VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILE SERVICES LIMITED) versus ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 26 (2) & ANR. on 29 April 2020

200

SUPREME COURT REPORTS

[2020] 11 S.C.R.

AVODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONEMOBILE SERVICES LIMITED)

v.

ASSISTANT COMMISSIONER OF INCOME TAXCIRCLE 26 (2) & ANR.

B

(Civil Appeal No. 2377 of 2020)

APRIL 29, 2020

[UDAY UMESH LALIT AND VINEET SARAN, JJ.]

Income Tax Act, 1961: s.143(1) and s.143(2) – Exercise ofCpower under – Distinction between – Held: Under s.143(1), thematter is processed, only to check whether any apparentinconsistencies are evident on the face of the return and connectedmaterial which may call for any adjustment while under s.143(2),the matter is scrutinized after taking into account such evidence asDthe assessee may produce – Exercise in s.143(2) is to ensure thatthere is no understating of income or overstating of loss or under-payment of the tax in any manner – The power under sub-section(1) of s.143 is summary in nature designed to cause adjustmentswhich are apparent from the return while that under sub-sections(2) and (3) is to scrutinize the return and cause deeper probe toEarrive at the correct determination of the liability of the assessee –Telecommunication.

Income Tax Act, 1961: s.143(1) and s.143(2) – In respect ofAssessment Years ending on 31[st] March 2017 or before, if a noticewas issued in conformity with the requirements stated in sub-sectionF(2) of s.143 of the Act, it shall not be necessary to process the refundunder sub-section (1) of s.143 of the Act and the requirement toprocess the return shall stand overridden.

Income Tax Act, 1961: s.143(1) and s.143(2) – Whether anyintimation is required to be given to the assessee that because ofGinitiation of proceedings pursuant to notice under sub-section (2)of s.143, processing of return in terms of sub-section (1) of s.143of the Act, would stand deferred – Held: The processing of returnin terms of sub-section (1A) of s.143 is to be done through centralizedprocessing and the scope of processing under sub-section (1) ofHs.143 of the Act is purely summary in character – Once deeper scrutiny is undertaken and the matter is being considered from theperspective whether there is any avoidance of tax in any manner,issuance of notice under sub-section (2) itself is sufficient indication– Sub-section (1D) of s.143 of the Act does not contemplate eitherissuance of any such intimation or further application of mind thatthe processing must be kept in abeyance – It would not, therefore,be proper to read into said provision the requirement to send aseparate intimation– Issuance of notice under sub-section (2) ofs.143 is enough to trigger the required consequence – Any otherintimation is neither contemplated by the statute nor would it achieveany purpose.

Income Tax Act, 1961: s.241-A – Applicability of – Returnsfiled in respect of assessment year commencing on or after the 1[st]April, 2017 – s.241-A of the Act requires a separate recording ofsatisfaction on part of the Assessing Officer that having regard tothe fact that a notice has been issued under sub-section (2) of s.143,the grant of refund is likely to adversely affect the revenue;whereafter, with the previous approval of the Principal Commissioneror Commissioner and for reasons to be recorded in writing, therefund can be withheld – Since the statute now envisages exerciseof power of withholding of refund in a particular manner, forassessment year commencing after 01.04.2017 the requirements ofSection 241-A of the Act must be satisfied.

Income Tax Act, 1961: s.241-A – Withholding of refund –Whether insofar as AY 2017-18 is concerned, the order dated14.03.2019 u/s.241-A satisfies the required statutory parametersor not – Held:In terms of second proviso to sub-section (1) of s.143of the Act, the required intimation under said sub-section must begiven before the expiry of one year from the end of the financialyear in which the return is made – In respect of AY 2017-18, thereturn having been filed on 25.11.2017, period available in termsof said second proviso was upto 31.03.2019, without taking intoaccount the fact that revised return was filed on 13.07.2018 – Inthis case, the exercise of power on 14.03.2019 was not only afterissuance of notice under sub-section (2) of s.143 and after recordingdue satisfaction in terms of s.241-A of the Act, but was also wellwithin the period contemplated by sub-section (1) of s.143 of theAct for causing due intimation.

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ADismissing the appeal, the Court

HELD: 1.1 Clause (a) of sub-section (1) of Section 143 hassix sub-clauses specifying the kinds of adjustments which arerequired to be made for computing the total income or loss. Suchadjustments are in the nature of “arithmetical error in the return”;Bincorrect claim “apparent from any information in the return”;disallowance of loss if the return of the previous year with respectto which such loss is claimed was furnished “beyond the due date”;disallowance of expenditure indicated in the audit report if it has“not taken into account in computing the total income”;disallowance of deductions specified in sub-clause if the “returnCis furnished beyond the due date”; and addition of income asspecified in sub-clause (vi) if it was not “included in computingthe total income”. All these features deal with matters which areapparent from the return and the inconsistency is evident on theface of it. Upon causing such adjustments after due intimation orDnotice to the assessee, the element of tax, interest and fee is tobe computed in terms of clause (b). Thereafter, in terms of clause(c), due credit to the amount of tax paid and any relief that isallowable is to be given and the net amount payable or to berefunded, is to be computed. The intimation to be generated underclause (d) is on the basis of such exercise and if any refund isEdue, the same has to be granted in terms of clause (e). Thus, atevery stage in sub-section (1) the return submitted by theassessee forms the foundation, with respect to which, if any ofthe inconsistencies referred to in various sub-clauses of clause(a) are found, appropriate adjustments are to be made. [ParaF12][237-B-F]

1.2 On the other hand, the exercise of power under sub-section (2) of Section 143 of the Act, leading to the passing of anorder sub-section (3) thereof, is to be undertaken, where it isconsidered necessary or expedient to ensure that the assessee:Ghas not understated the income, or has not computed excessiveloss, or has not under-paid the tax in any manner. The issuanceof notice and consequent proceedings are premised on any ofthe aforesaid three postulates. In other words, the return filedby the assessee itself calls for or requires a further probe anddeeper consideration. The guiding principle is to ensure that theH

income is not under-stated or the loss is not over-stated, or thetax is not under paid in any manner. Upon issuance of notice, theassessee is entitled to produce evidence in support of his case.After hearing the assessee and considering the evidence soproduced, by an order in writing, assessment of total income or loss is to be made. [Para 12][237-F-H; 238-A-B]

CIT v. Gujarat Electricity Board (2003) 260 ITR 84 –

referred to.

1.3 The power under sub-section (1) of Section 143 of theAct is summary in nature designed to cause adjustments whichare apparent from the return while that under sub-sections (2)and (3) is to scrutinize the return and cause deeper probe toarrive at the correct determination of the liability of the assessee.The exercise of power under Sub-sections (2) and (3) of Section143 of the Act is thus premised on non-acceptance of what isevident from the return itself and to ensure that there is noavoidance of tax in any manner. The dimension of such power isfar greater and deeper than mere adjustments to be made inrespect of what is available from the return. Once such scrutinyis undertaken and proceedings are initiated by issuance of a noticeunder sub-section (2) of Section 143, it would be anomalous andincongruent that while such proceedings so initiated are pending,the return be processed under sub-section (1) of Section 143,which may in a given case, entail payment of refund. Logically,the outcome of the exercise initiated through notice under sub-section (2) of Section 143, must determine whether any refund isdue and payable. If the return itself is under probe and scrutiny,such return cannot be the foundation to sustain a claim for refundtill such scrutiny is not complete. Considering the nature of powerexercisable under these two limbs of Section 143, the inescapableconclusion is that the processing of return under sub-section (1)of Section 143 must await the further exercise of power of scrutinyassessment under sub-sections (2) and (3) of Section 143. If thepower under sub-section (2) of Section 143 of the Act is initiatedin a manner known to law, there cannot be any insistence that theprocessing under sub-section (1) of Section 143 be completedand refund be made before the scrutiny pursuant to notice undersub-section (2) of Section 143 is over. This conclusion is fortified A

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Aand strengthened by clear stipulation to that effect in sub-section(1D) of Section 143. Irrespective of some change in the text ofsaid provision which was sought to be introduced by Finance Act2016 and not accepted by Finance Act, 2017, the legislative intentis clear from the expression, “… the processing of a return shallnot be necessary, where a notice has been issued to the assesseeBunder sub-section (2)” and by use of non-obstante clause. Thoughthe period for which it would not be necessary to process thereturn was sought to be specified by Finance Act, 2016, mereabsence of such period in the provision as it stands today, makesno difference. The above quoted portion from the provision andCuse of non-obstante clause indicate with sufficient clarity the intentof the Parliament that in cases where notice under sub-section(2) is issued and proceedings are initiated, the processing of areturn under sub-section (1) shall not be necessary. [Paras 13-15][238-E-H; 239-A-E]

DMohd. Ibrahim v. The State Transport AppellateTribunal, Madras (1970) 2 SCC 233; Sohanlal andothers v. Amir Chand and sons and others (1973) 2SCC 608 : [1974] 1 SCR 453; Upper India Cable Co.and others v. Bal Kishan (1984) 3 SCC 462; Brij KishoreSharma and others v. Ram Singh and sons and othersE(1996) 11 SCC 480 : [1996] 7 Suppl. SCR 152;Rasammal Issetheerammal Fernandez etc. v. JoosaMariyam Fernandez and others (2000) 7 SCC 189 :[2000] 2 Suppl. SCR 336 – referred to.

1.4 As against the general principle which mandates anFaction in a particular manner, when an exception is to be carvedout, the relevant provisions stipulate “it shall not be necessary”to adhere to and follow the manner mandated by such generalprinciple; and if the contingency contemplated by such exceptionarises, the general principle is to stand overridden.The intent toGhave the general principle emanating from sub-section (1) ofSection 143 overridden, in case where the proceedings areinitiated pursuant to notice under sub-section (2) of the Act, getsmore pronounced and emphasized by use of non-obstante clausein sub-section (1D). In the premises, in respect of AssessmentYears ending on 31[st] March 2017 or before, if a notice was issuedH

in conformity with the requirements stated in sub-section (2) ofSection 143 of the Act, it shall not be necessary to process therefund under sub-section (1) of Section 143 of the Act and thatthe requirement to process the return shall stand overridden.[Paras 16, 17, 18][240-B-D; 241-D]

Vaishali Abhimanyu Joshi v. Nanasaheb Gopal Joshi(2017) 14 SCC 373; Union of India v. G.M. Kokil (1984)

Supp. SCC 196 : [1984] SCR 292 – referred to.

