Vodafone Idea Ltd(Earlier Known … vs Assistant Commissioner Of Income … on 29 April, 2020


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Supreme Court of India

Vodafone Idea Ltd(Earlier Known … vs Assistant Commissioner Of Income … on 29 April, 2020

Author: Uday Umesh Lalit

Bench: Uday Umesh Lalit, Dinesh Maheshwari

CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
                                                                                  1
                                                               REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                         CIVIL APPELLATE JURISDICTION


                             Civil Appeal No.2377_ of 2020
                       Arising out of SLP(Civil) No.1169 of 2019



    VODAFONE IDEA LTD.
    (EARLIER KNOWN AS VODAFONE
     MOBILE SERVICES LIMITED)                           ....... APPELLANT(S)

                                               VERSUS

    ASSISTANT COMMISSIONER OF
    INCOME TAX CIRCLE 26 (2) & ANR.                  ...........RESPONDENT(S)


                                    JUDGMENT

Uday Umesh Lalit. J.

1. Leave granted.

2. This appeal arises out of the final judgment and order dated

14.12.2018 passed by the High Court1 in Writ Petition (Civil) No.2730 of

2018 preferred by the appellant herein.

3. The facts leading to the filing of this appeal, in brief, are as

under:-

1

High Court of Delhi at New Delhi
CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
2

A] The appellant-Vodafone Idea Ltd. (earlier known as Vodafone

Mobile Services Ltd or VMSL for short) is engaged in providing

telecommunication services in different circles.

a) By amalgamation which came into effect on 01.04.2011,

four group entities: Vodafone Cellular Ltd., Vodafone Digilink

Ltd., Vodafone East Ltd. and Vodafone South Ltd. got merged

in VMSL.

b) By second scheme of amalgamation, two other group

entities: Vodafone Spacetel Ltd. and Vodafone West Ltd. got

merged in VMSL w.e.f. 01.04.2012.

c) While the proceedings in the instant case were pending, by

scheme of arrangement2 between VMSL and Idea Cellular

Ltd. Vodafone Idea Ltd. – the resultant company assumed all

the rights and liabilities of the amalgamating/transferor

companies.

Most of the factual developments in the matter, as set out

hereafter, were before said scheme of arrangement.

2

Formulated by the Order dated 19.1.2018 passed by National Company Law Tribunal,
Mumbai and order dated 11.1.2018 by National Company Law Tribunal, Ahmedabad.
CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
3
3
B] For AY 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

16.03.2016 in respect of AY 2015-16. A revised return was filed by the

appellant on 31.03.2016 in respect of AY 2014-15. The appellant entered

into an Advanced Pricing Agreement with the CBDT 5 under Section 92

CC of the Act. Thereafter, further revised return was filed on 25.11.2016

for AY 2015-16 and a modified return in terms of Section 92 CD of the

Act was filed by the appellant on 22.02.2017 for AY 2014-15.

C] For AY 2016-17, the appellant filed ITR on 30.11.2016 claiming

refund of Rs.1128.47 Crores. A notice under Section 143(2) of the Act

was issued to the appellant on 03.07.2017 for AY 2016-17.

D] For AY 2017-18, ITR was filed by the appellant on 25.11.2017

claiming refund of Rs.743 Crores.

3

The Assessment Year
4
The Income Tax Act, 1961
5
Central Board of Direct Taxes
CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
4
E] Submitting that there was complete inaction on part of the

respondents in processing the ITRs filed by the appellant and in issuing

appropriate refund to the appellant, Writ Petition (Civil) No.2730 of

2018 was filed by the appellant in the High Court, praying for following

principal relief.

“a. Writ of Mandamus or Writ, Order or Direction in
the nature of Mandamus, or any other appropriate
Writ, Order or Directiion under Article 226 / 227 of
the Constitution of India directing the Respondents to
process and grant refunds for the AYs 2014-15 to
2017-18, along with interest under Section 244A of
the Act;”

F] On 03.07.2018, the respondent No.1 filed an affidavit in reply

submitting inter alia that the ITRs of the appellant raised multiple issues

like Transfer Pricing Adjustment, Capitalization of Licence Fees, 3G

Spectrum Fees, Asset Restoration Cost Obligation including the effect of

amalgamation of group entities which required thorough scrutiny and

determination.

G] During the pendency of said Writ Petition, a letter was issued by

the respondent No.1 on 23.07.2018, the relevant portion of which was as

under :-

“The assessment years for which request has been
made to process the return under Section 143(1) are
already under scrutiny for AY 2012-13, AY 2013-14,
AY 2014-15, AY 2015-16 and AY 2016-17. I would
CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
5
like to draw your attention to Section 143(1D) of
Income Tax Act:

(1D) Notwithstanding anything contained in sub-section (1),
the processing of a return shall not be necessary, where a
notice has been issued to the assessee under sub-section (2)

The case is under compulsory scrutiny for AY 2017-
18 and as per section 241A of Income Tax, Act 1961:

“For every assessment year commencing on or after the 1st
day of April, 2017, where refund of any amount becomes due
to the assessee under the provisions of sub-section (1) of
Section 143 and the Assessing Officer is of the opinion,
having regard to the fact that a notice has been issued under
sub-section (2) of Section 143 in respect of such return, that
the grant of the refund is likely to adversely affect the
revenue, he may, for reasons to be recorded in writing and
with the previous approval of the Principal Commissioner or
Commissioner, as the case may be, withhold the refund up to
the date on which the assessment is made.”

