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2016 (5) TMI 1255 - ITAT MUMBAI

2016 (5) TMI 1255 - ITAT MUMBAI - TMI - Interest charged u/s.220(2) - CIT(A) deleted the addition - order passed by the Settlement Commissioner - Held that:- Apparently the demand was raised in pursuance of order dated 17.11.1994 u/s. 245D(1) of the Act and in pursuance of final order dated 245D(4) of the Act determining the income to the tune of ₹ 21,91,030/- for the A.Y.1991-92 and ₹ 21,19,492/- for the A.Y.1992-93 had already been paid which is not in dispute. Subsequently, the de .....

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us, contrary to the finding of the learned CIT(A) in question. No tangible material was produced before us which may speak about the in-genuineness of the order passed by the learned CIT(A). In view of the above said circumstances we are of the view that the learned CIT(A) has passed the order judiciously and correctly which does not require to be interfere with at this appellate stage. - Decided against revenue - I.T.A. No. 1176/Mum/2013 & 1177/Mum/2013 - Dated:- 25-5-2016 - Shri R. C. Sharma, .....

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n conveniently be decided by a single order. 2. The brief facts of the case are that the assessee moved an application before the Settlement Commission on 18.10.1993 which was admitted by the Settlement Commissioner through order u/s.245D(1) of the Income Tax Act, 1961( in short the Act ) on 17.11.1994. Subsequently, the order passed u/s.254D(4) of the Act was also passed on 31.12.1998 determining the income to the tune of ₹ 21,91,030/- for A.Y.1991-92 and ₹ 21,19,492/- for A.Y.1992- .....

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o the Hon ble Bombay High Court. Thereafter, the Hon ble Bombay High Court in its second order dated 08.07.2009 again set aside the order of the Settlement Commission with the direction to decide the application of the appellant afresh. The appellant further filed an appeal before Hon ble Supreme Court and the Hon ble Supreme Court again send the matter back to the Settlement Commission to decide the application afresh. A fresh order u/s.245D(4) of the Act was passed on 03.05.2011 assessing inco .....

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291/- for A.Y.1991-92 and interest to the tune of ₹ 64,00,115/- for A.Y.1992-93 u/s.220(2) of the Act. Therefore, the assessee filed the rectification application u/s.154 on 18.08.2011 which was rejected by Assessing Officer therefore, the assessee filed an appeal before learned CIT(A) and learned CIT(A) accepted the appeal of the assessee. Feeling aggrieved the revenue filed the present appeal before us. 3. The revenue has raised the following ground of appeal:- "1. That on the facts .....

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case and in law, the Ld. CIT(A) erred in not appreciating the facts that the initial order of Hon ble ITSC was set aside only for limited purpose and as such the case clearly falls under para - 2 of Board s circular no.334 dt. 03.04.1982 wherein interest u/s. 220(2) was to be computed with reference to the due date reckoned from original demand notice and with respect to the tax liability finally determined. 4. Issue no.1 and 2 are inter connected infact these issues are raised only one issue wi .....

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r A.Y.1992-93 u/s. 220(2). This issue has been raised by the assessee before learned CIT(A) and the learned CIT(A) accepted the contention of the assessee and arrived at this conclusion that interest is liable to be payable on the above mentioned assessment year i.e. 1991-92 and 1992-93 for the period w.e.f. raising the demand by the Assessing Officer after the issuance of demand notice in pursuance of the fresh order passed by the Settlement Commission in pursuance of the direction of Hon ble B .....

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rder judiciously and correctly which is not required to be interfere with at this appellate stage and also placed reliance on the law settled in [2012] 209 taxman 456 / 23 Hon ble High Court of Bombay in case of Commissioner of Income Tax - 1 Vs. Chika Overseas (P.) Ltd. and CBDT Circular no.334, F. No.440/8/81 dated 03.04.1982 and Hon ble Supreme Court in Vikrant Tyres Ltd. 247 ITR 821 and Carbon Ltd. & Ors Vs. [1997 (6) SCC 479. Before going further we are of the view that it is necessary .....

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appeal, the Ld. A.O. had calculated interest u/s.220(2) in respect of demand raised vide order passed on 03.05.2011, the interest having been wrongly charged from 01.05.1993 to 03.05.2011. Further, it was agitated that the Ld. A.O. erred in giving effect to the order of the Settlement Commission in charging interest u/s.220(2) without giving opportunity of being heard to the appellant. 2.4.3 Upon hearing the appellant, I find that the appellant has filed more appeals for these assessment years .....

