, 1961
5 Central Board of Direct Taxes
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G] During the pendency of said Writ Petition, a letter was issued
by the respondent No.1 on 23.07.2018, the relevant portion of which
was as under :-
"The assessment years for which request has been made to process
the return under Section 143(1) are already under scrutiny for AY
2012-13, AY 2013-14, AY 2014-15, AY 2015-16 and AY 2016-17.
I would like to draw your attention to Section 143(1D) of Income
Tax Act:
(1D) Notwithstanding anything contained in sub-section
(1), the processing of a return shall not be necessary, where
a notice has been issued to the assessee under sub-section
(2)
The case is under compulsory scrutiny for AY 2017-18 and as per
section 241A of Income Tax, Act 1961:
"For every assessment year commencing on or after the
1st day of April, 2017, where refund of any amount becomes
due to the assessee under the provisions of sub-section (1)
of Section 143 and the Assessing Officer is of the opinion,
having regard to the fact that a notice has been issued
under sub-section (2) of Section 143 in respect of such
return, that the grant of the refund is likely to adversely
affect the revenue, he may, for reasons to be recorded in
writing and with the previous approval of the Principal
Commissioner or Commissioner, as the case may be,
withhold the refund up to the date on which the assessment
is made."
Considering, pending special audit, pending scrutiny, pending
demands of amount of more than 4500 crore, it will prejudicial to
the interest of revenue to process the returns without completion
of the pending scrutiny cases. Therefore, exercising the powers
under section 143(1D) of Income Tax Act, 1961 and under Section
241A of Income Tax Act, 1961, the undersigned decline the
processing of returns under Section 143(1). The above decision
has been taken after taking into cognizance the order of Honorable
High Court of Delhi in TATA TELESERVICES LIMITED versus
CENTRAL BOARD OF DIRECT TAXES & ANR. dated
11.05.2016 in para 24 of the judgment:
VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE
SERVICES LTD.) v. ACIT CIRCLE 26 (2) [UDAY UMESH LALIT. J.]
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"The question whether such return should be processed
will have to be decided by the ASSESSING OFFICER
concerned exercising his discretion in terms of Section 143
(1D) of the Act."
H] In the meantime, on 13.07.2018 a revised return was filed by
the appellant for AY 2017-18 claiming refund of Rs.744.94 Crores. A
notice under Section 143(2) of the Act was issued to the appellant on
10.08.2018 for AY 2017-18.
I] On 31.08.2018, VMSL merged with Idea Cellular Ltd. and the
resultant company was named Vodafone Idea Ltd.
J] By its judgment and order dated 14.12.2018, the High Court
dismissed said Writ Petition.
J-1] The submissions of the appellant were recorded as under:-
"8. Vodafone also place reliance on the decision of this Court in
Tata Teleservices Limited vs. CBDT, 386 ITR 30 and Bombay
High Court in Group M Media India (P) vs. Union of India, 2016
SCC OnLine Bom 13624, which held that the return should be
processed within a year and only where the assessing officer is
of the view that issuance of refund would be detrimental to
collection of demands which may arise, he may invoke the provision
of Section 143(1D) of the Act.
... ... ...
13. With respect to the delay in processing of the tax return,
Vodafone places reliance on the decision of this Court in Tata
Teleservices Limited vs. Central Board of Direct Taxes (supra),
and the decision of the Bombay High Court in Group M Media
India (P) vs Union of India (supra), where it was held that the
return should be processed within a year and only where the
assessing officer is of the view that issuance of refund would be
detrimental to collection of demands that may arise, he may invoke
the provision of Section 143(1D) of the Act. From the perusal of
Section 241A of the Act, it is evident that all tax returns are
necessarily to be processed within the time period as prescribed
under Section 143(1) of the Act. In the instant case, it is noteworthy that the time period prescribed under Section 143(1) of
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the Act has expired and there has been no correspondence from
the revenue that discretion under Section 143(1D) was exercised.
... ... ...
17. It was contended that after the lapse of the one year period,
by reason of second proviso to Section 143 (1), the right to claim
refund is vested in any assessee. Counsel argued that this is
independent of the Revenue's power to issue a scrutiny notice
under Section 143 (2), for which the period of limitation is longer.
However, if the Assessing Officer does not issue any notice, or
intimation, if the assessee can claim refund, that right is a statutorily
vested one if, within the said period of one year, a reasoned order
is not made under Section 143 (1D) within the said one year
period."
