TMI Blog1993 (6) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ing effect to the appeal order dated October 3, 1985, of the Income-tax Appellate Tribunal for the said assessment year 1973-74. The facts of the case are that for the assessment year 1973-74, the petitioner filed its return under the Act on October 31, 1973, which was revised on November 30, 1973, claiming, inter alia, deduction for gratuity liability calculated on the basis of actuarial valuation. The total income shown in the revised return was Rs. 8,29,370 and the tax paid thereon by way of tax deducted at source and self-assessment was Rs. 4,77,858. Assessment thereon under the Act was made on June 5, 1976, wherein the Income-tax Officer disallowed the claim of deduction of gratuity for not complying with the conditions of section 40A(7) of the Act. The total income assessed was Rs. 60,56,160. The tax thereon was computed at Rs. 34,96,327 and after adjusting the tax paid as above the balance tax payable was determined at Rs. 30,18,469. Against the said assessment, the petitioner preferred an appeal. The Appellate Assistant Commissioner of Income-tax, by his order dated February 28, 1977, set aside the assessment with the direction to make fresh assessment after examining the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 409 and tax thereon was computed at Rs. 10,39,784. After adjusting prepaid tax of Rs. 4,77,858 and further post-assessment payment of Rs. 6,30,587, a refund of Rs. 46,238 was found to be due to the petitioner which was granted on December 18, 1985. The Department had also preferred an appeal to the Income-tax Appellate Tribunal against the appeal order dated October 26, 1979, against the allowance of gratuity and other reliefs. The Department's appeal was decided by the Income-tax Appellate Tribunal on October 3, 1985, by which the disallowance of gratuity by the Income-tax Officer was upheld but the allowances of Rs. 34,398 and Rs. 56,106 were held to be justified. Pursuant to the Tribunal's order, the provision for gratuity to be disallowed was fixed at Rs. 41,45,444. By reason of the Tribunal's order dated October 3, 1985, the total income and tax thereon for the assessment year 1973-74 was recomputed at Rs. 59,48,067 and the tax thereon at Rs. 34,33,902. After adjusting the prepaid tax of Rs. 4,77,858 and interim post-assessment payment of Rs. 5,84,349, the balance tax payable was found to be Rs. 23,71,695. Interest under section 220(2) of the Act amounting to Rs. 11,370 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Board of Direct Taxes dated April 3, 1982 (see Circular No. 334, which provides, inter alia, that where the assessment made originally by the Income-tax Officer was either varied or even set aside by an appellate authority, but on further appeal, the original order of the Income-tax Officer was restored either in part or wholly the interest payable under section 220(2) will be computed with reference to the due date reckoned from the original demand notice. Therefore, the contention of the Department is that the assessment order dated September 24, 1979, was restored in respect of gratuity disallowance by the appeal order of the Income-tax Appellate Tribunal. Therefore, the tax demand computed on May 3, 1986, was payable and remained unpaid all through since September 24, 1979, until it was paid and, therefore, the assessee is liable to pay interest under section 220(2) of the Act on the said unpaid amount from the expiry of the period of 35 days from the date of the service of the notice of demand pursuant to the assessment order dated September 24, 1979. Learned counsel for the Department also relied on the decisions of the Kerala High Court in the cases of K P. Abdul Kar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember 24, 1979, and the tax demand raised thereby, as it was, was not wholly restored. By reason of the subsequent appeal orders including the order of the Tribunal, the total income and the tax was recomputed. Hence, in the words of the Kerala High Court decision, the assessment order dated September 24, 1979, could not be said to be " deemed to have operated in full vigour to make the petitioner liable . . . .". In fact, subsequently, by reason of the appellate order fresh computations of the total income and tax payable have been made. All the said subsequent orders of recomputations are assessment orders lawfully made. They cannot simply be ignored and deemed to have never existed or been made. The recomputed demand arose from the fresh orders and not by assessment or notice of demand dated September 24, 1979. What the Kerala High Court, on the facts of that case laid down was that the demand as originally made was all along executable and was wholly affirmed by the Tribunal's order. This is not the case in the instant case. The other decision of the Kerala High Court in the case of Mohammed Essa Moosa Sait [1987] 167 ITR 338, also proceeds on the same basis as in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings, it is not open to the Income-tax Officer to go into the true scope of the provisions of the Act. That being so, the impugned notice is in excess of jurisdiction under section 154 of the Act and, there fore, is liable to be declared invalid. Although not strictly necessary, yet, since it has been argued by both sides, a view about the applicability of the provisions of section 220(2) of the Act in the instant case may be expressed. Section 220(2) of the Act has to be strictly construed. Liability to pay interest would arise under section 220(2) of the Act only in case where,-- (i) the amount specified in the notice of demand is not paid ; (ii) within the period specified under sub-section (1) of section 220. Liability to pay interest under section 220(2) will commence after the end of the period mentioned in section 220(1). There is no liability to pay interest from the date of the service of the notice of demand for the marginal period of 35 days specified in section 220(1). Section 220(2), necessarily assumes that the amount specified in the notice of demand remains outstanding and payable by the assessee even after the expiry of the period mentioned in sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puting the tax and the redetermined and recomputed tax was not the same as determined in the assessment order dated September 24, 1979. Each recomputation giving effect to appeal order is a fresh assessment order under section 143 as has been held by this court in the case of Kooka Sidhwa and Co. v. CIT [1964] 54 ITR 54. Even if it is assumed that the notice of demand, as such, issued in September, 1979, subsisted all along and no fresh notice was required to be issued the amount specified in that notice was never payable, enforceable or recoverable even after the final determination. Hence, even on the interpretation of the provisions of section 220(2) of the Act, it is submitted that the petitioner has no liability to pay interest on the balance demand determined to be payable by the order dated May 3, 1986, right for the September 24, 1979. This court in the case of CIT v. Chloride India Ltd. [1990] 186 ITR 217, at page 224, observed as follows : " There is yet another approach that could be made to the controversy. What happens to an assessment by the Income-tax Officer when such assessment is subject to an appeal and pursuant to the appellate decision, the matter is reop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere noted and discussed, It was held : " The Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, merely lays down that where tax dues are reduced in appeal or are not varied in appeal, no fresh notice of demand will required to be served upon the assessee. But the Income-tax Officer will have to send an intimation of the fact of such reduction to the assessee. The provisions of this Act do not have the effect of nullifying the payment that has been made originally by the assessee. Refund of the tax paid by the assessee pursuant to the order of the Appellate Assistant Commissioner does not have the effect of making the taxpayer an assessee in default merely on the ground that the order of the Appellate Assistant Commissioner was ultimately reversed by the Tribunal. Therefore, the notice dated August 30, 1985, in so far as it seeks to recover interest on the amount refunded to the petitioner must be set aside and is hereby quashed. " It is submitted that by reason of the subsequent appellate orders the original order dated September 24, 1979, on the points in issue decided by the appellate orders expressly merged in the appeal orders and only the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
