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Bombay High Court Orders INR 1,128 Crore Tax Refund to Vodafone Idea

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Published on: November 10, 2023 at 11:19 IST

The Bombay High Court has issued a directive to the Income Tax department to refund the sum of Rs 1,128 crore to Vodafone Idea Limited.

This refund pertains to taxes paid by the telecom company for the assessment year 2016-2017. The High Court emphasized that the assessment order issued by the department in August of this year was “time-barred and, therefore, cannot be upheld.”

A division bench comprising Justices K R Shriram and Neela Gokhale expressed strong disapproval of the assessing officer’s “laxity and lethargy” in failing to issue the final order within the mandated 30-day period. This delay was deemed to have caused a significant loss to both the exchequer and the public.

The court’s decision is a response to a petition submitted by Vodafone Idea Limited, asserting that the Income Tax department had not refunded the excess amount it had paid for the assessment year 2016-2017, an amount exceeding the legitimate tax due on its income.

The bench, in its ruling, described the Vodafone case as “quite elementary” and pointed out the “complete apathy and negligent approach” of the assessing officer in discharging their duties in accordance with the provisions of the Income Tax Act.

The order stressed that any negligence by officers responsible for acting within the boundaries of the law has far-reaching consequences, affecting the nation’s economic stability and prosperity.

The court urged a detailed inquiry into the failure of the assessing officer to act in compliance with the Income Tax Act and recommended strict action against those responsible for the resulting laxity and loss to the exchequer and citizens.

The court also directed the circulation of its order to the Union Ministry of Finance, highlighting the importance of adherence to tax regulations for efficient and transparent administration.

According to the petition, the assessing officer issued a draft order related to the assessment year in December 2019, to which the company raised objections before the Dispute Resolution Panel (DRP) in January 2020. The DRP provided certain directions in March 2021.

Vodafone Idea Limited contended that the assessing officer was obliged to issue the final order within 30 days as stipulated by the Act. Since the officer failed to do so, the company claimed a refund with interest.

The company further stated that the assessing officer issued the final assessment order in August after the petition for the refund was filed in the High Court in June 2023.

Despite the tax department’s argument that they had not received the DRP’s directions due to the “Faceless Assessment Regime,” the high court rejected this and noted that the DRP directions were accessible on the Income Tax Business Application (ITBA) portal.

The court found no explanation for the assessing officer’s inactivity for two years and held that the assessment order dated August 31, 2023, was time-barred and could not be upheld, thus entitling Vodafone Idea Limited to the refund along with interest.