Considering, pending special audit, pending scrutiny,
pending demands of amount of more than 4500 crore,
it will prejudicial to the interest of revenue to process
the returns without completion of the pending scrutiny
cases. Therefore, exercising the powers under section
143(1D)
of Income Tax Act, 1961 and under Section
241A
of Income Tax Act, 1961, the undersigned
decline the processing of returns under Section
143(1)
. The above decision has been taken after
taking into cognizance the order of Honorable High
Court of Delhi in TATA TELESERVICES LIMITED
versus CENTRAL BOARD OF DIRECT TAXES &
ANR. dated 11.05.2016 in para 24 of the judgment:

“The question whether such return should be processed will
have to be decided by the ASSESSING OFFICER concerned
exercising his discretion in terms of Section 143 (1D) of the
Act.”

H] In the meantime, on 13.07.2018 a revised return was filed by the

appellant for AY 2017-18 claiming refund of Rs.744.94 Crores. A notice
CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
6
under Section 143(2) of the Act was issued to the appellant on

10.08.2018 for AY 2017-18.

I] On 31.08.2018, VMSL merged with Idea Cellular Ltd. and the

resultant company was named Vodafone Idea Ltd.

J] By its judgment and order dated 14.12.2018, the High Court

dismissed said Writ Petition.

J-1] The submissions of the appellant were recorded as under:-

“8. Vodafone also place reliance on the decision of
this Court in Tata Teleservices Limited vs. CBDT, 386
ITR 30 and Bombay High Court in Group M Media
India (P) vs. Union of India
, 2016 SCC OnLine Bom
13624, which held that the return should be processed
within a year and only where the assessing officer is
of the view that issuance of refund would be
detrimental to collection of demands which may arise,
he may invoke the provision of Section 143(1D) of
the Act.

………

13. With respect to the delay in processing of the tax
return, Vodafone places reliance on the decision of
this Court in Tata Teleservices Limited vs. Central
Board of Direct Taxes
(supra), and the decision of the
Bombay High Court in Group M Media India (P) vs
Union of India
(supra), where it was held that the
return should be processed within a year and only
where the assessing officer is of the view that
issuance of refund would be detrimental to collection
of demands that may arise, he may invoke the
provision of Section 143(1D) of the Act. From the
perusal of Section 241A of the Act, it is evident that
all tax returns are necessarily to be processed within
the time period as prescribed under Section 143(1) of
the Act. In the instant case, it is note-worthy that the
CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
7
time period prescribed under Section 143(1) of the
Act has expired and there has been no correspondence
from the revenue that discretion under Section
143(1D)
was exercised.

………

17. It was contended that after the lapse of the one
year period, by reason of second proviso to Section
143
(1), the right to claim refund is vested in any
assessee. Counsel argued that this is independent of
the Revenue’s power to issue a scrutiny notice under
Section 143 (2), for which the period of limitation is
longer. However, if the Assessing Officer does not
issue any notice, or intimation, if the assessee can
claim refund, that right is a statutorily vested one if,
within the said period of one year, a reasoned order is
not made under Section 143 (1D) within the said one
year period.”

J-2] On the other hand, the submissions on behalf of the respondents

were :-

“19. The revenue denies allegations of deliberate
omission to refund amounts aggregating to
Rs.4759.74 crores along with applicable interest and
states that income tax returns were not processed
under Section 143(1). The assessment years under
consideration were picked up for scrutiny under
Section 143(3) and there is a prima facie likelihood of
a substantial demand being raised by the Income Tax
Department, as has been done earlier in Vodafone’s
earlier case. Further, the revenue submitted that in
Vodafone’s own case for the AY 2011-12 wherein the
returned loss was Rs. 33,93,397 and subsequently, the
income determined by the Assessing Officer was
Rs.546,64,25,250/-.

………

21. Counsel for the Revenue contended that for the
relevant period under consideration, the Assessing
Officer has already issued notice under sub-section
(2) of Section 143 within time. As per the then
prevailing provision, it was thereafter not necessary
CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
8
for the Assessing Officer to proceed under sub-section
(1) of Section 143. Further, the Ld. Counsel placed
reliance on Section 143(1D) of the Act to explain that
the refund has not been processed till date. The Ld.
Counsel urged that sub-section (1D) of section 143
which starts with a non-obstante clause provided that
notwithstanding anything contained in sub-section
(1), the processing of the return shall not be necessary
before the expiry of the period specified in the second
proviso where a notice has been issued to the assessee
under Section 143(2). The provisio to Section 143
(1D) provided that such return shall be processed
before the issuance of an order under sub-section (3).
Therefore, Section 143 (1D) overrides Section 143
(1). Therefore, the counsel submitted that under
Section 143(1D) of the Act, the processing of return
shall not be necessary, where notice has been issued
under Section 143(2) of the Act.

