Supreme Court of India
VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)versusASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.
- Citation
- 2020 INSC 378
- Decided
- 29 April 2020
- Disposal
- Dismissed
- Bench
- UDAY UMESH LALIT
Holding
When a notice under s.143(2) is issued, the summary processing under s.143(1) must await the outcome of the scrutiny assessment, and s.143(1D) expressly overrides the need for any further processing or separate intimation.
Summary
Vodafone Idea Ltd. filed income‑tax returns for AY 2014‑15 to AY 2017‑18 claiming large refunds. The Assessing Officer issued notices under s.143(2) for each year and, invoking s.143(1D) and s.241A, declined to process the returns under s.143(1) and withheld refunds, arguing that the notice itself sufficed to defer processing. The company challenged the validity of the notices, the alleged need for a separate intimation, and the jurisdiction of the orders dated 23.07.2018 and 14.03.2019. The Supreme Court held that s.143(1) is a summary procedure for apparent inconsistencies, whereas s.143(2) and (3) entail full scrutiny, and that once a notice under s.143(2) is issued, processing under s.143(1) must await the outcome of the scrutiny. The Court clarified that s.143(1D) contains a non‑obstante clause that overrides the general rule, making further processing unnecessary, and that no separate intimation is required. It also affirmed that for assessment years commencing on or after 1 April 2017, the withholding of refund must comply with s.241A, which was satisfied in this case. Consequently, the Court ordered the refund of Rs.733 crore for AY 2014‑15 and directed the completion of pending scrutiny proceedings, dismissing the appeal.
Issues considered
- The distinction between the powers under s.143(1) and s.143(2) of the Income Tax Act, 1961.
- Whether issuance of a notice under s.143(2) automatically defers processing of the return under s.143(1).
- The necessity of a separate intimation to the assessee that processing under s.143(1) is deferred.
- The applicability of s.143(1D) and its non‑obstante clause in overriding the general processing rule.
- The compliance requirements under s.241A for assessment years commencing on or after 1 April 2017.
Legislation cited
- Finance Act, 2012
- Finance Act, 2016
- Finance Act, 2017
- Income Tax Act, 1961s. 143(1), s. 143(1D), s. 143(2), s. 143(3), s. 144C, s. 154, s. 241A, s. 245
Subjects
Income Tax ActSection 143Section 241ATax refundScrutiny assessmentNon‑obstante clauseProcessing of returnAssessment yearWithholding of refund
Judgment
200 [2020]REPORTS
SUPREME COURT 11 S.C.R. 200 [2020] 11 S.C.R.
A VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE
MOBILE SERVICES LIMITED)
v.
ASSISTANT COMMISSIONER OF INCOME TAX
CIRCLE 26 (2) & ANR.
B
(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
C
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
D the assessee may produce – Exercise in s.143(2) is to ensure that
there is no understating of income or overstating of loss or under-
payment 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
E
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
F
(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
G 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
H s.143 of the Act is purely summary in character – Once deeper
200
VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE 201
SERVICES LTD.) v. ACIT CIRCLE 26 (2)
scrutiny is undertaken and the matter is being considered from the A
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,
B
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 C
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; D
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. E
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 F
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 G
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.
H
202 SUPREME COURT REPORTS [2020] 11 S.C.R.
A 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”;
B 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
C 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
D 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
E 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
F 12][237-B-F]
1.2 On the other hand, the exercise of power under sub-
section (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:
G 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
H
VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE 203
SERVICES LTD.) v. ACIT CIRCLE 26 (2)
income is not under-stated or the loss is not over-stated, or the A
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]
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) C
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 D
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, E
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 F
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 G
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
H
204 SUPREME COURT REPORTS [2020] 11 S.C.R.
A 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
B
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
C 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 13-
15][238-E-H; 239-A-E]
D 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
E (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
F 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
G 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
H
VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE 205
SERVICES LTD.) v. ACIT CIRCLE 26 (2)
in conformity with the requirements stated in sub-section (2) of A
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 B
(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 C
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 sub-
section (1) of Section 143 of the Act is purely summary in
character. Once deeper scrutiny is undertaken and the matter is D
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 E
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 F
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-E-
H; 242-A-B] G
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 H
206 SUPREME COURT REPORTS [2020] 11 S.C.R.
A 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
B
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
C 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
D 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]
E
Gujarat Poly Avx Electronics Ltd. v. Dy. Commissioner
of Income Tax (Asstt.) (1996) 222 ITR 140 Guj –
referred to.
Case Law Reference
F (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)
G (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
H
[1984] SCR 292 referred to Para 17
VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE 207
SERVICES LTD.) v. ACIT CIRCLE 26 (2)
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2377 A
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, B
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. C
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.
D
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.
E
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 F
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. G
Most of the factual developments in the matter, as set out hereafter,
were before said scheme of arrangement.
1High Court of Delhi at New Delhi
2Formulated 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. H
208 SUPREME COURT REPORTS [2020] 11 S.C.R.
A 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
B
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
C 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
D 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
E 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
F 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
G 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
H
VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE 209
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G] During the pendency of said Writ Petition, a letter was issued A
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. B
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 C
(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 D
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 E
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.”
