1998 (12) TMI 70 - HC - Income Tax

Recovery Of Tax Notice Of Demand Addition Rectified Assessment Order Cash Credits Revision

Summary

Issues:
Assessment year 1984-85, Addition of unexplained cash credit, Interest under section 220(2) of the Income-tax Act, 1961, Assessment order under section 154, Petition under section 264, Validity of demand notice and order.

Assessment Year 1984-85:
The petitioner, an assessee to income-tax, filed the return of income for the assessment year 1984-85. The third respondent completed the assessment under section 143(3) of the Act, making an addition of Rs. 50,000 as unexplained cash credit. The Income-tax Appellate Tribunal set aside this addition, directing a re-examination of the cash credit's genuineness. The Assessing Officer then redetermined the total income, leading to a demand notice under section 154 of the Act. The petitioner contended that interest should only be charged from the date of the redetermination, not from the original assessment date.

Unexplained Cash Credit:
The issue revolved around the genuineness of the Rs. 50,000 cash credit added to the petitioner's income. The Tribunal's direction for re-examination led to a redetermination of the total income by the Assessing Officer. The petitioner argued that interest should only be levied from the date of the redetermined assessment order, not from the original assessment date.

Interest under Section 220(2):
The petitioner sought direction to charge interest under section 220(2) of the Act only from the date of the redetermined assessment order. The Assessing Officer had calculated the total tax payable, including interest, based on the original assessment order. The petitioner contested this calculation, emphasizing the Tribunal's decision and the subsequent redetermination.

Assessment Order under Section 154:
The Assistant Commissioner of Income-tax passed an order under section 154, holding the Rs. 50,000 credit as genuine and redetermining the total income. This led to the issuance of a notice of demand. The petitioner filed a petition under section 264, seeking a revision of the interest calculation based on the redetermined assessment.

Validity of Demand Notice and Order:
The petitioner challenged the demand notice and order issued by the first respondent, arguing that interest should only be charged from the date of the redetermined assessment order. The petitioner contended that the Tribunal's decision nullified the original assessment order, making it the sole governing assessment for the case.

In the judgment, the court analyzed the Tribunal's decision, noting that only the challenge against the additional Rs. 50,000 was set aside, and the original assessment order was not entirely canceled. The court cited precedents to support the validity of the notice of demand and the enforceability of tax liabilities based on final determinations. Additionally, the court referenced the Taxation Laws Act, 1964, to uphold the Revenue's position regarding the continuation of recovery proceedings after a reduction in government dues. Ultimately, the court found no grounds for interference against the demand notice and order, leading to the dismissal of the original petition.