The Delhi High Court on Thursday stayed recovery of ₹329 crore penalty imposed by the income tax department on Vivo Mobile India, which manufactures and sells smartphones and accessories under the ‘Vivo’ and ‘iQOO’ brand names. The court also sought the tax department’s response to its ruling.
The court also stayed penalty orders passed by the department’s Transfer Pricing Officer (TPO) against smartphone maker Oppo India. People familiar with the matter pegged the penalty for seven assessment years (2016-23) for Oppo Mobiles India at about ₹5,000 crore.
A division bench led by Justice V Kameshwar stayed the TPO’s order asking Vivo Mobile India, a wholly-owned unit of Hong Kong-based Multi Accord, to pay ₹329.11 crore penalty on various grounds, including failure to accurately disclose the group’s holding structure and declaring Vivo China as an associated enterprise, besides several international transactions.
Both the cases will be heard next on September 23.
Senior counsel Arvind P Datar, appearing for Vivo, told the HC that the tax department’s penalty order was “ex facie wholly without jurisdiction, illegal, arbitrary, perverse”, in contravention of the mandatory provisions of the Income Tax Act, 1961, and in breach of the basic principles of natural justice and therefore, bad in law.
He argued that the department had imposed a penalty even for not submitting the shareholding pattern of the foreign trading entities from which purchases were made and for failing to furnish the complete purchase details from foreign trading entities, including the relationship with such entities.
Datar said the assessment proceeding for AY2019-20 is currently ongoing and the draft assessment order under Section 144C (1) had not been yet passed by the assessing officer. “Consequently, the substantive assessment proceedings for the year under consideration remain incomplete. Therefore, in view of the provisions contained in Section 275 of the Act there is a complete bar to proceed with the penalty proceedings, and the limitation to complete the same has not yet commenced,” according to Vivo.
Vivo had filed its return of income for assessment year 2019-20 under Section 148, wherein it declared nil income. The case of Vivo was selected for scrutiny and notice was issued to it under Section 143(2).
