2012 (10) TMI 327 - HC - Income Tax

High Court upholds Tribunal's decision on appeal jurisdiction & interest demand under Income Tax Act

The High Court dismissed the appeal, upholding the Tribunal's decisions against the assessee on the maintainability of the appeal before the Commissioner ... Levy of interest under Section 234B, 234C and 220(2) - assessee contested against imposition of interest as 30 days time had not expired - Held that:- The original notice of demand under Section 156 creating a demand of Rs.3,29,371/- dated 31.3.1995 on the assessed income of Rs.5,23,020/- was duly served upon the assessee on 8.5.1995. As per provisions of Section 220(1), the assessee was required to satisfy the demand within 30 days from the date of service of notice of demand. Admittedly, the assessee did not deposit the said amount of tax of Rs.3,29,371/-. The appellant cannot take benefit of the time spent in the litigation because for the said period the department could not utilise the amount of tax. The rational behind the provisions of Section 220(2) to levy interest on delayed payment of tax is not to penalise the party but to make a provision for compensation for the department, on the failure of the assessee to make payment on the first notice of demand. The notice of demand dated 3.1.2003 cannot be said to be a first notice of demand because first notice of demand has already been issued to the assessee after completing the original assessment completed by the Dy. CIT(A), Gorakhpur. In these circumstances, there was no requirement in law to grant a further period of 30 days, after the service of the notice and thus it cannot be said that the demand has been raised for the first time on 3.1.2003. In these circumstances, no substance is found in the argument of assessee that interest under Section 234B, 234C and 220(2) could not have been charged before expiry of 30 days of serving the notice of demand - against assessee. Issues Involved:1. Maintainability of the appeal before the Commissioner of Income Tax (Appeals) against the order dated 3.1.03.2. Whether the appeal filed against the order dated 3.1.03 was maintainable under section 246 of the Income Tax Act.3. Demand of interest under Section 220(2) from the date of the original demand note despite variations in the assessment order.Issue-wise Detailed Analysis:1. Maintainability of the Appeal before CIT(A) Against the Order Dated 3.1.03:The Tribunal examined whether the appeal against the order dated 3.1.03 was maintainable before the Commissioner of Income Tax (Appeals). The Tribunal relied on the case of Bharat Commerce and Industries Ltd. vs. Union of India and others, which held that no appeal lies against the AO's order under section 220(2) of the Income Tax Act. The Tribunal concluded that the CIT(A) has no power to hear the appeal against the interest charged under section 220(2) of the I.T. Act. The Tribunal's findings were upheld, and the appeal by the revenue was allowed.2. Maintainability of the Appeal Under Section 246 of the Income Tax Act:The right to appeal can only be availed when specifically provided for in the statute. The Tribunal held that no appeal lies against the order of the A.O. for charging interest under Section 220(2), 234B, and 234C of the Income Tax Act. Chapter XX of the Income Tax Act, 1961, which defines appealable orders, does not provide a right of appeal against interest levied under these sections. Therefore, the order of A.O. dated 3.1.2003 was not appealable before the CIT(A), and the CIT(A) should not have entertained the appeal. The Tribunal's decision was upheld, and the questions were decided against the assessee.3. Demand of Interest Under Section 220(2):The main contention was whether interest under Section 220(2) could be demanded from the date of the original demand note, despite variations in the assessment order. The original notice of demand was issued on 31.3.1995, and the assessee was required to pay the tax within 30 days. The assessee did not pay the tax, and interest was charged on the delayed payment. The Tribunal held that the demand notice dated 3.1.2003 was not the first notice of demand but merely a recalculation of the income and interest by way of execution of the appellate authorities' orders. The assessee's liability to pay tax accrued on the date of the original assessment, and no further period of 30 days was required after the service of the notice on 3.1.2003. The Tribunal's decision was upheld, and the question was decided against the assessee.Conclusion:The High Court dismissed the appeal, deciding all three questions against the assessee and in favor of the revenue. The revenue may proceed accordingly.