The Bombay High Court directs Vodafone Idea to get a tax refund of Rs. 1128 crore and chastises the IT department for its inaction

 The Bombay High Court directs Vodafone Idea to get a tax refund of Rs. 1128 crore and chastises the IT department for its inaction

In its ruling on Wednesday, the HC said that the assessment order issued by the department in August of this year was time barred and hence could not be upheld.

The Income Tax department has been ordered by the Bombay High Court to reimburse Vodafone Idea Limited for the taxes that the telecom operator paid for the assessment year 2016–2017, totaling Rs 1,128 crore.

In its ruling on Wednesday, the HC said that the assessment order issued by the department in August of this year was time barred and hence could not be upheld.

A division bench of Justices K R Shriram and Neela Gokhale also expressed strong opposition to the assessing officer's actions, citing indolence and tardiness in failing to issue the final ruling within the allotted 30-day period, resulting in significant financial losses for the public and exchequer.

The Vodafone Idea Limited petitioned the court, arguing that the I-T department had not reimbursed it for the money it had paid for the assessment year 2016–2017, which exceeded the actual tax that was owed on its revenue. The court granted the petition.

In its ruling, the bench observed that the Vodafone case was rather straightforward and that it was obliged to take into account the assessing officer's total indifference and careless behavior in carrying out his responsibilities in compliance with the Income Tax Act.

The ruling said that any negligence or carelessness on the part of the officials tasked with upholding the precise letter and spirit of the law impacts the exchequer and has far-reaching effects on the economy and economic stability of the country.

It also said that any effective system established by the government for the transparent and efficient administration of tax laws and regulations has the potential to be destroyed and rendered useless by laxity in this area.

The court advised that a thorough investigation be started into the assessing officer's alleged disregard for the Income Tax Act's restrictions.

The HC ordered that its order copy be sent to the Union Ministry of Finance and said that strict action should be taken against those accountable for the laxity and lethargy demonstrated, which has resulted in a significant loss to the exchequer and ultimately to the residents of this nation.

According to the petition, in December 2019, the assessing officer issued a draft decision for the assessment year, to which the firm objected in January 2020 before the Dispute Resolution Panel (DRP).

Specific guidelines were released by the DRP in March 2021. In its request, Vodafone Idea Limited claimed that the Act's 30-day deadline for the assessing officer to provide the case's final ruling had to have been met. The corporation claimed it was entitled to a refund with interest since the officer was unable to approve the final order.

The business said that the assessing officer issued the final assessment decision in August of 2023, after its June 2023 filing of a petition before the HC requesting a return of the sum. The tax department said that it had not received the DRP's instructions because of the "Faceless Assessment Regime".

The Income Tax Business Application (ITBA) site is where the DRP instructions are always available and visible, according to the high court, which rejected this argument. It also said that there was no hint of an explanation for the assessing officer's two protracted years of inaction and silence in the matter, only acting upon learning of the filed petition.

The court said without reservation that the assessment order dated August 31, 2023, which was issued by the assessing officer two years after the DRP instructions, is outside the statute of limitations and cannot be upheld. According to the HC, Vodafone Idea Limited was thus entitled to the return plus interest.