AGYA RAM v. INCOME TAX OFFICER
[Citation -2005-LL-0812]

Citation 2005-LL-0812
Appellant Name AGYA RAM
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 12/08/2005
Assessment Year 1990-91 TO 1993-94
Judgment View Judgment
Keyword Tags rectification application • condition precedent • outstanding demand • demand notice
Bot Summary: Notice of demand under s. 156 of the Act for the amount mentioned in the respective assessment years was issued by the AO, but the assessee did not pay the tax and preferred appeals before the CIT(A), who allowed some relief to the assessee by partly allowing the appeals. The CIT(A) rejecting the contentions of the assessee, upheld the order of the AO after analyzing the decision in the case of Vikrant Tyres Ltd. Before us, the learned authorised representative for the assessee first placed reliance on the decision of the apex Court in the case of Vikrant Tyres Ltd. and thereafter reiterated the submissions made before the tax authorities below to canvass his point that as the assessee was not in default so no interest under s. 220(2) of the Act was chargeable. 11th July, 2004 passed by the AO under s. 154 of the Act, either no demand was raised against the assessee or a refund was given to the assessee, so at least for these asst. Another argument advanced by the learned Authorised Representative before us is that if the Tribunal concludes that the assessee is liable to pay interest under s. 220(2) of the Act then the period from the date of order passed by the CIT(A) till the date of the order of Tribunal is to be excluded from the period for charging interest under s. 220(2) of the Act because on account of appeal effect given by the AO to the orders of the CIT(A) no interest under s. 220(2) of the Act was required to be paid by the assessee in these assessment years in view of the reversal of the order of the AO by the CIT(A). Undisputedly in all the instant appeals, the AO charged interest under s. 220(2) of the Act when the assessee failed to make the payment against the demands raised by the AO. However, the assessee has not made any payment against these demands raised under s. 156 of the Act by the AO till the disposal of the appeals by the Tribunal upholding t h e orders of the AO and reversing those of the CIT(A). The question is whether the Revenue is entitled to demand interest in regard to the amount which was refunded to the assessee by virtue of the judgment of the appellate authority and which was repaid to the Revenue after decision in the reference by the High Court on fresh demand notices being issued to the assessee Admittedly, on a literal meaning of the provisions of s. 220(2) of the Act, such a demand for interest cannot be made. Whereas, in the instant cases of the assessee, before us, the assessee had not complied with the notice of demand issued under s. 156 of the Act till the disposal of the appeal by Tribunal, hence the assessee is not entitled to receive any advantage from the decision of the apex Court in the case of Vikrant Tyres Ltd. We are of the opinion that in view of the decision in the case of Vikrant Tyres Ltd. the above mentioned contention of the assessee is liable to be rejected and, accordingly, the same is rejected.


These four appeals filed by assessee arising out of separate orders of CIT(A) passed in appeal Nos. 298, 297, 296 & 295/2004-05 dt. 15th March, 2005, were heard together and are being disposed of by this common order, as issue of charging of interest under s. 220(2) of IT Act, 1961 (hereinafter referred to as Act ) in all these appeals is almost identical. relevant and material facts for disposal of issue under consideration before us are that in all these cases, assessments were completed under ss. 143(3)/148 of Act on 20th March, 1997. Notice of demand under s. 156 of Act for amount mentioned in respective assessment years was issued by AO, but assessee did not pay tax and preferred appeals before CIT(A), who allowed some relief to assessee by partly allowing appeals. Consequently AO gave appeal effect and reduced demand on assessee and charged interest under s. 220(2) of Act. Subsequently, Tribunal set aside order of CIT(A) and restored respective additions made by AO. However, while giving appeal effect AO raised demand on assessee including interest under s. 220(2) of Act as mentioned in respective orders. assessee moved application under s. 154 asking for rectification of interest charged under s. 220(2) of Act by placing reliance on decision of apex Court delivered in case of Vikrant Tyres Ltd. vs. ITO (2001) 166 CTR (SC) 1: (2001) 247 ITR 821 (SC). A O rejected rectification application filed by assessee, as according to AO facts of Vikrant Tyres Ltd. s case (supra) were different than instant cases of assessee. On appeal, against order of AO similar contentions were raised by t h e assessee before CIT(A). CIT(A) rejecting contentions of assessee, upheld order of AO after analyzing decision in case of Vikrant Tyres Ltd. (supra). Before us, learned authorised representative for assessee first placed reliance on decision of apex Court in case of Vikrant Tyres Ltd. (supra) and thereafter reiterated submissions made before tax authorities below to canvass his point that as assessee was not in default so no interest under s. 220(2) of Act was chargeable. learned authorised representative further contended that in instant cases, except in asst. yr. 1993-94, in final orders dt. 11th July, 2004 passed by AO under s. 154 of Act, either no demand was raised against assessee or refund was given to assessee, so at least for these asst. yrs. 1990-91 to 1992-93 no interest under s. 220(2) of Act should be charged against assessee. Another argument advanced by learned Authorised Representative before us is that if Tribunal concludes that assessee is liable to pay interest under s. 220(2) of Act then period from date of order passed by CIT(A) till date of order of Tribunal is to be excluded from period for charging interest under s. 220(2) of Act because on account of appeal effect given by AO to orders of CIT(A) no interest under s. 220(2) of Act was required to be paid by assessee in these assessment years in view of reversal of order of AO by CIT(A). On other hand, learned Departmental Representative for Revenue, submitted that in instant cases undisputed facts are that from date of demand notice issued under s. 156 of Act by AO till disposal of appeal by Tribunal, no interest under s. 220(2) of Act has been paid by assessee, as mentioned