F
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 G
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:
H
210 SUPREME COURT REPORTS [2020] 11 S.C.R.
A “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
B 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.
C 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
D 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
E 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),
F
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
G 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
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the Act has expired and there has been no correspondence from A
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 B
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 C
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 D
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 E
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/-.
F
………
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
G
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
H
212 SUPREME COURT REPORTS [2020] 11 S.C.R.
A 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,
B
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-
C 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
D 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
E 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
F 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
G 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
H return thus involves determination of total income or loss, tax and
VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE 213
SERVICES LTD.) v. ACIT CIRCLE 26 (2) [UDAY UMESH LALIT. J.]
interest, if any, payable and sum payable by, or the amount of A
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
B
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) C
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
D
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).
……… E
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, F
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 G
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 H
214 SUPREME COURT REPORTS [2020] 11 S.C.R.
A 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
B 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)
C 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
D 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.
………
E 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
F 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.
G
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
H cases. Therefore, exercising powers under Section 143(1) and
VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE 215
SERVICES LTD.) v. ACIT CIRCLE 26 (2) [UDAY UMESH LALIT. J.]
under Section 241A of the Act, the undersigned decline the A
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
B
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 C
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 D
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 E
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 F
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. G
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:-
H
216 SUPREME COURT REPORTS [2020] 11 S.C.R.
A “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
B
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
C 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
D 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,
E 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:-
F “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
G 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
H judgment.”
VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE 217
SERVICES LTD.) v. ACIT CIRCLE 26 (2) [UDAY UMESH LALIT. J.]
M] On 14.03.2019 an intimation was sent to the appellant by the A
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 Amount of Amount Balance
Demand Demand Raised already paid/ Outstanding
u/s 143(3)/154 Adjusted
2008-09 Corporate 84,91,27,579/- 10,00,00,000/ 74,91,27,579/- B
Tax -
assessment
u/s 143(3)
2009-10 Corporate 2,42,86,76,260/- 97,36,82,990/ 1,45,49,93,270/-
Tax -
Assessmen
t u/s 143(3)
2010-11 Corporate 3,36,22,76,980/- 60,00,00,000/ 2,76,22,76,980/- C
Tax -
Assessmen
t u/s 143(3)
2010-11 Corporate 1,65,14,76,430/- 1,65,14,76,430/-
Tax
Assessmen
t u/s 143(3)
2011-12 Corporate 2,11,61,29,711/- 2,11,61,29,411/- D
Tax
Assessmen
t u/s 143(3)
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 non- E
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 F
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 G
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 H
218 SUPREME COURT REPORTS [2020] 11 S.C.R.
A 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)
B of the Act were passed on 31.10.2019 for AY 2014-15 and 2015-2016,
whereunder 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
C the Income Tax Appellate Tribunal.
4. The relevant dates and the factual developments as stated
above, can be summarized in a tabular form as under:-
Asse ssme nt Date of Notice Filing of Modified Draft Order by Final Order
yea r Revi sed
filing of u/s Return in Assess DRP dis- Assess u/s.143
Return
D ITR 143(2) terms of
S.92CD
-ment
Order
posing of
objections
-ment
Order
(1D)
u/s. of the u/s.
144C appe-llant 143(3)
against
order
u/sec.
144C
23.7.2017
2014-15 3 0. 9. 2014 31.8.2015 31.3.2016 22.2.2017 27.12.2018 20.9.2019 31.10.20 19
(Refund: (Refund:
E Rs.1532 Cr Rs.733Cr.
Approx.)
Approx.)
2015-16 1.11. 2015 16.3.2016 25.11.2016 31.12.2018 20.9.2019 31.10.20 19 23.7.2018
(Refund: (Demand:
Rs.135 Rs.582 Cr.
5 Cr Approx.)
Approx.)
2016-17 30.11.2016 3.7.2017 23.7.2018
(Refund:
F Rs.1128 Cr.
Approx.)
2017-18 25.11.2017 10.8.2018 13.7.2018 14.3.2019
(Refund:
Rs.745 Cr
Approx.)
5. In this appeal, we heard Mr. J.D. Mistri, learned Senior
G Advocate for the appellant and Mr. Zoheb Hossain, learned Advocate
for the respondents. During the course of arguments, it was accepted
by the 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
H circumstances, a fresh order was passed on 14.03.2019 after due
VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE 219
SERVICES LTD.) v. ACIT CIRCLE 26 (2) [UDAY UMESH LALIT. J.]
compliance of the statutory requirements. In order to verify the A
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 B
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 9 th
April, 2019 and intimation u/s 143(1) was generated on 9th April,
2019. It is also evident from Page 1 of the intimation C
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 the intimation u/s 143(1) was sent to the email
address provided by the assessee, that is,
atul.goel@vodafoneidea.com..
D
That it was in this background that the screen-shot relied upon by
the assessee during the course of the hearing shows that the ITR
was processed on 09.04.2019.
