High Court Upholds Tribunal Decision on Interest Chargeability under Section 220(2) IT Act

The High Court upheld the Income Tax Appellate Tribunal's decision that interest under Section 220(2) of the IT Act was chargeable from the original demand notice date of 25.03.1991, despite the appellant not being in default during that period. The Court dismissed the appeal, ruling that the appellant is liable to pay interest as per the Tribunal's order, emphasizing the need for interest payment from the original demand date due to non-compliance.

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Issues involved:
The appeal challenges the order of the Income Tax Appellate Tribunal, Visakhapatnam bench, regarding the chargeability of interest on unpaid tax against the assessee from the original Assessment Order dated 25.03.1991.

Issue 1:
The Tribunal's correctness in holding that interest under Section 220(2) is chargeable from the date of the demand notice dated 25.03.1991, despite the order of the Commissioner of Income Tax (Appeals) stating no tax is payable.

The original assessment order for the AY 1988-89 was set aside by the CIT (A) in an appeal, directing the Assessing Officer to reassess capital gains and adhoc compensation. The subsequent assessment order dated 28.03.1994 determined additional compensation and interest, with the AO charging interest from the original demand date of 25.03.1991.

Issue 2:
The Tribunal's decision that interest under Section 220(2) arises from 25.03.1991, even though a fresh demand notice was issued after completion of assessment as directed by the Commissioner.

The CIT (A) observed that the original assessment order was set aside in an earlier order, and no enforceable notice existed until 28.03.1994. The Revenue challenged this in ITAT, which held that interest is payable from the original demand notice date if there is a default in compliance.

Issue 3:
The Tribunal's ruling that interest under Section 220(2) is chargeable from the date of the demand notice dated 25.03.1991, despite the appellant not being in default during that period.

The Tribunal interpreted the CIT (A)'s order as affirming the AO's action on minor issues without setting aside the entire assessment order. As the appellant did not pay the tax until a later date, interest was deemed payable from the original demand notice under the Taxation Laws Act.

Issue 4:
The Tribunal's refusal to rectify the order in ITA No.679/Vizag/2002 and rejecting the miscellaneous application without considering the facts of the case.

The Tribunal's decision was based on the interpretation of the CIT (A)'s order, emphasizing the need for interest payment from the original demand date due to non-compliance by the appellant.

In conclusion, the High Court dismissed the appeal, upholding the Tribunal's decision that interest was chargeable from the original demand notice date of 25.03.1991. The Court found no illegality or irregularity in the order and ruled that the appellant is liable to pay interest as per Section 220(2) of the IT Act.

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