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 Court[1] in Writ Petition (Civil) No.2730 of 2018 preferred by the appellant herein. [1] High Court of Delhi at New Delhi
(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 arrangement[2] 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.? [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. B] For AY[3] 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 Act[4]s 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 CBDT[5] 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. [3] The Assessment Year [4] The Income Tax Act, 1961 [5] Central Board of Direct Taxes 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 Direction 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. 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 TELE SERVICES LIMITED versus CENTRAL BOARD OF DIRECT TAXES and ANR. dated 11.05.2016 in para 24 of the judgment: "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 note-worthy that the time period prescribed under Section 143(1) of 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 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)/2018-19/216 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 2015-16 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 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 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 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 vs. Zuari Estate Development and 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 :- "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 non-obstante clause, which is over and above the provisions of Section 143(1), which has been discussed in Para 44 of the impugned judgment." 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 :- JUDGEMENT_57_LAWS(SC)4_2020_1.html Thereafter, it went on to state :- "It is also to be noted that earlier refund was withheld vide note sheet dated 23.07.2018 after due approval due to non-availability 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. Approval on note sheet was taken as well as procedure for approval through ITBA was also followed for withholding of refund which also involves approval from PCIT-09. The approval for withholding of refund u/s 241 was taken from PCIT-9 which was sent through proper channel through Addl. CIT Range 26. In view of the facts above you are hereby intimated that refund of A.Y.2017-18 in the case of M/s Vodafone Mobile Service Limited has been withhold u/s 241A of the Income Tax Act, 1961 till the completion of scrutiny proceedings u/s 143(3) or 144C r.w.s. 143(3) of the Income Tax Act, 1961." N] Objections raised by the appellant against the Draft Assessment Orders issued on 27.12.2018 and 31.12.2018 were disposed of on 20.09.2019. Thereafter, Final Assessment Orders under Section 143 (3)of the Act were passed on 31.10.2019 for AY 2014-15 and 2015-2016, where under the appellant was held entitled to refund of Rs.733 Crores (approximately) in respect of AY 2014-15, whereas for AY 2015-2016 the claim for refund was rejected and demand in the sum of Rs.582 Crores (approximately) was raised. In an appeal preferred by the appellant, said demand for AY 2015-16, has, since then, been stayed by the Income Tax Appellate Tribunal. ;