Pulling up the FAO, the HC held, “If the provisions of Section 144C—requiring final orders in 30 days– as mandated by the Statute are not strictly adhered to, the entire object of providing for an alternate redressal mechanism in the form of DRP stand defeated’’ .
The Judgment pronounced on Wednesday and authored by Justice Gokhale also strongly recommended a detailed inquiry against the FAO for failure to abide by the legal mandate and the :lack of diligence on part of officials concerned…in the present assesment’’.
“Strict action should be taken against persons responsible for the laxity and lethargy displayed which has caused a huge loss to the exchequer and in turn to the citizens of this country,’’ added the judgment directing that a copy be circulated to the CBDT and Principal Secretary, Union Finance Ministry.
Vodafone Idea Ltd had on June 8, 2023 this year, as successor of Vodafone Mobile Services Ltd, petitioned the HC against the Central Processing Centre, Bengaluru, Assistant Commissioner of Income-Tax, Mumbai and others. Through its senior counsel J D Mistri, the cellular operators called in question the failure of CPC and IT officials to refund the amount it paid for 2016-17, in excess of legitimate tax due on returned income.
The HC said, “The case of Petitioner is quite elementary and we are constrained to observe the complete apathy and negligent approach of the assessing officer concerned in discharging his duties, in accordance with the provisions of Income Tax Act, 1961.’’ It added, “Laxity in this regard has a propensity to destroy and bring to naught any effective system put in place by the Government for efficient and transparent administration of taxation laws and its regulations. Such an adverse effect on the exchequer is revealed in the present case.’’
The AO passed a draft order in this case on December 29, 2019, against which the company filed an objection before the DRP on January 27, 2020. On March 25, 2021 the DRP issued directions which were uploaded the same day on the Income Tax Business Application (ITBA) portal.
The grievance of Vodafone Idea essentially was that the AO failed to pass the final order in terms of the directions of DRP within 30 days, the period of limitation prescribed by Section 144C(13) of the Act and consequently said it is entitled to refund with interest. Mistri said once DRP order is uploaded and is available, when no order is passed in a month, the income declared by Vodafone Idea is deemed to be accepted by the Income Tax Department and petitioner, entitled to refund of excess tax.
After the petition was filed, the FAO passed its order on August 31, 2023, the HC noted. Defending the actions of the department, advocate Devvrat Singh for the Revenue said the FAO received the 2021 order only on August 23, 2023 in the ‘case history noting’ and then within a month passed the order.
The HC after analysing the law and the assessment proceeding scheme under e-assessment scheme said, “any notice, summons, order is deemed to have been received by the FAO once it is available to the NeAC.’’
Also highlighting the scheme of the Act was to ensure speedy disposal of disputes under, the HC held, “Once the statute has prescribed a limitation period for passing the final order, it is expected that the internal procedure of the department should mould itself to give meaning to and act in aid of the provision. Any procedural defect (there is none in this case) in the internal mechanism of the working of E-assessment Scheme, cannot operate against the interest of assessee. Hence, the FAO cannot be, believed that the DRP direction was received by him only on 23rd August 2023 despite being uploaded on the ITBA portal on 25th March 2021. The failure on the part of department to follow the procedure under Section 144C of the Act is not merely a procedural irregularity, but is an illegality and vitiates the entire proceeding.’’