The Bombay High Court nullifies the FAO order issued two years after the DRP directive concerning Vodafone Idea.

The proceedings stem from Vodafone Idea’s Return of Income (ROI) for the Assessment Year 2016–2017, which initially reflected a loss. Seeking a refund of prepaid taxes amounting to Rs. 1128.47 crore, encompassing tax deductions at source and advance tax, the petitioner filed this claim.

The assessment underwent scrutiny, triggering a notice under Section 143(2) of the Income Tax Act. Due to the petitioner’s international and specified domestic transactions with associated enterprises, a reference was made under Section 92CA(1) to the Transfer Pricing Officer (TPO) for determining the arm’s length price for the relevant AY.

During this period, the TPO issued an order suggesting an adjustment to the international transaction value. Subsequently, the Assessing Officer (AO) formulated a draft order, proposing various inclusions and disallowances. In response, the petitioner submitted objections to the Dispute Resolution Panel (DRP) on January 27, 2020.

The DRP issued a notice, and the petitioner promptly furnished relevant documents and supporting evidence for their objections. Ultimately, on March 25, 2021, the DRP issued directions pursuant to Section 144C(5). These directions were uploaded to the Income Tax Business Application (ITBA) portal on the same day and conveyed to the petitioner via email on April 6, 2021.

The crux of the petitioner’s grievance lies in the AO’s failure to issue a final order within the 30-day limitation period stipulated by Section 144C(13). As a result, the petitioner contends that the original ROI should be accepted, and any excess tax paid should be refunded with interest