TMI Blog2001 (4) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... , pursuant whereto the amount was refunded along with interest in terms of section 244 of the said Act on or about July 28, 1989. The Department preferred an appeal there against before the Appellate Tribunal, which was allowed on September 6, 1995. A consequential demand was made on September 6, 1995, wherein interest was charged under section 220(2) of the said Act from the date of the original demand. Mr. V. Ramachandran, learned counsel appearing on behalf of the writ petitioner-assessee, inter alia, submitted that having regard to the provision in section 156 read with the scheme as contained in Chapter XVII of the said Act, it is manifest that interest can be charged only when there exists a demand. According to learned counsel, as the assessee had already paid the entire amount pursuant to the notice of demand issued under section 156 of the said Act, the entire demand having been wiped out, the question of charging of interest from the date of the original demand would not arise only because the appeal of the Department before the Appellate Tribunal succeeded and in the meantime pursuant to the order of the Commissioner of Income-tax (Appeals), the amount was refunded tog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, in our opinion, is not relevant for the purpose of disposal of the present case. Section 220 prescribes the period within which the payment has to be made. Sub-section (2) of section 220 reads thus: "If the amount specified in any notice of demand under section 156 is not paid within the period limited under sub-section (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-section (1) and ending with the day on which the amount is paid." Section 221 of the said Act provides for penalty payable when the assessee is in default in payment of tax. Section 225 lays down the power of the Tax Recovery Officer to take action under section 222. Section 224 of the said Act provides that it shall not be open to the assessee to dispute the correctness of the certificate drawn up by the Tax Recovery Officer on any ground whatsoever, but the Tax Recovery Officer may cancel the certificate if, for any reason, he thinks it necessary so to do. He has also the power to correct any clerical or arithmetical mistake the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which has been repealed but kept alive only for some limited purposes, the same interpretation may hold good with respect to the corresponding, provisions in the Income-tax Act, 1961, and in the other Acts relating to the imposition of direct taxes. 2. The above decision of the Supreme Court will create difficulties in the collection of income-tax and other direct taxes. The number of assessments involved in the arrear demands of the direct taxes is nearly six lakhs and recovery certificates have been issued to Collectors or Tax Recovery Officers in approximately 2,25,000 cases and the revenue involved comes to Rs. 157 crores. In view of the above decision of the Supreme Court, in most of these cases, fresh notices of demand may have to be served upon the assessees and the assessees will have to be allowed a further period for paying the tax. It will be only after the expiry of the said period that fresh proceedings for recovery can be started. The result would be that recalcitrant assessees would get sufficient time to withdraw their funds or alienate their properties with a view to defeating the claims of the Revenue. 3. In order to overcome these difficulties, it is propos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved upon him before the disposal of such appeal or proceeding may, without the service of any fresh notice of demand, be continued from the stage at which such proceedings stood immediately before such disposal; (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; (c) no proceedings in relation to such Government dues (including the imposition of penalty or charging of interest) shall be invalid by reason only that no fresh notice of demand was served upon the assessee after the disposal of such appeal or proceeding or that such Government dues h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, therefore, there is no question of applying the provisions of sub-section (2) of section 220 of the Income-tax Act. As the provisions are absolutely unambiguous and clear, in our view, it is not necessary to refer to the decision of the Kerala High Court in the case of ITO v. A. V. Thomas and Co. [1986] 160 ITR 818, and the decision of the Delhi High Court in the case of Bharat Commerce and Industries Ltd. v. Union of India [1991] 188 ITR 277." In A. V. Thomas and Co. Ltd. v. ITO [1982] 138 ITR 275, the Kerala High Court held that where the assessee had paid the amount at the right time and received the refund as per the order of the Appellate Assistant Commissioner, he had no liability to pay any amount to the Department, unless notice of demand was served on him consequently upon the reversal of the order of the Appellate Assistant Commissioner by the Tribunal. The said decision was affirmed in appeal in ITO v. A. V Thomas and Co. [1986] 160 ITR 