M/S Vodafone Mobile Services Ltd v. Asst. Commissioner Of Income–Tax

$~ * IN THE HIGH COURT OF DELHI AT NEW DELHI % Date of Decision : 14[th] December, 2018 + W.P.(C) 2730/2018 & CM Nos.46054-55/2018 M/S VODAFONE MOBILE SERVICES LTD ...... Petitioner Through: Mr. Harish N. Salve, Senior Advocate with Ms. Anuradha Dutt, Mr. Sachit Jolly, Mr. Siddharth Joshi & Mr.Kunal Dutt, Advocates. versus ASST. COMMISSIONER OF INCOME–TAX ……Respondents & ANR. Through: Mr. Zoheb Hossain, Senior Standing Counsel CORAM:HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON’BLE MR. JUSTICE PRATEEK JALAN S. RAVINDRA BHAT, J. (ORAL) 1.The present Writ Petition No.2730/2018 is filed by the petitioner (hereafter “Vodafone”) under Article 226 and 227 of the Constitution of India on account of inaction on the part of the Assistant Commissioner of Income Tax (hereafter referred as “respondent”) in not processing income tax returns for four Assessment Years (hereafter referred as “AY”) 2014-15 to 2017-18 (hereafter referred as the “relevant period under consideration”) which will result in issuance of refunds aggregating to `4759.74 crores along with applicable interest under Section 244A of the Income Tax Act (hereafter referred as “Act”). A tabular depiction of the claims for refund for the aforementioned AYs is as under:- 2.The writ petition claims a direction upon the respondent to expeditiously process the refund claim made by Vodafone, and issue refund in respect of Vodafone’s income tax returns for the relevant period under consideration, together with eligible interest under Section 244A of the Act. 3.Briefly, Vodafone is engaged in providing telecommunication services. There were a total of seven group entities providing telecom services in different circles, as named below : (1)Vodafone Mobile Services Ltd. (“VMSL”) (2)Vodafone Cellular Limited ("VCL") (3)Vodafone Digilink Limited (“HVDL") (4)Vodafone East Limited ("VEL") (5)Vodafone South Limited ("VSL") (6)Vodafone Spacetel Limited ("VSPL") (7)Vodafone West Limited ("VWL") 4.Two amalgamation involving merger of certain Vodafone group companies were undertaken to re-structure business operations and increase operational efficiencies. Four Vodafone group entities (HVDL, VEL, VSLand VCL) amalgamated with Vodafone under the first scheme of amalgamation W.P.(C) 2730/2018 Page 2 of 40 w.e.f. 01.04.2011. Further, the second scheme of amalgamation, two other groups (VSPL and VWL) amalgamated with Vodafone w.e.f. 01.04.2012. The Revenue was duly intimated about the two schemes of amalgamation. As a consequence, all proceedings in the case of the amalgamating entities are to be carried on in the name of Vodafone. 5.The revised e-returns of income pertaining to AY 2014-15 and AY 2015-16, were filed on 31.03.2016 and 25.11.2016 respectively, claiming refunds of `l,532.09 crores and `l,355.51 crores, respectively. Subsequently, in view of the Advance Pricing Agreement dated 18.11.2016 entered by Vodafone with the Central Board of Direct Taxes (hereafter referred as 'CBDT') under section 92CC of the Act, it filed modified tax return as per the mandate of section 92CD of the Act for AY 2014-15 on 22.02.2017. However, such returns have not been processed till date. The return of income pertaining to AY 2016-2017, claiming refund of ` l128.47 crores was filed on 30.11.2016. However, this too has not been processed till date. 6.In the meanwhile, the Revenue (in certain pending writ petitions) filed a Civil Miscellaneous Application in WP(C)Nos.12301, 12303 and 12307 of 2015 in the month of March 2017 before this court (later withdrawn), whereby it, inter alia, agreed to process the tax returns filed by Vodafone for AYs 2012-13 to 2016-17 irrespective of the pending assessments. The Revenue, by such application sought this court’s permission to process such return and adjust the refunds to the extent of the stayed outstanding tax demand. However, such application was later withdrawn. Therefore, there exists no reason why the legitimate refunds continue to be held back from Vodafone. 6.In the meanwhile, the Revenue (in certain pending writ petitions) filed a Civil Miscellaneous Application in WP(C)Nos.12301, 12303 and 12307 of 2015 in the month of March 2017 before this court (later withdrawn), whereby it, inter alia, agreed to process the tax returns filed by Vodafone for AYs 2012-13 to 2016-17 irrespective of the pending assessments. The Revenue, by such application sought this court’s permission to process such return and adjust the refunds to the extent of the stayed outstanding tax demand. However, such application was later withdrawn. Therefore, there exists no reason why the legitimate refunds continue to be held back from Vodafone. 7.Further, by a letter dated 24.07.2017, Vodafone requested the revenue for expeditious processing of the pending income tax returns. It duly submitted that W.P.