TaxTMI 
TaxTMI 
2014 (5) TMI 474
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....(Delhi), both by the department and the assessee. The ITAT decided the appeals vide consolidated order dated 30th January, 2009, restoring the issue of disallowance u/s 14A of the Act to the AO with a direction to work out the disallowance in accordance with the guidelines laid down in the order of the Special Bench decision of the Tribunal in the case of Daga Capital Management Pvt. Ltd. 117 ITD 169 (Mum) (SB). The AO passed the order in consequence to Tribunal directions u/s 143(3)/254 on 31st August 2009 and determine the disallowance u/s 14A at Rs.4,44,82,525/-. In the demand note issued u/s 156 dated 31st August, 2009, the AO levied interest u/s 220(2) of Rs.1,10,08,896/- as under: Tax payable Rs. 23,57,556/- Amount already refunded Rs. 1,37,42,560/- Total tax payable Rs. 1,61,00,116/- Add; Interest u/s 220(2) Rs. 1,10,08,896/- Total Rs. 2,71,09,012/- 4. The assessee preferred an appeal before ld. CIT (A) and submitted that the AO failed to appreciate that in the notice of demand dated 31st August 2009 itself the assessee was directed to pay income tax demand of Rs.1,61,00,116/- within 30 days of service of said notice. In such circumstances, there was no occasion f....
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....issues set aside the assessee will be in default for only balance of demand raised and fallen due as he is in continuous default for the demand in respect of issues confirmed in appeal. (III) Wherever the demand has been paid, the assessee will not be treated as in default and no interest for that amount thereafter will be charged. Similarly where the total income is reduced to nil or to a minus figure then again the assessee cannot be treated as in default. (IV) Thus when the assessment becomes final and so the demand after all the litigation then the default has to be analyzed. The final demand has to be divided according to the default. The period of default may vary for different portion of final demand. Interest has to be charged on the amount of tax in default for the period for which that default existed. Entire final demand cannot be subjected to interest and entire period from the date of original default cannot be considered for the charge of interest." 6. In the alternative, it was submitted that the interest had wrongly been computed inasmuch as if at all interest u/s 220(2) was to be levied, the same could only be levied from the date of refund since the said amount....
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....and as such was annulled, the assessment stood annulled. At para 17 Sarkar, J. on behalf of the Bench observed as follows: " "17. The order of reduction must, in my opinion, necessarily have the effect of setting aside the original order as a whole. It does not simply strike out a few of the figures appearing in the original order. That would really be a case of rectification for which provision is made ins. 35 of the Act. What an appellate order does in a case of reduction is, as in the present case, to go into all the figures and arrive afresh at the assessable income which replaces the amount of the income arrived at by the ITO. Therefore it seems to me that in all cases of an appellate order reducing the assessment the original order goes and if it goes, of course the notice of demand also falls to the ground and the default based thereupon also ceases to be default anymore....." 3. To get over the above decision The Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964 (in short 'Validation Act') was passed. Under s. 3(1)(b) of the above Act, if the Government dues are reduced as a result of the appeal, taxing authority need not necessarily issue a fr....
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....ther appeals/revisions), no interest under s. 220(2) can be charged pursuant to the original demand notice. The necessary corollary of this position will be that even when the assessment is reframed, interest can be charged only after the expiry of 35 days from the date of service of demand notice pursuant to such fresh assessment order." It is true that the above circular is binding on the Department, but not on the Court and assessee if it is against the statutory provisions. [See CIT vs. Malayala Manorama & Ors. (1983) 33 CTR (Ker) 277 : (1983) 143 ITR 29 (Ker)]. Even in the last sentence of the circular it is clearly stated hat if assessment is reframed, interest can be charged only after the expiry of 35 days from the date of service of demand notice pursuant to the fresh assessment order. It was argued that it was not necessary for the AO to reframe the assessment or pass a fresh assessment order as was done in this case, and mere intimation as mentioned in the Validation Act, 1964 would have been enough. But the fact is that after the Tribunal's order fresh assessment order Ext. P5 was passed detailing tax payable, calculating interest under ss. 139(8) and 217(1A) till the ....