The intimation under Section 143(1) was made on 09.04.2019
and the said intimation stated that refund determined under Section E
143(1) in the said intimation has been withheld as per the proviso
of Section 241A and that the refund if any will be released on
completion of the assessment under Section 143(3)/144(4) as the
case may be along with the interest under Section 244A and subject
to adjustment of arrears demand, if any under Section 245.
F
In view of the above, it is submitted that the CPC has adopted the
due process prescribed by the ITBA-ITR Processing Instruction
No.5 dated 14.12.2018. As per the said process, the refund
determination is complete immediately after recommendation of
the total income tax and matching of tax credits is completed at
CPC system. At this stage the refund determination is G
communicated by CPC, Bangalore to AO through ITBA module.
Once the refund is approved/withheld/blocked by the AO, CPC
will complete the accounting of the record and act according to
other processes involved like Section 245 of I.T. Act i.e. adjustment
of refund determined against tax arrears due.”
H
220 SUPREME COURT REPORTS [2020] 11 S.C.R.
A 5.1 One more development must also be adverted to. In the hearing
dated 08.01.2020, reliance was placed on the order dated 28.12.2019
passed in connection with M/s Idea Cellullar Ltd. It was therefore
observed by this Court:
“During the course of hearing, Mr. Zoheb Hossain, learned counsel
B appearing for the Revenue produced a copy of the order dated
28.12.2019 passed in connection with Idea Cellular Limited (with
which entity the appellant now stands merged).
Mr. Hossain submitted that the order dated 28.12.2019 will have
bearing on the issue insofar as the refund payable to the present
C appellant in respect of the assessment year 2014-15 is concerned.
We direct the Department to place on record copy of the order
along with such submission as the Department wishes to place on
record. Let the submissions by way of an affidavit be filed within
seven days from today.
D The appellant shall have liberty to respond to those submissions
within next seven days.”
The copy of the order dated 28.12.2019 placed on record indicates
that for Assessment Year 2016-17 a demand in the sum of Rs.2824.99
crores has been raised against the appellant.
E
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
F 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
G 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.
H
VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE 221
SERVICES LTD.) v. ACIT CIRCLE 26 (2) [UDAY UMESH LALIT. J.]
Insofar as the Assessment Year 2017-18 is concerned, the A
Respondents during the course of arguments, before this Hon’ble
Court have admitted that order dated 23.07.2018 was without
jurisdiction because on that date, neither the return of income
was processed, nor a notice under Section 143(2) issued, warranting
exercise of powers under Section 241A of the Act. On that ground
B
alone, the Impugned Order insofar as Assessment Year 2017-18
is concerned should be set aside and the refund claimed for that
year should be granted with interest……
Having admitted that the Order dated 23.07.2018 was without
jurisdiction, the Respondent set up an alternate case that the time
limit for processing the return of income expires on 31.03.2020 C
and, therefore, the proceedings for AY 2017-18 are inchoate and
no direction may be issued for that year. When it was pointed out
that processing has already been completed vide intimation dated
09.04.2019, the Respondent changed its stand and argued that a
letter dated 14.03.2019 was issued after filing of the counter D
affidavit before this Hon’ble Court on 06.03.2019, seeking to again
exercise powers under Section 241A of the Act. Admittedly, as
per the e-filing portal of the Income Tax Department, and the
intimation produced by the Respondent before this Hon’ble Court
on 08.01.2020, the processing of the return for AY 2017-18 was
completed only on 09.04.2019 and, therefore, the alleged exercise E
of power under Section 241A on 14.03.2019 is without jurisdiction
since it suffered from the same vice as the Order dated 23.07.2018,
i.e. refunds could not have been withheld under Section 241A
prior to processing of the return of income…...
Without prejudice to the submission that the Order dated F
23.07.2018 issued for the AYs 2014-15 to 2016-17 was without
jurisdiction, having been issued beyond limitation and the Orders
dated 23.07.2018 and 14.03.2019 invoking jurisdiction under Section
241A of the Act for the AY 2017-18 have no sanctity of law since
the sine qua non for invoking that Section, i.e. processing of return G
was completed on 09.04.2019, even on merits, neither the Order
dated 23.07.2018 nor the order dated 14.03.2019 disclose any
grounds on which powers under Section 143(1D) or Section 241A
of the Act could have been invoked.”
7. The respondents submitted: H
222 SUPREME COURT REPORTS [2020] 11 S.C.R.
A “On merits, it is submitted that if the AO issued a Notice u/s
143(2) within the time limit i.e. 6 months from the end of the
financial year in which return was filed, then there is no longer a
requirement to process the return under 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
B
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
C 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
D 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/
E 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 merits of the order
dated 23.07.2018 as well as order dated 14.03.2019 has never
been assailed by the Petitioner before any forum, nor any
F arguments advance during the hearing before the High Court and
that the same cannot be raised for the first time before this Hon’ble
Court in an SLP, it is submitted that the AO had withheld refund in
all these years for cogent and valid reasons, in the interest of the
revenue, subject to final scrutiny assessment proceedings. It is
G submitted that the scope of judicial review against such an order
where the AO has exercised his discretion would be limited and
any interference can only be done if such an exercise of power is
either wholly capricious or without any valid reasons.”
