While directing the Income Tax Department (respondents) to pay to Vodafone Idea (petitioner) the amount of Rs. 53.09 crores along with applicable interest under Sections 244A and 244A(1A) of the Income Tax Act, on or before Sep 30, 2026, the Delhi High Court has held that once a TDS assessment under Section 201 is concluded and an appellate order gives rise to a refund, neither Rule 31A nor Form 26B can be insisted upon, and refund cannot be withheld without a Section 245 adjustment order.
Withholding such refund on the ground of alleged outstanding demands against the assessee’s PAN or sister TANs without a Section 245 order is arbitrary and violative of Articles 14, 19(1)(g) and 300A of the Constitution, clarified the Court.
The Division Bench comprising Justice Dinesh Mehta and Justice Rajneesh Kumar Gupta observed that once an assessment under Section 201 of the Income Tax Act has been made and any Appellate Authority passes an order giving rise to a refund, it becomes a vested and crystallised right of the assessee to receive the refund along with applicable interest, and such order is neither subservient to Section 200A nor to Rule 31A.
The Court further held that once an assessment under Section 201 has been made, neither Rule 31A applies nor can the AO or the CPC compel any assessee to furnish Form 26B, and the refundable amount found after giving effect to the Appellate Authority’s order has to be paid along with applicable interest, subject only to withholding or adjustment by way of a legally passed order under Section 245 of the Act. Unless any order under Section 245 is passed, the AO or the CPC cannot withhold any amount of an assessee once the Appellate Authority or the AO finds an amount to be refundable after passing of an order under Section 201 or pursuant to an appeal arising therefrom.
Applying this to the facts, the Court held that since the respondents had failed to show any order passed by the competent authority withholding or adjusting any refund in exercise of powers under Section 245, the plea taken by the respondents that the refund had not been issued because of the pending outstanding demand qua the petitioner’s PAN and sister TANs was clearly untenable in law, arbitrary and violative of Articles 14, 19(1)(g) and 300A of the Constitution of India.
Briefly, Vodafone Idea Limited, which is the successor of Vodafone Mobile Services Limited (VMSL) that merged with Idea Cellular Limited (ICL), has sought directions to the Income Tax Department to release its long-pending refunds along with applicable interest under Sections 244A(1) and 244A(1A) of the Income Tax Act. The refunds pertained to Assessment Years 2003-04 and 2008-09 to 2013-14 and had been pending for nearly two years.
The Income Tax Appellate Tribunal had allowed the assessee’s appeals and directed the Assessing Officer to grant refunds, and the AO had also passed appeal effect orders quantifying the refundable amount at Rs. 53.09 crores. Despite this, the Department insisted on the filing of Form 26B before releasing the refund, and when the assessee complied, the Form was rejected on the ground that there were outstanding demands of Rs. 924.57 crores against the assessee’s PAN and sister TANs.
The Department admitted in its counter affidavit that out of this demand, Rs. 913.66 crores had been stayed by various authorities and courts, leaving only Rs. 10.91 crores as the amount not under any stay, while the assessee in its rejoinder contended that only Rs. 27.63 lakhs were actually outstanding. The petitioner submitted that it is an Indian company in which approximately 50% of the shares are held by the Government of India, and that it was in dire need of cash because of the capital-intensive nature of its business.
