TMI Blog2020 (5) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sub-section (2) itself is sufficient indication. Sub-section (1D) of Section 143 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. In our view, 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. 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. Returns filed in respect of assessment year commencing on or after the 1st April, 2017, a different regime has been conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (2) of Section 143 of the Act in respect of AY 2016-17 and 2017-18 as early as possible. - Civil Appeal No.2377_ of 2020 Arising out of SLP(Civil) No.1169 of 2019 - - - Dated:- 29-4-2020 - Uday Umesh Lalit And Vineet Saran JJ. For the Petitioner(s) : Ms. B. Vijayalakshmi Menon, AOR For the Respondent(s) : Mr. Zoheb Hussain, Adv., Mrs. Anil Katiyar, AOR JUDGMENT 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 High Court of Delhi at New Delhi 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 scr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -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 prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mended 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 Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 :- 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 Assessment u/s 143(3) 2,42,86,76,260/- 97,36,82,990/- 1,45,49,93,270/- 2010-11 Corporate Tax Assessment u/s 143(3) 3,36,22,76,980/- 60,00,00,000/- 2,76,22,76,980/- 2010-11 Corporate Tax Assessment u/s 143(3) 1,65,14,76 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he respondents that insofar as AY 2017-18 was concerned, the order dated 23.07.2018 passed under Section 143(1D) of the Act was without jurisdiction, as by that time no order was passed under Section 143(2) of the Act for the concerned Assessment Year. It was submitted that in the circumstances, a fresh order was passed on 14.03.2019 after due compliance of the statutory requirements. In order to verify the developments leading to the passing of order dated 14.03.2019, the concerned record was summoned and perused. The Court was satisfied that all the antecedent steps leading to said order were taken in accordance with law and settled practice. An affidavit was also filed on behalf of the respondents explaining in detail the developments leading to the passing of order dated 14.03.2019 and issuance of intimation dated 09.04.2019. It was stated: That as per CPC accounting of the return was completed on 9th April, 2019 and intimation u/s 143(1) was generated on 9th April, 2019. It is also evident from Page 1 of the intimation dated 09.04.2019 that contrary to the allegations of the Petitioner that the intimation u/s 143(1) was never communicated to them, it is submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order dated 28.12.2019 placed on record indicates that for Assessment Year 2016-17 a demand in the sum of ₹ 2824.99 crores has been raised against the appellant. After conclusion of oral hearing, the parties also filed their written submissions. 6. It was submitted by the appellant: In the facts of the present case, admittedly, for AYs 2014-15 to 2016-17 (for which provisions of Section 143(1D) of the Act are relevant), the Respondent has neither processed the return of income for the said years by the last date, viz. 31.03.2018 nor did the Respondent exercise the discretion provided under Section 143(1D) of the Act by that. As per the Respondents own submission, such discretion under Section 143(1D) of the Act was only exercised vide letter/order dated 23.07.2018, which admittedly is beyond the limitation period. Therefore, the exercise of such discretion, having been made beyond limitation is a nullity in the eyes of law and, hence, no cognizance can be taken of such a letter/order. Insofar as the Assessment Year 2017-18 is concerned, the Respondents during the course of arguments, before this Hon ble Court have admitted that order dated 23.07.2018 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 143(1). That being the position of law laid down by the Hon ble Supreme Court, the discretion under Section 143(1D) can be exercised at any point prior to the passing of the final assessment order. The entire objective of not processing a return after issuance of a scrutiny notice is that in cases where there is a likelihood of substantial demands, there should not be a compulsion on the Revenue to issue refunds. There is no anomaly in the above legislative scheme which warrants dilution of the non-obstante clause and to read into Section 143(1D) a limitation which the legislature has not prescribed ... It is well settled that a non-obstante clause is a legislative device which is employed to give overriding effect to some or all contrary provisions and as such, the operation of a non-obstante clause cannot be limited in any manner and must be given its full effect The High Court at para 44 has categorically held that since Section 143(1D) begins with a non-obstante clause, it will overbear/override the second proviso to Section 143(1) which contains a limitation period of one year for precession of return. Without prejudice to the submission that the meri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43. The converse is not available; a regular assessment proceeding having been commenced under Section 143(2), there is no need for a summary proceeding under Section 143(1) (a). 8.1 The facts and relevant submissions in Gujarat Poly Avx Electronics Ltd. 