8. The inter-relation between sub-sections of Section 143 of the
Act, as the Section then stood, was subject matter of discussion by this
H
VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE 223
SERVICES LTD.) v. ACIT CIRCLE 26 (2) [UDAY UMESH LALIT. J.]
Court in CIT v. Gujarat Electricity Board6 which in turn referred to A
the decision of the Gujarat High Court in Gujarat Poly Avx Electronics
Ltd. v. Dy. Commissioner of Income Tax (Asstt.)7. This Court observed:
“5. The learned counsel appearing for the respondent have pointed
out that in a number of judgments several High Courts have
consistently taken the view that once regular assessment B
proceedings have commenced under Section 143(2) of the Income
Tax Act, 1961, it is a limitation on the jurisdiction of the assessing
officer to commence proceedings under Section 143(1)(a) of the
Act.
6. Even, otherwise, the view taken by the Gujarat High Court C
seems to be correct on principle. There is no dispute that Section
143(1)(a) of the Act enacts a summary procedure for quick
collection of tax and quick refunds. Under the scheme if there is
a serious objection to any of the orders made by the assessing
officer determining the income, it is open to the assessee to ask
for rectification under Section 154. D
7. Apart therefrom, the provisions of Section 143(1)(a)(i) indicate
that the intimation sent under Section 143(1)(a) shall be without
prejudice to the provisions of sub-section (2). The legislature,
therefore, intended that where the summary procedure under sub-
section (1) has been adopted, there should be scope available for E
the Revenue, either suo motu or at the instance of the assessee to
make a regular assessment under sub-section (2) of Section 143.
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).” F
8.1 The facts and relevant submissions in Gujarat Poly Avx
Electronics Ltd.2 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 Rs.1,74,78,530 for the assessment year 1993-94 as per the G
computation of income and depreciation chart annexed to the
petition at Annexure A. The assessee claimed depreciation of Rs.
1,74,78,526. Manufacturing activities started on 24th March, 1993,
6 (2003) 260 ITR 84
7 (1996) 222 ITR 140 Guj. H
224 SUPREME COURT REPORTS [2020] 11 S.C.R.
A 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
Rs. 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 including that
B
of the apex Court.
3. As stated by the learned counsel, on filing of the return, the
Assessing Officer (AO) under the new scheme for the assessment
under Section 143 of the Act, had two options; i.e., (i) either to
accept the return under s. 143(1) with necessary adjustments, if
C there is any, or (ii) to proceed to make assessment under Section
143(3) or under Section 144 by issuing notice under Section 143(2)
of the Act. In the instant case, instead of accepting the return
under Section 143(1) of the Act, undisputedly, the Assessing Officer
issued notice under Section 143(2) of the Act on 1st December,
D 1994, vide Annexure C. It is contended in the petition that in
continuation of the notice the Assessing Officer addressed a letter
on 15th November, 1995 calling upon the assessee to attend on
27th November, 1995, vide letter Annexure C-1. The assessee’s
representative appeared before the Assessing Officer on 27th
November, 1995 but the Assessing Officer adjourned the case to
E 1st December, 1995. On 1st December, 1995 there was a
discussion between the representative of the assessee and the
Assessing Officer. The assessee was called upon to make
clarifications regarding various points and was also asked to clarify
as to how the depreciation as claimed should not be disallowed
F and why interest should not be taxed as receipt on the revenue
account. It is contended by the assessee that the Assessing Officer
was in the midst of the proceedings under Section 143(3) of the
Act. However, Assessing Officer issued intimation/order under
Section 143(1)(a) of the Act, vide Annexure D, rejecting the return
of income as computed by the assessee resulting in disallowing
G depreciation as claimed and by taxing the interest income of
Rs.1,07,85,590 as income from other sources and thus raised the
demand of Rs. 1,30,83,741 under various heads and sections of
taxes, surcharge and additional tax under Sections 143(1A), 234A
and 234B.
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4. Mr. Shah, learned counsel appearing for the assessee, has A
contended that once the Assessing Officer has exercised option
to proceed under Section 143(3) of the Act by issuing notice under
Section 143(2) of the Act even if adjustments that may be made
by the Assessing Officer are in order, Assessing Officer has
forfeited the authority to act under Section 143(1) by virtue of his
B
option having exercised to make an 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 C
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 D
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, E
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 F
sub-s. (2), an intimation shall be sent to the assessee specifying
the sum so payable, and such intimation shall be deemed to
be a notice of demand issued under Section 156 and all the
provisions of this Act shall apply accordingly;
(ii) If any refund is due on the basis of such return, it shall be
G
granted to the assessee :
Provided that in computing the tax or interest payable by, or
refundable to the assessee, the following adjustments shall
be made in the income or loss declared in the return, namely -
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226 SUPREME COURT REPORTS [2020] 11 S.C.R.