818 (Ker). In CIT v. Chittoor Electric Supply Corporation [1995] 212 ITR 404, the apex court, in a different fact situation, overruled the decision of the Kerala High Court reported in New Woodlands Hotel v. CIT [1991] 188 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fresh assessment is made pursuant to appeal and not from the date of the appellate order. In the fact situation of that case, it was observed that according to section 220(2), interest is payable by the assessee on the amount due only after the service of the notice of demand pursuant to such fresh assessment. However, the apex court has clarified that the ratio laid down therein is confined to a case where an appellate or other authority under the Act sets aside or cancels the assessment and directs a fresh assessment to be made, i.e., a situation contemplated by the subsequently inserted proviso (clause (a)). In Bharat Commerce and Industries Ltd. v. CIT [1994] 210 ITR 13 (Delhi), it was held that interest 'cannot be levied in an order of rectification passed under section 154 of the Act. In K. P. Abdul Kareem Hajee v. ITO [1983] 141 ITR 120 (Ker), the doctrine of eclipse was taken recourse to stating: "The order of a judicial or quasi-judicial authority is not final for the purpose of res-judicata during the time allowed for filing an appeal or the pendency of an appeal. In the absence of any statutory provision to the contrary, or an interim stay granted by a competent au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpensation should cover the entire period during which the person to whom the money belongs lawfully was made to part with it to another. To reduce the period for which compensation is payable, when, in fact, the person was deprived of his money for a longer period, is to truncate the very concept of compensation.' That liability to pay income-tax is a debt due on the last date of the accounting period is a principle now established by the decision of the. Supreme Court in Kesoram Industries and Cotton Mills Ltd. v. CWT [1966] 59 ITR 767. At page 784, the Supreme Court observed: 'A liability to pay income-tax is a present liability though it becomes payable after it is quantified in accordance with ascertainable data. There is a perfected debt at any rate on the last day of the accounting year and not a contingent liability.' Therefore, jurisprudentially, the Revenue is a creditor and the tax-payer is a debtor and there is nothing strange if the law contemplates that the debtor should compensate the creditor by paying interest on the amount due. The fact that the law has postponed the discharge of tax liability to the date of issuance of a demand notice and the period of 30 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court on fresh demand notices being issued to the assessee? Admittedly, on a literal meaning of the provisions of section 220(2) of the Act, such a demand for interest cannot be made. The High Court by a liberal interpretation of the said section and relying upon section 3 of the Validation Act has held that the Revenue is entitled to invoke section 220(2) of the Act for the purpose of demanding interest on such retention of money. We are not in agreement with the High Court on the interpretation placed by it on section 220(2) of the Act in regard to the right of the Revenue to demand interest in a situation where the assessee has promptly satisfied the demand made by the Revenue in regard to the tax originally assessed. It is settled principle in law that the courts while construing revenue Acts have to give a fair and reasonable construction to the language of a statute without leaning to 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 statute clearly showing an intention to lay the burden on the subject. In this process, the courts must adhere to the words of the statute and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied." The Supreme Court approved the views of the Kerala High Court in A. V. Thomas and Co.'s case [1986] 160 ITR 818. In view of the aforementioned recent authoritative pronouncement of the apex court, the decisions of different High Courts in Pitambardas Dulichand's case [1999] 239 ITR 69 (MP); K. P. Abdul Kareem Hajees' case [1983] 141 ITR 120 (Ker); Bharat Commerce and Industries Ltd.'s case [1994] 2 10 ITR 13 (Delhi); Shri Ambica Mills Ltd.'s case [1993] 203 ITR 84 (Guj); Roopali Dyeing and Printing Work's case [1995] 212 ITR 573 (Guj) and Ghanshyamdas Jatia's case [1976] 105 ITR 693 (Cal), cannot be said to be good law. Interest is payable if a sum is due. Where the assessee is in default in making payment of the assessed amount demanded from him he is liable to pay interest. Although interest is payable to the Revenue by an assessee in terms of section 220 of the Income-tax Act by way of compensation, the same would not mean that, although there does not exist any demand, interest would become payable. For the reasons aforementioned these writ petitions must be allowed but, in the facts and circumstances of these cases, there shall be no order as to costs. - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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