SC to hear income tax appeal over Vodafone Idea tax dispute

The Supreme Court on Monday (January 20) agreed to hear the income tax department’s appeal against the Bombay High Court order that quashed tax notices issued to Vodafone Idea for discrepancies in the amount of income deemed to have escaped assessment for the assessment year (AY) 2016–17.

Although the notices issued in March 2023 under the Income Tax Act were for escaped income of Rs 42,858.47 crore, the amount was later reduced to around Rs 12,432 crore in the order issued by the Principal Chief Commissioner of Income Tax (PCCIT) in April 2023.

The Bombay High Court had rejected the PCCIT’s move to issue a reassessment notice, stating that the records with the commissioner should have explained how the escaped amount was reduced from Rs 42,858.47 crore to Rs 12,432 crore.

The High Court observed that the approvals for reassessment were “granted mechanically and without application of mind” by the PCCIT and other officers involved.

“…if only the PCCIT or the other officers had bothered to see the records and had really applied their mind to the same, these errors would not have crept in. This displays total non-application of mind by all those persons who have endorsed their approval for issuance of notice under Section 148 of the Act (Income Tax Act),” the Bombay High Court said.

Vodafone had informed the High Court that the sanction for reassessment was granted without due consideration of the substantial reduction in the amount of income deemed to have escaped assessment and without any explanation for such a discrepancy. Senior Advocate Sachit Jolly appeared for Vodafone Idea.

The case relates to transactions involving six entities that merged into Vodafone Idea.

On Monday, the Additional Solicitor General, appearing for the Income Tax Department, told the Supreme Court that the High Court had failed to consider the possibility of changes in the figure of likely escaped income from the beginning to the conclusion of the proceedings. Business Standard