22. The Counsel placed on record letter
F.No.ACIT/C-26(2)/2018-19/216 dated 23.07.2018. It
is in response to the multiple communications by the
assessee for expeditious processing of returns for
different AYs. The order informs that the cases are
pending for scrutiny as follows; for the AY 2012-13
and 2013-14, the assessment is under special audit
and for the AY 2014-15, the assessee approached the
AAR and lastly, returns for AYs 2015-16 and 2016-
17, are under scrutiny. The assessment years for
which request has been made to process the return
under Section 143(1) are already under scrutiny for
the various AYs. Therefore, exercising the power
under Section 143(1D), the Assistant Commissioner
declined the processing of returns under Section
143(1)
. Further, the case is under compulsory scrutiny
for AY 2017-2018, exercising the power Section
241A
, the Assistant Commissioner declined the
processing of returns under Section 143(1)……..”

J-3] After considering rival submissions, relevant statutory provisions

and the decisions relied upon, the High Court observed:-
CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
9
“29. In the facts of the present case, the issue
canvassed is on the interpretation of Section 143 (1D)
of the Act. It is first necessary to refer to the statutory
provisions and thereafter consider the effect of such
provisions on Vodafone’s request for refund for the
said assessment years. On reading of the Section 143
of the Act, it is apparent that when returns are filed
either under Section 139 or pursuant to a notice under
Section 142(1), Section 143(1) mandates that the
returns shall be processed in the manner prescribed in
the clauses (a) to (e) thereof. The processing of a
return thus involves determination of total income or
loss, tax and interest, if any, payable and sum payable
by, or the amount of refund due to the assessee.
Section 143(1)(d) stipulates that an intimation shall be
prepared or generated and sent to the assessee
specifying the sum determined payable by, or the
amount of refund due to the assessee under clause(C).
Section 143 (1) (e) provides that the amont of refund
due in pursuance of the determination under clause
(C) shall be granted to the assessee. A reading of
proviso to Section 143 (1) reveals that it mandates
that the intimation as provided in Section 143 (1) (d)
should be issued before the expiry of one year from
the end of the financial year in which the return is
made. Before proceeding to Section 143(1D) as it
stood at the relevant time, it is essential to refer to
Section 143 (2) and (3). Sub-section (2) contemplates
issuance of a notice in the contingency covered by the
said provision. Sub-section (3) provides that once
such a notice is served, after following the procedure
laid, the Assessing Officer is required to pass an order
in writing making an assessment of the total income
or loss and determine the sum payable by the assessee
or refund of any amount due to him on the basis of the
assessment. It is also relevant to notice that whether it
is the processing of a return under Section 143(1) or
an order under Section 143(3) is subject to the same
time limit, i.e. Section 153(1).

………

39. A reading of the above judgments and the
relevant provisions, clearly shows that Section 143(2)
empowers, the Assessing Officer to issue notice to the
assessee to produce documents or other evidence, to
CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
10
prove the genuineness of the income tax return. Under
Section 143(1D) of the Act an introduced by the
Finance Act, 2012 processing of a return under
Section 143 (1)(a) is not necessary where a notice has
been issued under Section 143(2) of the Act. This
provision has now been amended by the Finance Act,
2016 (with effect from the AY 2017-18) to provide
that if scrutiny notice is issued under Section 143(2),
processing of return shall not be necessary before the
expiry of one year from the end of the financial year
in which return is submitted.

40. The assesse’s argument in these proceedings is
that once the one year period in proviso to Section
143(1)
ends, the return – and whatever calculations are
contained in it, with respect to tax liability as well as
the consequential refunds, become final, subject to
only one event: issuance of notice under Section 143
(2).

41. To this Court, it appears that the net effect of Tata
Teleservices (supra) is that the revenue cannot be
inactive, in cases where the assessee claims refund,
and the one year period is over (under proviso to
Section 143(1) ends. The Assessing Officer has to
apply his mind to consider whether the facts and
circumstances of the case, warrant some or all of the
refund of the assessee’s amounts, or if all of it needs
to be withheld, whenever the assessee presses for
refund. This exercise should be undertaken promptly,
keeping in mind the time limit under the normal
provision of Section 143(1) expires. This Court held
in Tata Teleservices Ltd. (supra) and the Bombay
High Court in case of Group M Media India (P) Ltd.
(supra) that it would be wholly inequitable for the
Assessing Officer to merely sit over the petitioner’s
request for refund citing the availability of time up to
the last date of framing the assessment under Section
143
(3). The proper interpretation of the statute and
the situation in such a case would be, the Assessing
Officer should take up an expeditious disposal of the
question once the assessee requests for release of the
refund.