A (i) any arithmetical errors in the return, accounts or documents
accompanying it shall be rectified;
(ii) any loss carried forward, deduction, allowance or relief,
which, on the basis of the information available in such return,
accounts or documents, is prima facie admissible but which
B is not claimed in the return, shall be allowed :
(iii) any loss carried forward, deduction, allowance or relief
claimed in the return, which, on the basis of the information
available in such return, accounts or documents, is prima
facie inadmissible, shall be disallowed.
C Provided further that where adjustments are made under the
first proviso, an intimation shall be sent to the assessee,
notwithstanding that no tax or interest is found due from him
after making the said adjustments :
Provided also that an intimation for any tax or interest due
D under this clause shall not be sent after the expiry of two
years from the end of the assessment year in which the income
was first assessable.......
xxx xxx
xxx xxx
E
(1A)(a) Where as a result of the adjustments made under the
first proviso to clause (a) of sub-section (1) -
(i) the income declared by any person in the return is
increased; or
F (ii) the loss declared by such person in the return is reduced
or is converted into income, The Assessing Officer shall, -
(A) in a case where the increase in income under sub-clause
(i) of this clause has increased the total income of such person,
further increase the amount of tax payable under sub-section
G (1) by an additional income-tax calculated at the rate of twenty
per cent on the difference between the tax on the total income
so increased and the tax that would have been chargeable
had such total income been reduced by the amount of
adjustments and specify the additional income-tax in the
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intimation to be sent under sub-clause (i) of clause (a) of A
sub-section (1):
(B) in a case 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 B
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
(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 D
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 E
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 be produced there, any evidence on
which the assessee may rely in support of the return: F
Provided that no notice under this sub-section shall be served
on the assessee after the expiry of twelve months from the
end of the month in which the return is furnished.
(3) On the day specified in the notice issued under sub-section
(2) or as soon afterwards as may be, after hearing, such G
evidence as the assessee may produce and such other evidence
as the AO may require on specified points, and after taking
into account all relevant material which he has gathered, the
AO shall, by an order in writing, make an assessment of the
total income or loss of the assessee, and determine the sum
payable by him on the basis of such assessment. H
228 SUPREME COURT REPORTS [2020] 11 S.C.R.
A (4) Where a regular assessment under sub-section (3) of this
section or Section 144 is made -
(a) any tax or interest paid by the assessee under sub-section
(1) shall be deemed to have been paid towards such regular
assessment;
B (b) if no refund is due on regular assessment or the amount
refunded under sub-section (1) exceeds the amount refundable
on regular assessment, the whole or the excess amount so
refunded shall be deemed to be tax payable by the assessee
and the provisions of this Act shall apply accordingly.........”
C 8.1.2 Thereafter, the issue was considered thus:-
“8. It is thus clear that the Assessing Officer even after issuing
intimation after making adjustments as per provisions of s. 143(1)
of the Act can call upon the assessee, if he considers it necessary
or expedient to ensure that the assessee has not understated the
D income or has not computed excessive loss or has not underpaid
the tax in any manner. Once this opinion is formed then the
Assessing Officer will have to serve on the assessee a notice
under Section 143(2) of the Act requiring him to produce evidence
before him on the date specified in the notice. This is permissible
E in view of saving clause in Section 143(1) of the Act. Section
143(1) of the Act is to be exercised without prejudice to the
provisions of sub-s. (2) of Section 143 of the Act. However,
exercise of powers under Section 143(1) is not made permissible
after issuance of notice under Section 143(2) of the Act. The
Assessing Officer cannot exercise powers under Section 143(1)
F of the Act as he himself has decided to make regular assessment
under Section 143(3) of the 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
G 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
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the Revenue, fairly stated that notice under Section 143(2) of the A
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.
B
………
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 clearly indicates that it must be first C
evidenced. A decision on the debatable issue is not envisaged.
Issuance of notice under s. 143(2) of the Act suggests that the
Assessing Officer has determined to make assessment under
Section 143(3) of the Act. It is clear, looking to the language used
in different sub-sections that order under Section 143(1) is a
summary one and the Assessing Officer on perusal of the return, D
that is, computation of income, is able to accept it as it is or with
necessary adjustments as indicated in sub-clause (a) of sub-section
(1) of Section 143 of the Act. The submission made by learned
counsel for the Revenue is that even after issuance of notice
under Section 143(2) of the Act, it is permissible for the Assessing E
Officer to assess under Section 143(1) of the Act. One has to
examine the claim on account of results of adjustments made in
the income shown in the return whether it results into increase or
loss declared in the return is reduced or is converted into income.
If that is so it would entail further tax at the rate of 20% on the
income so increased or a further tax of 20% on the loss so reduced F
as if it is income and assessee will be charged as per sub-section
(1A) of Section 143 of the Act. With a view to see that taxpayers
in the return furnish details with accuracy and correctness this
provision is made. The assessee is aware about the provision and
should take care that no incorrect statement is made with a view G
to save additional tax which may be imposed on him. However,
when the Assessing Officer is not assessing the correctness about
the claim which is either prima facie admissible or prima facie
inadmissible, and Assessing Officer with a view to ensure that
the assessee has not computed excessive loss or has not underpaid
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230 SUPREME COURT REPORTS [2020] 11 S.C.R.