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. were recorded in the decision of the Gujarat High Court as under: 2. On 12th September, 1994 the assessee submitted a return of loss of ₹ 1,74,78,530 for the assessment year 1993-94 as per the computation of income and depreciation chart annexed to the petition at Annexure A. The assessee claimed depreciation of ₹ 1,74,78,526. Manufacturing activities started on 24th March, 1993, i.e. during the accounting year ending on 31st March, 1993 (the assessment year 1993-94). It was specifically pointed out that the amount of interest received during the public issue of ₹ 1,07,85,590 is not to be considered as income and has been given set off against the interest outgoings included under pre-operative expenditure in view of several decisions includi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment under Section 143(3) of the Act by issuing a notice under s. 143(2) of the Act. 5. As against this, Mr. Shelat, learned counsel (for the Revenue), has contended that it is open for the AO to follow the procedure under s. 143(1) and 143(2) simultaneously. His contention is that it is open to have parallel proceedings and is not compulsory to assess as per s. 143(3) of the Act though notice under s. 143(2) of the Act is issued and before making assessment under s. 143(3) of the Act he can proceed under s. 143(1) of the Act. No other contention is raised. 8.1.1 The relevant provision, namely Section 143 as it then stood was quoted in paragraph 6 as under: 6. It would be better to have a look at the relevant section which is reproduced as under: 143(1)(a) Where a return has been made under Section 139, or in response to a notice under sub-s. (1) of Section 143, - (i) If any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-s. (2), an intimation shall be sent to the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase where the loss so declared is reduced under sub-clause (i) of this clause or the aforesaid adjustments have the effect of converting that loss into income, calculate a sum (hereinafter referred to as additional income-tax) equal to twenty per cent of the tax that would have been chargeable on the amount of the adjustments as if it had been the total income of such person and specify the additional income-tax so calculated in the intimation to be sent under sub-clause (i) of clause (a) of sub-s. (1); (C) where any refund is due under sub-s. (1), reduce the amount of such refund by an amount equivalent to the additional income-tax calculated under sub-clause (A) or sub-clause (B), as the case may be........... xxx xxx xxx xxx (2) Where a return has been made under Section 139, or in response to a notice under sub-s. (1) of Section 142, the AO shall, if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. That in Section 143(2) like under Section 143(1) powers are not saved. As the Assessing Officer has called upon the assessee to furnish evidence to satisfy himself about the correctness or legality of the claim made by the assessee in his return, hence, only after hearing the assessee and after considering the evidence that may be produced by the assessee the Assessing Officer has to make the order in writing making assessment of the total income or loss of the assessee and he has to determine the amount payable on the basis of such assessment, that is, under s. 143(3) of the Act. Mr. Shelat, learned counsel for the Revenue, fairly stated that notice under Section 143(2) of the Act cannot be withdrawn. Notice under Section 143(2) of the Act is a step towards regular assessment under Section 143(3) of the Act and, therefore, in absence of any provision it is not open to make assessment in any other manner than provided as per Section 143(3) of the Act. 10. Powers to make assessment in terms of its proviso can be invoked and when the claim is prima facie inadmissible or prima facie admissible, as the case may be, adjustment is to be made. The word prima facie cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act which is not contemplated under Section 143(3) of the Act and thus what is not permissible under Section 143(3) of the Act cannot be made permissible by allowing the Assessing Officer to resort to Section 143(1) of the Act. 16. In this view of the matter, we are of the opinion that after issuance of notice under Section 143(2) of the Act, it is not open for the Assessing Officer to make adjustment or to pass order under Section 143(1) of the Act but he has to make assessment in accordance with law, i.e., under Section 143(3) of the Act. 9. These decisions were rendered in the context of the provisions then in existence which had following notable features:- (a) sub-section (1A) in terms of which, if any adjustments had resulted in increased total income, an additional income tax at the rate of 20 per cent on the difference would be levied. (b) the intimation to be sent under sub-section (1) was expressly stated to be without prejudice to the provision of sub-section (2). Nonetheless, the basic distinction that was noted was: the procedure under sub-section (1) was summary in nature whereas that under sub-section (2) was a regular assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here a notice has been issued under sub-section (2) of Section 143 of the Income Tax Act the processing of return shall not be necessary before the expiry of one year from the end of the financial year in which the return is furnished. However, it is mandated to process the return before the issuance of order under