………
CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
11

44. Now in this case, acknowledgement or intimation
had not been sent by the Assessing Officer. There is
no doubt that the period of one year indicated in the
second proviso to Section 143 (1). However, Section
143
(1D) begins with a non-obstante clause that
overbears that provision. Tata Teleservices (supra) and
the Bombay High Court ruling in Group M Media
India (supra) state that the fact that a regular
assessment is resorted to, does not ipso facto mean
that in every case, the Assessing Officer has to refuse
refunds or there is an automatic bar to refunds. The
Assessing Officer has to apply his mind and make an
order keeping in perspective the facts of the case.

45. In this case, the revenue has relied on an order
dated 28.07.2018, which inter alia, stated that
“considering pending special audit, pending scrutiny,
opening demands of amount more than 4500 crore, it
will be prejudicial to the interest of the revenue to
process the returns without completion of the pending
scrutiny cases. Therefore, exercising powers under
Section 143(1) and under Section 241A of the Act, the
undersigned decline the processing of returns under
Section 143(1).” The senior counsel for Vodafone had
attacked the reliance on this order, stating that it was
made later. However, that is an aspect this Court
cannot go into. Facially, the order contains reasons.
Therefore, unlike Tata Teleservices, a reasoned order
was made; that decision was based on a circular,
which fettered the Assessing Officer’s discretion.
Therefore, the CBDT circular was set aside.

………

49. As far as the argument that the expiry of the one
year period, per second proviso to Section 143(1)
resulting in finality of the intimation of acceptance,
this Court is of opinion that the deeming provision in
question, i.e. Section 143 (1) (d) only talks of two
eventualities: “shall be deemed to be the intimation in
a case where no sum is payable by, or refundable to,
the assessee under clause (c), and where no
adjustment has been made under clause (a).”
Secondly, that intimation or acknowledgement cannot
confer any greater right than for the assessee to ask
the Assessing Officer to process the refund and make
over the money; it is up to the Assessing Officer –
CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
12
wherever the possibility of issuing a notice under
Section 143 (2) exists, or where such notice has been
issued, to apply his mind, and decide whether given
the nature of the returns and the potential or likely
liability, the refund can be given. It does not mean
that when an assessment – pursuant to notice under
Section 143(2) is pending, such right to claim refund
can accrue. This Court also recollects the decision of
the Supreme Court in Deputy Commissioner of
Income Tax v Zuari Estate Development &
Investment Co Ltd. 2015 (15) SCC 248 which held
that an intimation under Section 143 (1) is not to be
considered as an assessment.”

K] On 27.12.2018 and 31.12.2018, Draft Assessment Orders in

terms of Section 144 C of the Act were passed for AY 2014-15 and AY

2015-16 respectively.

L] In the Special Leave Petition (from which this appeal arises)

questioning the aforesaid decision of the High Court, notice was issued

by this Court on 18.01.2019. In the affidavit in reply, the respondents

asserted:-

“7. That having extracted the relevant provisions, it
would be relevant to state that the petitioner itself has
made several averments before the High Court that is
facing “precarious financial conditions” with an
accumulated loss of Rs.5,557 crores and debts
amounting to Rs.53,000 crores as on 31.03.2017″. It
is equally pertinent to state that the Respondent-

Revenue had filed a counter affidavit on 3rd July,
2018 against the Writ Petition in the High Court of
Delhi wherein it has been categorically averred that
there are huge pending demands against the petitioner
herein more than of Rs.5000 Crores. The contents of
the Counter Affidavit before the High Court may be
treated as a part and parcel of the present Affidavit. It
CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
13
has been stated that multiple issues on which addition
have been made giving rise to the demand liabilities,
and several of such issues are also recurring in nature.

………

10. That it is also submitted that the order dated 23rd
July, 2018 passed by the Assessing Officer is an order
under Section 143(1)(D) for the assessment years
2012-13 to 2016-17 as evident from a bare reading of
the said order giving reasons for refusal of refund
claimed by Vodafone Mobile Service Limited. As far
as the refusal of refund claimed for the A.Y. 2017-18
is concerned, the said order draws its power under
Section 241A of the Act as clearly stated in the order
dated 23rd July, 2018.”

Reference was made to various pending proceedings where the

demands raised for earlier assessment years were stayed and it was

stated:-

“24. That it is wrong to say that the letter/order dated
23.07.2018 issued by Respondent No.1 u/s 143(1D)
and 241A of the Income Tax Act, 1961 is beyond
limitation, bereft of any cogent reasoning and without
jurisdiction as the letter/order was issued for good
reasons to protect the interest of the revenue which is
reflected vide Para 45 of the impugned judgment. The
reasoning was based upon pending special audit,
pending scrutiny and pending demands of more than
Rs.5000 crore. Further, the letter/order was not
beyond limitation because Section 143(1D) starts with
a non-obstante clause, which is over and above the
provisions of Section 143(1), which has been
discussed in Para 44 of the impugned judgment.”

