Vodafone Idea tax refund delay presents ‘grim picture’ of IT Department: Delhi HC

The delay in refunding ₹53 crore to Vodafone Idea Limited paints a “grim picture” of the Department’s handling of tax refunds, the Delhi High Court recently observed while ordering refund of the amount to the telecom operator [Vodafone Idea Vs ACIT].

A bench of Justices Dinesh Mehta and Rajneesh Kumar Gupta held that once a refund arises from an assessment or an appellate order, it becomes a vested and crystallised right of the assessee.

“The case in hands portrays a grim picture of the state of affairs prevailing in the Department so far as issues relating to refund is concerned,” the Court said in its judgment of August 18.

The Court directed the Department to pay Vodafone Idea ₹53 crore along with interest by September 30.

If the amount is not credited by the deadline, it will carry additional interest at 1 percent per month over and above the statutory interest, the Court ordered.

The dispute concerned assessment years 2003-04 and 2008-09 to 2013-14. Vodafone Idea had succeeded before the Income Tax Appellate Tribunal (ITAT) through orders passed between April 2024 and February 2025.

The assessing officer subsequently passed orders giving effect to the Tribunal’s decisions and quantified the total refund at over ₹53 crore. However, the money was not released.

The IT Department insisted that the company furnish Form 26B. It also cited outstanding demands of ₹924.57 crore against the company’s permanent account number and associated tax deduction and collection account numbers.

However, the IT Department admitted that demands totalling ₹913.66 crore had been stayed by courts or competent authorities. According to it, only about ₹10.91 crore remained unstayed. Vodafone Idea disputed this figure and claimed that the actual outstanding amount was only ₹27.63 lakh.

The Court declined to decide that factual dispute. It nevertheless rejected the Department’s reliance on Form 26B and its standard operating procedure governing refunds.

It explained that while Section 201 of the Income Tax Act deals with the assessment of tax deducted at source, Section 200A concerns adjustments at the centralised processing cell before assessment. Rule 31A and Form 26B apply to the latter category.

“Once the assessment by a competent AO has been made under Section 201 of the Act of 1961 and/or any Appellate Authority passes an order and the refund arises or emanates therefrom, it becomes a vested and crystallised right of an assessee to get the refund, along with applicable interest,” the judgment said.

Therefore, after an assessment under Section 201, neither the assessing officer nor the centralised processing cell can compel an assessee to furnish Form 26B, the Court ruled.

It added that a refund could be withheld or adjusted only through a legally passed order under Section 245 of the Income Tax Act. No such order had been passed in Vodafone Idea’s case.

The Court consequently termed withholding of the refund arbitrary, legally untenable and violative of Articles 14, 19(1)(g) and 300A of the Constitution.

“It is a fit case for imposition of exemplary cost, but we make the case easy,” the Bench remarked while disposing of the petitions without imposing costs.

Senior Advocate Sachit Jolly along with advocates Soumya Singh, Abhyudaya Shankar Bajpai and Ananya Kapoor represented Vodafone Idea.

Senior Standing Counsel Indruj Singh Rai, along with advocates Sanjeev Menon, Rahul Singh, Priya Sarkar, Gaurav Kumar and Prateek Bhati appeared for the Income Tax Department.

[Read Judgment]