1990 (6) TMI 103 - AT - Income Tax

Tribunal upholds interest charges on tax demand, no fresh notice needed.

The Tribunal upheld the legitimacy of interest charged under Section 220(2) of the Income-tax Act on the enhanced demand and ruled that no fresh demand ... A Firm, A Partner, Cash Credits, Income From Other Sources Issues Involved1. Legitimacy of interest charged under Section 220(2) of the Income-tax Act on the enhanced demand.2. Necessity of issuing a fresh demand notice for the enhanced demand.3. Applicability and interpretation of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964.4. Relevance of previous case laws and judicial precedents.Detailed Analysis1. Legitimacy of Interest Charged under Section 220(2)The primary issue was whether the interest of Rs. 47,025 levied under Section 220(2) on the enhanced demand of Rs. 95,000 was properly charged. The Tribunal concluded that the interest was legitimate. The assessee contended that the interest should not be charged from 16-10-1982, as the demand of Rs. 95,000 did not exist at that time. However, the Tribunal held that the starting point for interest calculation was the original demand created by the Assessing Officer (A.O.), and any subsequent orders did not alter this fact.2. Necessity of Issuing a Fresh Demand NoticeThe Tribunal examined whether a fresh demand notice was required for the additional Rs. 95,000 resulting from the Tribunal's order. The assessee argued that a new notice was necessary, while the revenue contended that it was not. The Tribunal agreed with the revenue, stating that the original demand notice issued by the A.O. remained valid and enforceable. The issuance of a fresh notice by the A.O. was deemed an act of abundant caution and not a legal requirement.3. Applicability and Interpretation of the Validation ActThe Validation Act was brought into focus to determine its impact on the case. The Tribunal noted that the Validation Act was enacted to safeguard government dues and was a complete code in itself. The Tribunal rejected the assessee's argument that the Validation Act necessitated a fresh demand notice for the enhanced amount, citing that the original demand notice continued to be valid under the Act.4. Relevance of Previous Case Laws and Judicial PrecedentsThe Tribunal reviewed various case laws to support its decision:- A.V. Thomas & Co. Ltd. v. ITO (Kerala High Court): The Tribunal distinguished this case from the present one, noting that in A.V. Thomas, the original demand had been paid, and thus no default under Section 220(1) arose.- K.P. Abdul Kareem Hajee v. ITO (Kerala High Court): This case supported the view that the original assessment order remained operative, and the assessee was liable to pay interest under Section 220(2).- M.N. Jadhav v. Fourth ITO (Karnataka High Court): This case was almost identical to the present case, reinforcing that the original notice of demand remained valid and enforceable.- Mohammed Essa Moosa Sait v. GTO (Kerala High Court): This case under the Gift-tax Act, with provisions similar to Section 220(2), supported the charging of interest when the original order was restored.- ITO v. Ghanshyamdas Jatia (Calcutta High Court): This case confirmed that the original demand notice continued to be valid under the Validation Act, negating the need for a fresh notice.The Tribunal also considered but ultimately dismissed the relevance of the Tribunal's decision in Aero Traders (P.) Ltd., noting that it did not address the merits of the issue at hand.ConclusionThe Tribunal upheld the interest charged by the A.O. under Section 220(2) as legal and valid. It concluded that no fresh demand notice was necessary for the enhanced amount of Rs. 95,000. The appeal by the assessee was dismissed.