A tax in any manner has issued notice under Section 143(2) of the
Act, then there should be evidence before him and on the basis of
the evidence that may be produced by the assessee assessment
is to be made under Section 143(3) of the Act, and assessee will
be liable to the tax in the manner laid down in the Act if he is
required to pay. After calling upon the assessee to produce evidence
B
if the Assessing Officer is sending intimation instead of making
regular assessment under Section 143(3) of the Act then in that
case the Assessing Officer would assess and would charge tax
as per Section 143(1A) of the Act which is not contemplated
under Section 143(3) of the Act and thus what is not permissible
C 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
D 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
E 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.
F (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.
G
10. Section 143 of the Act has since then undergone considerable
change. Sub-section (1) stands modified and now specifies with clarity
the nature of adjustments. Sub-section (1A) contemplates processing of
returns through Centralized Processing. Since we are principally
concerned in the present matter with the effect and applicability of sub-
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section (1D), the legislative history relating to said sub-section (1D) is A
dealt with in detail hereunder:-
A) Sub-section (1D) was inserted vide Finance Act, 2012 as
under:-
“(1D) Notwithstanding anything contained in sub-section (1), the
processing of a return shall not be necessary, where a notice has B
been issued to the assessee under sub-section (2)”
The explanatory Note to the Finance Act, 2012 relevant to the
proposed insertion of sub-section (1D) was:-
“Under the existing provisions, every return of income is to be C
processed under sub-section (1) of Section 143 and refund, if any,
due is to be issued to the tax payer. Some returns of income are
also selected for scrutiny which may lead to raising a demand for
taxes although refunds may have been issued earlier at the time
of processing.
D
It is therefore proposed to amend the provisions of the Income
Tax Act to provide that processing of return will not be necessary
in a case where notice under sub-section (2) of Section 143 has
been issued for scrutiny of the return.”
B) Finance Act, 2016 contemplated substitution of sub-section
E
(1D) and insertion of a proviso with effect from 01.04.2017 as follows:
“(1D) Notwithstanding anything contained in sub-section (1), the
processing of a return shall not be necessary before the expiry of
the period specified in the second proviso to sub-section (1), where
a notice has been issued to the assessee under sub-section (2):
F
Provided that such return shall not be processed before the issuance
of an order under sub-section (3).”
The relevant explanatory Note to Finance Act, 2016 was:
“56. Processing under Section 143(1) of the Income Tax Act be
mandated before assessment: G
56.1 Under the existing provision of sub-section (1D) of Section
143 of the Income Tax Act, processing of a return is not necessary
where a notice has been issued to the assessee under sub-section
(2) of the said Section.
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232 SUPREME COURT REPORTS [2020] 11 S.C.R.
A 56.2 The said sub-section (1D) of the aforesaid section has been
amended to provide that in cases where 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
B
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
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:-
D
“(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):
Provided that the provisions of this sub-section shall not apply
E to any return furnished for the assessment year commencing
on or after the day of April 2017.”
The concerned explanatory Note to Finance Act, 2017 was:-
“59. Processing of return within the prescribed time and enable
withholding of refund in certain cases.
F
59.1 Before amendment by the Finance Act, 2016, the provisions
of sub-section (1D) of Section 143 of the Income Tax Act specify
that the processing of a return shall not be necessary, where a
notice has been issued to the assessee under sub-section (2) of
the said section.
G 59.2 The said sub-section was amended vide Finance Act, 2016
and it was provided that with effect from assessment year 2017-
18, processing under Section 143(1) of the Income Tax Act is to
be done before passing of assessment order.
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59.3 In order to address the grievance of delay in issuance of A
refund in genuine cases, a proviso has been inserted in Section
143(1D) of the Income Tax Act specifying that the provisions of
the said sub-section shall cease to apply in respect of returns
furnished for assessment year 2017-18 and onwards.
59.4 However, to address the concern of recovery of revenue in B
doubtful cases, a new section 241A has been inserted in the Income
Tax Act to provide that, for the returns furnished for assessment
year commencing on or after 1st April, 2017, where refund of any
amount becomes due to the assessee under Section 143(1) of the
Income Tax Act and the Assessing Officer is of the opinion that
grant of refund may adversely affect the recovery of revenue, he C
may, for the reasons recorded in writing and with the previous
approval of the Principal Commissioner or Commissioner, withhold
the refund up to the date on which the assessment is made.
59.5 Applicability: These amendments take effect from 1st April,
2017 and accordingly apply to returns furnished for assessment D
year 2017-18 and subsequent years.”