J-2] On the other hand, the submissions on behalf of the
respondents were :-
"19. The revenue denies allegations of deliberate omission to
refund amounts aggregating to Rs.4759.74 crores along with
applicable interest and states that income tax returns were not
processed under Section 143(1). The assessment years under
consideration were picked up for scrutiny under Section 143(3)
and there is a prima facie likelihood of a substantial demand being
raised by the Income Tax Department, as has been done earlier
in Vodafone's earlier case. Further, the revenue submitted that in
Vodafone's own case for the AY 2011-12 wherein the returned
loss was Rs. 33,93,397 and subsequently, the income determined
by the Assessing Officer was Rs.546,64,25,250/-.
... ... ...
21. Counsel for the Revenue contended that for the relevant period
under consideration, the Assessing Officer has already issued
notice under sub-section (2) of Section 143 within time. As per
the then prevailing provision, it was thereafter not necessary for
the Assessing Officer to proceed under sub-section (1) of Section
143. Further, the Ld. Counsel placed reliance on Section 143(1D)
of the Act to explain that the refund has not been processed till
date. The Ld. Counsel urged that sub-section (1D) of section 143
which starts with a non-obstante clause provided that
VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE
SERVICES LTD.) v. ACIT CIRCLE 26 (2) [UDAY UMESH LALIT. J.]
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notwithstanding anything contained in sub-section (1), the
processing of the return shall not be necessary before the expiry
of the period specified in the second proviso where a notice has
been issued to the assessee under Section 143(2). The provisio to
Section 143 (1D) provided that such return shall be processed
before the issuance of an order under sub-section (3). Therefore,
Section 143 (1D) overrides Section 143 (1). Therefore, the counsel
submitted that under Section 143(1D) of the Act, the processing
of return shall not be necessary, where notice has been issued
under Section 143(2) of the Act.
22. The Counsel placed on record letter F.No.ACIT/C-26(2)/201819/216 dated 23.07.2018. It is in response to the multiple
communications by the assessee for expeditious processing of
returns for different AYs. The order informs that the cases are
pending for scrutiny as follows; for the AY 2012-13 and 2013-14,
the assessment is under special audit and for the AY 2014-15, the
assessee approached the AAR and lastly, returns for AYs 201516 and 2016-17, are under scrutiny. The assessment years for
which request has been made to process the return under Section
143(1) are already under scrutiny for the various AYs. Therefore,
exercising the power under Section 143(1D), the Assistant
Commissioner declined the processing of returns under Section
143(1). Further, the case is under compulsory scrutiny for AY
2017-2018, exercising the power Section 241A, the Assistant
Commissioner declined the processing of returns under Section
143(1)........"
J-3] After considering rival submissions, relevant statutory
provisions and the decisions relied upon, the High Court observed:-
"29. In the facts of the present case, the issue canvassed is on
the interpretation of Section 143 (1D) of the Act. It is first necessary
to refer to the statutory provisions and thereafter consider the
effect of such provisions on Vodafone's request for refund for
the said assessment years. On reading of the Section 143 of the
Act, it is apparent that when returns are filed either under Section
139 or pursuant to a notice under Section 142(1), Section 143(1)
mandates that the returns shall be processed in the manner
prescribed in the clauses (a) to (e) thereof. The processing of a
return thus involves determination of total income or loss, tax and
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interest, if any, payable and sum payable by, or the amount of
refund due to the assessee. Section 143(1)(d) stipulates that an
intimation shall be prepared or generated and sent to the assessee
specifying the sum determined payable by, or the amount of refund
due to the assessee under clause(C). Section 143 (1) (e) provides
that the amont of refund due in pursuance of the determination
under clause (C) shall be granted to the assessee. A reading of
proviso to Section 143 (1) reveals that it mandates that the
intimation as provided in Section 143 (1) (d) should be issued before
the expiry of one year from the end of the financial year in which
the return is made. Before proceeding to Section 143(1D) as it
stood at the relevant time, it is essential to refer to Section 143 (2)
and (3). Sub-section (2) contemplates issuance of a notice in the
contingency covered by the said provision. Sub-section (3) provides
that once such a notice is served, after following the procedure
laid, the Assessing Officer is required to pass an order in writing
making an assessment of the total income or loss and determine
the sum payable by the assessee or refund of any amount due to
him on the basis of the assessment. It is also relevant to notice
that whether it is the processing of a return under Section 143(1)
or an order under Section 143(3) is subject to the same time limit,
i.e. Section 153(1).