(C) 2730/2018 it was under financial stress and no recoverable demands are foreseeable, thus stating that there was no ground for delaying the processing of the returns and issuance of the consequent refunds. Thereafter, by letter dated 19.09.2017, Vodafone reiterated that it was under immense financial stress and, therefore, the returns should be processed forthwith. Vodafone also submitted that system related issues cannot be held against Vodafone so as to deny its due and such considerable delay is against the mandate of the provisions of the Act and the law laid down by this court. Vodafone submits that the ITD System does have a functionality, enabling the revenue to manually grant credit of tax in case of a merger. Reliance in this regard is placed on the decision in the case of Times Internet v. Additional Commissioner of Income Tax WP (C) 3384 of 2017. The relevant para of the case is extracted hereunder for ready reference: ―1. Pursuant to the order of this Court dated 6th July, 2017, a reply has been handed over today on behalf of the Respondents wherein it has been, inter alia, stated that 71% of the tax refund amount claimed by the Petitioner for the AYs 2013-14 and 2014-15 has been processed by the Department. It is sought to be explained by Mr. Rahul Chaudhary; the learned Senior Standing Counsel for the Revenue that new software has to be developed to process the refund claims and, pending the development of such software, manual credit for tax deducted at source, after verification, is being given. The Respondent seeks six more months' time to process all the refund claims and issue appropriate orders. 2. Mr. C. S. Agarwal, learned Senior Counsel for the Petitioner, points out that for no fault of the Petitioner, it is being made to unnecessarily wait for what is legitimately due to it and that the time, as sought by the Respondent, is unreasonable. Mr. Chaudhary explains that the Systems Directorate of the Department is doing its best to develop the software functionality and, as it is, a large portion of its work force is engaged only in the task of processing the Petitioner's refund Applications. It is also stated that as W.P.(C) 2730/2018 Page 4 of 40 many as 10,746 entries in the 26AS Form had to be manually given tax credit so for and, considering the number of entries involved, the time sought is not unreasonable. 3. The Court notes that the balance refund which remains to be processed to the tune of Rs.15.86 crores along with interest. Considering that any further delay would only mean further loss to the exchequer on account of the interest which will become payable, it is in the interest of the Revenue to expedite the entire process. The Respondent should inform the Court within a period of three months the further progress made in the matter of processing the refund claims for the remaining AYs.‖ W.P.(C) 2730/2018 Page 4 of 40 many as 10,746 entries in the 26AS Form had to be manually given tax credit so for and, considering the number of entries involved, the time sought is not unreasonable. 3. The Court notes that the balance refund which remains to be processed to the tune of Rs.15.86 crores along with interest. Considering that any further delay would only mean further loss to the exchequer on account of the interest which will become payable, it is in the interest of the Revenue to expedite the entire process. The Respondent should inform the Court within a period of three months the further progress made in the matter of processing the refund claims for the remaining AYs.‖ 8.Vodafone also placed 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. 9.Further, Vodafone submits that the intent of the court has also been accepted by the Government, which is evident by the fact that the Section 143(1D) has been amended. It is submitted that the intent of retaining discretion is evident by the insertion of Section 241A of the Act. From the perusal of the 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 present case, it is noteworthy that the time period prescribed under Section 143(1) of the Act has already expired and there has been no correspondence from the Respondents that discretion under section 143(1D) has been exercised. W.P.(C) 2730/2018 Page 5 of 40 10.On 27.09.2017, Vodafone again requested the Revenue that the returns of income be processed expeditiously and if it were in disagreement then a personal hearing followed by a reasoned order as to why the returns of income were not being processed be given. In the interim, through notice dated 21.09.2017, the Revenue sought to delay the issuance of the refunds arising from the processing of the returns by issuing a letter to Vodafone, inter alia, calling for details of the amalgamating entities as well asking Vodafone to give "consent" to adjustment of refunds due to Vodafone against demands, which have already been stayed by the various Courts and Tribunals. In response, Vodafone filed a detailed reply pointing that the details sought were already part of an application filed by the Revenue before this court and also giving a detailed rebuttal; it further requested for refunds. Vodafone also stated that it filed its