sub-section (3) of Section 143 of the Income Tax Act. 56.3 Applicability: This amendment takes effect from the 1st of April, 2017 and will, accordingly apply in relation to assessment year 2017-18 and subsequent years. C) The aforementioned substitution of sub-section (1D), however, never came into effect, as by Finance Act, 2017 said sub-section in the earlier form was retained and the text of the proviso was also modified. Effectively, on and with effect from 01.04.2017, sub-section (1D) and the proviso are:- (1D) Notwithstanding anything contained in subsection (1), the processing of a return shall not be necessary, where a notice has been issued to the assessee under sub-section (2): Provided that the provisions of this sub-section shall not apply to any return furnished for the assessment year commencing on or after the day of April 2017. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and with the previous approval of the Principal Commissioner or Commissioner, as the case may be, withheld the refund up to the date on which the assessment is made. 11. Consequently, the relevant parts of sub-sections (1) to (3) of Section 143 of the Act, as they stand today are as under: 143. Assessment .- (1) Where a return has been made under Section 139, or in response to a notice under sub-section (1) of Section 142, such return shall be processed in the following manner, namely:- ( a ) the total income or loss shall be computed after making the following adjustments, namely:- ( i ) any arithmetical error in the return; ( ii ) an incorrect claim, if such incorrect claim is apparent from any information in the return; ( iii ) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of Section 139; ( iv ) disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return; ( v ) disallowance of deduction claimed under Sections 10-AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or Section 80-IE, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of an item, which is inconsistent with another entry of the same or some other item in such return; ( ii ) in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or ( iii ) in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction; ( b ) the acknowledgment of the return 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 ). (1A) For the purposes of processing of returns under sub-section (1), the Board may make a scheme for centralized processing of returns with a view to expeditiously determining the tax payable by, or the refund due to, the assessee as required under the said sub-section. (1B) Save as otherwise expressly provided, for the purpose of giving effect to the scheme made under sub-section (1A), the Central Government may, by notification in the Official Gazette, direct that any of the provisions of this Act relating to processing of returns s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrect determination of the liability of the assessee. 14. 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 sub-section (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 retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmal Fernandez etc. v. Joosa Mariyam Fernandez and others (2000) 7 SCC 189 . 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. 17. The intent to have the general principle emanating from subsection (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). Recently, while dealing with non-obstante clause in Section 26(1) of the Provincial Small Cause Courts Act, 1887 this Court observed in Vaishali Abhimanyu Joshi v. Nanasaheb Gopal Joshi (2017) 14 SCC 373 as under: 33. Notwithstanding anything contained elsewhere in this Act as used in Section 26(1) of the 1887 Act are words of expression of the widest amplitude engulfing the contrary provisions contained in the Act. The suit in question has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pe 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 sub-section (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. In our view, 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. 20. 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. 21. However, insofar as returns filed in respect of assessment year commencing on or after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es; while for AY 2015-16 there is a demand of ₹ 582 Crores. During the course of hearing, it was suggested on behalf of the respondents that demands in respect of earlier assessment years including the liability as a result of order dated 28.12.2019 as referred to in para 5.1 hereinabove being outstanding, the respondents would be entitled to invoke the requisite power under Section 245 of the Act to set off the amount of refund payable in respect of AY 2014-15 against tax remaining payable. Since the requisite action is not even initiated, we say nothing in that respect. In the premises, we direct that the amount of ₹ 733 Crores shall be refunded to the appellant within four weeks from today subject to any proceedings that the Revenue may deem appropriate to initiate in accordance with law. We also direct the respondents to conclude the proceedings initiated pursuant to notice under sub-section (2) of Section 143 of the Act in respect of AY 2016-17 and 2017-18 as early as possible. 24. Except for the directions as indicated above, we see no merit in any of the contentions advanced by the appellant. This appeal is, therefore, dismissed without any order as to cost ..... X X X X Extracts X X X X X X X X Extracts X X X X
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