IN HIGH COURT OF JUDICATURE AT BOMBAY O.O.C.J. WRIT PETITION NO.2036 OF 2019 Vodafone Idea Ltd. Petitioner Vs Dy. Commissioner of income Tax, CPC, Respondents Bangalore & Ors. Mr.J.D. Mistri, Senior Advocate with Mr.Nitesh Joshi i/b Mr.Atul Jasani for Petitioner Mr.N.C. Mohanty for Respondents CORAM: AKIL KURESHI & S.J. KATHAWALLA, JJ. DATED: SEPTEMBER 3, 2019 P.C. (Per Akil Kureshi, J.): 1. Heard learned Counsel for parties for final disposal of petition at stage of admission. 2. petitioner has challenged action of respondents, i.e., authorities of Income Tax department of not releasing petitioner s refund of sum of Rs.207 crores (rounded off) arising out of intimation under section 143 (1) of Income Tax Act, 1961 ( Act for short) dated 26.10.2018 in relation to petitioner s return for AY 2016-2017. Page 1 of 14 wp.2036.2019_7.doc 3. Brief facts are as under: petitioner is company registered under Companies Act and is engaged in business of providing communication services. For AY 2016-2017, petitioner had filed return of income declaring loss of Rs.2,561 crores (rounded off). Since assessing officer was not processing return of petitioner, petitioner had previously approached this Court by filing Writ Petition No.2146 of 2018 which was disposed of by order dated 1.10.2018. In context of grievance of petitioner that return was not being processed promptly, Court made following observations in said order: 7. communication, copy of which is at Annexure-A makes interesting reading with regard to assessment year 2016-2017. It is solemnly stated that return for this assessment year has been processed but it is pushed to what is stated as and styled as Centralized Processing Center. That is stated to be forwarded for computation. 8. We fail to understand as to why somebody who is in- charge of making and framing assessment, namely, Assessing Officer can process return and ordinarily empowered to finalize it as well but must forward it or push it to this center for computation. If computation such difficult, if not important task, why it cannot be performed by this Assessing Officer, is not clarified to us at all. It is evident that, after it is pushed to this center, from centre s communication, copy of which is handed over Mr.Mohanty Page 2 of 14 ::: Uploaded on - 05/09/2019 ::: Downloaded on - 10/09/2019 12:53:23 ::: wp.2036.2019_7.doc dated 7th August, 2018, it is apparent that this center has done nothing in relation to this computation. said letter dated 7th August, 2018 is taken on record and marked X for identification. It may be lying with it until such time as law permits holding up of further proceedings or till last date. We only remind Revenue of inherent risk in such exercise. Far from making things simpler, we are of opinion that such complications and confusions often prejudice interest of Revenue. It can then very well be managed with such centers and officials manning same that they sit on files and thereafter returns are processed as it is or there is nothing left to be done in relation thereto. They would definitely have to be then accepted in manner forwarded by Assessee. That would be indeed prejudicial to interest of Revenue if not necessarily harassing Assessee. balance has to be created and this procedure, cumbersome as it is, does not facilitate same. In such circumstance, we direct this Centralized Processing Center-ITR to forthwith take decision and as regards computation. decision be taken and communicated to concerned Assessing Officer within period of four weeks from today. 9. Any opinion on merits of issue would prejudice both sides. We do not think and as rightly urged by Mr.Pardiwala that whole exercise would necessarily result in either refund or demand. We expect authorities to take decision and not delay matters. Even if there is any exercise and warranting adjustment, there is no reason to delay that, by sitting on files and forcing Assessee like Petitioner to approach this Court in its writ jurisdiction. It is as if authorities wait for writ Court to issue direction so that they can take and pull files out of turn and grant necessary reliefs. 10. As far as this aspect is concerned, we express no opinion. We clarify that on merits this Court has neither expressed any view in favour of refund or against it. Page 3 of 14 ::: Uploaded on - 05/09/2019 ::: Downloaded on - 10/09/2019 12:53:23 ::: wp.2036.2019_7.doc 4. It was pursuant to this order that return was processed which gave rise to refund of Rs.180 crores (rounded off) and with interest, it came to Rs.207 crores (rounded off). In ordinary course, petitioner should have received refund from department. However, under section 245 of Act, competent authority has right to claim set-off of such refund against any tax remaining payable even if it arises out of any other assessment year. Under section 281B of Act, competent authority subject to following proper procedure also has power to provisionally attach any property of assessee to protect interest of revenue under certain circumstances. refund would undoubtedly be covered within said expression - any property belonging to assessee. We would take closer look at those sections later. 5. For time being, we may record that respondents while intimating processing of return under section 143(1) of Act, appended following note to said communication: NOTE:- As per records of CPC, following demands are outstanding. intimation under Section 245 of Income Tax Act, 1961 has been issued separately proposing to adjust outstanding demands against refund determined as per this order. Since, release of Page 4 of 14 ::: Uploaded on - 05/09/2019 ::: Downloaded on - 10/09/2019 12:53:23 ::: wp.2036.2019_7.doc refundable amount will be considered on basis of your response/compliance to Intimation U/s 245, you are requested to submit your response expeditiously. 