returns for AY 2017-18 on 25.l1.2017 claiming a refund of `743.67 crore. The refund sought was because of delay in issuing the “Nil” withholding certificate sought by Vodafone in August, 2016. While Vodafone had sought a nil withholding order, a lower withholding order was issued, after a delay of five (5) months. It is submitted that while the time limit prescribed under the provisions of section 143(1) has not yet lapsed for the year, it could not act as a bar on the processing of the return and the grant of consequential refund to Vodafone since such refund has arisen largely on account of delay on the revenue’s part. 11.Vodafone contends that revenue’s deliberate omission to process and grant refunds for the relevant period under consideration is contrary to Section 143(1) given that such processing of refunds not later than one year from the end of the relevant financial year is mandated. It is also argued that the revenue’s omission to process and grant refunds for AYs 2014-15 to 2017-18 is on the pretext of system related problems is contrary to the law laid down in W.P.(C) 2730/2018 11.Vodafone contends that revenue’s deliberate omission to process and grant refunds for the relevant period under consideration is contrary to Section 143(1) given that such processing of refunds not later than one year from the end of the relevant financial year is mandated. It is also argued that the revenue’s omission to process and grant refunds for AYs 2014-15 to 2017-18 is on the pretext of system related problems is contrary to the law laid down in W.P.(C) 2730/2018 Times Internet v. ACIT WP(C) 3384 of 2017. Further, it is urged that the Revenue had in WP(C)Nos.12301, 12303 and 12307/2015 agreed to process the tax returns, it cannot now decide not to process the same under the same set facts and circumstances. Alleging that the revenue acted casually, Vodafone submits that its omission is causing serious financial prejudice. 12.With respect to the AY 2017-18, Vodafone contended that a delay has arisen in processing of return of income on account of delay caused by the Respondents in issuing the NIL withholding order for the relevant AY and this delay on behalf of the respondents is contrary to the law as per Tata Teleservices Limited v. CBDT (supra).It is alleged that the revenue’s inaction in not granting refunds has resulted in blocking of Vodafone’s working capital and caused it grave financial hardship particularly, in view of its sustained losses incurred year after year. Withholding of refunds, says Vodafone violates of the principle contained in Articles 265 and 300A of the Constitution of India. 13.With respect to the delay in processing of the tax returns, Vodafone places reliance on the decision of this court in Tata Teleservices Limited vs Central Board of Direct Taxes (supra), and the decision of the Bombay High Court in Group M Media India (P) vs Union of India (supra), where it was held that the return should be processed within a year and only where the assessing officer is of the view that issuance of refund would be detrimental to collection of demands that may arise, he may invoke the provision of Section 143(1D) of the Act. From the perusal of section 241A of the Act, it is evident that all tax returns are necessarily to be processed within the time period as prescribed under Section 143(1) of the Act. In the instant case, it is note-worthy that the time period prescribed under Section 143(1) of the Act has expired and there has been no correspondence from the revenue that discretion under Section 143(1D) was exercised. W.P.(C) 2730/2018 Page 7 of 40 14.Appearing for Vodafone, Mr. Harish Salve, Senior counsel, urged that the Revenue deliberately did not process Vodafone’s tax returns for the relevant assessing years, resulting in deprivation of refund of about approximately `5,500 crores despite repeated reminders and requests on its behalf. The Senior counsel further urged that for the AYs 2012-13 and 2013-14, the limitation period expired on 15.09.2018 and for AYs 2014-15, 2015-16 and 2016-17, the limitation expires on 31.12.2018. Mr. Salve alleged that the intention of the revenue is obvious and it defeats the very object and purpose of the enactment. W.P.(C) 2730/2018 Page 7 of 40 14.Appearing for Vodafone, Mr. Harish Salve, Senior counsel, urged that the Revenue deliberately did not process Vodafone’s tax returns for the relevant assessing years, resulting in deprivation of refund of about approximately `5,500 crores despite repeated reminders and requests on its behalf. The Senior counsel further urged that for the AYs 2012-13 and 2013-14, the limitation period expired on 15.09.2018 and for AYs 2014-15, 2015-16 and 2016-17, the limitation expires on 31.12.2018. Mr. Salve alleged that the intention of the revenue is obvious and it defeats the very object and purpose of the enactment. 