2003 (11) TMI 19

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....eal by exhibit P3 order the Appellate Tribunal directed the Assessing Officer to reconsider the addition of Rs. 50,000 as the unexplained cash credit. The Tribunal held that the "addition as it now stands cannot be sustained". The appellate order exhibit P3 ends with the following: "In the result, the appeal will be treated as partly allowed." The Assessing Officer, consequent to the appellate order passed a fresh assessment order by exhibit P5. The heading of exhibit P5 order itself is "order under section 154 of the Income-tax Act, 1961". Income-tax payable was determined as Rs. 9,88,981, after taking into account the rebate and addition of surcharge, after deducting the advance tax paid, tax payable was determined as Rs. 9,78,279. Interest under section 139(8) of Rs. 1,42,862 and under section 217(1A) of Rs. 3,03,537 were also added and tax payable was determined as Rs. 14,24,678. Penalty proceedings were also initiated and exhibit P5(A) demand notice was issued. The operative part of exhibit P5 assessment order is as follows: "In view of the above, I hold that the credit of Rs. 50,000 is proved. According to that total income is computed as under: --------------------------....

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....nbsp;                      ---------- Income-tax                                           9,88,981 Less; Rebate on agricultural income                     1,000                                                     ---------- Balance                                              9,87,981 Surcharge at....

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....;            9,78,279  Add: Interest under section 139(8)                  1,42,862  Interest under section 217(1A)                      3,03,537                                                     ----------  Total tax                                          14,24,678                                  &nbsp....

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..... That would really be a case of rectification for which provision is made in section 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 Income-tax Officer. 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..." To get over the above decision, the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964 (in short "Validation Act"), was passed. Under section 3(1)(b) of the above Act, if the Government dues are reduced as a result of the appeal, the taxing authority need not necessarily issue a fresh notice of demand and the taxing authority need give only an intimation regarding the reduction of the amount. Section 3(1)(b) of the above Act is as follows: "(b) Where such Government dues are reduced in such appeal or proceeding, - (i) it shall not be necessary for the taxing authority to serve u....

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.... the fresh assessment. The above decision is with respect to a claim of interest under section 244. Even by comparison this decision will help only the assessee. In this case admittedly fresh assessment was made, fresh computation was made and fresh demand notice was issued instead of sending an intimation under the Validation Act, 1964. Learned standing counsel then referred to the judgment of this court in ITO v. A.V. Thomas and Co. [1986] 160 ITR 818. In that case, when the original assessment and demands were made, the assessee paid the tax within the stipulated time. But in appeal, the Appellate Assistant Commissioner allowed the appeal. Consequently, refund was made. But the Appellate Tribunal allowed the Department's appeal. Fresh demand was made and the assessee paid the tax. The Department contended that since the original assessment was upheld and restored, the assessee has to pay interest from the date of the original demand as provided under section 220(2). This was negatived by this court as the assessee has paid the tax as demanded by the Income-tax Officer in time when the original demand was made, even though it was refunded to the assessee due to the order of the ....