Court rules interest cannot be levied under section 220(2) post assessment order set aside in appeal.

The High Court dismissed the appeal, upholding that interest could not be levied under section 220(2) of the Income Tax Act after the assessment order was set aside in appeal. The court emphasized the need for a fresh demand to be raised following the setting aside of the assessment order, citing relevant case law. It was held that interest cannot be charged during a period with no demand until it is revived, as supported by previous decisions. The Assessing Officer was found unjustified in charging interest under section 220(2), leading to the dismissal of the appeal.

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Issues involved: Interpretation of interest levy u/s 220(2) of the IT Act based on the setting aside of the assessment order by the CIT(A) and the requirement of a fresh demand.

Summary:
The appeal was filed against the Tribunal's decision which held that interest could not be levied u/s 220(2) of the IT Act after the order of assessment was set aside in appeal. The Tribunal relied on judgments in Vikrant Tyres Ltd. vs. ITO, SMS Schloemann Siemag, A.G. vs. Dy. CIT, and Smt. B. Indira Rani vs. CIT. The appellant argued that once a demand was raised, the assessee was required to deposit the amount without the need for a fresh demand. However, the High Court rejected this argument citing the decision in Vikrant Tyres Ltd. vs. ITO, where it was held that a fresh demand was necessary after an appellate order. The High Court emphasized that setting aside the assessment order by the CIT(A) required a new demand to be raised, as per the decisions of Andhra Pradesh High Court and Kerala High Court.

The Tribunal also considered the arguments regarding interest levy u/s 220(2) and found support in the decision of Vikrant Tyres Ltd. vs. ITO. It was noted that interest cannot be charged during a period with no demand until it is revived. The Full Bench of Andhra Pradesh High Court and Kerala High Court also supported this view. The High Court concluded that the Assessing Officer was not justified in charging interest u/s 220(2) of the Act. Therefore, the appeal was dismissed as it lacked merit.

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