15.Counsel argued that Act does not provide for automatic adjustment towards the demand arising in any assessment year. In this regard, he relied on the decision of this court in Court on its Motion v Commissioner of Income Tax(W.P. (C) No. 2659 of 2012) where it was held that Section 245 of the Act contemplates prior intimation to the assessee to enable a response before any adjustment is made towards the demand relating to any other assessment year. Thus, an opportunity of response/reply should be given and after considering the assessee’s stand and plea, a justified order for adjustment of refund could be made. Further, the court held that an assessee can be denied interest if delay is attributable to him in terms of Section 244A (2). However, when the delay is not attributable to the assessee but due to the fault of the Revenue, then interest should be paid under the section. The Bench held that the law requires intimation under Section 143(1) to be communicated to the assesee, if there is an adjustment made in the return resulting either in demand or reduction in refund. Uncommunicated orders/intimations cannot be enforced and are not valid. 16.Counsel also cited Commissioner Of Income Tax and Others vs. Society for the Promotion of Education [2016] 382 ITR 6 (SC), where the short issue is with regard to the deemed registration of an application under Section 12AA of W.P.(C) 2730/2018 Page 8 of 40 the Act. The SC upheld the order of the High Court which had taken the view that once an application is made under the said provision and in case the same is not responded to within six months, it would be taken that the application is registered under the provision. 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 AO 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. ’The Revenues stand 18.The Revenue argued that processing of returns without scrutiny would be prejudicial to its interests as there is a likelihood of additions to Vodafone’s income on the following grounds, namely, (i) Certain additions are made pursuant to adjustment by the Transfer Pricing officer. Pricing officer. ’The Revenues stand 18.The Revenue argued that processing of returns without scrutiny would be prejudicial to its interests as there is a likelihood of additions to Vodafone’s income on the following grounds, namely, (i) Certain additions are made pursuant to adjustment by the Transfer Pricing officer. Pricing officer. (ii) With respect to the issue of capitalization of license fees, the Revenue submitted that Vodafone debits the Revenue share of license to the P&L account as a revenue expenditure whereas considering the enduring nature of the benefit derived by Vodafone out of the telecom license and the intangible nature of the license, the license fee is treated as a capital expenditure and amortization is allowed over the period of the license agreement. Resultantly, an addition of submitted that Vodafone debits the Revenue share of license to the P&L account as a revenue expenditure whereas considering the enduring nature of the benefit derived by Vodafone out of the telecom license and the intangible nature of the license, the license fee is treated as a capital expenditure and amortization is allowed over the period of the license agreement. Resultantly, an addition of `11,10,99,763/- was made in AY 2011-12. As the company underwent amalgamation, the total sum of the license fee paid by the companies is to be amortized, resulting in higher additions. Besides this, as the special audit for the AYs 2012-13 and 2013-14 is underway, the accounting treatments of the license and their amortizations will also result in huge additions being made. (iii) With respect to the issue of 3G spectrum fees, Vodafone claimed depreciation on the spectrum it acquired. The revenue here contends that rather than depreciation being claimed on the intangible asset of 3G spectrum, the capital expenditure which includes the interest incurred should be amortized over the life of the spectrum. On this count, an addition of `269.63 crores was made in the AY 2011-2012. Besides this, as the special audit for the AYs 2012-13 and 2013-14 is underway, the accounting treatments of the 3G spectrum fee and its amortizations will also result in substantial additions being made. (iv) With respect to the issue of asset restoration cost obligation, Vodafone claims that it has to incur cost for restoration of leased and shared network sites. Vodafone claims depreciation on the amount so capitalized and reduces profit to that extent. As the asset restoration cost is in the nature of a provision and is not an ascertained liability, it was disallowed. After the amalgamation of the group companies, the quantum of the addition would increase and might get enhanced in light of the special audit which is underway. It is also submitted that an addition of `6633988 was made in the AY 2011-12 based on the issue. Vodafone claims that it has to incur cost for restoration of leased and shared network sites. Vodafone claims depreciation on the amount so capitalized and reduces profit to that extent. As the asset restoration cost is in the nature of a provision and is not an ascertained