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Products Vs. CIT 108 ITR 935(Kar.) 2.4.4 The above being the case, I do not find any merit in the appeal filed by the appellant bearing appeal Nos. I.T.No.314 & 315/DCCC-10/11-12 and these are accordingly dismissed as infructuous. 2.5.1 As regards appellant s other appeals filed on the same subject bearing I.T.No.413 & 414/DCCC- 10/11-12, it is seen that appellant s claim falls u/s.246A(1)(c) as the Ld. A.O. s order was to the effect of refusing to allow appellant s claim u/s.154 in res .....

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DT s Circular No.334 [F.No.400/3/81-ITCC] dated 03.04.1982. The operative part of the remand report reads as under:- I have carefully gone through the submissions made by the assessee before your goodself in its letter dated 30th April, 2012, Order of the Hon ble Settlement Commission, High Court, Supreme Court and other relevant facts of the case. Here, it is significant to read point no.2 of para 2 of the Board s aforesaid circular, which states that Where the assessment made originally by the .....

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nce to this position. 4. Further, it is observed from the final order of the Income Tax Settlement Commission dated 10.04.2011 in the assessee firm, at para 8.1, page 6 that there is a reference of the Hon ble Supreme Court s order dated 20.08.2010 in the instant case dismissing the appeal of the assessee wherein it was held by the Apex Court as under: Thus the remand of the case by the High Court to the Settlement Commission was confined only to the question of determination of legal income, pe .....

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urther, it is evidence that the Hon ble Supreme Court has held clearly that the Settlement Commission was not required to go into the maintainability of application u/s.245C(1) of the Act. Therefore, in view of the above para of Board s Circular, as the order of the Settlement Commission has been partially restored in further appeal, the interest u/s.220(2) in the instant case is chargeable with reference to the due date reckoned from original demand notice and with reference to the tax determin .....

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g effect to the Settlement Commission s final order u/s.245D(4). Therefore, it is kindly requested that the issue of chargeability of interest u/s.220(2) may be decided on merits keeping in view the legislative intent behind the legislation in this regard and above factual proposition . 2.5.3 On the other hand, Ld. A.R. has stated that Hon ble Supreme Court has merely confirmed the Bombay High Court s order dated 08.07.2009 where it was held that all the proceedings were remanded back to the Set .....

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before the Settlement Commission at Mumbai on 3rd August, 2009 and the Settlement Commission shall dispose off the proceedings within six months thereafter. (Emphasis supplied) 2.5.4 It would be appropriate at this stage to go into the history of this case. Pursuant to a search at the appellant s premises, an application to Settlement Commission was made on 18.10.1993. This application came to be admitted by the Settlement Commission vide order u/s. 245D(1) on 17.11.94 and the final order u/s.24 .....

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d the application to the Hon ble Bombay High Court. 2.5.5 Thereafter, the Hon ble Bombay High Court in its second order dated 08.07.2009 again set aside order of the Settlement Commission with a direction to decide the appeal of the appellant afresh (please refer to the para 17 of the said order as cited supra). The appellant again filed an SLP against the order of the Hon ble Bombay High Court. However, Hon ble Supreme Court upheld the order of the High Court and the matter was sent back to the .....

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therefore, requested the Ld. A.O. to provide the calculation sheet and upon receipt of the same, rectification application u/s.154 was filed before the Ld. A.O. on 18.02.2011 stating that the interest u/s.220(2) of ₹ 67,20,291/- for A.Y.1991-92 and ₹ 64,00,115/- for A.Y.1992-93 were wrongly calculation since if the amount specified in any notice of demand u/s.156 is of paid within 30 days of the service of the notice, the assessee shall be liable to pay simple interest at one percen .....

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of Settlement Commission s order) was passed by the Ld. A.O. on 03.05.2011 because neither the Assessment order dt. 03.05.2011 nor the demand notice dt. 03.05.2011 require the appellant to pay interest after 30 days from the date of service of the original demand notice dt.17.11.1994. It was further argued that since the demand crystallized under the order giving effect to Settlement Commission s order 03.05.2011, question of levying of interest from the date of original order on 17.11.1994 doe .....

