The Delhi High Court on Monday asked Vodafone Mobile Services Ltd to file its response to the government’s show-cause notice that asked the telecom major why its financial records for 2011-12 should not be subjected to a special audit. It also warned the company that failing to respond to the show-cause would be at its own peril.
A bench of justices S Muralidhar and Vibhu Bakhru gave time to Vodafone to
respond after the income tax department, through additional solicitor general Sanjay Jain said the company had failed to respond to its show-cause notice so far 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 told the Vodafone counsel, who sought adjournment till March 23.
The court also clarified that no further time will be granted to the company to respond to the show-cause notice.
The audit would give the government fresh material to reassess the income submitted by the company for assessment year 2012-13. The audit was ordered after the Comptroller and Auditor General ( CAG) of India claimed huge losses to the exchequer from under-reporting of revenues by telcos.
The IT department, in its show-cause notice of March 11, had asked the company as to why its 2011-12 financial records not be subjected to special audit to arrive at the total income for assessment year 2012-13. Instead of filing the response, the firm chose to move the court, arguing that referring it for a special audit was akin to casting a stigma on it. This power ought to be exercised only after satisfying the twin conditions of “complexity in accounts and protecting interests of the revenue,” the telecom company said.