Revenue cannot charge interest under section 220(2) without properly serving FBT demand notice to assessee

ITAT Delhi ruled in favor of the assessee regarding interest charged under section 220(2) on non-payment of FBT demand. The Revenue adjusted outstanding FBT demand from the assessee's refund along with interest, despite the assessee's claim that no proper intimation or demand notice was served. The assessee had voluntarily deposited the FBT amount after discovering the demand on the IT portal. ITAT held that mere reflection of demand on e-filing portal does not absolve Revenue from properly serving intimation and demand notice. Since Revenue failed to establish proper service of demand notice, interest under section 220(2) could not be levied. Appeal allowed.

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Issues Involved:
The core issue in this case pertains to the chargeability of interest u/s 220(2) of the Income-tax Act, 1961.

Chargeability of Interest u/s 220(2):
The appellant, a resident corporate entity, filed its return of income for the assessment year 2017-18, which was processed under section 143(1) of the Act. An amount was adjusted from the refund due, including interest under section 220(2) on an outstanding Fringe Benefit Tax (FBT) demand. The appellant contended that no demand notice concerning the interest component of the FBT demand was served on them. The Commissioner (Appeals) directed the Assessing Officer to give credit for the payment made by the appellant and set off the demand. The Commissioner held that interest u/s 220(2) shall be chargeable till the date of payment of demand and that the issue related to the FBT demand for a previous year cannot be the subject matter of the appeal for the current assessment year.

Validity of Intimation and Demand Notice:
The appellant argued that the intimation under section 115WE(1) was issued after the limitation period and was not communicated along with the demand notice. The appellant contended that uploading the demand status on the Income Tax Department portal does not substitute valid service of the intimation and demand notice. The appellant relied on legal provisions and court decisions to support their argument.

Decision:
The Tribunal observed that the appellant had paid the FBT liability for the relevant year through a challan in 2008, and the department had wrongly adjusted it against income tax liability, creating an alleged FBT demand with interest. The Tribunal found that the appellant had discharged its FBT liability in 2008 itself and had continuously sought information regarding the demand notice. The Tribunal held that the mere reflection of demand on the portal does not absolve the Revenue from properly serving the intimation and demand notice. Therefore, the Tribunal directed the Assessing Officer to delete the demand and refund the amount adjusted against the refund due for the assessment year in question.

Conclusion:
The appeal was allowed, and the demand for interest u/s 220(2) was directed to be deleted, with the amount adjusted to be refunded to the appellant.

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