3.1 The issue whether any intimation is required to be givento the assessee that because of initiation of proceedings pursuantto notice under sub-section (2) of Section 143 of the Actprocessing of return in terms of sub-section (1) of Section 143 ofthe Act, would stand deferred. The processing of return in termsof sub-section (1A) of Section 143 of the Act is to be done throughcentralized processing and the scope of processing under sub-section (1) of Section 143 of the Act is purely summary incharacter. Once deeper scrutiny is undertaken and the matter isbeing considered from the perspective whether there is anyavoidance of tax in any manner, issuance of notice under sub-section (2) itself is sufficient indication. Sub-section (1D) ofSection 143 of the Act does not contemplate either issuance ofany such intimation or further application of mind that theprocessing must be kept in abeyance. It would not, therefore, beproper to read into said provision the requirement to send aseparate intimation. Issuance of notice under sub-section (2) ofSection 143 is enough to trigger the required consequence. Anyother intimation is neither contemplated by the statute nor wouldit achieve any purpose.Consequently, the submission that theintimation dated 23.07.2018 must be held to be invalid, inter aliaon the ground that it was issued well after the period within whichthe return was required to be processed under sub-section (1) ofSection 143 of the Act, must be rejected. [Paras 19, 20][241-E-H; 242-A-B]

3.2 Insofar as returns filed in respect of assessment yearcommencing on or after the 1[st] April, 2017, a different regimehas been contemplated by the Parliament. Section 241-A of theAct requires a separate recording of satisfaction on part of theAssessing Officer that having regard to the fact that a notice has A

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Abeen issued under sub-section (2) of Section 143, the grant ofrefund is likely to adversely affect the revenue; whereafter, withthe previous approval of the Principal Commissioner orCommissioner and for reasons to be recorded in writing, therefund can be withheld. Since the statute now envisages exerciseof power of withholding of refund in a particular manner, it goesBwithout saying that for assessment year commencing after01.04.2017 the requirements of Section 241-A of the Act mustbe satisfied. [Para 21][242-C-D]

4. In terms of second proviso to sub-section (1) of Section 143 of the Act, the required intimation under said sub-sectionCmust be given before the expiry of one year from the end of thefinancial year in which the return is made. In respect of AY 2017-18, the return having been filed on 25.11.2017, period availablein terms of said second proviso was upto 31.03.2019, withouttaking into account the fact that revised return was filed onD13.07.2018. In the present case, the exercise of power on14.03.2019 was not only after issuance of notice under sub-section(2) of Section 143 and after recording due satisfaction in terms ofSection 241-A of the Act, but was also well within the periodcontemplated by sub-section (1) of Section 143 of the Act forcausing due intimation. [Para 22][242-F-G]EGujarat Poly Avx Electronics Ltd. v. Dy. Commissionerof Income Tax (Asstt.) (1996) 222 ITR 140 Guj –referred to.

Case Law Reference

F(2003) 260 ITR 84

referred to

Para 8

(1996) 222 ITR 140 Guj.(1970) 2 SCC 233[1974] 1 SCR 453

referred toreferred toreferred toreferred toreferred toreferred toreferred to Para 8

Para 16 (i)

Para 16 (ii)

G(1984) 3 SCC 462

Para 16 (ii)

[1996] 7 Suppl. SCR 152

Para 16 (ii)

[2000] 2 Suppl. SCR 336

Para 16 (iii)

(2017) 14 SCC 373H[1984] SCR 292

Para 17

referred to

Para 17

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2377of 2020.

From the Judgment and Order dated 14.12.2018 by the High Courtof Delhi at New Delhi in W.P. (C) No. 2730 of 2018.

J.D. Mistri, Sr. Adv., Ms. Anuradha Dutt, Ms. Fereshte D. Sethna,Sachit Jolly, Rohit Garg, Siddharth Joshi, Ms. B. Vijayalakshmi Menon,Zoheb Hossain, Saurabh Mishra, Piyush Goyal, Vivek Gurnani, andMrs. Anil Katiyar, Advs. for the appearing parties.

The Judgment of the Court was delivered by UDAY UMESH LALIT. J.

1. Leave granted.

2. This appeal arises out of the final judgment and order dated14.12.2018 passed by the High Court[1] in Writ Petition (Civil) No.2730of 2018 preferred by the appellant herein.

3. The facts leading to the filing of this appeal, in brief, are asunder:- A] The appellant-Vodafone Idea Ltd. (earlier known as VodafoneMobile Services Ltd or VMSL for short) is engaged in providingtelecommunication services in different circles.

a) By amalgamation which came into effect on 01.04.2011, fourgroup entities: Vodafone Cellular Ltd., Vodafone Digilink Ltd.,Vodafone East Ltd. and Vodafone South Ltd. got merged in VMSL.

b) By second scheme of amalgamation, two other group entities:Vodafone Spacetel Ltd. and Vodafone West Ltd. got merged inVMSL w.e.f. 01.04.2012.

c) While the proceedings in the instant case were pending, byscheme of arrangement[2] between VMSL and Idea Cellular Ltd.Vodafone Idea Ltd. - the resultant company assumed all the rightsand liabilities of the amalgamating/transferor companies.

Most of the factual developments in the matter, as set out hereafter,were before said scheme of arrangement.

1 High Court of Delhi at New Delhi

2 Formulated by the Order dated 19.1.2018 passed by National Company Law Tribunal,Mumbai and order dated 11.1.2018 by National Company Law Tribunal, Ahmedabad.

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AB] For AY[3] 2014-15, the appellant filed Income Tax Return (ITR,for short) on 30.09.2014 claiming refund of Rs.1532.09 Crores. On31.08.2015, a notice under Section 143(2) of the Act[4] was issued to theappellant in respect of AY 2014-15. On 01.11.2015, the appellant filedITR for AY 2015-16 claiming refund of Rs.1355.51 Crores. A noticeunder Section 143(2) of the Act was issued by the Department onB16.03.2016 in respect of AY 2015-16. A revised return was filed by theappellant on 31.03.2016 in respect of AY 2014-15. The appellant enteredinto an Advanced Pricing Agreement with the CBDT[5] under Section 92CC of the Act. Thereafter, further revised return was filed on 25.11.2016for AY 2015-16 and a modified return in terms of Section 92 CD of theCAct was filed by the appellant on 22.02.2017 for AY 2014-15.

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C] For AY 2016-17, the appellant filed ITR on 30.11.2016 claimingrefund of Rs.1128.47 Crores. A notice under Section 143(2) of the Actwas issued to the appellant on 03.07.2017 for AY 2016-17.

D] For AY 2017-18, ITR was filed by the appellant on 25.11.2017Dclaiming refund of Rs.743 Crores.

E] Submitting that there was complete inaction on part of therespondents in processing the ITRs filed by the appellant and in issuingappropriate refund to the appellant, Writ Petition (Civil) No.2730 of 2018was filed by the appellant in the High Court, praying for following principalErelief.

“a. Writ of Mandamus or Writ, Order or Direction in the nature ofMandamus, or any other appropriate Writ, Order or Directiionunder Article 226 / 227 of the Constitution of India directing theRespondents to process and grant refunds for the AYs 2014-15Fto 2017-18, along with interest under Section 244A of the Act;”

F] On 03.07.2018, the respondent No.1 filed an affidavit in replysubmitting inter alia that the ITRs of the appellant raised multiple issueslike Transfer Pricing Adjustment, Capitalization of Licence Fees, 3GSpectrum Fees, Asset Restoration Cost Obligation including the effectGof amalgamation of group entities which required thorough scrutiny anddetermination.

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3 The Assessment Year

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G] During the pendency of said Writ Petition, a letter was issuedby the respondent No.1 on 23.07.2018, the relevant portion of whichwas as under :- “The assessment years for which request has been made to processthe return under Section 143(1) are already under scrutiny for AY2012-13, AY 2013-14, AY 2014-15, AY 2015-16 and AY 2016-17.I would like to draw your attention to Section 143(1D) of IncomeTax Act:

(1D) Notwithstanding anything contained in sub-section(1), the processing of a return shall not be necessary, wherea notice has been issued to the assessee under sub-section(2)

The case is under compulsory scrutiny for AY 2017-18 and as persection 241A of Income Tax, Act 1961:

“For every assessment year commencing on or after the1st day of April, 2017, where refund of any amount becomesdue to the assessee under the provisions of sub-section (1)of Section 143 and the Assessing Officer is of the opinion,having regard to the fact that a notice has been issuedunder sub-section (2) of Section 143 in respect of suchreturn, that the grant of the refund is likely to adverselyaffect the revenue, he may, for reasons to be recorded inwriting and with the previous approval of the PrincipalCommissioner or Commissioner, as the case may be,withhold the refund up to the date on which the assessmentis made.”

Considering, pending special audit, pending scrutiny, pendingdemands of amount of more than 4500 crore, it will prejudicial tothe interest of revenue to process the returns without completionof the pending scrutiny cases. Therefore, exercising the powersunder section 143(1D) of Income Tax Act, 1961 and under Section241A of Income Tax Act, 1961, the undersigned decline theprocessing of returns under Section 143(1). The above decisionhas been taken after taking into cognizance the order of HonorableHigh Court of Delhi in TATA TELESERVICES LIMITED versusCENTRAL BOARD OF DIRECT TAXES & ANR. dated11.05.2016 in para 24 of the judgment:

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“The question whether such return should be processedwill have to be decided by the ASSESSING OFFICERconcerned exercising his discretion in terms of Section 143(1D) of the Act.”

H] In the meantime, on 13.07.2018 a revised return was filed byBthe appellant for AY 2017-18 claiming refund of Rs.744.94 Crores. Anotice under Section 143(2) of the Act was issued to the appellant on10.08.2018 for AY 2017-18.

