Revived tax demand and section 220(2) interest: unpaid demand keeps interest chargeable from the original notice of demand.

Interest under section 220(2) of the Income-tax Act remains chargeable when an original tax demand is revived by the final appellate order and the amount specified in the notice of demand was not paid within time. The Court treated section 156 and the statutory recovery scheme as fixing liability to simple interest on unpaid demand, and held that the later restoration of the Revenue's case revived the original demand in law. The Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964 was also relied on to preserve the validity of the original notice of demand. The CBDT circular was not treated as controlling, and the refusal to delete interest was upheld.

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Issues: Whether interest under section 220(2) of the Income-tax Act could be levied after the original demand was restored on final appeal and the assessee's request for waiver of interest under section 264 of the Income-tax Act was sustainable.

Analysis: Section 156 provides for service of a notice of demand and section 220(2) fastens liability to simple interest where the amount specified in such notice is not paid within time. The original assessment demand was later reduced by the appellate authority, but the Tribunal, on further appeal, restored the Revenue's position following a retrospective amendment. On final determination, the original demand stood revived. The Court also relied on the statutory effect of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, which preserves the validity of the original notice of demand. The CBDT circular was treated as non-binding on the Court, and the decisive factor remained the statutory scheme and the factual finding that the entire amount demanded had not been paid.

Conclusion: The levy of interest under section 220(2) was held to be valid, and the Commissioner's refusal to delete the interest was upheld.

Final Conclusion: The writ petitions failed because the restored original demand continued to operate in law, and interest on the unpaid amount was chargeable from the original notice of demand.

Ratio Decidendi: When an original tax demand is revived by the final appellate order, interest under section 220(2) remains chargeable from the original notice of demand if the amount specified therein was not paid within the prescribed time.

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