liability, it was disallowed. After the amalgamation of the group companies, the quantum of the addition would increase and might get enhanced in light of the special audit which is underway. It is also submitted that an addition of `6633988 was made in the AY 2011-12 based on the issue. (v) With respect to the issue of disallowance of roaming charges, the revenue submitted Vodafone failed to deduct TDS on this count, arguing that this was an automatic process not involving human intervention. In the AY 2011-12, an addition of` 142.3 crore was made. The Revenue urges that the fall out of amalgamation of Vodafone group companies is likely to result in a higher addition for the AYs 2012-13, 2013-14 and 2014-15, resulting in substantial demands. revenue submitted Vodafone failed to deduct TDS on this count, arguing that this was an automatic process not involving human intervention. In the AY 2011-12, an addition of` 142.3 crore was made. The Revenue urges that the fall out of amalgamation of Vodafone group companies is likely to result in a higher addition for the AYs 2012-13, 2013-14 and 2014-15, resulting in substantial demands. (vi) The revenue urged that Vodafone gave discount to its distributors, of prepaid SIM cards, which is in the nature of commission for which no TDS was deducted. The amount to be disallowed is likely to be much more as compared to a disallowance of `50.85 crore made by the revenue in the AY 2011-12. prepaid SIM cards, which is in the nature of commission for which no TDS was deducted. The amount to be disallowed is likely to be much more as compared to a disallowance of `50.85 crore made by the revenue in the AY 2011-12. (vii) With respect to the additions made on account of Section 14A, the Revenue stated that Vodafone made various investments in the AYs 2012-13, 2013-14 and 2014-15. They were used to earn exempt income i.e., dividend income. Since Vodafone failed to include the expenses incurred to earn untaxable income, an addition of `1,39,10,000/- was made to the income. Considering that the group has just undertaken a merger and the shares and investments would have been redistributed and/or extinguished, considerable demand is likely to arise in the pending assessment proceedings. Revenue stated that Vodafone made various investments in the AYs 2012-13, 2013-14 and 2014-15. They were used to earn exempt income i.e., dividend income. Since Vodafone failed to include the expenses incurred to earn untaxable income, an addition of `1,39,10,000/- was made to the income. Considering that the group has just undertaken a merger and the shares and investments would have been redistributed and/or extinguished, considerable demand is likely to arise in the pending assessment proceedings. (viii) On penalty levied by the DoT, the Revenue alleged that there have been penalties levied by the Department of Telecom on Vodafone for non-verification of customers etc. The penalty is levied as per the Indian Telegraph Act, 1885. Hence, the penalty is not an allowable been penalties levied by the Department of Telecom on Vodafone for non-verification of customers etc. The penalty is levied as per the Indian Telegraph Act, 1885. Hence, the penalty is not an allowable W.P.(C) 2730/2018 expenditure under Section 37 of the Act. The disallowance of this expenditure would lead to substantial additions for all the, amalgamating companies and would thereby result in creation of a substantial demand for Vodafone. (ix) With respect to Issue of Disallowance on account of network site rentals, the respondent submits that Vodafone pays network site rentals to the company M/s Indus towers Ltd., to which it has gifted the passive infrastructure assets, which has been held unreasonable by the department. The assesee in the AY 2011-12 had failed to furnish the ledgers duly certified by M/s Indus Towers Ltd, indicating the payments made. Thus, the amounts were not crystallized and an addition of `52.2 crore was made. Considering that Vodafone has merged into itself other subsidiary companies, the addition on account of network site rentals will be substantially higher. (x) (ix) With respect to Issue of Disallowance on account of network site rentals, the respondent submits that Vodafone pays network site rentals to the company M/s Indus towers Ltd., to which it has gifted the passive infrastructure assets, which has been held unreasonable by the department. The assesee in the AY 2011-12 had failed to furnish the ledgers duly certified by M/s Indus Towers Ltd, indicating the payments made. Thus, the amounts were not crystallized and an addition of `52.2 crore was made. Considering that Vodafone has merged into itself other subsidiary companies, the addition on account of network site rentals will be substantially higher. (x) It is urged that abundant caution needs be exercised because of the above concerns and refunds can be issued only on the completion of the assessment under Section 143(3) and the correct determination of an assessee’s income after thorough scrutiny. The