I] On 31.08.2018, VMSL merged with Idea Cellular Ltd. and theresultant company was named Vodafone Idea Ltd.

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J] By its judgment and order dated 14.12.2018, the High Courtdismissed said Writ Petition.

J-1] The submissions of the appellant were recorded as under:-

“8. Vodafone also place reliance on the decision of this Court inTata Teleservices Limited vs. CBDT, 386 ITR 30 and BombayHigh Court in Group M Media India (P) vs. Union of India, 2016SCC OnLine Bom 13624, which held that the return should beprocessed within a year and only where the assessing officer isof the view that issuance of refund would be detrimental tocollection of demands which may arise, he may invoke the provisionof Section 143(1D) of the Act.

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13. With respect to the delay in processing of the tax return,Vodafone places reliance on the decision of this Court in TataTeleservices Limited vs. Central Board of Direct Taxes (supra),and the decision of the Bombay High Court in Group M MediaIndia (P) vs Union of India (supra), where it was held that thereturn should be processed within a year and only where theassessing officer is of the view that issuance of refund would bedetrimental to collection of demands that may arise, he may invokethe provision of Section 143(1D) of the Act. From the perusal ofSection 241A of the Act, it is evident that all tax returns arenecessarily to be processed within the time period as prescribedunder Section 143(1) of the Act. In the instant case, it is note-worthy that the time period prescribed under Section 143(1) of F

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the Act has expired and there has been no correspondence fromthe revenue that discretion under Section 143(1D) was exercised.

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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 claimrefund is vested in any assessee. Counsel argued that this isindependent of the Revenue’s power to issue a scrutiny noticeunder Section 143 (2), for which the period of limitation is longer.However, if the Assessing Officer does not issue any notice, orintimation, if the assessee can claim refund, that right is a statutorilyvested one if, within the said period of one year, a reasoned orderis not made under Section 143 (1D) within the said one yearperiod.”

J-2] On the other hand, the submissions on behalf of therespondents were :- “19. The revenue denies allegations of deliberate omission torefund amounts aggregating to Rs.4759.74 crores along withapplicable interest and states that income tax returns were notprocessed under Section 143(1). The assessment years underconsideration were picked up for scrutiny under Section 143(3)and there is a prima facie likelihood of a substantial demand beingraised by the Income Tax Department, as has been done earlierin Vodafone’s earlier case. Further, the revenue submitted that inVodafone’s own case for the AY 2011-12 wherein the returnedloss was Rs. 33,93,397 and subsequently, the income determinedby the Assessing Officer was Rs.546,64,25,250/-.

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21. Counsel for the Revenue contended that for the relevant periodunder consideration, the Assessing Officer has already issuednotice under sub-section (2) of Section 143 within time. As perthe then prevailing provision, it was thereafter not necessary forthe Assessing Officer to proceed under sub-section (1) of Section143. Further, the Ld. Counsel placed reliance on Section 143(1D)of the Act to explain that the refund has not been processed tilldate. The Ld. Counsel urged that sub-section (1D) of section 143which starts with a non-obstante clause provided that A

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notwithstanding anything contained in sub-section (1), theprocessing of the return shall not be necessary before the expiryof the period specified in the second proviso where a notice hasbeen issued to the assessee under Section 143(2). The provisio toSection 143 (1D) provided that such return shall be processedbefore the issuance of an order under sub-section (3). Therefore,Section 143 (1D) overrides Section 143 (1). Therefore, the counselsubmitted that under Section 143(1D) of the Act, the processingof return shall not be necessary, where notice has been issuedunder 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 multiplecommunications by the assessee for expeditious processing ofreturns for different AYs. The order informs that the cases arepending for scrutiny as follows; for the AY 2012-13 and 2013-14,the assessment is under special audit and for the AY 2014-15, theassessee approached the AAR and lastly, returns for AYs 2015-16 and 2016-17, are under scrutiny. The assessment years forwhich request has been made to process the return under Section143(1) are already under scrutiny for the various AYs. Therefore,exercising the power under Section 143(1D), the AssistantCommissioner declined the processing of returns under Section143(1). Further, the case is under compulsory scrutiny for AY2017-2018, exercising the power Section 241A, the AssistantCommissioner declined the processing of returns under Section143(1)……..”

J-3] After considering rival submissions, relevant statutoryprovisions and the decisions relied upon, the High Court observed:- “29. In the facts of the present case, the issue canvassed is onthe interpretation of Section 143 (1D) of the Act. It is first necessaryto refer to the statutory provisions and thereafter consider theeffect of such provisions on Vodafone’s request for refund forthe said assessment years. On reading of the Section 143 of theAct, it is apparent that when returns are filed either under Section139 or pursuant to a notice under Section 142(1), Section 143(1)mandates that the returns shall be processed in the mannerprescribed in the clauses (a) to (e) thereof. The processing of areturn thus involves determination of total income or loss, tax and interest, if any, payable and sum payable by, or the amount ofrefund due to the assessee. Section 143(1)(d) stipulates that anintimation shall be prepared or generated and sent to the assesseespecifying the sum determined payable by, or the amount of refunddue to the assessee under clause(C). Section 143 (1) (e) providesthat the amont of refund due in pursuance of the determinationunder clause (C) shall be granted to the assessee. A reading ofproviso to Section 143 (1) reveals that it mandates that theintimation as provided in Section 143 (1) (d) should be issued beforethe expiry of one year from the end of the financial year in whichthe return is made. Before proceeding to Section 143(1D) as itstood at the relevant time, it is essential to refer to Section 143 (2)and (3). Sub-section (2) contemplates issuance of a notice in thecontingency covered by the said provision. Sub-section (3) providesthat once such a notice is served, after following the procedurelaid, the Assessing Officer is required to pass an order in writingmaking an assessment of the total income or loss and determinethe sum payable by the assessee or refund of any amount due tohim on the basis of the assessment. It is also relevant to noticethat whether it is the processing of a return under Section 143(1)or an order under Section 143(3) is subject to the same time limit,i.e. Section 153(1).

39. A reading of the above judgments and the relevant provisions,clearly shows that Section 143(2) empowers, the Assessing Officerto issue notice to the assessee to produce documents or otherevidence, to prove the genuineness of the income tax return. UnderSection 143(1D) of the Act an introduced by the Finance Act,2012 processing of a return under Section 143 (1)(a) is notnecessary where a notice has been issued under Section 143(2)of the Act. This provision has now been amended by the FinanceAct, 2016 (with effect from the AY 2017-18) to provide that ifscrutiny notice is issued under Section 143(2), processing of returnshall not be necessary before the expiry of one year from the endof the financial year in which return is submitted.

40. The assesse’s argument in these proceedings is that once theone year period in proviso to Section 143(1) ends, the return - andwhatever calculations are contained in it, with respect to tax liability AB

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as well as the consequential refunds, become final, subject to onlyone event: issuance of notice under Section 143 (2).

41. To this Court, it appears that the net effect of Tata Teleservices(supra) is that the revenue cannot be inactive, in cases where theassessee claims refund, and the one year period is over (underproviso to Section 143(1) ends. The Assessing Officer has to applyhis mind to consider whether the facts and circumstances of thecase, warrant some or all of the refund of the assessee’s amounts,or if all of it needs to be withheld, whenever the assessee pressesfor refund. This exercise should be undertaken promptly, keepingin mind the time limit under the normal provision of Section 143(1)expires. This Court held in Tata Teleservices Ltd. (supra) and theBombay High Court in case of Group M Media India (P) Ltd.(supra) that it would be wholly inequitable for the Assessing Officerto merely sit over the petitioner’s request for refund citing theavailability of time up to the last date of framing the assessmentunder Section 143 (3). The proper interpretation of the statuteand the situation in such a case would be, the Assessing Officershould take up an expeditious disposal of the question once theassessee requests for release of the refund.

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44. Now in this case, acknowledgement or intimation had notbeen sent by the Assessing Officer. There is no doubt that theperiod of one year indicated in the second proviso to Section 143(1). However, Section 143 (1D) begins with a non-obstante clausethat overbears that provision. Tata Teleservices (supra) and theBombay High Court ruling in Group M Media India (supra) statethat the fact that a regular assessment is resorted to, does notipso facto mean that in every case, the Assessing Officer has torefuse refunds or there is an automatic bar to refunds. TheAssessing Officer has to apply his mind and make an order keepingin perspective the facts of the case.

45. In this case, the revenue has relied on an order dated28.07.2018, which inter alia, stated that “considering pendingspecial audit, pending scrutiny, opening demands of amount morethan 4500 crore, it will be prejudicial to the interest of the revenueto process the returns without completion of the pending scrutinycases. Therefore, exercising powers under Section 143(1) and under Section 241A of the Act, the undersigned decline theprocessing of returns under Section 143(1).” The senior counselfor Vodafone had attacked the reliance on this order, stating thatit was made later. However, that is an aspect this Court cannot gointo. Facially, the order contains reasons. Therefore, unlike TataTeleservices, a reasoned order was made; that decision was basedon a circular, which fettered the Assessing Officer’s discretion.Therefore, the CBDT circular was set aside.

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49. As far as the argument that the expiry of the one year period,per second proviso to Section 143(1) resulting in finality of theintimation of acceptance, this Court is of opinion that the deemingprovision in question, i.e. Section 143 (1) (d) only talks of twoeventualities: “shall be deemed to be the intimation in a case whereno sum is payable by, or refundable to, the assessee under clause(c), and where no adjustment has been made under clause (a).”Secondly, that intimation or acknowledgement cannot confer anygreater right than for the assessee to ask the Assessing Officer toprocess the refund and make over the money; it is up to theAssessing Officer - wherever the possibility of issuing a noticeunder Section 143 (2) exists, or where such notice has been issued,to apply his mind, and decide whether given the nature of thereturns and the potential or likely liability, the refund can be given.It does not mean that when an assessment - pursuant to noticeunder Section 143(2) is pending, such right to claim refund canaccrue. This Court also recollects the decision of the SupremeCourt in Deputy Commissioner of Income Tax v Zuari EstateDevelopment & Investment Co Ltd. 2015 (15) SCC 248 whichheld that an intimation under Section 143 (1) is not to be consideredas an assessment.”