M] On 14.03.2019 an intimation was sent to the appellant by the

respondent No.1 regarding withholding of refund for AY 2017-18. It

stated about the demand status for earlier assessment years as under :-
CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
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A.Y. Nature of Demand Amount of Demand Amount already Balance
Raised u/s 143(3)/154 paid/ Adjusted Outstanding
2008-09 Corporate Tax 84,91,27,579/- 10,00,00,000/- 74,91,27,579/-

assessment u/s 143(3)
2009-10 Corporate Tax 2,42,86,76,260/- 97,36,82,990/- 1,45,49,93,270/-

Assessment u/s 143(3)
2010-11 Corporate Tax 3,36,22,76,980/- 60,00,00,000/- 2,76,22,76,980/-

Assessment u/s 143(3)
2010-11 Corporate Tax 1,65,14,76,430/- 1,65,14,76,430/-

Assessment u/s 143(3)
2011-12 Corporate Tax 2,11,61,29,711/- 2,11,61,29,411/-

Assessment 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-availability of proceeding of return facility
in ITBA for AY 2017-18 which was intimated to the
assessee vide letter dated 23.07.2018. In view of the
above discussion there is sufficient reason to believe
that issue of refund will negatively impact the interest
of the revenue. Therefore, proposal for withhold the
refund for AY.2017-18 was forwarded again to Pr.
Commissioner of Income Tax-09, Delhi and same has
been approved. Approval on note sheet was taken as
well as procedure for approval through ITBA was also
followed for withholding of refund which also
involves approval from PCIT-09. The approval for
withholding of refund u/s 241 was taken from PCIT-9
which was sent through proper channel through Addl.
CIT Range 26.

In view of the facts above you are hereby
intimated that refund of A.Y.2017-18 in the case of
M/s Vodafone Mobile Service Limited has been
withhold u/s 241A of the Income Tax Act, 1961 till
the completion of scrutiny proceedings u/s 143(3) or
144C r.w.s. 143(3) of the Income Tax Act, 1961.”

N] Objections raised by the appellant against the Draft Assessment

Orders issued on 27.12.2018 and 31.12.2018 were disposed of on

20.09.2019. Thereafter, Final Assessment Orders under Section 143 (3)
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VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
15
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

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:-
Assessment Date of filing of
Notice
ITR Filing of Modified Draft Order by DRPFinal
dis-posing ofOrder
objections of the appe-llant
year
u/s Revised Return in Assess against order u/sec.

                                                                                           Assess144C u/s.143
                            143(2)     Return       terms of    -ment                      -ment         (1D)
                                                    S.92CD      Order                      Order
                                                                u/s.                       u/s.
                                                                144C                       143(3)
2014-15      30.9.2014     31.8.2015   31.3.2016    22.2.2017   27.12.2018   20.9.2019     31.10.2019    23.7.2017
             (Refund:                                                                      (Refund:
             Rs.1532 Cr                                                                    Rs.733Cr.
             Approx.)                                                                      Approx.)
2015-16      1.11.2015     16.3.2016   25.11.2016               31.12.2018   20.9.2019     31.10.2019    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:
             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 Advocate

for the appellant and Mr. Zoheb Hossain, learned Advocate for the

respondents. During the course of arguments, it was accepted by the
CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
16
respondents that insofar as AY 2017-18 was concerned, the order dated

23.07.2018 passed under Section 143(1D) of the Act was without

jurisdiction, as by that time no order was passed under Section 143(2) of

the Act for the concerned Assessment Year. It was submitted that in the

circumstances, a fresh order was passed on 14.03.2019 after due

compliance of the statutory requirements. In order to verify the

developments leading to the passing of order dated 14.03.2019, the

concerned record was summoned and perused. The Court was satisfied

that all the antecedent steps leading to said order were taken in

accordance with law and settled practice.

An affidavit was also filed on behalf of the respondents

explaining in detail the developments leading to the passing of order

dated 14.03.2019 and issuance of intimation dated 09.04.2019. It was

stated:

“That as per CPC accounting of the return was
completed on 9th April, 2019 and intimation u/s
143(1) was generated on 9th April, 2019. It is also
evident from Page 1 of the intimation dated
09.04.2019 that contrary to the allegations of the
Petitioner that the intimation u/s 143(1) was never
communicated to them, it is submitted that the
intimation u/s 143(1) was sent to the email address
provided by the assessee, that is,
atul.goel@vodafoneidea.com..

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.

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VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
17
The intimation under Section 143(1) was made on
09.04.2019 and the said intimation stated that refund
determined under Section 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.

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 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.”

