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2014 DIGILAW 2483 (BOM)

Vodafone India Ltd. v. Union of India

2014-12-17

M.S.SANKLECHA, M.S.SONAK

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JUDGMENT 1. At the request of the Counsel, the petition is being taken up for final disposal at the stage of admission. 2. This petition challenges the order dated 5 November 2014 passed under Section 220(6) of the Income Tax Act ("the Act") by the Assessing Officer rejecting the Petitioner's application for stay pending the disposal of its appeal by the Commissioner of Income Tax (Appeals). The appeal was filed against the Assessment Order dated 28 March 2013 passed under Section 143(3) read with Section 263 of the Act for the Assessment Year 2006-07. The petition also challenges a communication dated 5 November 2014 by the Assessing Officer seeking to adjust a refund of Rs. 204.65 crores available to the Petitioner for the A.Y. 2013-14 against the demand on the Petitioner for the A.Y. 2006-07. 3. The short facts of the case are as follows: (a) For the A.Y. 2006-07 the Assessing Officer passed an order dated 5 February 2011 under Section 143(3) of the Act in the regular assessment proceedings raising a demand of Rs. 297.26 crores. As this order was passed consequent to the order of Dispute Resolution Panel, the petitioner filed an appeal to the Income Tax Appellate Tribunal ("Tribunal"). By an order dated 18 July 2014 the Tribunal stayed the demand of Rs. 267.26 crores after taking into account the amount of Rs. 30 crores already paid by the Petitioners. The appeal is still awaiting disposal by the Tribunal. (b) Simultaneously the Assessment Order dated 5 February 2011 was also subject to the revision under Section 263 of the Act by the Commissioner of Income Tax. By an order dated 30 March 2012, the Commissioner of Income Tax in exercise of his powers under Section 263 of the Act directed the Assessing Officer to examine the identity, genuineness and creditworthiness of shareholders who had subscribed to the rights shares of the Petitioner and pass a fresh assessment order. (c) Consequent to the order dated 30 March 2012 of the Commissioner of Income Tax in Revision, the Assessing Officer passed a fresh Assessment Order on 28 March 2013 under Section 143(3) read with Section 263 of the Act. The order dated 28 March 2013 originally raised a demand for Rs. 937.57 crores which was rectified later to Rs. 822.36 crores. The order dated 28 March 2013 originally raised a demand for Rs. 937.57 crores which was rectified later to Rs. 822.36 crores. (d) Being aggrieved, the Petitioner filed an appeal on 17 April 2013 to the Commissioner of Income Tax (Appeals) [CIT (Appeals)]. On 17 April 2013 itself the Petitioner applied to the Assessing Officer for stay of the demand in terms of Section 220(6) of the Act. The Assessing Officer by the impugned order dated 5 November 2014 rejected the Petitioner's application for stay of the balance demand of Rs. 525.09 crores till the final disposal of its appeal by the CIT(A). The demand payable was only Rs. 525.09 crores out of an aggregate demand of Rs. 822.36 crores as an amount of Rs. 297.26 crores had been stayed by order dated 18 July 2014 of the Tribunal on payment of Rs. 30 crores. (e) Consequent to the above order dated 5 November 2014 of the Assessing Officer rejecting the Petitioner's application for stay, the petitioner filed on 10 November 2014 an application for stay of the Assessment Order dated 28 March 2013 before the CIT (Appeals). This for the reason that according to Petitioner the hearing in respect of the Petitioner's appeal from the assessment order dated 28 March 2013 passed under Section 143(3) read with Section 263 of the Act was completed on 25 June 2014. (f) In the meantime, on 5 November 2014 itself the Assessing Officer issued a communication to the Petitioner seeking to set off the refund of Rs. 204.65 crores due to them for the A.Y. 2013-14 from the outstanding demand of Rs. 525.09 crores for the A.Y. 2006-07. (g) It was on the above facts, that this petition was filed to restrain the Assessing Officer from recovering the amount of Rs. 525.09 crores till the disposal of its appeal by the CIT (Appeals) and also seeking to restrain the Assessing Officer from acting upon the letter dated 5 November 2014. 