K] On 27.12.2018 and 31.12.2018, Draft Assessment Orders interms of Section 144 C of the Act were passed for AY 2014-15 and AY2015-16 respectively.

L] In the Special Leave Petition (from which this appeal arises)questioning the aforesaid decision of the High Court, notice was issuedby this Court on 18.01.2019. In the affidavit in reply, the respondentsasserted:- A

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“7. That having extracted the relevant provisions, it would berelevant to state that the petitioner itself has made severalaverments before the High Court that is facing “precarious financialconditions” with an accumulated loss of Rs.5,557 crores and debtsamounting to Rs.53,000 crores as on 31.03.2017". It is equallypertinent to state that the Respondent-Revenue had filed a counteraffidavit on 3rd July, 2018 against the Writ Petition in the HighCourt of Delhi wherein it has been categorically averred that thereare huge pending demands against the petitioner herein more thanof Rs.5000 Crores. The contents of the Counter Affidavit beforethe High Court may be treated as a part and parcel of the presentAffidavit. It has been stated that multiple issues on which additionhave been made giving rise to the demand liabilities, and severalof such issues are also recurring in nature.

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10. That it is also submitted that the order dated 23rd July, 2018Dpassed by the Assessing Officer is an order under Section143(1)(D) for the assessment years 2012-13 to 2016-17 as evidentfrom a bare reading of the said order giving reasons for refusal ofrefund claimed by Vodafone Mobile Service Limited. As far asthe refusal of refund claimed for the A.Y. 2017-18 is concerned,Ethe said order draws its power under Section 241A of the Act asclearly stated in the order dated 23rd July, 2018.”

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Reference was made to various pending proceedings where thedemands raised for earlier assessment years were stayed and it wasstated:- F

“24. That it is wrong to say that the letter/order dated 23.07.2018issued by Respondent No.1 u/s 143(1D) and 241A of the IncomeTax Act, 1961 is beyond limitation, bereft of any cogent reasoningand without jurisdiction as the letter/order was issued for goodreasons to protect the interest of the revenue which is reflectedvide Para 45 of the impugned judgment. The reasoning was basedupon pending special audit, pending scrutiny and pending demandsof more than Rs.5000 crore. Further, the letter/order was notbeyond limitation because Section 143(1D) starts with a non-obstante clause, which is over and above the provisions of Section143(1), which has been discussed in Para 44 of the impugnedjudgment.”

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M] On 14.03.2019 an intimation was sent to the appellant by therespondent No.1 regarding withholding of refund for AY 2017-18. Itstated about the demand status for earlier assessment years as under :- Thereafter, it went on to state:- “It is also to be noted that earlier refund was withheld videnotesheet dated 23.07.2018 after due approval due to non-availability of proceeding of return facility in ITBA for AY2017-18 which was intimated to the assessee vide letter dated23.07.2018. In view of the above discussion there is sufficientreason to believe that issue of refund will negatively impactthe interest of the revenue. Therefore, proposal for withholdthe refund for AY.2017-18 was forwarded again to Pr.Commissioner of Income Tax-09, Delhi and same has beenapproved. Approval on note sheet was taken as well asprocedure for approval through ITBA was also followed forwithholding of refund which also involves approval from PCIT-09. The approval for withholding of refund u/s 241 was takenfrom PCIT-9 which was sent through proper channel throughAddl. CIT Range 26.

In view of the facts above you are hereby intimated thatrefund of A.Y.2017-18 in the case of M/s Vodafone MobileService Limited has been withhold u/s 241A of the Income A

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ATax Act, 1961 till the completion of scrutiny proceedings u/s143(3) or 144C r.w.s. 143(3) of the Income Tax Act, 1961.”

N] Objections raised by the appellant against the Draft AssessmentOrders issued on 27.12.2018 and 31.12.2018 were disposed of on20.09.2019. Thereafter, Final Assessment Orders under Section 143 (3)Bof the Act were passed on 31.10.2019 for AY 2014-15 and 2015-2016,whereunder the appellant was held entitled to refund of Rs.733 Crores(approximately) in respect of AY 2014-15, whereas for AY 2015-2016the claim for refund was rejected and demand in the sum of Rs.582Crores (approximately) was raised. In an appeal preferred by theappellant, said demand for AY 2015-16, has, since then, been stayed byCthe Income Tax Appellate Tribunal.

4. The relevant dates and the factual developments as statedabove, can be summarized in a tabular form as under:-

5. In this appeal, we heard Mr. J.D. Mistri, learned SeniorGAdvocate for the appellant and Mr. Zoheb Hossain, learned Advocatefor the respondents. During the course of arguments, it was acceptedby the respondents that insofar as AY 2017-18 was concerned, the orderdated 23.07.2018 passed under Section 143(1D) of the Act was withoutjurisdiction, as by that time no order was passed under Section 143(2) ofthe Act for the concerned Assessment Year. It was submitted that in theHcircumstances, a fresh order was passed on 14.03.2019 after due compliance of the statutory requirements. In order to verify thedevelopments leading to the passing of order dated 14.03.2019, theconcerned record was summoned and perused. The Court was satisfiedthat all the antecedent steps leading to said order were taken inaccordance with law and settled practice.

An affidavit was also filed on behalf of the respondents explainingin detail the developments leading to the passing of order dated 14.03.2019and issuance of intimation dated 09.04.2019. It was stated:

“That as per CPC accounting of the return was completed on 9[th]April, 2019 and intimation u/s 143(1) was generated on 9[th] April,2019. It is also evident from Page 1 of the intimationdated 09.04.2019 that contrary to the allegations of the Petitionerthat the intimation u/s 143(1) was never communicated to them, itis submitted that the intimation u/s 143(1) was sent to the emailaddress provided by the assessee, that is,[REDACTED]..

That it was in this background that the screen-shot relied upon bythe assessee during the course of the hearing shows that the ITRwas processed on 09.04.2019.

The intimation under Section 143(1) was made on 09.04.2019and the said intimation stated that refund determined under Section143(1) in the said intimation has been withheld as per the provisoof Section 241A and that the refund if any will be released oncompletion of the assessment under Section 143(3)/144(4) as thecase may be along with the interest under Section 244A and subjectto adjustment of arrears demand, if any under Section 245.

In view of the above, it is submitted that the CPC has adopted thedue process prescribed by the ITBA-ITR Processing InstructionNo.5 dated 14.12.2018. As per the said process, the refunddetermination is complete immediately after recommendation ofthe total income tax and matching of tax credits is completed atCPC system. At this stage the refund determination iscommunicated by CPC, Bangalore to AO through ITBA module.Once the refund is approved/withheld/blocked by the AO, CPCwill complete the accounting of the record and act according toother processes involved like Section 245 of I.T. Act i.e. adjustmentof refund determined against tax arrears due.”

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[2020] 11 S.C.R.

A5.1 One more development must also be adverted to. In the hearingdated 08.01.2020, reliance was placed on the order dated 28.12.2019passed in connection with M/s Idea Cellullar Ltd. It was thereforeobserved by this Court:

“During the course of hearing, Mr. Zoheb Hossain, learned counselBappearing for the Revenue produced a copy of the order dated28.12.2019 passed in connection with Idea Cellular Limited (withwhich entity the appellant now stands merged).

Mr. Hossain submitted that the order dated 28.12.2019 will havebearing on the issue insofar as the refund payable to the presentCappellant in respect of the assessment year 2014-15 is concerned.

We direct the Department to place on record copy of the orderalong with such submission as the Department wishes to place onrecord. Let the submissions by way of an affidavit be filed withinseven days from today.

DThe appellant shall have liberty to respond to those submissionswithin next seven days.”

The copy of the order dated 28.12.2019 placed on record indicatesthat for Assessment Year 2016-17 a demand in the sum of Rs.2824.99crores has been raised against the appellant.

EAfter conclusion of oral hearing, the parties also filed their writtensubmissions.

6. It was submitted by the appellant:

“In the facts of the present case, admittedly, for AYs 2014-15 toF2016-17 (for which provisions of Section 143(1D) of the Act arerelevant), the Respondent has neither processed the return ofincome for the said years by the last date, viz. 31.03.2018 nor didthe Respondent exercise the discretion provided under Section143(1D) of the Act by that. As per the Respondents’ ownsubmission, such discretion under Section 143(1D) of the Act wasGonly exercised vide letter/order dated 23.07.2018, which admittedlyis beyond the limitation period.

Therefore, the exercise of such discretion, having been madebeyond limitation is a nullity in the eyes of law and, hence, nocognizance can be taken of such a letter/order.

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Insofar as the Assessment Year 2017-18 is concerned, theRespondents during the course of arguments, before this Hon’bleCourt have admitted that order dated 23.07.2018 was withoutjurisdiction because on that date, neither the return of incomewas processed, nor a notice under Section 143(2) issued, warrantingexercise of powers under Section 241A of the Act. On that groundalone, the Impugned Order insofar as Assessment Year 2017-18is concerned should be set aside and the refund claimed for thatyear should be granted with interest……

Having admitted that the Order dated 23.07.2018 was withoutjurisdiction, the Respondent set up an alternate case that the timelimit for processing the return of income expires on 31.03.2020and, therefore, the proceedings for AY 2017-18 are inchoate andno direction may be issued for that year. When it was pointed outthat processing has already been completed vide intimation dated09.04.2019, the Respondent changed its stand and argued that aletter dated 14.03.2019 was issued after filing of the counteraffidavit before this Hon’ble Court on 06.03.2019, seeking to againexercise powers under Section 241A of the Act. Admittedly, asper the e-filing portal of the Income Tax Department, and theintimation produced by the Respondent before this Hon’ble Courton 08.01.2020, the processing of the return for AY 2017-18 wascompleted only on 09.04.2019 and, therefore, the alleged exerciseof power under Section 241A on 14.03.2019 is without jurisdictionsince it suffered from the same vice as the Order dated 23.07.2018,i.e. refunds could not have been withheld under Section 241Aprior to processing of the return of income…...

