TMI Blog2014 (5) TMI 474X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of Revenue. - I.T.A .No.-863/Del/2011 - - - Dated:- 28-4-2014 - Shri S. V. Mehrotra And Shri A. D. Jain,JJ. For the Petitioner : Sh. R. S. Gill, CIT. DR. For the Respondent : Sh. Rohit Jain, Adv. Sh. Rohit Garg, CA. ORDER Per S. V. Mehrotra, AM : This appeal by the Revenue is directed against the order passed by the CIT (A)-III, New Delhi, on 24.11.2010, in relation to the assessment year 2000-01. 2. The only issue in this appeal is in regard to computation of interest leviable u/s 220(2) of the Income Tax Act. 3. The brief facts of the case are that the assessee had filed its return of income on 30th November, 2000, declaring a total income of Rs.73,13,04,670/-. The assessment was completed at a total income of Rs.82,45,76,787/-, after making a disallowance of Rs.9,32,72,113/- u/s 14A vide order dated 27th March 2003. The assessment was challenged before the ld. CIT (A) who vide appellate order dated 1st September, 2008, allowed part relief. The order of ld. CIT (A) was assailed before ITAT (Delhi), both by the department and the assessee. The ITAT decided the appeals vide consolidated order dated 30th January, 2009, restoring the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no interest under section 220(2) can be charged till the period when fresh assessment is made, fresh demand notice is issued, and statutory time period for making the payment has expired. The assessee has to be in default for charging interest under section 220(2). For default there should be demand pending and not paid within the statutory period given for payment. After the assessment order is set aside there is no demand pending against the assessee. When fresh assessment is made it may relate back to the original assessment but the default cannot relate back to the original default. If the demand does not survive in the register of the department when the assessment order is set aside, the assessee cannot be compelled to make the payment and hence he will not be in default. (II) If the assessment is set aside on a limited issue/s and some issues are confirmed against the assessee then the original demand notice does not cease to exist. While giving appeal effect the demand relating to the set aside issues should be taken into minus and the assessee would continue to be in default in respect of balance of demand from the date of original default. In the fresh demand notice is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The appellant craves leave to add, alter or amend any / all of the grounds of appeal before or during the course of the hearing of the appeal. 7. The ld. DR submitted that the facts in the case of Vikrant Tyres Ltd. were different and, therefore, the ld. CIT(A) erred in applying the ratio of the said decision to the facts of the present case. The ld. DR submitted that in consequence to the assessment order passed on 31st August 2009, the original tax demand dated 27th March 2003 got revised. He supported the order passed by the AO levying interest u/s 220(2). 8. The ld. counsel for the assessee submitted that AO had issued fresh notice of demand dated 31st August, 2009. He submitted that since the Tribunal had set aside the assessment order, therefore, the original notice of demand also could not be treated as pending. The ld. counsel vehemently relied on the decision of Hon ble Kerala High Court in the case of Smt. B Indira Rani (Supra) and referred to following observations: The apex Court in ITO Anr. vs. Seghu Buchiah Setty AIR 1964 SC 1473 held that where the amount of tax was reduced as a result of the orders in appeal, a fresh notice of demand has to be served ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed form was sent. Whereas in Ext. P5(A) notice demand was made to pay the amount within 35 days. It was further stated that if the assessee failed to pay the amount within the time prescribed, he will be liable to pay interest under s. 220(2). In such circumstances, original demand is superseded and fresh demand is issued and liability to pay interest starts only from the date of new demand. First demand is nullified by the second demand. By the action of the assessing authority in making fresh assessment and demand notice, original demand notice is superseded. It is not a case where intimation is sent under Validation Act, 1964. Validation Act, also has not prohibited issuance of fresh demand notice. It only says that it is not always necessary. First demand is nullified by the second demand. 9. The ld. counsel for the assessee further pointed out that in the said judgment, the Circular No. 334 dated April 3 1982, was also discussed as under: 2. These issues were comprehensively examined in consultation with the Ministry of Law and the Board has been advised : (i) where an assessment order is cancelled under s. 146 or cancelled/set aside by an appellate/revisional author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order in consequence to the Tribunal s direction, therefore, interest u/s 220 (2) could be levied only if the notice of demand was not satisfied by the assessee. Ld. counsel further referred to the decision of the Hon ble Rajasthan High Court in 325 ITR 346 in the case of CIT Vs. Rajesh Kumar, Dinesh Kumar wherein also, after considering Circular No.334, dated April 3, 1982, similar view was taken. He submitted that the SLP filed by the Department against this decision has been dismissed. The ld. counsel submitted that in consequence to the Tribunal s order, original demand was also got set aside as the only issue before the Tribunal was disallowance of interest u/s 14A. The ld. counsel further referred to the decision of Hon ble Bombay High Court in the case of CIT vs. Cheeka 247 CTR 136 wherein also similar view was taken. 