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2015 (10) TMI 478 - ITAT BANGALORE

2015 (10) TMI 478 - ITAT BANGALORE - TMI - Levy of interest under Section 220(2) - contention of the assessee that the Assessing Officer has wrongly computed the interest under Section 220(2) from the date of original demand i.e. 30.4.2013 till the date of order giving effect to the order of the Hon'ble High Court on 22.3.2012 - Held that:- In case the Hon'ble High Court had confirmed the relief granted by Tribunal, the inevitable conclusion will be that the original notice of demand will surviv .....

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.1982.

In view of the above, we hold that the learned CIT (Appeals) was right in upholding the decision of the Assessing Officer in charging interest u/s.220(2) of the Act for the entire period from the date of original demand notice till the time when the order giving effect to the Hon'ble High Court of Karnataka was passed.

Provisions of Section 220(1A) of the Act; in terms of which the demand would be valid till the disposal of appeal before the last appellate authority .....

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gainst assessee. - I.T. (S.S) A. No.11/Bang/2014 - Dated:- 4-9-2015 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER For The Appellant By : Shri C. Ramesh, C.A. For The Respondent By : Dr.Shankar Prasad, JCIT (D.R). ORDER Per Shri Jason P. Boaz, A.M. : This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-VII, Bangalore dt.7.7.2014 for the Block Period 1.4.1991 to 27.4.2001. 2. The facts of the case, briefly, are as .....

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IT(SS)A No.152/Bang/2004 granted substantial relief to the assessee. The Assessing Officer passed the order giving effect to the order of the Tribunal on 26.7.2005 which resulted in refund to the assessee, as the assessee has made part payment of the demand originally raised by the Assessing Officer. 2.2 Revenue preferred an appeal against the order of the Tribunal before the Hon'ble High Court of Karnataka. The Hon'ble High Court vide orders in ITA No.3027/2005 dt.11.11.2011 partly allo .....

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passed under Section 154 of the Act dt.27.7.2012, the assessee preferred an appeal before the CIT (Appeals) - VI, Bangalore. The learned CIT (Appeals) vide order dt.7.6.2014 upheld the order of the Assessing Officer in respect of the charging of interest under Section 220(2) of the Act. 3.1 Aggrieved by the order of the CIT (Appeals) - VI, Bangalore dt.7.6.2014, the assessee has preferred this appeal raising the following grounds :- 1. The order of the learned CIT (Appeals) is opposed to the fa .....

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nsequent to giving effect to the order of the Tribunal on 26.7.2005, the appellant was issued a refund and from that date the appellant could not have been treated as an assessee in default. 4. The learned CIT (Appeals) erred in ignoring the ratio laid down by the Hon'ble High Court of Kerala in the case of Income Tax Officer Vs. A.V. Thomas & Co. (1986) 160 ITR 818 (Ker). 5. The learned CIT (Appeals) erred in ignoring the ratio laid down by the Hon'ble High Court of Kerala in the ca .....

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reciating the position of law that, only after amendment by introducing section 220(1A) of the Act, w.e.f. 1.10.2014, the provisions of section 3 of taxation laws (continuation and validation of recovery proceedings) Act, 1964 is made applicable to the taxes demanded, which empowers the Assessing Officer to levy interest right from the date of issue of original demand and this position of law cannot be applied prior to 1.10.2014. 8. The appellant craves permission to add, delete or alter any of .....

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.2012. The assessee submits that the order giving effect to the order of the co-ordinate bench of the Tribunal (supra) was passed on 26.7.2005, which resulted in a refund to the assessee. According to the assessee, since there was no demand subsisting as on 26.7.2005 and thereafter, interest under Section 220(2) of the Act was not chargeable for the period from 26.7.2005 to 22.3.2012. 3.2.2 The learned CIT (Appeals) did not accept the contentions of the assessee and upheld the action of the Asse .....

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date of original demand notice till the date of order giving effect to the appellate order. The Hon'ble Apex Court had reversed the decision of the Hon'ble High Court and cancelled the said charging of interest. 3.2.3 The learned CIT (Appeals) distinguished the facts of the case decided by the Hon'ble Apex Court with the facts of the assessee's case. The learned CIT (Appeals) observed that in the cited case, i.e. Vikrant Tyres Ltd. (supra), the entire demand raised by the demand .....

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, the learned Authorised Representative of the assessee put forth oral and written submissions. While reiterating the submissions made before the authorities below, the assessee assailed the decision of the learned CIT (Appeals) on the issue of interest charged under Section 220(2) of the Act. It was submitted that soon after raising of the original demand, the assessee had approached the Addl. CIT who had granted permission to pay the outstanding demand in instalments and subsequently the Tribu .....