Without prejudice to the submission that the Order dated23.07.2018 issued for the AYs 2014-15 to 2016-17 was withoutjurisdiction, having been issued beyond limitation and the Ordersdated 23.07.2018 and 14.03.2019 invoking jurisdiction under Section241A of the Act for the AY 2017-18 have no sanctity of law sincethe sine qua non for invoking that Section, i.e. processing of returnwas completed on 09.04.2019, even on merits, neither the Orderdated 23.07.2018 nor the order dated 14.03.2019 disclose anygrounds on which powers under Section 143(1D) or Section 241Aof the Act could have been invoked.”

7. The respondents submitted:

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“On merits, it is submitted that if the AO issued a Notice u/s143(2) within the time limit i.e. 6 months from the end of thefinancial year in which return was filed, then there is no longer arequirement to process the return under Section 143(1). That beingthe position of law laid down by the Hon’ble Supreme Court, thediscretion under Section 143(1D) can be exercised at any pointprior to the passing of the final assessment order.

The entire objective of not processing a return after issuance of ascrutiny notice is that in cases where there is a likelihood ofsubstantial demands, there should not be a compulsion on theRevenue to issue refunds. There is no anomaly in the abovelegislative scheme which warrants dilution of the non-obstanteclause and to read into Section 143(1D) a limitation which thelegislature has not prescribed…...

It is well settled that a non-obstante clause is a legislative devicewhich is employed to give overriding effect to some or all contraryprovisions and as such, the operation of a non-obstante clausecannot be limited in any manner and must be given its fulleffect……

The High Court at para 44 has categorically held that since Section143(1D) begins with a non-obstante clause, it will overbear/override the second proviso to Section 143(1) which contains alimitation period of one year for precession of return.

Without prejudice to the submission that the merits of the orderdated 23.07.2018 as well as order dated 14.03.2019 has neverbeen assailed by the Petitioner before any forum, nor anyarguments advance during the hearing before the High Court andthat the same cannot be raised for the first time before this Hon’bleCourt in an SLP, it is submitted that the AO had withheld refund inall these years for cogent and valid reasons, in the interest of therevenue, subject to final scrutiny assessment proceedings. It issubmitted that the scope of judicial review against such an orderwhere the AO has exercised his discretion would be limited andany interference can only be done if such an exercise of power iseither wholly capricious or without any valid reasons.”

8. The inter-relation between sub-sections of Section 143 of theAct, as the Section then stood, was subject matter of discussion by this Court in CIT v. Gujarat Electricity Board[6]which in turn referred tothe decision of the Gujarat High Court in Gujarat Poly Avx ElectronicsLtd. v. Dy. Commissioner of Income Tax (Asstt.)[7]. This Court observed:

“5. The learned counsel appearing for the respondent have pointedout that in a number of judgments several High Courts haveconsistently taken the view that once regular assessmentproceedings have commenced under Section 143(2) of the IncomeTax Act, 1961, it is a limitation on the jurisdiction of the assessingofficer to commence proceedings under Section 143(1)(a) of theAct.

6. Even, otherwise, the view taken by the Gujarat High Courtseems to be correct on principle. There is no dispute that Section143(1)(a) of the Act enacts a summary procedure for quickcollection of tax and quick refunds. Under the scheme if there isa serious objection to any of the orders made by the assessingofficer determining the income, it is open to the assessee to askfor rectification under Section 154.

7. Apart therefrom, the provisions of Section 143(1)(a)(i) indicatethat the intimation sent under Section 143(1)(a) shall be withoutprejudice to the provisions of sub-section (2). The legislature,therefore, intended that where the summary procedure under sub-section (1) has been adopted, there should be scope available forthe Revenue, either suo motu or at the instance of the assessee tomake a regular assessment under sub-section (2) of Section 143.The converse is not available; a regular assessment proceedinghaving been commenced under Section 143(2), there is no needfor a summary proceeding under Section 143(1)(a).”

8.1 The facts and relevant submissions in Gujarat Poly AvxElectronics Ltd.[2] were recorded in the decision of the Gujarat HighCourt as under:

“2. On 12th September, 1994 the assessee submitted a return ofloss of Rs.1,74,78,530 for the assessment year 1993-94 as per thecomputation of income and depreciation chart annexed to thepetition at Annexure A. The assessee claimed depreciation of Rs.1,74,78,526. Manufacturing activities started on 24[th] March, 1993, 6 (2003) 260 ITR 84

7 (1996) 222 ITR 140 Guj.

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i.e. during the accounting year ending on 31st March, 1993 (theassessment year 1993-94). It was specifically pointed out that“the amount of interest received during the public issue ofRs. 1,07,85,590 is not to be considered as income and has beengiven set off against the interest outgoings included under pre-operative expenditure” in view of several decisions including thatof the apex Court.

3. As stated by the learned counsel, on filing of the return, theAssessing Officer (AO) under the new scheme for the assessmentunder Section 143 of the Act, had two options; i.e., (i) either toaccept the return under s. 143(1) with necessary adjustments, ifthere is any, or (ii) to proceed to make assessment under Section143(3) or under Section 144 by issuing notice under Section 143(2)of the Act. In the instant case, instead of accepting the returnunder Section 143(1) of the Act, undisputedly, the Assessing Officerissued notice under Section 143(2) of the Act on 1st December,1994, vide Annexure C. It is contended in the petition that incontinuation of the notice the Assessing Officer addressed a letteron 15th November, 1995 calling upon the assessee to attend on27th November, 1995, vide letter Annexure C-1. The assessee’srepresentative appeared before the Assessing Officer on 27thNovember, 1995 but the Assessing Officer adjourned the case to1st December, 1995. On 1st December, 1995 there was adiscussion between the representative of the assessee and theAssessing Officer. The assessee was called upon to makeclarifications regarding various points and was also asked to clarifyas to how the depreciation as claimed should not be disallowedand why interest should not be taxed as receipt on the revenueaccount. It is contended by the assessee that the Assessing Officerwas in the midst of the proceedings under Section 143(3) of theAct. However, Assessing Officer issued intimation/order underSection 143(1)(a) of the Act, vide Annexure D, rejecting the returnof income as computed by the assessee resulting in disallowingdepreciation as claimed and by taxing the interest income ofRs.1,07,85,590 as income from other sources and thus raised thedemand of Rs. 1,30,83,741 under various heads and sections oftaxes, surcharge and additional tax under Sections 143(1A), 234Aand 234B.

4. Mr. Shah, learned counsel appearing for the assessee, hascontended that once the Assessing Officer has exercised optionto proceed under Section 143(3) of the Act by issuing notice underSection 143(2) of the Act even if adjustments that may be madeby the Assessing Officer are in order, Assessing Officer hasforfeited the authority to act under Section 143(1) by virtue of hisoption having exercised to make an assessment under Section143(3) of the Act by issuing a notice under s. 143(2) of the Act.

5. As against this, Mr. Shelat, learned counsel (for the Revenue),has contended that it is open for the AO to follow the procedureunder s. 143(1) and 143(2) simultaneously. His contention is thatit is open to have parallel proceedings and is not compulsory toassess as per s. 143(3) of the Act though notice under s. 143(2)of the Act is issued and before making assessment under s. 143(3)of the Act he can proceed under s. 143(1) of the Act. No othercontention is raised.”

8.1.1 The relevant provision, namely Section 143 as it then stoodwas quoted in paragraph 6 as under:

“6. It would be better to have a look at the relevant section whichis reproduced as under:

“143(1)(a) Where a return has been made under Section 139,or in response to a notice under sub-s. (1) of Section 143, -

(i) If any tax or interest is found due on the basis of suchreturn, after adjustment of any tax deducted at source, anyadvance tax paid and any amount paid otherwise by way oftax or interest, then, without prejudice to the provisions ofsub-s. (2), an intimation shall be sent to the assessee specifyingthe sum so payable, and such intimation shall be deemed tobe a notice of demand issued under Section 156 and all theprovisions of this Act shall apply accordingly;

(ii) If any refund is due on the basis of such return, it shall begranted to the assessee :

Provided that in computing the tax or interest payable by, orrefundable to the assessee, the following adjustments shallbe made in the income or loss declared in the return, namely - A

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(i) any arithmetical errors in the return, accounts or documentsaccompanying it shall be rectified;

(ii) any loss carried forward, deduction, allowance or relief,which, on the basis of the information available in such return,accounts or documents, is prima facie admissible but whichis not claimed in the return, shall be allowed :

(iii) any loss carried forward, deduction, allowance or reliefclaimed in the return, which, on the basis of the informationavailable in such return, accounts or documents, is primafacie inadmissible, shall be disallowed.

Provided further that where adjustments are made under thefirst proviso, an intimation shall be sent to the assessee,notwithstanding that no tax or interest is found due from himafter making the said adjustments :

Provided also that an intimation for any tax or interest dueunder this clause shall not be sent after the expiry of twoyears from the end of the assessment year in which the incomewas first assessable.......

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(1A)(a) Where as a result of the adjustments made under thefirst proviso to clause (a) of sub-section (1) -

(i) the income declared by any person in the return isincreased; or

(ii) the loss declared by such person in the return is reducedor is converted into income, The Assessing Officer shall, - (A) in a case where the increase in income under sub-clause(i) of this clause has increased the total income of such person,further increase the amount of tax payable under sub-section(1) by an additional income-tax calculated at the rate of twentyper cent on the difference between the tax on the total incomeso increased and the tax that would have been chargeablehad such total income been reduced by the amount ofadjustments and specify the additional income-tax in the intimation to be sent under sub-clause (i) of clause (a) ofsub-section (1):

(B) in a case where the loss so declared is reduced undersub-clause (i) of this clause or the aforesaid adjustments havethe effect of converting that loss into income, calculate a sum(hereinafter referred to as additional income-tax) equal totwenty per cent of the tax that would have been chargeableon the amount of the adjustments as if it had been the totalincome of such person and specify the additional income-taxso calculated in the intimation to be sent under sub-clause (i)of clause (a) of sub-s. (1);

(C) where any refund is due under sub-s. (1), reduce theamount of such refund by an amount equivalent to theadditional income-tax calculated under sub-clause (A) or sub-clause (B), as the case may be...........