6. As per this note, thus, respondents proposed to adjust said refund against outstanding tax demands in terms of section 245 of Act and called upon petitioner to respond to such proposal. This note also contained table of various outstanding tax demands of petitioner for different assessment years. 7. petitioner responded to such note under communication dated 29.11.2018. Referring to each of seven outstanding tax demands, as per table appended to note, petitioner pointed out that such demands were stayed by Income Tax Appellate Tribunal ( Tribunal for short) under various orders. respondents served yet another communication to petitioner proposing to invoke section 245 of Act in order to deny release of refund. This communication dated 1.2.2019 contained specific reference to four outstanding tax demands. petitioner replied to such communication under letter dated 5.3.2019, once again pointing out that each of above mentioned demands has been stayed by Tribunal. Page 5 of 14 ::: Uploaded on - 05/09/2019 ::: Downloaded on - 10/09/2019 12:53:23 ::: wp.2036.2019_7.doc 8. attempt to adjust petitioner s refund was abandoned at this stage. Deputy Commissioner of Income Tax, Mumbai, instead passed impugned order dated 19.7.2019 invoking section 281B which reads as under: Order u/s 281B of I T Act 1961 following refunds for AY 2016-17 in above cases determined after processing return of income u/s 143(1) are hereby provisionally attached up to 31.12.2019: - 1 Vodafone India Ltd 143(1) / Rs.180,09,04,670 now CPC amalgamated with Vodafone Idea Ltd AAACH5332B 2 Idea Cellular Ltd now 143(1) / Rs.12,68,47,537 known CPC as Vodafone Idea Ltd AAACB2100P order has been passed with prior approval of Pr. Commissioner of Income Tax 5, Mumbai. 9. At that stage, petitioner has filed this petition challenging action of department in not releasing refund, seeking setting aside of said order dated 19.7.2019 and making further prayer that respondents be directed to release said refund with statutory interest. Page 6 of 14 ::: Uploaded on - 05/09/2019 ::: Downloaded on - 10/09/2019 12:53:23 ::: wp.2036.2019_7.doc 10. learned Counsel Shri Mistri, appearing for petitioner, submitted that action of department is wholly illegal and unlawful. Originally, department refused to process return for AY 2016-2017. When High Court directed department to do so, refund was not released arising out of intimation on ground that previous tax demands were outstanding. When it was pointed out that these demands were stayed by Tribunal, authorities invoked power of provisional attachment under section 281B of Act, without there being any justifiable reason. 11. On other hand, learned Counsel Shri Mohanty submitted that when High Court previously ordered expeditious processing of petitioner s return under order dated 19.10.2018, it was clarified that High Court has not examined merits of petitioner s claim of refund. He submitted that demands are stayed by Tribunal for various assessment years without entering into merits of assessments which were confirmed by appellate Commissioner. He submitted that scrutiny assessment of petitioner s return for AY 2016-2017 would be over shortly. In this year also, there is every likelihood of Page 7 of 14 ::: Uploaded on - 05/09/2019 ::: Downloaded on - 10/09/2019 12:53:23 ::: wp.2036.2019_7.doc sizeable tax demands arising in relation to petitioner s international transactions and other issues which are already examined in earlier assessment years. department is, therefore, justified in carrying bonafide belief that assessment of said return is likely to give rise to sizeable tax demands. In order to protect interest of revenue, impugned order has been passed provisionally attaching petitioner s refund. He submitted that final assessment after scrutiny alone, can give legal shape to petitioner s ultimate tax liability. 12. Having heard learned Counsel for parties and having perused documents on record, facts of case present curious sequence. As noted, previously, petitioner had filed Writ Petition before this Court complaining about department not showing sufficient urgency in processing petitioner s return for AY 2016-2017 which petitioner expected would give rise to sizeable refund. High Court directed respondents to complete process expeditiously. Consequently, intimation under section 143(1) of Act gave rise to refund of sum of Rs.180 crores. With interest, this refund came to approximately Page 8 of 14 ::: Uploaded on - 05/09/2019 ::: Downloaded on - 10/09/2019 12:53:23 ::: wp.2036.2019_7.doc Rs.207 crores. Immediately, department raised possibility of invoking section 245 of Act in order not to release refund. petitioner pointed out that tax demands referred to in communications proposing to invoke section 245 of Act have all been stayed by Tribunal under different interim orders. 13. Section 245 of Act pertains to set-off of refunds against tax remaining payable and reads as under: 245. Where under any of provisions of this Act, refund is found to be due to any person, Assessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals) or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as case may be, may, in lieu of payment of refund, set off amount to be refunded or any part of that amount, against sum, if any, remaining payable under this Act by person to whom refund is due, after giving intimation in writing to such person of action proposed to be taken under this section. 