No Withholding of Income Tax Refunds Without a Section 245 Order : Delhi High Court

Parties & Years Involved: Vodafone Idea Limited (successor to Vodafone Mobile Services Ltd. / Idea Cellular Ltd.) sought refunds for Assessment Years 2003–04 and 2008–09 to 2013–14.

Prior Orders: The ITAT had allowed the assessee’s appeals between April 2024 and February 2025. Following this, the Assessing Officer (AO) passed appeal effect orders quantifying a total refund of ₹53,09,56,470.

Department’s Objection: The Department withheld the refund on grounds that:

Scope of Section 200A vs. Section 201: Section 200A deals with processing and adjustments of TDS statements prior to assessment at the CPC level, whereas Section 201 governs the assessment of TDS.

Inapplicability of Form 26B: Rule 31A and Form 26B apply to corrections/adjustments of excess or mistaken deductions at the CPC stage. Once an assessment under Section 201 or an appellate order is passed, the refund becomes a vested, crystallized right. The Department cannot compel an assessee to file Form 26B or rely on internal SOPs to deny an appellate refund.

Section 245 Requirement: Refunds cannot be withheld or adjusted against demands of sister TANs or other unstayed dues without passing a valid, formal order under Section 245 of the Income Tax Act, 1961. Withholding refunds arbitrarily without a Section 245 order violates Articles 14, 19(1)(g), and 300A of the Constitution of India.

The Department must remit ₹53,09,56,470 along with applicable interest under Sections 244A and 244A(1A) on or before September 30, 2026.

If the amount is not credited by September 30, 2026, it will carry additional penal interest at 1% per month over and above statutory interest.