4. When the petition reached hearing, the Respondent-Revenue has filed an affidavit of the Assessing Officer one Mr. S.N. Kabra dated 16 December 2014, to which has been annexed a copy of the order dated 1 December 2014 passed by the CIT (Appeals) on the Petitioner's application for stay. 4. When the petition reached hearing, the Respondent-Revenue has filed an affidavit of the Assessing Officer one Mr. S.N. Kabra dated 16 December 2014, to which has been annexed a copy of the order dated 1 December 2014 passed by the CIT (Appeals) on the Petitioner's application for stay. The order dated 1 December 2014 notes that the CIT (Appeals) has asked for a remand report from the Assessing Officer on 12 November 2014 and the same would be available within two months of 12 November 2014 i.e. by January 2015. The order dated 1 December 2014 of CIT (Appeals) also notes his distress at the Assessing Officer acting in an undue haste in adjusting the refund due of Rs. 204.65 crores to the Petitioner for the A.Y. 2013-14 to meet the outstanding demand for the A.Y. 2006-07. This was consequent to letter dated 5 March 2014 of the Assessing Officer intimating the proposed adjustment. Besides on merits of the application for stay the CIT (Appeals) records that after adjustment of Rs. 204.65 crores against the outstanding demand of Rs. 525.09 crores for the A.Y. 2006-07, the balance amount payable of Rs. 320.44 crores is stayed. However, as the Petitioner in the meantime had already filed the petition, the order dated 1 December 2014 restricted the life of the stay upto the date of disposal of the petition by this Court or till the date of the disposal of the appeal by the CIT (Appeals), whichever is earlier. 5. It is contended by the petitioners the issue involved in the appeal revolves around the charge-ability to income tax of share capital received from a non resident is already covered in its favour by the decision in Vodafone Ltd. vs. Union of India 368 ITR 1 where this Court has taken a view that issue of share capital is not chargeable to tax as income. However, the issue here is with regard to the genuineness and credit worthiness of the subscribers to the shares issued by the Petitioner, on application of Section 68 of the Act. This is a matter which would require consideration in some depth by the CIT (Appeals). However, the issue here is with regard to the genuineness and credit worthiness of the subscribers to the shares issued by the Petitioner, on application of Section 68 of the Act. This is a matter which would require consideration in some depth by the CIT (Appeals). Taking note of the fact that the Petitioner has already paid approximately 40% of the total amount of the dues for A.Y. 2006-07 and the Petitioner has acted in right earnest in having the appeal disposed of and the last hearing was held as far back as on 25 June 2014, the delay thereafter in disposing of the appeal is entirely due to CIT(A) as the remand report was called for on 12 November 2014. It is only now that the petitioner has learnt for the first time that the remand report has been called for by the CIT (Appeals) by virtue of the affidavit dated 16 December 2014 filed by the Assessing Officer in reply to the present petition. In these circumstances, it would only be fair that the balance demand of Rs. 320.45 crores is stayed till the disposal of the petitioner's appeal by the CIT (Appeals). 6. Needless to state as held by this Court in UTI Mutual Fund vs. ITO 345 ITR 71, the orders passed by the Authorities under the Act would not be enforced till such time as the period to file an appeal before the Appellate Authority expires and where stay applications have been filed, the Respondent-Revenue would not adopt coercive proceedings till the disposal of the stay application by the Appellate Authorities. 7. Before parting, we would also mention that so far as the Petitioner's challenge to the impugned letter dated 5 November 2014 issued under Section 245 of the Act, seeking to adjust the refund due to the Petitioner for A.Y. 2013-14 against the outstanding demand for A.Y. 2006-07 is concerned, the same is not being addressed to for the reason that the aforesaid refund of Rs. 204.65 crores has already been adjusted by the Assessing officer. Besides, upon consideration of such adjustment, we are, by this order directing a stay upon recovery of the balance demand of Rs. 320.45 crores till the disposal of Petitioner's appeal by the CIT (Appeals). 204.65 crores has already been adjusted by the Assessing officer. Besides, upon consideration of such adjustment, we are, by this order directing a stay upon recovery of the balance demand of Rs. 320.45 crores till the disposal of Petitioner's appeal by the CIT (Appeals). In case the Petitioner succeeds in its appeal they would be entitled to refund of any excess tax collected by the Revenue from the Petitioner. 8. Accordingly, the petition is disposed of in the above terms with no order as to costs.