... ... ...
39. A reading of the above judgments and the relevant provisions,
clearly shows that Section 143(2) empowers, the Assessing Officer
to issue notice to the assessee to produce documents or other
evidence, to prove the genuineness of the income tax return. Under
Section 143(1D) of the Act an introduced by the Finance Act,
2012 processing of a return under Section 143 (1)(a) is not
necessary where a notice has been issued under Section 143(2)
of the Act. This provision has now been amended by the Finance
Act, 2016 (with effect from the AY 2017-18) to provide that if
scrutiny notice is issued under Section 143(2), processing of return
shall not be necessary before the expiry of one year from the end
of the financial year in which return is submitted.
40. The assesse's argument in these proceedings is that once the
one year period in proviso to Section 143(1) ends, the return - and
whatever calculations are contained in it, with respect to tax liability
VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE
SERVICES LTD.) v. ACIT CIRCLE 26 (2) [UDAY UMESH LALIT. J.]
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as well as the consequential refunds, become final, subject to only
one event: issuance of notice under Section 143 (2).
41. To this Court, it appears that the net effect of Tata Teleservices
(supra) is that the revenue cannot be inactive, in cases where the
assessee claims refund, and the one year period is over (under
proviso to Section 143(1) ends. The Assessing Officer has to apply
his mind to consider whether the facts and circumstances of the
case, warrant some or all of the refund of the assessee's amounts,
or if all of it needs to be withheld, whenever the assessee presses
for refund. This exercise should be undertaken promptly, keeping
in mind the time limit under the normal provision of Section 143(1)
expires. This Court held in Tata Teleservices Ltd. (supra) and the
Bombay High Court in case of Group M Media India (P) Ltd.
(supra) that it would be wholly inequitable for the Assessing Officer
to merely sit over the petitioner's request for refund citing the
availability of time up to the last date of framing the assessment
under Section 143 (3). The proper interpretation of the statute
and the situation in such a case would be, the Assessing Officer
should take up an expeditious disposal of the question once the
assessee requests for release of the refund.
... ... ...
44. Now in this case, acknowledgement or intimation had not
been sent by the Assessing Officer. There is no doubt that the
period of one year indicated in the second proviso to Section 143
(1). However, Section 143 (1D) begins with a non-obstante clause
that overbears that provision. Tata Teleservices (supra) and the
Bombay High Court ruling in Group M Media India (supra) state
that the fact that a regular assessment is resorted to, does not
ipso facto mean that in every case, the Assessing Officer has to
refuse refunds or there is an automatic bar to refunds. The
Assessing Officer has to apply his mind and make an order keeping
in perspective the facts of the case.
45. In this case, the revenue has relied on an order dated
28.07.2018, which inter alia, stated that "considering pending
special audit, pending scrutiny, opening demands of amount more
than 4500 crore, it will be prejudicial to the interest of the revenue
to process the returns without completion of the pending scrutiny
cases. Therefore, exercising powers under Section 143(1) and
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under Section 241A of the Act, the undersigned decline the
processing of returns under Section 143(1)." The senior counsel
for Vodafone had attacked the reliance on this order, stating that
it was made later. However, that is an aspect this Court cannot go
into. Facially, the order contains reasons. Therefore, unlike Tata
Teleservices, a reasoned order was made; that decision was based
on a circular, which fettered the Assessing Officer's discretion.
Therefore, the CBDT circular was set aside.
... ... ...
49. As far as the argument that the expiry of the one year period,
per second proviso to Section 143(1) resulting in finality of the
intimation of acceptance, this Court is of opinion that the deeming
provision in question, i.e. Section 143 (1) (d) only talks of two
eventualities: "shall be deemed to be the intimation in a case where
no sum is payable by, or refundable to, the assessee under clause
(c), and where no adjustment has been made under clause (a)."
Secondly, that intimation or acknowledgement cannot confer any
greater right than for the assessee to ask the Assessing Officer to
process the refund and make over the money; it is up to the
Assessing Officer - wherever the possibility of issuing a notice
under Section 143 (2) exists, or where such notice has been issued,
to apply his mind, and decide whether given the nature of the
returns and the potential or likely liability, the refund can be given.