revenue alleged that penalty would be levied on the addition which are made further resulting in huge demand which would have to be paid to the revenue along with applicable interest. This would result in incurring of a substantial tax liability for Vodafone, which given the financial condition of Vodafone as has been admitted by Vodafone itself. Therefore, in light of the above facts, the respondent has taken recourse to Section 281B of the Act. It is submitted by the revenue that the refunds arising out of the appeal effects in the entities VSL for AYs 2007-2008 amounting to `3,23,09,941/-, for AY 2008-1009 above concerns and refunds can be issued only on the completion of the assessment under Section 143(3) and the correct determination of an assessee’s income after thorough scrutiny. The revenue alleged that penalty would be levied on the addition which are made further resulting in huge demand which would have to be paid to the revenue along with applicable interest. This would result in incurring of a substantial tax liability for Vodafone, which given the financial condition of Vodafone as has been admitted by Vodafone itself. Therefore, in light of the above facts, the respondent has taken recourse to Section 281B of the Act. It is submitted by the revenue that the refunds arising out of the appeal effects in the entities VSL for AYs 2007-2008 amounting to `3,23,09,941/-, for AY 2008-1009 W.P.(C) 2730/2018 Page 12 of 40 amounting to `355,52,00,613 and VWL for AY 2004-2005 amounting to `82,65,79.837 as well as those arising out of the rectification applications for the following assessment years are provisionally attached to protect the interest of the revenue. Therefore, a total attachment of `655.67 crores has been made in Vodafone’s case under Section 281B of the Act. The respondent contends that a total attachment of `655.67 crores has been made under Section 281B of the Act. (xi) Further, refunds arising out of the following rectification are attached to protect the interest of the revenue. It is stated that for VSL, the attachment of amounts (on account of appeal effects) are `3,23,09,941 and `355,52,00,613 respectively for AY 2007-08 and 2008-09 and for VWL it is `82,65,79,837 (for AY 2004-05). Attachment on account of rectifications for various group companies (VCL, VSPL, HVDL and VEL) is for a total sum of `2,14,26,18,683 for various assessment years. 19.The revenue denies allegations of deliberate omission to refund amounts aggregating to `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 `33,93,397 and subsequently, the income determined by the AO was `546,64,25,250/-. 19.The revenue denies allegations of deliberate omission to refund amounts aggregating to `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 `33,93,397 and subsequently, the income determined by the AO was `546,64,25,250/-. 20.Mr. Zoheb Hossain, the Revenue’s counsel urged that Tata Teleservices(supra), is distinguishable. The petitioner there had not undergone retrospective mergers and had incurred substantial losses where no net demand could have been created. Whereas, in the facts of the present case, the returned loss in the AY 2011-12 was assessed as a profit in excess of `500 crore by the assessing officer. Tata Teleservices did not face outstanding demands amounting to `5,500 crores that were yet to be recovered. The assessments there were not under any special audit which were likely to result in substantial demands. However, this case involves three assessment years, where, revised returns were filed but that are subject to special audit. The shareholding pattern of Tata Teleservices is such that the money could not be repatriated abroad leaving the interest of revenue indefinitely compromised, which is not the case with Vodafone with the actual owner being a foreign company. Therefore, the decision in the Tata Teleservices case (supra), cannot be applied to the facts of the present case as such. 21.Counsel for the Revenue contended that for the relevant period under consideration, the Assessing Officer has already issued notice under sub-section (2) of Section 143 within time. As per the then prevailing provision, it was thereafter not necessary for 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 proviso to Section 143 (1D) provided that such return shall be processed before the issuance of an order under sub-section W.P.(C) 2730/2018 (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). The relevant portion of the letter dated 23.07.2018 is extracted here under: “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 above decision has been taken after taking into cognizance the order of Honourable 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 AO concerned exercising his discretion in terms of Section 143(1D) of the Act.‖ 23.Mr. Hossain placed reliance on the decision of this court in the case of Indus Towers Limited Vs. Union of India & Ors (W.P.10293/2017), where the writ petition was withdrawn with liberty to approach the Commissioner by way of revision petition under Section 264 of the Act against the impugned order passed by the assessing officer refusing to issue refund. 