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Not Replying to an IT Show-Cause Notice Is Risky: HC to Vodafone

The Delhi High Court on Monday warned Vodafone that refusing to file a reply to a show-cause notice is risky.

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Tech News
3 min read
The income tax department vs the UK-based Vodafone Group Plc. (Photo: Reuters)

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 IT department’s show-cause notice asking the company 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 31 March deadline.

If you are not filing a reply to the show-cause notice, then you are taking a risk.
Bench

The submission on behalf of the IT department was made by Additional Solicitor General (ASG) Sanjay Jain.

However, the counsel for the company sought an adjournment in the matter as the arguing counsel was not present.

Union Minister for Finance, Corporate Affairs and Information & Broadcasting, Arun Jaitley shakes hand with Vodafone Group CEO Vittorio Colao during a meeting in New Delhi. (Photo: PTI)
Union Minister for Finance, Corporate Affairs and Information & Broadcasting, Arun Jaitley shakes hand with Vodafone Group CEO Vittorio Colao during a meeting in New Delhi. (Photo: PTI)
The court has adjourned the matter to 23 March but made it clear that it would not grant the company any time on the 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 should not be subjected to special audit, in order to arrive at the total income for the 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 is one of the telephone operators that filed for a petition that the court later dismissed. (Photo: Reuters)
Vodafone is one of the telephone operators that filed for a petition that the court later dismissed. (Photo: Reuters)
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 a 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 31 March.

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The company had earlier told the court it was willing to waive the 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 11 March, the IT department had said,

During course of assessment proceeding, the information and details asked vide various questionnaire has 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. The above aspects render the accounts of assessee company very complex with voluminous transaction, thereby necessitating a thorough investigation, by special audit for arriving at a 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.

(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)

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