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(2) Where a return has been made under Section 139, or inresponse to a notice under sub-s. (1) of Section 142, the AOshall, if he considers it necessary or expedient to ensure thatthe assessee has not understated the income or has notcomputed excessive loss or has not underpaid the tax in anymanner, serve on the assessee a notice requiring him, on adate to be specified therein, either to attend his office or toproduce, or cause to be produced there, any evidence onwhich the assessee may rely in support of the return:

Provided that no notice under this sub-section shall be servedon the assessee after the expiry of twelve months from theend of the month in which the return is furnished.

(3) On the day specified in the notice issued under sub-section(2) or as soon afterwards as may be, after hearing, suchevidence as the assessee may produce and such other evidenceas the AO may require on specified points, and after takinginto account all relevant material which he has gathered, theAO shall, by an order in writing, make an assessment of thetotal income or loss of the assessee, and determine the sumpayable by him on the basis of such assessment.

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(4) Where a regular assessment under sub-section (3) of thissection or Section 144 is made - (a) any tax or interest paid by the assessee under sub-section(1) shall be deemed to have been paid towards such regularassessment; (b) if no refund is due on regular assessment or the amountrefunded under sub-section (1) exceeds the amount refundableon regular assessment, the whole or the excess amount sorefunded shall be deemed to be tax payable by the assesseeand the provisions of this Act shall apply accordingly.........”

8.1.2 Thereafter, the issue was considered thus:- “8. It is thus clear that the Assessing Officer even after issuingintimation after making adjustments as per provisions of s. 143(1)of the Act can call upon the assessee, if he considers it necessaryor expedient to ensure that the assessee has not understated theincome or has not computed excessive loss or has not underpaidthe tax in any manner. Once this opinion is formed then theAssessing Officer will have to serve on the assessee a noticeunder Section 143(2) of the Act requiring him to produce evidencebefore him on the date specified in the notice. This is permissiblein view of saving clause in Section 143(1) of the Act. Section143(1) of the Act is to be exercised without prejudice to theprovisions of sub-s. (2) of Section 143 of the Act. However,exercise of powers under Section 143(1) is not made permissibleafter issuance of notice under Section 143(2) of the Act. TheAssessing Officer cannot exercise powers under Section 143(1)of the Act as he himself has decided to make regular assessmentunder Section 143(3) of the Act. That in Section 143(2) like underSection 143(1) powers are not saved. As the Assessing Officerhas called upon the assessee to furnish evidence to satisfy himselfabout the correctness or legality of the claim made by the assesseein his return, hence, only after hearing the assessee and afterconsidering the evidence that may be produced by the assesseethe Assessing Officer has to make the order in writing makingassessment of the total income or loss of the assessee and he hasto determine the amount payable on the basis of such assessment,that is, under s. 143(3) of the Act. Mr. Shelat, learned counsel for the Revenue, fairly stated that notice under Section 143(2) of theAct cannot be withdrawn. Notice under Section 143(2) of theAct is a step towards regular assessment under Section 143(3) ofthe Act and, therefore, in absence of any provision it is not opento make assessment in any other manner than provided as perSection 143(3) of the Act.

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10. Powers to make assessment in terms of its proviso can beinvoked and when the claim is prima facie inadmissible or primafacie admissible, as the case may be, adjustment is to be made.The word prima facie clearly indicates that it must be firstevidenced. A decision on the debatable issue is not envisaged.Issuance of notice under s. 143(2) of the Act suggests that theAssessing Officer has determined to make assessment underSection 143(3) of the Act. It is clear, looking to the language usedin different sub-sections that order under Section 143(1) is asummary one and the Assessing Officer on perusal of the return,that is, computation of income, is able to accept it as it is or withnecessary adjustments as indicated in sub-clause (a) of sub-section(1) of Section 143 of the Act. The submission made by learnedcounsel for the Revenue is that even after issuance of noticeunder Section 143(2) of the Act, it is permissible for the AssessingOfficer to assess under Section 143(1) of the Act. One has toexamine the claim on account of results of adjustments made inthe income shown in the return whether it results into increase orloss declared in the return is reduced or is converted into income.If that is so it would entail further tax at the rate of 20% on theincome so increased or a further tax of 20% on the loss so reducedas if it is income and assessee will be charged as per sub-section(1A) of Section 143 of the Act. With a view to see that taxpayersin the return furnish details with accuracy and correctness thisprovision is made. The assessee is aware about the provision andshould take care that no incorrect statement is made with a viewto save additional tax which may be imposed on him. However,when the Assessing Officer is not assessing the correctness aboutthe claim which is either prima facie admissible or prima facieinadmissible, and Assessing Officer with a view to ensure thatthe assessee has not computed excessive loss or has not underpaid A

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Atax in any manner has issued notice under Section 143(2) of theAct, then there should be evidence before him and on the basis ofthe evidence that may be produced by the assessee assessmentis to be made under Section 143(3) of the Act, and assessee willbe liable to the tax in the manner laid down in the Act if he isrequired to pay. After calling upon the assessee to produce evidenceBif the Assessing Officer is sending intimation instead of makingregular assessment under Section 143(3) of the Act then in thatcase the Assessing Officer would assess and would charge taxas per Section 143(1A) of the Act which is not contemplatedunder Section 143(3) of the Act and thus what is not permissibleCunder Section 143(3) of the Act cannot be made permissible byallowing the Assessing Officer to resort to Section 143(1) of theAct.

… … …

16. In this view of the matter, we are of the opinion that afterissuance of notice under Section 143(2) of the Act, it is not openfor the Assessing Officer to make adjustment or to pass orderunder Section 143(1) of the Act but he has to make assessment inaccordance with law, i.e., under Section 143(3) of the Act.”

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9. These decisions were rendered in the context of the provisionsEthen in existence which had following notable features:- (a) sub-section (1A) in terms of which, if any adjustments hadresulted in increased total income, an additional income tax at therate of 20 per cent on the difference would be levied.

(b) the intimation to be sent under sub-section (1) was expresslystated to be “without prejudice to the provision of sub-section(2).”

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Nonetheless, the basic distinction that was noted was: theprocedure under sub-section (1) was summary in nature whereas thatunder sub-section (2) was a regular assessment.G

10. Section 143 of the Act has since then undergone considerablechange. Sub-section (1) stands modified and now specifies with claritythe nature of adjustments. Sub-section (1A) contemplates processing ofreturns through Centralized Processing. Since we are principallyconcerned in the present matter with the effect and applicability of sub-H

VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILESERVICES LTD.) v. ACIT CIRCLE 26 (2) [UDAY UMESH LALIT. J.]

section (1D), the legislative history relating to said sub-section (1D) isdealt with in detail hereunder:-

A) Sub-section (1D) was inserted vide Finance Act, 2012 asunder:- “(1D) Notwithstanding anything contained in sub-section (1), theprocessing of a return shall not be necessary, where a notice hasbeen issued to the assessee under sub-section (2)”

The explanatory Note to the Finance Act, 2012 relevant to theproposed insertion of sub-section (1D) was:- “Under the existing provisions, every return of income is to beprocessed under sub-section (1) of Section 143 and refund, if any,due is to be issued to the tax payer. Some returns of income arealso selected for scrutiny which may lead to raising a demand fortaxes although refunds may have been issued earlier at the timeof processing.

It is therefore proposed to amend the provisions of the IncomeTax Act to provide that processing of return will not be necessaryin a case where notice under sub-section (2) of Section 143 hasbeen issued for scrutiny of the return.”

B) Finance Act, 2016 contemplated substitution of sub-section(1D) and insertion of a proviso with effect from 01.04.2017 as follows:

“(1D) Notwithstanding anything contained in sub-section (1), theprocessing of a return shall not be necessary before the expiry ofthe period specified in the second proviso to sub-section (1), wherea notice has been issued to the assessee under sub-section (2):

Provided that such return shall not be processed before the issuanceof an order under sub-section (3).”

The relevant explanatory Note to Finance Act, 2016 was:

“56. Processing under Section 143(1) of the Income Tax Act bemandated before assessment:

56.1 Under the existing provision of sub-section (1D) of Section143 of the Income Tax Act, processing of a return is not necessarywhere a notice has been issued to the assessee under sub-section(2) of the said Section.

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56.2 The said sub-section (1D) of the aforesaid section has beenamended to provide that in cases where a notice has been issuedunder sub-section (2) of Section 143 of the Income Tax Act theprocessing of return shall not be necessary before the expiry ofone year from the end of the financial year in which the return isfurnished. However, it is mandated to process the return beforethe issuance of order under sub-section (3) of Section 143 of theIncome Tax Act.

56.3 Applicability: This amendment takes effect from the 1[st] ofApril, 2017 and will, accordingly apply in relation to assessmentyear 2017-18 and subsequent years.”

C) The aforementioned substitution of sub-section (1D), however,never came into effect, as by Finance Act, 2017 said sub-section in theearlier form was retained and the text of the proviso was also modified.Effectively, on and with effect from 01.04.2017, sub-section (1D) andthe proviso are:-

“(1D) Notwithstanding anything contained in sub-section (1),the processing of a return shall not be necessary, where anotice has been issued to the assessee under sub-section (2):

Provided that the provisions of this sub-section shall not applyto any return furnished for the assessment year commencingon or after the day of April 2017.”

The concerned explanatory Note to Finance Act, 2017 was:- “59. Processing of return within the prescribed time and enablewithholding of refund in certain cases.

59.1 Before amendment by the Finance Act, 2016, the provisionsof sub-section (1D) of Section 143 of the Income Tax Act specifythat the processing of a return shall not be necessary, where anotice has been issued to the assessee under sub-section (2) ofthe said section.

59.2 The said sub-section was amended vide Finance Act, 2016and it was provided that with effect from assessment year 2017-18, processing under Section 143(1) of the Income Tax Act is tobe done before passing of assessment order.