D) Finance Act, 2017 also inserted Section 241A in the Act as
under:-
“241A. Withholding of refund in certain cases - For every E
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 F
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, 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 G
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:— H
234 SUPREME COURT REPORTS [2020] 11 S.C.R.
A (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;
B
(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
C 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, if the
return is furnished beyond the due date specified under sub-
D section (1) of Section 139; or
(vi) addition of income appearing in Form 26-AS or Form 16-
A or Form 16 which has not been included in computing the
total income in the return:
Provided that no such adjustments shall be made unless an
E intimation is given to the assessee of such adjustments either
in writing or in electronic mode:
Provided further that the response received from the
assessee, if any, shall be considered before making any
adjustment, and in a case where no response is received
F within thirty days of the issue of such intimation, such
adjustments shall be made:
Provided also that no adjustment shall be made under sub-
clause (vi) in relation to a return furnished for the assessment
year commencing on or after the 1st day of April, 2018;
G (b) the tax, interest and fee, if any, shall be computed on the basis
of the total income computed under clause (a);
(c) the sum payable by, or the amount of refund due to, the assessee
shall be determined after adjustment of the tax, interest and fee, if
any, computed under clause (b) by any tax deducted at source,
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any tax collected at source, any advance tax paid, any relief A
allowable under an agreement under Section 90 or Section 90-A,
or any relief allowable under Section 91, any rebate allowable
under Part A of Chapter VIII, any tax paid on self-assessment
and any amount paid otherwise by way of tax, interest or fee;
(d) an intimation shall be prepared or generated and sent to the B
assessee specifying the sum determined to be payable by, or the
amount of refund due to, the assessee under clause (c); and
(e) the amount of refund due to the assessee in pursuance of the
determination under clause (c) shall be granted to the assessee:
Provided that an intimation shall also be sent to the assessee in C
a case where the loss declared in the return by the assessee is
adjusted but no tax, interest or fee is payable by, or no refund
is due to him:
Provided further that no intimation under this sub-section shall
be sent after the expiry of one year from the end of the financial D
year in which the return is made.
Explanation.—For the purposes of this sub-section,—(a) “an
incorrect claim apparent from any information in the return” shall
mean a claim, on the basis of an entry, in the return,—
E
(i) 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
F
(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, G
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
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236 SUPREME COURT REPORTS [2020] 11 S.C.R.
A 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,
B direct that any of the provisions of this Act relating to processing
of returns shall not apply or shall apply with such exceptions,
modifications and adaptations as may be specified in that
notification; so, however, that no direction shall be issued after
the 31st day of March, 2012.
(1C) Every notification issued under sub-section (1B), along with
C the scheme made under sub-section (1A), shall, as soon as may
be after the notification is issued, be laid before each House of
Parliament.
(1D) Notwithstanding anything contained in sub-section (1), the
processing of a return shall not be necessary, where a notice has
D 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 1st day of April, 2017.
(2) Where a return has been furnished under Section 139, or in
E response to a notice under sub-section (1) of Section 142, the
Assessing Officer or the prescribed income-tax authority, as the
case may be, if, considers it 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, shall
serve on the assessee a notice requiring him, on a date to be
F
specified therein, either to attend the office of the Assessing Officer
or to produce, or cause to be produced before the Assessing
Officer any evidence on which the assessee may rely in support
of the return:
Provided that no notice under this sub-section shall be served on
G the assessee after the expiry of six months from the end of the
financial year in which the return is furnished.
(3) On the day specified in the notice issued under sub-section
(2), or as soon afterwards as may be, after hearing such evidence
as the assessee may produce and such other evidence as the
H Assessing Officer may require on specified points, and after taking
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into account all relevant material which he has gathered, the A
Assessing Officer shall, by an order in writing, make an assessment
of the total income or loss of the assessee, and determine the sum
payable by him or refund of any amount due to him on the basis of
such assessment…….”
12. Clause (a) of sub-section (1) of Section 143 has six sub-clauses B
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 C
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 D
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 E
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 F
are to be made.
On the other hand, the exercise of power under sub-section (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:
G
• 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 H
238 SUPREME COURT REPORTS [2020] 11 S.C.R.
A by the assessee itself calls for or requires a further probe and deeper
consideration. The guiding principle is to ensure that the 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
B
income or loss is to be made.
13. The nature of exercise of power under sub-section (1) as
against that under sub-sections (2) and (3) is thus completely different.
In the former case, the matter is processed, only to check whether any
apparent inconsistencies are evident on the face of the return and
C connected material which may call for any adjustment while in the latter
case, the matter is scrutinized after taking into account such evidence as
the assessee may produce. The exercise in the latter case is to ensure
that there is no understating of income or overstating of loss or under-
payment of the tax in any manner. In other words, the veracity of the
D return is checked threadbare rather than considering mere apparent
inconsistencies from the return. Thus, the nature of power under these
two provisions, as found by this Court in CIT v. Gujarat Electricity
Board6 continues to bear the same distinction.
The power under sub-section (1) of Section 143 of the Act is
E 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.
14. The exercise of power under Sub-sections (2) and (3) of
F 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
G 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
H due and payable. If the return itself is under probe and scrutiny, such
VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE 239
SERVICES LTD.) v. ACIT CIRCLE 26 (2) [UDAY UMESH LALIT. J.]
return cannot be the foundation to sustain a claim for refund till such A
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
B
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.
