The telecom operators have dented their financials after the massive data tariff war which was kickstarted by Reliance Jio. As such it makes sense for them to search for cash flow from various sources. In a similar attempt, Vodafone had previously filed a plea in the Delhi High Court seeking directions to the Income Tax department to fast-track process its claim for income tax returns worth Rs 4,759 crores. However, in the latest development in this matter, the Delhi High Court has dismissed this plea of the operator which made a claim to returns from the FY 2014-15 to 2017-18.
Bench Dismisses Plea Because of Absence of Merit in the Argument
The bench which dismissed the plea was headed by Justices S Ravindra Bhat and Prateek Jalan. They cited that there is merit in the argument presented by the Income-tax department adding that substantial outstanding demand is pending against the company and that the department should have the power to adjust the demands against the returns. However, the bench added that since the complete assessment of the AYs is pending, therefore, there is a chance of more pending demands being against the operator.
According to an ET Telecom report, the bench remarked, "There is some merit in the revenue's (tax department) argument that substantial outstanding demand are pending against the petitioner. Further, the likelihood of substantial demands upon the assessee after the scrutiny for the AYs is completed, cannot be ruled out.” The bench further added, "The Revenue should have the right to adjust the demands against the refunds that may arise but have not yet been determined due to ongoing scrutiny proceedings.”
The court highlighted that the AYs for which the returns were being requested are either under special audit or pending before the Assessment Officer (AO) for scrutiny. Keeping in mind that upon examination of earlier years, the substantial demand from the telco increased. Therefore the department has held back the processing for the company’s returns.
More Demands to Emerge as Assesment of AYs Moves Ahead
On this matter, the department said, "In the facts of the present case, for AY 2014-15, the petitioner (Vodafone) has approached the AAR, and for AYs 2015-16 and 2017-18, scrutiny assessments are pending before the AO. The AO has exercised discretion under section 143 (1)D of the Income Tax Act not to process the returns considering the fact that substantial demand has been raised on completion of scrutiny assessment of earlier years.” Adding on top of that, department remarked, "The petitioner has undertaken two schemes of amalgamation involving a merger of certain group companies to restructure its business operations and increase operational efficiencies. In light of the above fact, assessments for the AY 2012-13 and 2013-14 are under special audit and any demand that would arise from the processing of the said assessment years are to be allowed to be adjusted against the refund claims.”
The company, on the other hand, had said that it received the acknowledgement after filing returns in the previous years, following which the returns should have been processed in the specific year only. The company added that failure to do so means that interest will be applicable on the amount. However, court countered this argument of Vodafone saying, "Intimation or acknowledgement cannot confer any greater right than for the assessee to ask the AO to process the refund and make over the money."
Citing that…“it is up to the AO, 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 a refund can accrue.” The bench, therefore, dismissed the petition filed by the operator.