TMI Blog2008 (10) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... ted on March 25, 1991, by determining the total income at Rs. 60,94,755. In this order, the Assessing Officer has brought to tax interest on additional compensation as well as the capital gains on additional compensation. On an appeal filed by the assessee, the learned Commissioner of Income-tax (Appeals) vide order dated January 23, 1992, partly set aside the assessment. Pursuant to the order passed by the learned Commissioner of Income-tax (Appeals), the Assessing Officer recomputed the income, vide order dated March 28, 1994, wherein he has determined income at Rs. 70,13,860. It is necessary to notice here that as per the original order dated March 25, 1991, the tax component was Rs. 38,39,696 and, including the interest under section 217, the total tax due was Rs. 39,65,816; despite demand notice, being issued along with the original assessment order, the assessee appears to have not paid any tax and, instead, preferred an appeal against the said order. In the consequential order dated March 28, 1994, the Assessing Officer collected a sum of Rs. 45,54,978 from the Land Acquisition Officer and adjusted the same against tax payable by the assessee and another sum of Rs. 41,558 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der dated January 23, 1992, passed by the learned Commissioner of Income-tax (Appeals) to submit that the entire assessment order was not set aside and thus the consequential order passed by the Assessing Officer giving effect to certain directions of the Commissioner of Income-tax (Appeals) was only in the form of modifying the original order and cannot be treated as a fresh order. In other words, the original demand does not get obliterated by virtue of the directions given by the Commissioner of Income-tax (Appeals) in his order dated January 23, 1992. Hence, going by the final conclusions of the order, i.e., partly allowed or partly set aside, it would merely indicate a direction to modify the earlier order and upon modification of the order as per the directions of the learned Commissioner of Income-tax (Appeals),' the demand as modified/varied in the fresh assessment order should be treated as demand due, on which interest is chargeable from the date of original assessment order. He thus strongly relied upon the order passed by the Assessing Officer. On the other hand, learned counsel appearing on behalf of the assessee submitted that the assessee originally declared loss r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner of Income-tax (Appeals). Joining issue, the learned Departmental representative submitted that the decision relied upon by learned counsel for the assessee is distinguishable on the facts. We have carefully considered the rival submissions and perused the record. Before going into the relevancy of the case law, it is necessary to appreciate the facts of the case. In the assessment order dated March 25, 1991, as well as in the second order dated March 28, 1994, business loss of Rs. 1,99,362 is the common factor, whereas in the original order interest on additional compensation, as worked out subject to rectification, was taken at Rs. 6,67,422 and net capital gains on account of additional compensation received from award Nos. 4 and 5 was determined at Rs. 56,26,695 as against which in the order dated March 28, 1994, passed by the Assessing Officer to give effect to the direction of the learned Commissioner of Income-tax (Appeals), the Assessing Officer has determined the same at Rs. 62,61,883 and interest on additional compensation was brought to tax by determining the same at Rs. 9,51,341. Even as per the order passed by the Income-tax Appellate Tribunal, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al (i.e., it is not varied as a result of further appeals/revisions), no interest under section 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. (ii) where the assessment made originally by the Income-tax Officer is either varied or even set aside by one appellate authority but, on further appeal, the original order of the Income-tax Officer is restored either in part or wholly, the interest payable under section 220(2) will be computed with reference to the due date reckoned from the original demand notice and with reference to the tax finally determined. The fact that during an intervening period, there was no tax payable by the assessee under any operative order would make no difference to this position." As could be noticed from paragraph 2(ii) of the circular, whenever an assessment is partly set aside, interest payable under section 220(2) of the Act has to be computed with reference to the due date reckoned from the original deman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the demand notice issued upon passing the consequential order can be equated to intimation of giving effect to the appellate order or a fresh demand notice. It may be noticed that the first appellate authority has not decided the issue on those lines and, in fact, there was no reference to the decision of the apex court in the case of Vikrant Tyres Ltd. v. First ITO [2001] 247 ITR 821 and thus the decision of the Kerala High Court is distinguishable on the facts. The Income-tax Appellate Tribunal, Visakhapatnam Bench, in the case of the KCP Ltd. (I.T.A. No. 210/V/2005, dated June 20, 2008) had an occasion to consider an identical issue wherein, upon an analysis of the provisions of the Validation Act and the decision of the apex court in the case of Vikrant Tyres Ltd. v. First ITO [2001] 247 ITR 821, the Bench concluded that wherever there is a default on the part of the assessee to comply with the original demand notice, the provisions of the Validation Act shall apply and interest is chargeable on the basis of the original notice of demand though such interest has to be calculated with reference to the tax finally determined. The circular issued by the Central Board of Direct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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