in demand notice issued under s. 156 of Act by AO, so, ratio of decision of Vikrant Tyres Ltd. (supra) does not apply to instant cases of assessee. He further contended that in view of Circular No. 334 dt. 3rd April, 1982 issued by CBDT in respect of s. 220 of Act, it would not make any difference in respect of charging of interest under s. 220(2) of Act even if during intervening period there was no tax payable by assessee under any operative order in view of following clarification made by CBDT in Circular: "Where assessment made originally by ITO is either varied or even set aside by one appellate authority but, on further appeal, original order of ITO is restored either in part or wholly, interest payable under s. 220(2) will be computed with reference to due date reckoned from original demand notice and with reference to tax finally determined. fact that during intervening period, there was no tax payable by assessee under any operative order would make no difference to this position." We have considered relevant rival submissions of both parties, perused record and carefully gone through orders of tax authorities below as well as case law cited (supra). Undisputedly in all instant appeals, AO charged interest under s. 220(2) of Act when assessee failed to make payment against demands raised by AO. However, assessee has not made any payment against these demands raised under s. 156 of Act by AO till disposal of appeals by Tribunal upholding t h e orders of AO and reversing those of CIT(A). Reference by learned Authorised Representative to passing of orders by AO on 11th July, 2005 under s. 154, either raising no demand or issuing refund to assessee, is of no relevance as it does not clinch issue regarding charging of interest under s. 220(2) of Act under consideration before us because we are required to resolve issue as to whether assessee is required to pay interest under s. 220(2) of Act after assessee fails to comply with demand raised under s. 156 of Act by AO and not that if on 11th July, 2005 there is no outstanding demand against assessee, interest cannot be charged under s. 220(2) of Act from assessee because in these orders also AO has calculated and charged interest under s. 220(2) of Act, but only after making adjustments, etc. From reading of CBDT Circular (supra) it is clear that even in cases where during intervening period, i.e., from raising of demand under s. 156 of Act till passing of order by ITAT, there was no tax payable in view of operative orders of CIT(A), interest payable under s. 220(2) of Act would still be computed only with reference to due date reckoned from original demand notice as well as with reference to tax finally determined in view of order of appellate authority, i.e., in instant cases Tribunal. contention of learned Authorised Representative for excluding period when appellate order of CIT(A) in favour of assessee creating no demand against him was under operation is rejected in light of Circular (supra) passed by CBDT. We shall now consider this contention in view of ratio of decision of apex Court in case of Vikrant Tyres Ltd. (supra) referred to by learned Authorised Representative for assessee. relevant portion of decision (supra) is reproduced hereunder: "A bare reading of this section clearly indicates that if assessee does not pay amount demanded under notice issued under s. 156 of Act within time stipulated under sub-s. (1), said assessee is liable to pay simple interest at one and one-half per cent for every month or part of month comprised in period commencing from day immediately following end o f period mentioned in sub-s. (1), and ending with day on which amount is paid, and therefore, condition precedent under this section is that there should be demand notice and there should be default to pay amount as demanded within time stipulated in said notice. Applying this section to facts of case, it is seen that immediately after assessment was made for relevant years, demand notices were issued under s. 156 of Act and admittedly appellant satisfied said demands and nothing was due pursuant to said demand notices. However, after judgment of appellate authority, which went in favour of assessee, Revenue refunded amount due as per said order of authority. Thereafter, when matter was taken up ultimately in reference to High Court and assessee lost case, fresh demand notices were issued and it is also admitted fact that in satisfaction of said demand notices appellant had paid amount s demanded within time stipulated therein. question, therefore, is whether Revenue is entitled to demand interest in regard to amount which was refunded to assessee by virtue of judgment of appellate authority and which was repaid to Revenue after decision in reference by High Court on fresh demand notices being issued to assessee? Admittedly, on literal meaning of provisions of s. 220(2) of Act, such demand for interest cannot be made. High Court by liberal interpretation of said section and relying upon s. 3 of Valuation Act has held that Revenue is entitled to invoke s. 220(2) of Act for purpose of demanding interest on such retention of money. We are not in agreement with High Court on interpretation placed b y it on s. 220(2) of Act in regard to right of Revenue to demand interest in situation where assessee has promptly satisfied demand made by Revenue in regard to tax originally assessed." made by Revenue in regard to tax originally assessed." From above referred case law it is clear that had assessee immediately complied with notice of demand under s. 156 of Act issued by AO, no interest under s. 220(2) of Act could be charged. Whereas, in instant cases of assessee, before us, assessee had not complied with notice of demand issued under s. 156 of Act till disposal of appeal by Tribunal, hence assessee is not entitled to receive any advantage from decision of apex Court in case of Vikrant Tyres Ltd. (supra). We are of opinion that in view of decision in case of Vikrant Tyres Ltd. (supra) above mentioned contention of assessee is liable to be rejected and, accordingly, same is rejected. For reasons stated hereinabove in this order, issue under consideration before us, is decided against assessee and, hence, impugned orders of CIT(A) are upheld and grounds of appeal taken by assessee in respective instant appeals are rejected. In result, all instant four appeals filed by assessee, are dismissed. *** AGYA RAM v. INCOME TAX OFFICER
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