2015 (10) TMI 478 - AT - Income Tax

Tribunal Upholds Interest Charge Decision under Income Tax Act, 1961

Shri J.P. Narayanaswamy Versus Asst. Commissioner of Income Tax, Circle 8 (1), Bangalore

The Tribunal upheld the decision of the CIT (Appeals) in the case concerning the charging of interest under Section 220(2) of the Income Tax Act, 1961. ... Levy of interest under Section 220(2) - contention of the assessee that the Assessing Officer has wrongly computed the interest under Section 220(2) from the date of original demand i.e. 30.4.2013 till the date of order giving effect to the order of the Hon'ble High Court on 22.3.2012 - Held that:- In case the Hon'ble High Court had confirmed the relief granted by Tribunal, the inevitable conclusion will be that the original notice of demand will survive and the default existed even in the period between the order of the Tribunal and that of the Hon'ble High Court and therefore interest u/s.220(2) of the Act was liable to be paid. Once the Tribunal’s order is vacated and the original order is revived, the original demand that remained unpaid also gets revived. The principle of continuing liability is applicable to the Income Tax Act, being a Scheduled Act. The principle of continuing liability was highlighted in the CBDT Circular No.334 dt.3.4.1982. In view of the above, we hold that the learned CIT (Appeals) was right in upholding the decision of the Assessing Officer in charging interest u/s.220(2) of the Act for the entire period from the date of original demand notice till the time when the order giving effect to the Hon'ble High Court of Karnataka was passed. Provisions of Section 220(1A) of the Act; in terms of which the demand would be valid till the disposal of appeal before the last appellate authority was introduced only in Finance Act, 2014 w.e.f. 1.10.2014 and therefore does not apply to the case on hand. We, however, find from a perusal of the impugned order that the learned CIT (Appeals) has neither invoked the provisions of Section 220(1A) of the Act nor even discussed the same while deciding the issue. We are of the view that the issue raised by the assessee does not require adjudication for deciding the issue at hand and these grounds are therefore dismissed as infructuous. - Decided against assessee. Issues Involved:1. Charging of interest under Section 220(2) of the Income Tax Act, 1961.2. Period for which such interest is chargeable.Detailed Analysis:Issue 1: Charging of Interest under Section 220(2) of the Income Tax Act, 1961The core issue in the appeal is the charging of interest under Section 220(2) of the Income Tax Act, 1961. The assessee contended that the Assessing Officer wrongly computed the interest from the date of the original demand (30.4.2013) until the date of the order giving effect to the High Court's order (22.3.2012). The assessee argued that since there was no demand subsisting from 26.7.2005 (the date of the Tribunal's order granting relief) onwards, interest under Section 220(2) should not be charged for the period from 26.7.2005 to 22.3.2012.The CIT (Appeals) upheld the Assessing Officer's action, distinguishing the facts of the case from the Supreme Court's decision in Vikrant Tyres Ltd. v. ITO, where the entire demand was paid. In the present case, the entire demand was not paid, and therefore, the CIT (Appeals) held that the Supreme Court's decision was not applicable.Issue 2: Period for which Interest is ChargeableThe assessee argued that it was granted instalments and stay during the period when the demand subsisted, and hence there was no default warranting the charging of interest under Section 220(2). The CIT (Appeals) rejected this argument, stating that the stay of demand and grant of instalments did not negate the subsistence of the demand. The demand always subsisted, and the assessee was protected from recovery measures but was still liable for interest under Section 220(2).The assessee also relied on the Kerala High Court's decision in P.P. Koya v. CIT, which held that Section 220(2) does not apply for the period after the assessee was granted a refund. However, the Tribunal distinguished this case, stating that in P.P. Koya, the matter attained finality at the Tribunal stage, whereas in the present case, the High Court vacated the relief granted by the Tribunal, reviving the original demand.The Tribunal referred to CBDT Circular No.334 dated 3.4.1982, which clarified that if an assessment is set aside by an appellate authority but later restored, interest under Section 220(2) is computed from the original demand notice date.Conclusion:The Tribunal upheld the CIT (Appeals)'s decision, confirming the charging of interest under Section 220(2) for the entire period from the original demand notice date until the order giving effect to the High Court's order. The Tribunal dismissed the assessee's appeal, stating that the provisions of Section 220(1A) introduced by the Finance Act, 2014, were not invoked by the CIT (Appeals) and were not relevant to the issue at hand.Final Judgment:The assessee's appeal was dismissed, and the order of the CIT (Appeals) was upheld, confirming the charging of interest under Section 220(2) for the specified period.