15. The afore-stated conclusion is fortified and strengthened by
clear stipulation to that effect in sub-section (1D) of Section 143. C
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 D
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 E
initiated, the processing of a return under sub-section (1) shall not be
necessary.
16. The expression “shall not be necessary” is used in various
statutes and even in the Constitution of India. This expression is used in
the first proviso to Article 311(2) and in proviso to Article 320(3) of the F
Constitution of India. Some of the cases in which similar expression
occurring in statutes was taken into account and effect was given to its
plain language are:-
i) Proviso to Section 63(3) of the Motor Vehicles Act, 1939 – in
Mohd. Ibrahim v. The State Transport Appellate Tribunal, G
Madras. 8
ii) Order XXX Rule 4 of the Code of Civil Procedure in Sohanlal
and others v. Amir Chand and sons and others9, Upper India
8 (1970) 2 SCC 233
9 (1973) 2 SCC 608 H
240 SUPREME COURT REPORTS [2020] 11 S.C.R.
A Cable Co. and others v. Bal Kishan 10 and in Brij Kishore
Sharma and others v. Ram Singh and sons and others11.
iii) Proviso to Section 68 of the Indian Evidence Act, 1872 – in
Rasammal Issetheerammal Fernandez etc. v. Joosa Mariyam
Fernandez and others12.
B 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
C overridden.
17. 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-
D 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 Joshi13 as under:
“33. “Notwithstanding anything contained elsewhere in this Act”
as used in Section 26(1) of the 1887 Act are words of expression
E of the widest amplitude engulfing the contrary provisions contained
in the Act. The suit in question has been filed by the plaintiff for
enforcement of his right as a licensor after allegedly terminating
the gratuitous licence of the appellant. On a plain reading, Item 11
of Schedule II covers determination or enforcement of any such
right or interest in immovable property. But by virtue of Section
F 26 sub-section (1) as applicable in the State of Maharashtra, Item
11 of Schedule II has to give way to Section 26(1) and a suit
between licensor and licensee which is virtually a suit for recovery
of immovable property is fully maintainable in Judge, Small Cause
Court that is why the suit has been instituted by the plaintiff in the
G Judge, Small Cause Court claiming the right and interest in the
immovable property.
10 (1984) 3 SCC 462
11 (1996) 11 SCC 480
12 (2000) 7 SCC 189
13 (2017) 14 SCC 373
H
VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE 241
SERVICES LTD.) v. ACIT CIRCLE 26 (2) [UDAY UMESH LALIT. J.]
35. A statutory provision containing non obstante clause has to be A
given full effect. This Court in Union of India v. G.M. Kokil14
has laid down in para 11 as below: (SCC p. 203)
“11. … It is well known that a non obstante clause is a
legislative device which is usually employed to give overriding
effect to certain provisions over some contrary provisions that B
may be found either in the same enactment or some other
enactment, that is to say, to avoid the operation and effect of
all contrary provisions. Thus the non obstante clause in
Section 70, namely, “notwithstanding anything contained in
that Act” must mean notwithstanding anything to the contrary
contained in that Act and as such it must refer to the exempting C
provisions which would be contrary to the general
applicability of the Act. …”
18. In the premises, we hold that 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 Section 143 of the D
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.
19. We must now deal with the issue whether any intimation is
required to be given to the assessee that because of initiation of E
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 as stated earlier, the scope of processing F
under sub-section (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 G
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
14 (1984) Supp. SCC 196 H
242 SUPREME COURT REPORTS [2020] 11 S.C.R.
A 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
B 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 the 1st April, 2017, a different regime has
been contemplated by the Parliament. Section 241-A of the Act requires
C 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 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.
D
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.
E 22. We will, therefore, have to see whether insofar as AY 2017-
18 is concerned, the order dated 14.03.2019 satisfies the required statutory
parameters or not.
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
F 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 the present case, the exercise of power on 14.03.2019 was not
G
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.
H
VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE 243
SERVICES LTD.) v. ACIT CIRCLE 26 (2) [UDAY UMESH LALIT. J.]
Whether the satisfaction recorded in terms of said Section 241-A A
of the Act was otherwise correct or not and whether case for withholding
of refund was made out or not, are not the issues that arise for our
consideration. For the present purposes, whether exercise of power is
facially in conformity with the statutory provisions is the issue and we
are satisfied that there is nothing in the exercise of power that led to the
B
passing of the order dated 14.03.2019 which could be said to have violated
any statutory requirements.
23. Insofar as AY 2014-15 is concerned, final assessment order
passed under Section 143(3) of the Act indicates that the appellant is
entitled to refund of Rs.733 Crores; while for AY 2015-16 there is a
demand of Rs.582 Crores. During the course of hearing, it was suggested C
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 D
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 Rs.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 E
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, F
therefore, dismissed without any order as to costs.
Devika Gujral Appeal dismissed.
G
H
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