24.It was pointed out that no doubt Tata Teleservices (supra) quashed the instructions issued by the CBDT. However, it still gave the revenue the ability to exercise the discretion provided for in Section 143(1D). The relevant portion of the judgment: "The Court is of the view that the impugned Instruction No.1 of 2015 dated 13th January 2015 issued by the CBDT is unsustainable in law and it is hereby quashed. It is directed that the said instruction shall not hereafter be relied upon to deny refunds to the Assessees in whose cases notices might have been issued under Section 143(2) of the Act. The question whether such return should be processed will have to be decided by the AO concerned exercising his discretion in terms of Section 143 (1D) of the Act." 25.The revenue contends that the financial condition of Vodafone cannot be a ground to discount its tax liability. In the facts of the present case, the interest of the revenue is to be protected as huge demands are outstanding which are stayed by the appellate forums. For the AY 2011-12, Vodafone chose to approach the court in writ jurisdiction against the orders of the dispute resolution panel instead of availing the available remedy of approaching the ld. ITAT. Further, Counsel for the revenue urged that any refunds as determined only after the completion of assessment of income shall be issued to Vodafone in accordance with law. Analysis and Conclusions Relevant provisions 26.Section 143 (1) of the Act states that every return made under Section 139 of the Act or filed in response to a notice under Section 142 (1) of the Act, would be processed in the following manner: “143. (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; [92][***] (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; 93[(iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139; (iv) disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under sections 10AA, 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 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return: (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; 93[(iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139; (iv) disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under sections 10AA, 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 26AS or Form 16A 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:] 94[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;]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[95][, 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[95][, 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 allowable under an agreement under section 90 or section 90A, 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 [96][, 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 [96][, 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; (b) the acknowledgement 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 centralised 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. (ii) in respect of which the information required to be furnished under this Act to substantiate such entry has not been so furnished; or (iii) in respect of a deduction, where such deduction exceeds specified statutory limit which may have been expressed as monetary amount or percentage or ratio or fraction; (b) the acknowledgement 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 centralised 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 W.P.(C) 2730/2018 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[99], as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be 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)[1][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: —Provided that in the case of a (a) research association referred to in clause (21) of section 10; (b) news agency referred to in clause (22B) of section 10; (c) association or institution referred to in clause (23A) of section 10; (d) institution referred to in clause (23B) of section 10; —Provided that in the case of a (a) research association referred to in clause (21) of section 10; (b) news agency referred to in clause (22B) of section 10; (c) association or institution referred to in clause (23A) of section 10; (d) institution referred to in clause (23B) of section 10; (e) fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via) of clause (23C) of section 10, which is required to furnish the return of income under sub-section (4C) of section 139, no order making an assessment of the total income or loss of such research association, news agency, association or institution or fund or trust or university or other educational institution or any hospital or other medical institution, shall be made by the Assessing Officer, without —giving effect to the provisions of section 10, unless (i) the Assessing Officer has intimated the Central Government or the prescribed authority the contravention of the provision