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he question of charging interest under Section 220(2) of the Act after 26.7.2005 does not arise. 3.3.2 The learned Authorised Representative also contended that the learned CIT (Appeals) had misdirected herself in interpreting the decision in the case of Vikrant tyres Ltd. (supra), in the manner done by her. It was contended that the said decision was rendered in the context of the particular set of facts of that case wherein the entire demand has been paid. It is submitted that the facts of the .....

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was contended that the decision of the Hon'ble High Court of Karnataka in the case of P.P. Koya V CIT (2010) 46 DTR 357 (Ker) is applicable to the assessee's case, as the facts in the cited case are similar to those of the case on hand. 3.4 Per contra, the learned Departmental Representative placed strong reliance on the impugned order of the learned CIT (Appeals). 3.5.1 We have heard the rival contentions and perused and carefully considered the material on record. The dispute in the ca .....

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n the case of Vikrant Tyres Ltd. (supra) in which the Hon'ble High Court had upheld the charging of interest under Section 220(2) of the Act. On appeal, Hon'ble Apex Court, however, did not concur with the decision of the Hon'ble High Court of Karnataka, but rather agreed with the stand of the Kerala High Court in the case of A.V. Thomas (supra). 3.5.3 The learned CIT (Appeals), however, has distinguished the applicability of the decision of the Hon'ble Apex Court in the case of .....

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n paid in full within the time allowed in the notice; but rather only a part of the taxes were paid, the decision of the Hon'ble Apex Court in the case of Vikrant Tyres Ltd. (supra) would not apply to the case on hand. 3.5.4 We find that in the decision cited by the assessee in the case of P.P. Koya (supra), the Hon'ble Kerala High Court has made a similar distinction. While referring to the cases of A.V. Thomas (supra) and Vikrant Tyres Ltd. (supra), the High Court did not consider the .....

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and hence there was no default warranting the charging of interest under Section 220(2) of the Act; and (ii) The decision of the Hon'ble Kerala High Court in the case of P.P. Koya (supra), which has held that Section 220(2) does not apply for the period after the assessee was granted a refund, because there was no subsisting demand and consequently, the assessee cannot be said to be a defaulter. 5.1 Section 220, so far as it relates to our purpose, reads as under :- "220 (1) Any amount .....

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ll be paid within such period being a period less than the period of thirty days aforesaid, as may be specified by him in the notice of demand. (2) If the amount specified in any notice of demand under s. 156 is not paid within the period limited under sub-s. (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 day immediately following the end of the period mentioned in sub-s. (1) an .....

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time limited under sub-s. (1) or extended under sub-s. (3), as the case may be, at the place and to the person mentioned in the said notice the assessee shall be deemed to be in default." 5.2 To complete the narration, Section 221 of the Act provides for the levy of penalty when the assessee is in default or is deemed to be in default in making payment of tax. This penalty is in addition to the amount of arrears and interest payable u/s.220(2) of the Act. The language of Section 221 of the .....

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ause the assessee was granted stay of recovery of demand or instalments for payment of demand, it cannot be said that the demand itself was not due. The demand raised always subsisted. It is only that the assessee was protected from recovery measures by not considering him as an assessee in default. In this view of the matter, the contention of the assessee that there was no default on the part of the assessee is without basis and is not acceptable. 5.4 In the decision in the case of P.P. Koya ( .....

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facts of the above cited case viz. P.P. Koya (supra) are different from the facts of the assessee's case on hand. In that case, the taxpayer was granted relief at the first appellate stage and refund was granted to the taxpayer. On further appeal before the Tribunal reversed the order of the learned CIT (Appeals) and the original assessment and the original demand was restored. The matter attained finality at the Tribunal stage. In the facts of that case, the Hon'ble High Court held that .....

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time between the original demand notice and the first appeal stage and did not subsist between the Tribunal order and the order of the Hon'ble High Court and was again revived after the High Court s order. In case the Hon'ble High Court had confirmed the relief granted by Tribunal, the inevitable conclusion will be that the original notice of demand will survive and the default existed even in the period between the order of the Tribunal and that of the Hon'ble High Court and therefo .....

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of Vibrant Tyres Ltd. (supra) reads as under :- "Subject: levy of interest under s. 220(2) when the original assessment is set aside- Instructions regarding. Doubts have been raised as to the quantum of interest chargeable under s. 220(2) of the IT Act when the original assessment order passed by the ITO is- (i) cancelled by him under s. 146 of the IT Act; (ii) set aside/cancelled by an appellate/revisional authority and such appellate/revisional order has become final; or (iii) set aside b .....

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ther appeals/revisions), no interest under s. 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 ITO is either varied or even set aside by one appellate authority but, on further appeal, the original order of .....

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