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 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
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VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
18
payable to the present 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.

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.

After conclusion of oral hearing, the parties also filed their

written submissions.

6. It was submitted by the appellant:

“In the facts of the present case, admittedly, for AYs
2014-15 to 2016-17 (for which provisions of Section
143(1D)
of the Act are relevant), the Respondent has
neither processed the return of income for the said
years by the last date, viz. 31.03.2018 nor did the
Respondent exercise the discretion provided under
Section 143(1D) of the Act by that. As per the
Respondents’ own submission, such discretion under
Section 143(1D) of the Act was only exercised vide
letter/order dated 23.07.2018, which admittedly is
beyond the limitation period.

Therefore, the exercise of such discretion, having
been made beyond limitation is a nullity in the eyes of
law and, hence, no cognizance can be taken of such a
letter/order.

CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
19
Insofar as the Assessment Year 2017-18 is concerned,
the Respondents during the course of arguments,
before this Hon’ble Court have admitted that order
dated 23.07.2018 was 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 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 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
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 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 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 was completed on
09.04.2019, even on merits, neither the Order dated
23.07.2018 nor the order dated 14.03.2019 disclose
CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
20
any grounds on which powers under Section 143(1D)
or Section 241A of the Act could have been invoked.”

7. The respondents submitted:

“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 prior to the passing of the final
assessment order.

The entire objective of not processing a return after
issuance of a scrutiny notice is that in cases where
there is a likelihood of substantial demands, there
should not be a compulsion on the Revenue to issue
refunds. There is no anomaly in the above legislative
scheme which warrants dilution of the non-obstante
clause and to read into Section 143(1D) a limitation
which the legislature has not prescribed……

It is well settled that a non-obstante clause is a
legislative device which is employed to give
overriding effect to some or all contrary provisions
and as such, the operation of a non-obstante clause
cannot be limited in any manner and must be given its
full effect……

The High Court at para 44 has categorically held that
since Section 143(1D) begins with a non-obstante
clause, it will overbear/override the second proviso to
Section 143(1) which contains a limitation period of
one year for precession of return.

Without prejudice to the submission that the 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 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
CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
21
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 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

Court in CIT v. Gujarat Electricity Board6 which in turn referred to 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 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 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.

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
6
(2003) 260 ITR 84
77
(1996) 222 ITR 140 Guj.

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VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
22
that where the summary procedure under sub-section
(1) has been adopted, there should be scope available
for 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).”

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 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, 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 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
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, 1994, vide Annexure C. It is contended in
CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
23
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 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 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 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.

4. Mr. Shah, learned counsel appearing for the
assessee, has 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 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
assess as per s. 143(3) of the Act though notice under
s. 143(2) of the Act is issued and before making
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VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
24
assessment under s. 143(3) of the Act he can proceed
under s. 143(1) of the Act. No other contention is
raised.”

8.1.1 The relevant provision, namely Section 143 as it then stood was

quoted in paragraph 6 as under:

“6. It would be better to have a look at the relevant
section which is reproduced as under:

“143(1)(a) Where a return has been made under Section 139, or in
response to a notice under sub-s. (1) of Section 143, –

(i) If any tax or interest is found due on the basis of such return, after
adjustment of any tax deducted at source, any advance tax paid and
any amount paid otherwise by way of tax or interest, then, without
prejudice to the provisions of sub-s. (2), an intimation shall be sent to
the 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 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 –

(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 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.

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 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
(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

(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 (1) by an additional
CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
25
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 intimation to be sent under sub-clause (i) of clause (a) of 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 twenty per cent of the tax that
would have been chargeable on the amount of the adjustments as if it
had been the total income of such person and specify the additional
income-tax so calculated in the intimation to be sent under sub-clause

(i) of clause (a) of sub-s. (1);

(C) where any refund is due under sub-s. (1), reduce the amount of
such refund by an amount equivalent to the additional income-tax
calculated under sub-clause (A) or sub-clause (B), as the case may
be………..

                                               xxx    xxx
                                                xxx  xxx

(2) Where a return has been made under Section 139, or in response
to a notice under sub-s. (1) of Section 142, the AO shall, if he
considers it necessary or expedient to ensure that the assessee has not
understated the income or has not computed excessive loss or has not
underpaid the tax in any manner, serve on the assessee a notice
requiring him, on a date to be specified therein, either to attend his
office or to produce, or cause to be produced there, 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 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 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.
(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) 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………”

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
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VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
26
the assessee, if he considers it necessary or expedient
to ensure that the assessee has not understated the
income or has not computed excessive loss or has not
underpaid the tax in any manner. 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 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) 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 in his return, hence, only after
hearing the assessee and after considering the
evidence that may be produced by the assessee the
Assessing Officer has to make the order in writing
making assessment of the total income or loss of the
assessee and he has to determine the amount payable
on the basis of such assessment, that is, under s.
143(3)
of the Act. Mr. Shelat, learned counsel for the
Revenue, fairly stated that notice under Section
143(2)
of the Act cannot be withdrawn. Notice under
Section 143(2) of the Act is a step towards regular
assessment under Section 143(3) of the Act and,
therefore, in absence of any provision it is not open to
make assessment in any other manner than provided
as per Section 143(3) of the Act.