It does not mean that when an assessment - pursuant to notice
under Section 143(2) is pending, such right to claim refund can
accrue. This Court also recollects the decision of the Supreme
Court in Deputy Commissioner of Income Tax v Zuari Estate
Development & Investment Co Ltd. 2015 (15) SCC 248 which
held that an intimation under Section 143 (1) is not to be considered
as an assessment."
K] On 27.12.2018 and 31.12.2018, Draft Assessment Orders in
terms of Section 144 C of the Act were passed for AY 2014-15 and AY
2015-16 respectively.
L] In the Special Leave Petition (from which this appeal arises)
questioning the aforesaid decision of the High Court, notice was issued
by this Court on 18.01.2019. In the affidavit in reply, the respondents
asserted:-
VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE
SERVICES LTD.) v. ACIT CIRCLE 26 (2) [UDAY UMESH LALIT. J.]
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"7. That having extracted the relevant provisions, it would be
relevant to state that the petitioner itself has made several
averments before the High Court that is facing "precarious financial
conditions" with an accumulated loss of Rs.5,557 crores and debts
amounting to Rs.53,000 crores as on 31.03.2017". It is equally
pertinent to state that the Respondent-Revenue had filed a counter
affidavit on 3rd July, 2018 against the Writ Petition in the High
Court of Delhi wherein it has been categorically averred that there
are huge pending demands against the petitioner herein more than
of Rs.5000 Crores. The contents of the Counter Affidavit before
the High Court may be treated as a part and parcel of the present
Affidavit. It has been stated that multiple issues on which addition
have been made giving rise to the demand liabilities, and several
of such issues are also recurring in nature.
... ... ...
10. That it is also submitted that the order dated 23rd July, 2018
passed by the Assessing Officer is an order under Section
143(1)(D) for the assessment years 2012-13 to 2016-17 as evident
from a bare reading of the said order giving reasons for refusal of
refund claimed by Vodafone Mobile Service Limited. As far as
the refusal of refund claimed for the A.Y. 2017-18 is concerned,
the said order draws its power under Section 241A of the Act as
clearly stated in the order dated 23rd July, 2018."
Reference was made to various pending proceedings where the
demands raised for earlier assessment years were stayed and it was
stated:-
"24. That it is wrong to say that the letter/order dated 23.07.2018
issued by Respondent No.1 u/s 143(1D) and 241A of the Income
Tax Act, 1961 is beyond limitation, bereft of any cogent reasoning
and without jurisdiction as the letter/order was issued for good
reasons to protect the interest of the revenue which is reflected
vide Para 45 of the impugned judgment. The reasoning was based
upon pending special audit, pending scrutiny and pending demands
of more than Rs.5000 crore. Further, the letter/order was not
beyond limitation because Section 143(1D) starts with a nonobstante clause, which is over and above the provisions of Section
143(1), which has been discussed in Para 44 of the impugned
judgment."
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M] On 14.03.2019 an intimation was sent to the appellant by the
respondent No.1 regarding withholding of refund for AY 2017-18. It
stated about the demand status for earlier assessment years as under :-
A.Y.
Nature of
Demand
Amount of
Demand Raised
u/s 143(3)/154
Amount
already paid/
Adjusted
Balance
Outstanding
2008-09
Corporate
Tax
assessment
u/s 143(3)
84,91,27,579/-
10,00,00,000/
-
74,91,27,579/-
2009-10
Corporate
Tax
Assessmen
t u/s 143(3)
2,42,86,76,260/-
97,36,82,990/
-
1,45,49,93,270/-
2010-11
Corporate
Tax
Assessmen
t u/s 143(3)
3,36,22,76,980/-
60,00,00,000/
-
2,76,22,76,980/-
2010-11
Corporate
Tax
Assessmen
t u/s 143(3)
1,65,14,76,430/-

1,65,14,76,430/-
2011-12
Corporate
Tax
Assessmen
t u/s 143(3)
2,11,61,29,711/-

2,11,61,29,411/-
Thereafter, it went on to state:-
"It is also to be noted that earlier refund was withheld vide
notesheet dated 23.07.2018 after due approval due to nonavailability of proceeding of return facility in ITBA for AY
2017-18 which was intimated to the assessee vide letter dated
23.07.2018. In view of the above discussion there is sufficient
reason to believe that issue of refund will negatively impact
the interest of the revenue. Therefore, proposal for withhold
the refund for AY.2017-18 was forwarded again to Pr.
Commissioner of Income Tax-09, Delhi and same has been
approved.