59.3 In order to address the grievance of delay in issuance ofrefund in genuine cases, a proviso has been inserted in Section143(1D) of the Income Tax Act specifying that the provisions ofthe said sub-section shall cease to apply in respect of returnsfurnished for assessment year 2017-18 and onwards.

59.4 However, to address the concern of recovery of revenue indoubtful cases, a new section 241A has been inserted in the IncomeTax Act to provide that, for the returns furnished for assessmentyear commencing on or after 1[st] April, 2017, where refund of anyamount becomes due to the assessee under Section 143(1) of theIncome Tax Act and the Assessing Officer is of the opinion thatgrant of refund may adversely affect the recovery of revenue, hemay, for the reasons recorded in writing and with the previousapproval of the Principal Commissioner or Commissioner, withholdthe refund up to the date on which the assessment is made.

59.5 Applicability: These amendments take effect from 1[st] April,2017 and accordingly apply to returns furnished for assessmentyear 2017-18 and subsequent years.”

D) Finance Act, 2017 also inserted Section 241A in the Act asunder:- “241A. Withholding of refund in certain cases - For everyassessment year commencing on or after the 1[st] day of April,2017 where refund of any amount becomes due to the assesseeunder the provisions of sub-section (1) of Section 143 and theAssessing Officer is of the opinion, having regard to the fact thata notice has been issued under sub-section (2) of Section 143 inrespect of such return, that the grant of the refund is likely toadversely affect the revenue, he may, for reasons to be recordedin writing and with the previous approval of the PrincipalCommissioner or Commissioner, as the case may be, withheld therefund up to the date on which the assessment is made.”

11. Consequently, the relevant parts of sub-sections (1) to (3) ofSection 143 of the Act, as they stand today are as under:

“143. Assessment.—(1) Where a return has been made underSection 139, or in response to a notice under sub-section (1) ofSection 142, such return shall be processed in the following manner,namely:—

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(a) the total income or loss shall be computed after making thefollowing adjustments, namely:—

(i) any arithmetical error in the return;

(ii) an incorrect claim, if such incorrect claim is apparent fromany information in the return;

(iii) disallowance of loss claimed, if return of the previous yearfor which set off of loss is claimed was furnished beyond thedue date specified under sub-section (1) of Section 139;

(iv) disallowance of expenditure indicated in the audit reportbut not taken into account in computing the total income in thereturn;

(v) disallowance of deduction claimed under Sections 10-AA,80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or Section 80-IE, if thereturn is furnished beyond the due date specified under sub-section (1) of Section 139; or

(vi) addition of income appearing in Form 26-AS or Form 16-A or Form 16 which has not been included in computing thetotal income in the return:

Provided that no such adjustments shall be made unless anintimation is given to the assessee of such adjustments eitherin writing or in electronic mode:

Provided further that the response received from theassessee, if any, shall be considered before making anyadjustment, and in a case where no response is receivedwithin thirty days of the issue of such intimation, suchadjustments shall be made:

Provided also that no adjustment shall be made under sub-clause (vi) in relation to a return furnished for the assessmentyear commencing on or after the 1st day of April, 2018; (b) the tax, interest and fee, if any, shall be computed on the basisof the total income computed under clause (a);

(c) the sum payable by, or the amount of refund due to, the assesseeshall be determined after adjustment of the tax, interest and fee, ifany, computed under clause (b) by any tax deducted at source, any tax collected at source, any advance tax paid, any reliefallowable under an agreement under Section 90 or Section 90-A,or any relief allowable under Section 91, any rebate allowableunder Part A of Chapter VIII, any tax paid on self-assessmentand any amount paid otherwise by way of tax, interest or fee; (d) an intimation shall be prepared or generated and sent to theassessee specifying the sum determined to be payable by, or theamount of refund due to, the assessee under clause (c); and (e) the amount of refund due to the assessee in pursuance of thedetermination under clause (c) shall be granted to the assessee:

Provided that an intimation shall also be sent to the assessee ina case where the loss declared in the return by the assessee isadjusted but no tax, interest or fee is payable by, or no refundis due to him:

Provided further that no intimation under this sub-section shallbe sent after the expiry of one year from the end of the financialyear in which the return is made.

Explanation.—For the purposes of this sub-section,—(a) “anincorrect claim apparent from any information in the return” shallmean a claim, on the basis of an entry, in the return,—

(i) of an item, which is inconsistent with another entry of thesame or some other item in such return;

(ii) in respect of which the information required to be furnishedunder this Act to substantiate such entry has not been sofurnished; or

(iii) in respect of a deduction, where such deduction exceedsspecified statutory limit which may have been expressed asmonetary amount or percentage or ratio or fraction; (b) the acknowledgment of the return shall be deemed to be theintimation in a case where no sum is payable by, or refundable to,the assessee under clause (c), and where no adjustment has beenmade under clause (a).

(1A) For the purposes of processing of returns under sub-section(1), the Board may make a scheme for centralized processing ofreturns with a view to expeditiously determining the tax payable A

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by, or the refund due to, the assessee as required under the saidsub-section.

(1B) Save as otherwise expressly provided, for the purpose ofgiving effect to the scheme made under sub-section (1A), theCentral Government may, by notification in the Official Gazette,direct that any of the provisions of this Act relating to processingof returns shall not apply or shall apply with such exceptions,modifications and adaptations as may be specified in thatnotification; so, however, that no direction shall be issued afterthe 31st day of March, 2012.

(1C) Every notification issued under sub-section (1B), along withthe scheme made under sub-section (1A), shall, as soon as maybe after the notification is issued, be laid before each House ofParliament.

(1D) Notwithstanding anything contained in sub-section (1), theprocessing of a return shall not be necessary, where a notice hasbeen issued to the assessee under sub-section (2):

Provided that the provisions of this sub-section shall not apply toany return furnished for the assessment year commencing on orafter the 1st day of April, 2017.

(2) Where a return has been furnished under Section 139, or inresponse to a notice under sub-section (1) of Section 142, theAssessing Officer or the prescribed income-tax authority, as thecase may be, if, considers it necessary or expedient to ensure thatthe assessee has not understated the income or has not computedexcessive loss or has not under-paid the tax in any manner, shallserve on the assessee a notice requiring him, on a date to bespecified therein, either to attend the office of the Assessing Officeror to produce, or cause to be produced before the AssessingOfficer any evidence on which the assessee may rely in supportof the return:

Provided that no notice under this sub-section shall be served onthe assessee after the expiry of six months from the end of thefinancial year in which the return is furnished.

(3) On the day specified in the notice issued under sub-section(2), or as soon afterwards as may be, after hearing such evidenceas the assessee may produce and such other evidence as theAssessing Officer may require on specified points, and after taking VODAFONE IDEA LTD. (EARLIER KNOWN AS VODAFONE MOBILESERVICES LTD.) v. ACIT CIRCLE 26 (2) [UDAY UMESH LALIT. J.]

into account all relevant material which he has gathered, theAssessing Officer shall, by an order in writing, make an assessmentof the total income or loss of the assessee, and determine the sumpayable by him or refund of any amount due to him on the basis ofsuch assessment…….”

12. Clause (a) of sub-section (1) of Section 143 has six sub-clausesspecifying the kinds of adjustments which are required to be made forcomputing the total income or loss. Such adjustments are in the natureof “arithmetical error in the return”; incorrect claim “apparent fromany information in the return”; disallowance of loss if the return of theprevious year with respect to which such loss is claimed was furnished“beyond the due date”; disallowance of expenditure indicated in theaudit report if it has “not taken into account in computing the totalincome”; disallowance of deductions specified in sub-clause if the “returnis furnished beyond the due date”; and addition of income as specifiedin sub-clause (vi) if it was not “included in computing the total income”.All these features deal with matters which are apparent from the returnand the inconsistency is evident on the face of it. Upon causing suchadjustments after due intimation or notice to the assessee, the elementof tax, interest and fee is to be computed in terms of clause (b).Thereafter, in terms of clause (c), due credit to the amount of tax paidand any relief that is allowable is to be given and the net amount payableor to be refunded, is to be computed. The intimation to be generatedunder clause (d) is on the basis of such exercise and if any refund is due,the same has to be granted in terms of clause (e). Thus, at every stagein sub-section (1) the return submitted by the assessee forms thefoundation, with respect to which, if any of the inconsistencies referredto in various sub-clauses of clause (a) are found, appropriate adjustmentsare to be made.

On the other hand, the exercise of power under sub-section (2) ofSection 143 of the Act, leading to the passing of an order sub-section (3)thereof, is to be undertaken, where it is considered necessary or expedientto 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.

The issuance of notice and consequent proceedings are premisedon any of the aforesaid three postulates. In other words, the return filed A

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Aby the assessee itself calls for or requires a further probe and deeperconsideration. The guiding principle is to ensure that the income is notunder-stated or the loss is not over-stated, or the tax is not under paid inany manner. Upon issuance of notice, the assessee is entitled to produceevidence in support of his case. After hearing the assessee and consideringthe evidence so produced, by an order in writing, assessment of totalBincome or loss is to be made.

13. The nature of exercise of power under sub-section (1) asagainst that under sub-sections (2) and (3) is thus completely different.In the former case, the matter is processed, only to check whether anyapparent inconsistencies are evident on the face of the return andCconnected material which may call for any adjustment while in the lattercase, the matter is scrutinized after taking into account such evidence asthe assessee may produce. The exercise in the latter case is to ensurethat there is no understating of income or overstating of loss or under-payment of the tax in any manner. In other words, the veracity of theDreturn is checked threadbare rather than considering mere apparentinconsistencies from the return. Thus, the nature of power under thesetwo provisions, as found by this Court in CIT v. Gujarat ElectricityBoard[6] continues to bear the same distinction.

The power under sub-section (1) of Section 143 of the Act isEsummary in nature designed to cause adjustments which are apparentfrom the return while that under sub-sections (2) and (3) is to scrutinizethe return and cause deeper probe to arrive at the correct determinationof the liability of the assessee.