………

10. Powers to make assessment in terms of its proviso
can be invoked and when the claim is prima facie
inadmissible or prima facie admissible, as the case
may be, adjustment is to be made. The word prima
facie clearly indicates that it must be first evidenced.
A decision on the debatable issue is not envisaged.

Issuance of notice under s. 143(2) of the Act suggests
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VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
27
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, 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
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 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 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 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 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 under Section 143(3) of
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the Act cannot be made permissible by allowing the
Assessing Officer to resort to Section 143(1) of the
Act.

………

16. In this view of the matter, we are of the opinion
that after issuance of notice under Section 143(2) of
the Act, it is not open for the Assessing Officer to
make adjustment or to pass order under Section
143(1)
of the Act but he has to make assessment in
accordance with law, i.e., under Section 143(3) of the
Act.”

9. These decisions were rendered in the context of the provisions

then in existence which had following notable features:-

(a) sub-section (1A) in terms of which, if any adjustments had

resulted in increased total income, an additional income tax at

the rate of 20 per cent on the difference would be levied.

(b) the intimation to be sent under sub-section (1) was

expressly stated to be “without prejudice to the provision of

sub-section (2).”

Nonetheless, the basic distinction that was noted was: the

procedure under sub-section (1) was summary in nature whereas that

under sub-section (2) was a regular assessment.

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
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returns through Centralized Processing. Since we are principally

concerned in the present matter with the effect and applicability of sub-

section (1D), the legislative history relating to said sub-section (1D) is

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 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 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.

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 (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):

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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:

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.

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 the issuance of order under
sub-section (3) of Section 143 of the Income Tax Act.

56.3 Applicability: This amendment takes effect from
the 1st of April, 2017 and will, accordingly apply in
relation to assessment year 2017-18 and subsequent
years.”

C) The aforementioned substitution of sub-section (1D), however,

never came into effect, as by Finance Act, 2017 said sub-section in the

earlier form was retained and the text of the proviso was also modified.

Effectively, on and with effect from 01.04.2017, sub-section (1D) and

the proviso are:-

“(1D) Notwithstanding anything contained in 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):

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Provided that the provisions of this sub-section shall
not apply to any return furnished for the assessment
year commencing on or after the day of April 2017.”

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.

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.

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.

59.3 In order to address the grievance of delay in
issuance of 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 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 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
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furnished for assessment 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 assessment year commencing on or after the 1 st
day of April, 2017 where refund of any amount
becomes due to the assessee under the provisions of
sub-section (1) of Section 143 and the Assessing
Officer is of the opinion, having regard to the fact that
a notice has been issued under sub-section (2) of
Section 143 in respect of such return, that the grant of
the refund is likely to adversely affect the revenue, he
may, for reasons to be recorded in writing and with
the previous approval of the Principal Commissioner
or Commissioner, as the case may be, withheld the
refund up to the date on which the assessment is
made.”

11. Consequently, the relevant parts of sub-sections (1) to (3) of

Section 143 of the Act, as they stand today are as under:

“143. Assessment.—(1) Where a return has been
made under Section 139, or in response to a notice
under sub-section (1) of Section 142, such return shall
be processed in the following manner, namely:—

(a) the total income or loss shall be computed after
making the following adjustments, namely:—

(i) any arithmetical error in the return;

(ii) an incorrect claim, if such incorrect claim is
apparent from any information in the return;

(iii) disallowance of loss claimed, if return of the
previous year for which set off of loss is claimed
was furnished beyond the due date specified
under sub-section (1) of Section 139;

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(iv) disallowance of expenditure indicated in the
audit report but not taken into account in
computing the total income in the return;

(v) disallowance of deduction claimed under
Sections 10-AA, 80-IA, 80-IAB, 80-IB, 80-IC,
80-ID or Section 80-IE, if the return is furnished
beyond the due date specified under sub-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 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 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;

(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, any tax
collected at source, any advance tax paid, any relief
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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 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 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 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,—

(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

(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;
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(b) the acknowledgment of the return shall be deemed
to be the intimation in a case where no sum is payable
by, or refundable to, the assessee under clause (c), and
where no adjustment has been made under clause (a).

(1A) For the purposes of processing of returns under
sub-section (1), the Board may make a scheme for
centralized processing of returns with a view to
expeditiously determining the tax payable by, or the
refund due to, the assessee as required under the said
sub-section.

