TMI Blog1996 (3) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 154 on 2-8-1989. After issuing some more notices and after considering the replies submitted on behalf of the assessee, the ITO held that the assessee was liable to be charged interest under section 220 for the period from the date of provisional assessment, i.e., from 30-11-1984 to the date of assessment order in view of the provisions of section 141A(4)(b) of Income-tax Act. He accordingly charged interest under section 220 for different periods aggregating to an amount of Rs. 4,12,480. The details of such calculations made for different periods had been given at page 9 of the order passed by him. 2.2 The CIT(A) held that the assessee is not liable to pay interest beyond 30-1-1988 in view of the refunds arising as a result of ITAT's order. He also directed the ITO not to charge any interest for the period from 1-5-1986 to 31-12-1987 on the sum of Rs. 3,41,521 which represented the amount of different adjustments and refunds due to the assessee at the time when the original demand notice was served on the assessee on 24-3-1986. He, however, did not accept the assessee's contention that he is not liable to pay interest during the period from 1-12-1984 to 30-4-1986 beca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee should be required to pay interest by way of compensation on money so used by him during the intervening period from the date of refund granted on the basis of provisional assessment and the date of making the regular assessment or service of demand notice pursuant to regular assessment. It is not only legal but equitable and fair that interest should be charged for the period for which the assessee has used the Government money. 2.6 We have considered the rival submissions made by the learned representatives of the parties. It would be worthwhile to reproduce the provisions of section 220(1) and 220(2) of Income-tax Act, 1961 :-- " 220(1) Any amount, otherwise than by way of advance tax, specified as payable in a notice of demand under section 156 shall be paid within (thirty-five) days of the service of the notice at the place and to the person mentioned in the notice : 220(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 and one-half per cent for every month or part of a month comprised in the period commencing from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that it shall be deemed to be tax payable with effect from the date when such refund was granted on provisional assessment. In the absence of a specific deeming provision that the assessee will be treated to be in default or that it would be deemed to be tax payable by the assessee with retrospective effect from the date when such refund was granted, it is legally not possible to charge interest under section 220(2) for a period anterior to the date of service of demand notice. Wherever the Legislature wanted to levy interest under section 220 from a specific date prior to issue of demand notice, it has clearly so specified in the relevant provisions contained in Income-tax Act. For instance section 201(1) clearly provides that where a person responsible for deducting tax at source does not deduct or after deducting fails to pay the tax as required under the provisions of this Act, he shall be deemed to be an assessee in default in respect of the tax. Similarly, in section 201(1A), it has also been clearly provided that where a company does not deduct tax at source or after deducting fails to pay the tax as required under this Act, it shall be liable to pay interest at 15 per cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be kept in abeyance till the disposal of the first appeal, as the entire demand is disputed in the appeal submitted to the CIT(A), Baroda. The Assessing Officer thereafter issued a notice under section 221(1) on 14-11-1986 in which he stated that a demand of Rs. 13,86,379 for assessment year 1983-84 is overdue. In this notice, the Assessing Officer further mentioned the following : " Please pay undisputed demand immediately. " The assessee submitted a reply dated 2-12-1986. In this reply it was pointed out that the demand has been created as a result of heavy addition of Rs. 30 lacs which is totally in dispute in appeals. It was also pointed out that interest payable for assessment years 1983-84 and 1984-85 amounting to Rs. 6 lacs and refund for assessment years 1976-77 to 1980-81 is due to the assessee-company for which the assessee's representative visited the Assessing Officer's office twice to finalise the net demand position up to the assessment year 1983-84 but the same could not be done in the absence of the concerning clerk. The assessee once again requested that the entire demand is in dispute in the appeal before the CIT(A) and, therefore, the assessee should no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refund of Rs. 95,807. These details have been given at pages 15 and 16 of the compilation. 3.6 Thereafter, a letter dated 15-7-1987 was sent by the assessee to the Assessing Officer requesting him to grant stay for payment of demand for assessment years 1983-84 and 1984-85. In this application, the assessee once again requested the ITO for adjustments of the old refunds. The assessee also produced a copy of order under section 154 dated 27-5-1993 which shows that after giving effect to the order of the CIT(A) and after adjusting the old refunds, the assessee has been held to be entitled to a refund of Rs. 1,01,420. He also invited our attention towards variations in the demand made for aforesaid year 1983-84 from time to time. 3.7 The learned counsel on the strength of exchange of such correspondence between the Assessing Officer and the assessee and the assessee's claim for grant of adjustment of old refunds wanted to convey that the assessee was all along the creditor of the department and, therefore, there is no justification in levying any penalty under section 221. 3.8 The learned counsel for the assessee further submitted that the assessee was required to pay only the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion particularly in view of the fact that the assessee is entitled to grant of interest in respect of delayed refunds. He relied upon the reasons mentioned in the order passed by the Assessing Officer under section 221 and submitted that the CIT(A) ought to have confirmed the entire amount of penalty levied. 5. We have carefully considered the rival submissions made by the learned representatives of the parties. We have also gone through the orders of the learned departmental authorities and all other documents to which our attention was drawn during the course of hearing. The position of tax payable by the assessee for the aforesaid year after giving affect to the ITAT's order and the old refunds adjusted against the demand created for the aforesaid years as given in the order under section 154 made by the Assessing Officer on 27th May, 1993 is as under :-- " Tax payable after giving effect to ITAT's order Rs. 7,96,270 Taxes paid as under : Refunds adjusted as per order dated 19-12-1986 Assessment year Rs. 1977-78 (154) 18,592 1981-82 (154) 1,01,355 1983-84 (154) 1,58,588 ---------------- Rs. 2,78,535 Refund adjusted as per order dated 13-1-1988 Assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated for the year under consideration. It will also be worthwhile to recall that the assessee paid advance tax of Rs. 21,60,000 which was refunded on provisional assessment made under section 141A. The assessee has been granted interest under section 214 in respect of such amount determined as refund on provisional assessment under section 141A dated 30-11-1984 vide separate order passed under section 154 after a period of more than two years on 19-12-1986. If this interest under section 214 would have been granted along with the order under section 141A dated 30-11-1984 instead of granting such interest after a period of two years, the amount refundable to the assessee would have increased by the said amount of interest allowed under section 214 after a gap of more than two years. A perusal of all the letters submitted in the compilation to which our attention was drawn during the course of hearing establishes the fact that the assessee had promptly submitted elaborate reply in response to recovery notices issued by the department. Such replies contained justifiable reasons including the prayer made for determination of refunds for earlier years. The department has not been able ..... X X X X Extracts X X X X X X X X Extracts X X X X
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