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....unt, otherwise than by way of advance tax, specified as payable in a notice of demand under section 156 shall be paid within thirty days of the service of the notice at the place and to the person mentioned in the notice. (2) If the amount specified in any notice of demand under section 156 is not paid within the period limited under sub-section (1), the assessee shall be liable to pay simple interest at one per cent for every month or part of a month comprised in the period commencing from the day immediately following the end of the period mentioned in sub-section (1) and ending with the day on which the amount is paid: Provided that, where as a result of an order under section 154, or section 155, of section 250 or section 254, or section 260, or section 262, or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under this section had been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded:" ****** "(6) Where an assessee has presented an appeal under section 246 or section 246A the Assessing Officer may, in his discretion and subject to su....
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....act as judge in (a competition or argument) Re: combining form used to add the meaning 'do again, esp. to verb. Compute: to calculate (an answer or amount) or by using a machine. In the backdrop of above meanings of various phrases adjudicating an appeal, we will examine the findings of Tribunal which read as under: "the solitary ground of appeal, taken by the Revenue was interconnected with the ground number one of the assessee's appeal and in that ground of appeal the issue involved was whether any amount deserved to be disallowed out of finance charges under section 14 A of the Act. If yes then how much amount is to be disallowed. Assessment officer has disallowed a sum of Rs.9,32,72,113/-. The CIT(A) have confirmed the disallowance of Rs.72,78,820/-. The revenue in its appeal is impugning the deletion of Rs.8,89,93,293/- out of the disallowance of finance charges. Whereas assessee is impugning the confirmation of disallowance that at Rs.72,78,820/-. The brief facts are the company has filed its return of income on 30th November 2000 declaring total income of Rs.73,13,04,670/-. This return was processed u/s 143(1)(a) of the Income Tax Act on 24th of July 2002. Thereafter t....
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..... In the backdrop of above discussion it is evident that in the present case Tribunal had only directed for re-computation of disallowance u/s 14A to the AO while upholding AO's finding that disallowance u/s 14A was called for. Therefore, it was not a case of set aside of the original assessment order but only for quantification purpose, the matter was restored to the file of the AO. The original disallowance of Rs.9,75,13,971/- got reduced to 4,77,25,657/-. 16. Now in the back-drop of the said facts and direction of the Tribunal let us look at the facts of the Vikrant Tyres Ltd's case. The fact of the case were that for the assessment year 1977-78, 1978-79, and 1980-81, assessment order were served on the assessee-appellant and demand notice were issued. The assessee complied with the demands by paying the tax due. The appellate authority on an appeal preferred by the appellant allowed the same and the taxes paid were refunded to the appellant. When the matter went for reference to the High Court, the same came to be allowed thereby upholding all the assessment order. Thereafter, the Revenue made fresh demands and the assessee repaid the taxes as assessed and demanded. However, t....
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....enue after decision in the reference by the High Court on fresh demand notices being issued to the assessee and the Hon'ble Supreme Court held admittedly, on a literal meaning of the provisions of section 220(2) of the Act, such a demand for interest cannot be made. The High Court by a liberal interpretation of the said section and relying upon section 3 of the Validation Act has held that the Revenue is entitled to invoke section 220(2) of the Act for the purpose of demanding interest on such retention of money and in that context Hon'ble Supreme Court has observed (which is reproduced below):. "We are not in agreement with the High Court on the interpretation placed by it on section 220(2) of the Act in regard to the right of the Revenue to demand interest in a situation where the assessee has promptly satisfied the demand made by the Revenue in regard to the tax originally assessed." 18. From the facts stated above of the Vikrant's case we can understand that in that case before the Supreme Court, the assessee had paid the entire tax demanded of him at the first instance itself i.e. when the original assessment was made and demand raised, at that time itself the assessee has m....
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....nd " in the result the appeal is treated as partly allowed", and in the back ground of the said finding of the Tribunal, the Hon'ble High Court has treated the assessment order, finally passed after the direction of Tribunal, as a fresh order of the AO. Accordingly, Hon'ble High court has held that interest under sec 220(2) of the Act can be levied after the expiry of time granted in the demand notice in that order. 20. Therefore this precedent also doesn't come to the rescue of the assessee. All other cases cited by the assessee also do not help the assessee because in those cases also the final demand notice emanated from a fresh order of the AO, which was passed in pursuance of an order from an appellate authority who had quashed or set aside or directed de novo proceeding or ordered to pass fresh assessment proceedings, which is not the case here and is therefore distinguishable to the facts of this case and does not support the case of the assessee." 21. In this regard, we may refer to the decision of Hon'ble Delhi High Court in the case of Girnar Investment Ltd. Vs. CIT wherein it has been held as Under: "Held, That the assessee was liable to pay interest under section 220....