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ugh the original assessment order dated 28.02.1997 was set aside by the ITAT, once the fresh assessment order is passed, the demand arising therefrom would relate back to the date of service of the original demand notice. In the present case, the original demand was served on 28.02.1997 and, therefore, interest under sec.220(2) would be leviable after thirty days from 28.02.1997. 6. We see no merit in the above contention. Under sec. 156 of the Act, service of the demand notice is mandatory. Sec .....

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2006 and the demand notice was notice was served on 24.12.2006. As per Section 220(1) of the Act, the assessee was liable to pay the amount of demand within thirty days from the service of demand notice dated 24.12.2006. It is only if the assessee fails to pay the amount demand, within thirty days of the service of the demand notice dated 24.12.2006 as stipulated under 220(1) of the Act, the assessee was liable to pay interest under section 220(2) of the Act. If the liability to pay interest und .....

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interest under section 220(2) of the Act, for the period prior to the crystallization of the demand on 24.12.2006 can not be sustained. Therefore, in the facts of the present case, the decision of the ITAT in holding that the assessee is liable to pay interest under section 220(2) of the Act from the end of the period mentioned in section 220(1) of the Act, i.e. thirty days after the service of notice of demand dated 24.12.2006 till the date on which the amount demanded was paid cannot be faulte .....

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y the Hon ble Supreme Court. Admittedly, the original demand after passing of first order u/s.245D(4) was paid within the due date. This is a case where the assessment has been reframed afresh by the Ld. A.O. upon receipt of order passed by the Settlement Commission u/s.254D(4) on 03.05.2011. Secondly, it is not a case where the original order of the A.O. was varied or set aside by the Appellate authority as mentioned in circular No.334. The proceedings before the Settlement Commission are not i .....

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a month comprised in the period commencing from the date 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. In the instant, immediately after the assessment was made for the relevant years, demand notices were issued un .....

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n of the said demand notice, the appellant had paid the amount as demanded within the time stipulated therein. The question, therefore, was whether the revenue was entitled to demand interest in regard to the amount which was refunded to the assessee by virtue of the judgment of the appellate authority and which was repaid to the revenue after the decision in the reference by the High Court on fresh demand notices being issued to the assessee. Admittedly, on a literal meaning of the provisions o .....

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the Courts while construing Revenue Acts, have to give a fair and reasonable construction to the language of a statue without leaning on one side or the other, meaning thereby that no tax or levy can be imposed on a subject by an Act of Parliament without the words of the statue clearly showing an intention to lay the burden on the subject. In this process, the courts must adhere to the words of the state and the socalled equitable construction of those words of the statue is not permissible. T .....

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s not satisfied, the section 220(2) can be invoked. The High Court also fell in error in replying on section 3 of the Validation Act to construe section 22(2) in the manner in which it had done in the impugned judgment. Section 3 of the Validation Act, could not be relied upon to construe the authority of the revenue to demand interest under section 220. The said section enacted to cope up with a different fact-situation. That section only revives the old demand notice which had never been satis .....

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e for the assessment years in question. 2.5.8 It was, further, held by the Hon ble Supreme Court in Vikrant Tyres Ltd (Supra). This principle in law is settled by this court in India Carbon Ltd. Vs. State of Assam 1997 (6) SCC 479 wherein this Court held Interest can be levied and charged on delayed payment of tax only if the statute that levies and charges the tax makes a substantive provision in this behalf. A Constitution Bench of this Court speaking through one of us (Hon. Bharucha, J) in th .....

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ment of amount demanded under a notice by the revenue within the time stipulated therein and if such a demand is not satisfied, then section 220(2) can be invoked. 2.5.9 Respectfully following the above mentioned decisions of Hon ble Supreme Court and Hon ble Bombay High Court and in the facts of the case, I am of the view that the interest u/s.220(2) charged by the Ld. A.O. for the period prior to the passing of final order dated 03.05.2011 is not sustainable in the eyes of law. As it was a mis .....

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date 03.05.2011 when the fresh order u/s.245D(4) was passed by the Settlement Commission assessing the income to the tune of ₹ 81,92,874/- for A.Y.1991-92 and ₹ 79,21,543/- for A.Y.1992-93. No doubt the earlier order passed by the Settlement Commissioner was under litigation. However the final order was passed by the Settlement Commissioner u/s. 245D(4) on 31.12.1998 determining the income to the tune of ₹ 21,91,030/- for the A.Y.1991-92 and ₹ 21,19,492/- for the A.Y.1992 .....

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