(1B) Save as otherwise expressly provided, for the
purpose of giving effect to the scheme made under
sub-section (1A), the Central Government may, by
notification in the Official Gazette, direct that any of
the provisions of this Act relating to processing of
returns 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 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 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 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
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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 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 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 Assessing Officer may
require on specified points, and after taking into
account all relevant material which he has gathered,
the 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

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

audit report if it has “not taken into account in computing the total

income”; disallowance of deductions specified in sub-clause if the
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“return is furnished beyond the due date”; and addition of income as

specified in sub-clause (vi) if it was not “included in computing the total

income”. All these features deal with matters which are apparent from

the return and the inconsistency is evident on the face of it. Upon

causing such adjustments after due intimation or notice to the assessee,

the element of tax, interest and fee is to be computed in terms of clause

(b). Thereafter, in terms of clause (c), due credit to the amount of tax

paid and any relief that is allowable is to be given and the net amount

payable or to be refunded, is to be computed. The intimation to be

generated under clause (d) is on the basis of such exercise and if any

refund is due, the same has to be granted in terms of clause (e). Thus, at

every 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.

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:

 has not understated the income, or

 has not computed excessive loss, or
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 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 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 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 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

return is checked threadbare rather than considering mere apparent
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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

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 Section

143 of the Act is thus premised on non-acceptance of what is evident

from the return itself and to ensure that there is no avoidance of tax in

any manner. The dimension of such power is far greater and deeper than

mere adjustments to be made in respect of what is available from the

return. Once such scrutiny is undertaken and proceedings are initiated

by issuance of a notice under sub-section (2) of Section 143, it would be

anomalous and incongruent that while such proceedings so initiated are

pending, the return be processed under sub-section (1) of Section 143,

which may in a given case, entail payment of refund. Logically, the

outcome of the exercise initiated through notice under sub-section (2) of

Section 143, must determine whether any refund is due and payable. If

the return itself is under probe and scrutiny, such return cannot be the
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foundation to sustain a claim for refund till such scrutiny is not complete.

Considering the nature of power exercisable under these two limbs of

Section 143, the inescapable conclusion is that the processing of 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 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. 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 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
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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.

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

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, 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

Cable Co. and others v. Bal Kishan10 and in Brij Kishore Sharma and

others v. Ram Singh and sons and others11.

8

(1970) 2 SCC 233
9
(1973) 2 SCC 608
10
(1984) 3 SCC 462
11
(1996) 11 SCC 480
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iii) Proviso to Section 68 of the Indian Evidence Act, 1872 –

in Rasammal Issetheerammal Fernandez etc. v. Joosa Mariyam

Fernandez and others12.

As against the general principle which mandates an action in a

particular manner, when an exception is to be carved out, the relevant

provisions stipulate “it shall not be necessary” to adhere to and follow

the manner mandated by such general principle; and if the contingency

contemplated by such exception arises, the general principle is to stand

overridden.

17. The intent to have the general principle emanating from 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). 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 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
12
(2000) 7 SCC 189
13
(2017) 14 SCC 373
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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 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 Judge, Small Cause
Court claiming the right and interest in the immovable
property.

35. A statutory provision containing non obstante
clause has to be 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
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 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 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.

14

(1984) Supp. SCC 196
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19. We must now deal with 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 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 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 the processing must be kept in abeyance. It would not,

therefore, be proper to read into said provision the requirement to send a

separate intimation. In our view, issuance of notice under sub-section (2)

of Section 143 is enough to trigger the required consequence. Any other

intimation is neither contemplated by the statute nor would it achieve

any purpose.

20. Consequently, the submission that the intimation dated

23.07.2018 must be held to be invalid, inter alia on the ground that it
CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
45
was issued well after the period within which the return was required to

be processed under sub-section (1) of Section 143 of the Act, must be

rejected.

21. However, insofar as returns filed in respect of assessment year

commencing on or after 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 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 without saying that for

assessment year commencing after 01.04.2017 the requirements of

Section 241-A of the Act must be satisfied.

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.

CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
46
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

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

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.

Whether the satisfaction recorded in terms of said Section 241-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

passing of the order dated 14.03.2019 which could be said to have

violated any statutory requirements.

CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
47

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 on behalf of the respondents that demands in respect of earlier

assessment years including the liability as a result of order dated

28.12.2019 as referred to in para 5.1 hereinabove being outstanding, the

respondents would be entitled to invoke the requisite power under

Section 245 of the Act to set off the amount of refund payable in respect

of AY 2014-15 against tax remaining payable.

Since the requisite action is not even initiated, we say nothing in

that respect. In the premises, we direct that the amount of 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

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.

CIVIL APPEAL NO. 2377 OF 2020 (@ SLP (C) NO.1169 OF 2019)
VODAFONE IDEA LTD (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED)
VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR.)
48

24. Except for the directions as indicated above, we see no merit in

any of the contentions advanced by the appellant. This appeal is,

therefore, dismissed without any order as to costs.

……………………..J
(Uday Umesh Lalit)

…………………….J
(Vineet Saran)
New Delhi,
April 29, 2020



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