The Delhi High Court has dismissed telecom major Vodafone’s plea seeking directions to the Income Tax Department to expeditiously process its claim for refund of over Rs 4,759 crore in respect of returns filed for the assessment years (AYs) 2014-15 to 2017-18.
A bench of Justices S Ravindra Bhat and Prateek Jalan declined to grant any relief to the company, saying there was merit in the tax department’s argument that substantial outstanding demand was pending against the company and there was likelihood of more demands being made after the assessment for the AYs in question were scrutinised.
The court said the department should have the right to adjust the demands against the refunds that may arise but have not yet been determined due to the ongoing scrutiny proceedings. “There is some merit in the revenue’s (tax department) argument that substantial outstanding demand are pending against the petitioner. Further, the likelihood of substantial demands upon the assessee after the scrutiny for the AYs is completed, cannot be ruled out.
“The Revenue should have the right to adjust the demands against the refunds that may arise but have not yet been determined due to ongoing scrutiny proceedings,” it said in the judgement rejecting Vodafone’s plea.
The court noted that assessments for the years in question were either facing special audit or pending before the Assessment Officer (AO) for scrutiny and since scrutiny assessment of earlier years had led to raising of substantial demand, the tax department had decided not to process the company’s returns.
“In the facts of the present case, for AY 2014-15, the petitioner (vodafone) has approached the AAR and for AYs 2015-16 and 2017-18, scrutiny assessments are pending before the AO. The AO has exercised discretion under section 143 (1)D of the Income Tax Act not to process the returns considering the fact that substantial demand has been raised on completion of scrutiny assessment of earlier years.
“The petitioner has undertaken two schemes of amalgamation involving merger of certain group companies in order to restructure its business operations and increase operational efficiencies. In light of the above fact, assessments for the AY 2012-13 and 2013-14 are under special audit and any demand that would arise from the processing of the said assessment years are to be allowed to be adjusted against the refund claims,” it said.
The company had claimed that it had received an acknowledgment after it had filed a return and therefore, within a year of the same, the refund ought to have been processed and failing which, interest would be applicable.
Rejecting the contention, the court said, “Intimation or acknowledgment cannot confer any greater right than for the assessee to ask the AO to process the refund and make over the money.”
“It is up to the AO, 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.” “For the above reasons this court is of the opinion that there is no merit in the petitioner’s argument. The writ petition fails and is accordingly dismissed,” it added.