14. Under this provision, thus, where under any of provisions of Act, refund is found to be due to any person, it would be open for competent authority mentioned in said provision to, in lieu of payment of refund, set off amount to be so refunded or any part thereof against sum remaining payable under Act by person to whom refund is due and Page 9 of 14 ::: Uploaded on - 05/09/2019 ::: Downloaded on - 10/09/2019 12:53:23 ::: wp.2036.2019_7.doc payable. This provision thus, could have been applied if tax demand was due and recoverable from petitioner. In present case, admittedly, all such tax demands were suspended by Tribunal. Enabling department to adjust such tax demands against petitioner s refund would amount to overreaching interim orders passed by Income Tax Appellate Tribunal. As long as stay against recoveries was in operation issued by competent appellate authority, Tribunal or Court, it would not be open for department to enforce recoveries through aid of section 245 of Act. Perhaps, it was not necessary for us to elaborate on this since advisedly, department has given up this line of action for refusing refund to petitioner. 15. These brief comments were however, necessary since department seeks to press in service power of provisional attachment under section 281B of Act and in context of which, Counsel for department has taken us through nature of interim orders passed by Tribunal. Section 281B of Act pertains to provisional attachment by revenue in certain cases. Subsection (1) of section 281B reads as under: Page 10 of 14 ::: Uploaded on - 05/09/2019 ::: Downloaded on - 10/09/2019 12:53:23 ::: wp.2036.2019_7.doc 281B. (1) Where, during pendency of any proceeding for assessment of any income or for assessment or reassessment of any income which has escaped assessment, Assessing Officer is of opinion that for purpose of protecting interests of revenue it is necessary so to do, he may, with previous approval of Principal Chief Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General or Principal Director or Director, by order in writing, attach provisionally any property belonging to assessee in manner provided in Second Schedule. 16. Under sub-section (1) of section 281B of Act thus, where during pendency of any proceedings for assessment or reassessment, assessing officer is of opinion that for purposes of protecting interest of revenue, it is necessary so to do, he may with previous approval of higher authority pass order in writing provisionally attaching property belonging to assessee. These are drastic powers permitting assessing officer to attach any property of assessee even before completion of assessment or reassessment. These powers are thus in nature of attachment before judgment. They have provisional applicability and in terms of sub-section (2) of section 281B of Act, limited life. Such powers must, therefore, be exercised in appropriate cases for proper reasons. Such powers cannot be exercised merely by repeating phraseology used in Page 11 of 14 ::: Uploaded on - 05/09/2019 ::: Downloaded on - 10/09/2019 12:53:23 ::: wp.2036.2019_7.doc section and recording opinion of officer passing such order that he was satisfied for purpose of protecting interest of revenue, it was necessary so to do. 17. It was in this context that we had heard learned Counsel for department as to reason why such order came to be passed, particularly when order itself does not cite reasons for said authority to hold such opinion. In this context, Counsel for department had argued before us that in present assessment year i.e., AY 2016-2017, issues where assessing officer believes that there will be sizeable tax demands are common as in earlier assessment years and which are subject matter of appeals before Tribunal and in which Tribunal has passed interim orders preventing department from carrying out recovery. He emphasized that what Tribunal has stayed is recoveries and not orders. 18. Even if it were to be believed that by going by his previous assessments, assessing officer is most likely to confirm demands while carrying out final assessment of petitioner s return for AY 2016-2017, we cannot lose sight of fact that demands for previous assessments have been stayed by Page 12 of 14 ::: Uploaded on - 05/09/2019 ::: Downloaded on - 10/09/2019 12:53:23 ::: wp.2036.2019_7.doc Tribunal. Tribunal has given reasons why it was persuaded to pass such interim orders. It is not possible for us to dissect reasons of Tribunal and come to conclusion that in final analysis, such demands would be confirmed. Permitting department to provisionally attaching petitioner s refund for current year on ground that in final assessment, demands are likely to be confirmed, would amount to ignoring hard fact that for earlier assessment years, Tribunal has suspended recoveries arising out of demands made by assessing officer on similar issues. It may be that before doing so, Tribunal has either put petitioner to some terms or has found itself satisfied that deposits already made are sufficient. Nevertheless, looked from any angle, occasion for competent authority to exercise drastic power under section 281B of Act has not arisen. We do not doubt his power, however, we do not find proper justification for exercise of such power. 19. Under circumstances, impugned order dated 26.10.2018 is set aside. respondents shall release refund arising out of intimation under section 143(1) of Act for Page 13 of 14 ::: Uploaded on - 05/09/2019 ::: Downloaded on - 10/09/2019 12:53:23 ::: wp.2036.2019_7.doc AY 2016-2017 with further statutory interest, if any, to be paid within two weeks from date of receipt of copy of this order. 20. With these directions, petition is disposed of. (S.J. KATHAWALLA, J.) (AKIL KURESHI, J.) Page 14 of 14 Vodafone Idea Ltd. v. Dy. Commissioner of Income-tax, CPC, Bangalore & Or