11. We have considered the submissions of both the parties and have perused the record of the case. In order to appreciate controversy, we first reproduce the relevant sections on this issue: 156. When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act, the Assessing Officer shall serve upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee will be treated as assessee in default in respect of impugned amount as long as the said amount has not been paid. In various case laws relied upon by the ld. counsel for the assessee, the view taken is that if the assessment order has been set aside then the demand will also got set aside and, therefore, only after the passing of the fresh assessment order, the default is to be reckoned if the fresh notice of demand is not satisfied. 13. Before we consider the various case laws relied upon by the ld. counsel, it would be gainful to refer to the Law lexicon, the encyclopedic legal and commercial dictionary to know the meaning of various words.. Set aside To annul, quash, void or nugatory [ s, 96, Cr.PC.] [S, 178(3) (b), income tax act.] Restore To give back; to make return or restitution of anything previously taken a way or lost]; to put back into a former or original state. Let us now examine the meaning of the word Restore from the chambers concise dictionary Restore- to repair; to bring, to put or give back; to make good; to reinstate; to bring back to a [supposed] former state, or to a normal state; to reconstruct mentally, by inference or conjecture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limit available to the AO. Therefore we do not see any good reason to interfere in the finding of Ld. CIT(A) the additional contention of the assessee is rejected. The next question for our consideration is that quantification of disallowance. We find that this issue has also been considered by the special bench in para 18.7 and 22 of the order wherein the special bench was considering retrospective applicability of section 14A of the Act. According to the mandate of Special bench for the purpose of the disallowance u/s 14A one has to see the expenditure in relation too the exempt income and not to examine whether the expenditure incurred by the assessee has resulted into exempt income or taxable income. Special bench has observed that such quantification has to be worked out in accordance with the Rule 8D of the Income Tax Rules. The ld. Revenue authorities below has not worked out the disallowance as provided in Rule 8D of the Income Tax Rules. In view of the above discussion we are of the view that both the issues i.e. disallowance u/s 14A and its quantification are covered by l bench of the Tribunal in the case of Daga Capital. the Special Bench order. Thus in principle we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the time stipulated under sub-section (1), the said assessee is 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 day immediately following the end of the period mentioned in sub-section (1) and ending with the day on which the amount is paid, and, therefore, the condition precedent under this section is that there should be a demand notice and there should be a default to pay the amount so demanded within the time stipulated in the said notice. The Hon ble Supreme Court noted that when applying this section to the facts of the case, it is seen that immediately after the assessment was made for the relevant years demand notices were issued under section 156(1) of the Act and the appellant satisfied the said demands and nothing was due pursuant to the said demand notices. However, after the judgment of the appellant authority went in favour of the assessee, the Revenue refunded the amount due as per the said order of the authority. Thereafter, when the matter was taken up ultimately in reference to the High Court and the assessee lost the case, fresh demand notices were issued and it was also a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment of the appellate authority and which was repaid to the Revenue after decision in reference by the High Court on fresh demand notices being issued to the Assessee. Here in this case though refund was made, the fact of the matter does not in any way change that the assessee did not pay tax exigible, when the tax was demanded u/s 156 of the Act, after the original assessment order of 22nd March, 2003. In Vikrant s case it may be noted that the assessee paid tax both at the time of original assessment and also when finally High Court restored the original assessment order, then also the assessee made the payment without any default, though tax was refunded due to the order of ld CIT(A). Here that is not the case. In the case before us, the assessee did not make any payment when the first demand notice in pursuance to the assessment order was passed by AO in the year 2003, and till date the assessee has not made any payment even though, the AO, in pursuance of the Tribunal order, recomputed the tax to be levied u/s 14A. Therefore this case is distinguishable from the facts and circumstances of the Vikrant s case. 19. In the case of Indira Rani s case, from a reading of the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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