14. The exercise of power under Sub-sections (2) and (3) ofFSection 143 of the Act is thus premised on non-acceptance of what isevident from the return itself and to ensure that there is no avoidance oftax in any manner. The dimension of such power is far greater anddeeper than mere adjustments to be made in respect of what is availablefrom the return. Once such scrutiny is undertaken and proceedings areinitiated by issuance of a notice under sub-section (2) of Section 143, itGwould be anomalous and incongruent that while such proceedings soinitiated are pending, the return be processed under sub-section (1) ofSection 143, which may in a given case, entail payment of refund.Logically, the outcome of the exercise initiated through notice undersub-section (2) of Section 143, must determine whether any refund isHdue and payable. If the return itself is under probe and scrutiny, such return cannot be the foundation to sustain a claim for refund till suchscrutiny is not complete. Considering the nature of power exercisableunder these two limbs of Section 143, the inescapable conclusion is thatthe processing of return under sub-section (1) of Section 143 must awaitthe further exercise of power of scrutiny assessment under sub-sections(2) and (3) of Section 143. If the power under sub-section (2) of Section143 of the Act is initiated in a manner known to law, there cannot be anyinsistence that the processing under sub-section (1) of Section 143 becompleted and refund be made before the scrutiny pursuant to noticeunder sub-section (2) of Section 143 is over.

15. The afore-stated conclusion is fortified and strengthened byclear stipulation to that effect in sub-section (1D) of Section 143.Irrespective of some change in the text of said provision which wassought to be introduced by Finance Act 2016 and not accepted by FinanceAct, 2017, the legislative intent is clear from the expression, “… theprocessing of a return shall not be necessary, where a notice has beenissued to the assessee under sub-section (2)” and by use of non-obstanteclause. Though the period for which it would not be necessary to processthe return was sought to be specified by Finance Act, 2016, mere absenceof such period in the provision as it stands today, makes no difference.The above quoted portion from the provision and use of non-obstanteclause indicate with sufficient clarity the intent of the Parliament that incases where notice under sub-section (2) is issued and proceedings areinitiated, the processing of a return under sub-section (1) shall not benecessary.

16. The expression “shall not be necessary” is used in variousstatutes and even in the Constitution of India. This expression is used inthe first proviso to Article 311(2) and in proviso to Article 320(3) of theConstitution of India. Some of the cases in which similar expressionoccurring in statutes was taken into account and effect was given to itsplain language are:-

i) Proviso to Section 63(3) of the Motor Vehicles Act, 1939 – inMohd. Ibrahim v. The State Transport Appellate Tribunal,Madras.[8]

ii) Order XXX Rule 4 of the Code of Civil Procedure in Sohanlaland others v. Amir Chand and sons and others[9], Upper India 8 (1970) 2 SCC 233

9 (1973) 2 SCC 608

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ACable Co. and others v. Bal Kishan[10]and in Brij KishoreSharma and others v. Ram Singh and sons and others[11].

iii) Proviso to Section 68 of the Indian Evidence Act, 1872 – inRasammal Issetheerammal Fernandez etc. v. Joosa MariyamFernandez and others[12].

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As against the general principle which mandates an action in aparticular manner, when an exception is to be carved out, the relevantprovisions stipulate “it shall not be necessary” to adhere to and followthe manner mandated by such general principle; and if the contingencycontemplated by such exception arises, the general principle is to standCoverridden.

17. The intent to have the general principle emanating from sub-section (1) of Section 143 overridden, in case where the proceedingsare initiated pursuant to notice under sub-section (2) of the Act, getsmore pronounced and emphasized by use of non-obstante clause in sub-Dsection (1D). Recently, while dealing with non-obstante clause in Section26(1) of the Provincial Small Cause Courts Act, 1887 this Court observedin Vaishali Abhimanyu Joshi v. Nanasaheb Gopal Joshi[13] as under:

“33. “Notwithstanding anything contained elsewhere in this Act”as used in Section 26(1) of the 1887 Act are words of expressionEof the widest amplitude engulfing the contrary provisions containedin the Act. The suit in question has been filed by the plaintiff forenforcement of his right as a licensor after allegedly terminatingthe gratuitous licence of the appellant. On a plain reading, Item 11of Schedule II covers determination or enforcement of any suchright or interest in immovable property. But by virtue of SectionF26 sub-section (1) as applicable in the State of Maharashtra, Item11 of Schedule II has to give way to Section 26(1) and a suitbetween licensor and licensee which is virtually a suit for recoveryof immovable property is fully maintainable in Judge, Small CauseCourt that is why the suit has been instituted by the plaintiff in theGJudge, Small Cause Court claiming the right and interest in theimmovable property.

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10 (1984) 3 SCC 462

11 (1996) 11 SCC 480

12 (2000) 7 SCC 189

H13 (2017) 14 SCC 373

35. A statutory provision containing non obstante clause has to begiven full effect. This Court in Union of India v. G.M. Kokil[14]has laid down in para 11 as below: (SCC p. 203)

“11. … It is well known that a non obstante clause is alegislative device which is usually employed to give overridingeffect to certain provisions over some contrary provisions thatmay be found either in the same enactment or some otherenactment, that is to say, to avoid the operation and effect ofall contrary provisions. Thus the non obstante clause inSection 70, namely, “notwithstanding anything contained inthat Act” must mean notwithstanding anything to the contrarycontained in that Act and as such it must refer to the exemptingprovisions which would be contrary to the generalapplicability of the Act. …”

18. In the premises, we hold that in respect of Assessment Yearsending on 31[st] March 2017 or before, if a notice was issued in conformitywith the requirements stated in sub-section (2) of Section 143 of theAct, it shall not be necessary to process the refund under sub-section(1) of Section 143 of the Act and that the requirement to process thereturn shall stand overridden.

19. We must now deal with the issue whether any intimation isrequired to be given to the assessee that because of initiation ofproceedings pursuant to notice under sub-section (2) of Section 143 ofthe Act processing of return in terms of sub-section (1) of Section 143of the Act, would stand deferred. The processing of return in terms ofsub-section (1A) of Section 143 of the Act is to be done throughcentralized processing and as stated earlier, the scope of processingunder sub-section (1) of Section 143 of the Act is purely summary incharacter. Once deeper scrutiny is undertaken and the matter is beingconsidered from the perspective whether there is any avoidance of taxin any manner, issuance of notice under sub-section (2) itself is sufficientindication. Sub-section (1D) of Section 143 of the Act does not contemplateeither issuance of any such intimation or further application of mind thatthe processing must be kept in abeyance. It would not, therefore, beproper to read into said provision the requirement to send a separateintimation. In our view, issuance of notice under sub-section (2) of Section A

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A143 is enough to trigger the required consequence. Any other intimationis neither contemplated by the statute nor would it achieve any purpose.

20. Consequently, the submission that the intimation dated23.07.2018 must be held to be invalid, inter alia on the ground that itwas issued well after the period within which the return was required toBbe processed under sub-section (1) of Section 143 of the Act, must berejected.

21. However, insofar as returns filed in respect of assessmentyear commencing on or after the 1[st] April, 2017, a different regime hasbeen contemplated by the Parliament. Section 241-A of the Act requiresCa separate recording of satisfaction on part of the Assessing Officerthat having regard to the fact that a notice has been issued under sub-section (2) of Section 143, the grant of refund is likely to adverselyaffect the revenue; whereafter, with the previous approval of the PrincipalCommissioner or Commissioner and for reasons to be recorded in writing,the refund can be withheld.D

Since the statute now envisages exercise of power of withholdingof refund in a particular manner, it goes without saying that for assessmentyear commencing after 01.04.2017 the requirements of Section 241-Aof the Act must be satisfied.

E22. We will, therefore, have to see whether insofar as AY 2017-18 is concerned, the order dated 14.03.2019 satisfies the required statutoryparameters or not.

In terms of second proviso to sub-section (1) of Section 143 ofthe Act, the required intimation under said sub-section must be givenFbefore the expiry of one year from the end of the financial year in whichthe return is made. In respect of AY 2017-18, the return having beenfiled on 25.11.2017, period available in terms of said second proviso wasupto 31.03.2019, without taking into account the fact that revised returnwas filed on 13.07.2018.

In the present case, the exercise of power on 14.03.2019 was notGonly after issuance of notice under sub-section (2) of Section 143 andafter recording due satisfaction in terms of Section 241-A of the Act, butwas also well within the period contemplated by sub-section (1) of Section143 of the Act for causing due intimation.

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Whether the satisfaction recorded in terms of said Section 241-Aof the Act was otherwise correct or not and whether case for withholdingof refund was made out or not, are not the issues that arise for ourconsideration. For the present purposes, whether exercise of power isfacially in conformity with the statutory provisions is the issue and weare satisfied that there is nothing in the exercise of power that led to thepassing of the order dated 14.03.2019 which could be said to have violatedany statutory requirements.

23. Insofar as AY 2014-15 is concerned, final assessment orderpassed under Section 143(3) of the Act indicates that the appellant isentitled to refund of Rs.733 Crores; while for AY 2015-16 there is ademand of Rs.582 Crores. During the course of hearing, it was suggestedon behalf of the respondents that demands in respect of earlier assessmentyears including the liability as a result of order dated 28.12.2019 asreferred to in para 5.1 hereinabove being outstanding, the respondentswould be entitled to invoke the requisite power under Section 245 of theAct to set off the amount of refund payable in respect of AY 2014-15against tax remaining payable.

Since the requisite action is not even initiated, we say nothing inthat respect. In the premises, we direct that the amount of Rs.733 Croresshall be refunded to the appellant within four weeks from today subjectto any proceedings that the Revenue may deem appropriate to initiate inaccordance with law. We also direct the respondents to conclude theproceedings initiated pursuant to notice under sub-section (2) of Section143 of the Act in respect of AY 2016-17 and 2017-18 as early as possible.

24. Except for the directions as indicated above, we see no meritin any of the contentions advanced by the appellant. This appeal is,therefore, dismissed without any order as to costs.

Devika Gujral

Appeal dismissed.

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