‘No reply’ to I-T notice will be at own risk: HC to Vodafone

In a subtle warning, Delhi High Court on Monday told Vodafone that it would be taking a risk if it did not file a reply to the I-T department’s show cause notice asking why its 2011-12 financial records not be subjected to a special audit. A bench of justices S Muralidhar and Vibhu Bakhru made the observation after the IT department said the telecom major has not yet responded to the show cause notice and was trying to delay the assessment process beyond the March 31 deadline. “If you are not filing reply to the show cause notice, then you are taking a risk,” the bench said. The submission on behalf of the IT department was made by Additional Solicitor General (ASG) Sanjay Jain.

However, the counsel for the company sought adjournment in the matter as the arguing counsel was not present. The court, thereafter, adjourned the matter to March 23 but made it clear that it would not grant the company any time on next date to file its response to the show cause notice of the Income Tax department.

In its notice, the department had asked the company to show cause why its 2011-12 financial records not be subjected to special audit to arrive at the total income for assessment year 2012-13. In its plea challenging the notice, Vodafone has also challenged the amendment to section 142(2A) of IT Act that says the assessing officer can seek a special audit in certain circumstances. Vodafone Mobile Services Ltd has contended that referring a company for special audit is akin to a stigma on it and this power ought to be exercised only after satisfying the twin conditions of “complexity in the accounts and protecting interests of the revenue”.

It had contended that issuance of show cause notice to refer their accounts to special audit was done to “save” the department from “limitation” and to pass an assessment order by March 31. The company had earlier told the court it was willing to waive defence of limitation and the IT department can take its own time to assess their accounts without referring it for special audit. In its show cause notice of March 11, the IT department had said, “During course of assessment proceeding, the information and details asked vide various questionnaire have not been submitted till date and you yourself submitting the reasons that due to extreme voluminous of records the specific information cannot be furnished or requesting to grant some more time to furnish details which itself is concrete evidence that records of assessee are voluminous and accordingly need thorough investigation by special audit.” 

It had further said “the above aspects render the accounts of assessee company very complex with voluminous transaction, thereby necessitating thorough investigation, by special audit for arriving at correct amount of total income. “Accordingly, you are hereby given an opportunity to show cause why your case should not be referred to special audit.”