TMI Blog2003 (11) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... B. Koshy J. - The liability of an assessee to pay interest under section 220(2) of the Income-tax Act, 1961, after fresh demand is raised on the basis of the appellate order is the issue to be decided in this case. The facts of this case are not disputed. The appellant filed a return for the period 1984-85, showing a net income of Rs. 13,42,720. The Assessing Officer by exhibit P1 order made some additions and assessed a total income of Rs. 17,32,260. One item of such addition was Rs. 50,000 said to be an unexplained cash credit. A notice of demand in the prescribed form under section 156 for a tax of Rs. 14,66,497 was also served on the assessee along with exhibit P1 order, the appellant's appeal was partly allowed by the Commissioner of Income-tax (Appeals) by reducing an addition of Rs. 4,000 only by exhibit P2 order. But in further appeal by exhibit P3 order the Appellate Tribunal directed the Assessing Officer to reconsider the addition of Rs. 50,000 as the unexplained cash credit. The Tribunal held that the "addition as it now stands cannot be sustained". The appellate order exhibit P3 ends with the following: "In the result, the appeal will be treated as partly allowed." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,78,279 Add: Interest under section 139(8) 1,42,862 Interest under section 217(1A) 3,03,537 ---------- Total tax 14,24,678 ---------- -------------------------------------------------------------- This should be paid as per demand notice and challan. Penalty proceedings under sections 271(1)(a), 271(1)(c) and 273(2)(c) are initiated separately." Exhibit P5(A) demand notice dated April 24, 1989, attached to exhibit P5 assessment order shows that it is a demand notice under section 156 of the Income-tax Act, 1961, and not a mere intimation of giving effect to the appellate order. It was issued under the prescribed form as per rules demanding payment of the amount mentioned therein within 35 days of the service of notice. Clause 3 of exhibit P5(A) demand stated as follows : "If you do not pay the amount within the period specified above, you will be liable to pay simple interest at twelve per cent, per annum from the date commencing after the end of the period aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imation regarding the reduction of the amount. Section 3(1)(b) of the above Act is as follows: "(b) Where such Government dues are reduced in such appeal or proceeding, - (i) it shall not be necessary for the taxing authority to serve upon the assessee a fresh notice of demand; (ii) the taxing authority shall give intimation of the fact of such reduction to the assessee, and where a certificate has been issued to the Tax Recovery Officer for the recovery of such amount, also to that officer; (iii) any proceedings initiated on the basis of the notice or notices of demand served upon the assessee before the disposal of such appeal or proceeding may be continued in relation to the amount so reduced from the stage at which such proceedings stood immediately before such disposal;" In this case admittedly no intimation was sent as provided under the above section. But after the appellate order, fresh assessment was made as can be seen from exhibit P5 and fresh demand notice (exhibit P5(A)) in the prescribed form was sent. Whereas in exhibit 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided under section 220(2). This was negatived by this court as the assessee has paid the tax as demanded by the Income-tax Officer in time when the original demand was made, even though it was refunded to the assessee due to the order of the Appellate Assistant Commissioner. The court held that merely because the Departmental circular stated otherwise, one need not pay interest under section 220(2) unless it is warranted as per the wordings in the section. Lord Jenkins in IRC v. Jamieson [1964] AC 1445,1466 (HL) held as follows: " 'The task of the courts, as in any other revenue case, is to construe the provisions of the taxing enactment according to the ordinary and natural meaning of the language used and then to apply that meaning to the facts of the case. If, by the application of this process, the taxpayer is brought fairly within the net, he is caught. Otherwise he goes free, but there must be no straining of language either way'." Following the above decision, Varghese Kalliath J. in ITO v. A.V. Thomas and Co. [1986] 160 ITR 818 (Ker) for the Division Bench observed that: "We feel the statutory provision in section 220(2) is clean and clear. It is not difficult to u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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