2004 (5) TMI 525 - AT - Income Tax

Summary

Issues Involved:
1. Levy of interest under section 220(2) of the Income-tax Act on interest levied under sections 217 and 234B.
2. Applicability of section 3(3)(c) of the Interest Tax Act, 1974.
3. Relevance of Supreme Court judgments in similar contexts.

Detailed Analysis:

1. Levy of Interest under Section 220(2) on Interest Levied under Sections 217 and 234B:
The primary issue addressed in the appeals is whether interest can be levied under section 220(2) of the Income-tax Act on interest already levied under sections 217 and 234B. The assessee contended that charging interest on interest is not permissible. The Tribunal examined the relevant provisions of the Income-tax Act, specifically sections 156 and 220, which mandate that any amount specified in a demand notice must be paid within a specified period, failing which interest under section 220(2) is applicable. The Tribunal concluded that the classification of amounts as tax, interest, or penalty ceases once the demand notice is issued. Therefore, if the assessee fails to pay the specified amount, including interest levied under sections 217 and 234B, within the stipulated time, interest under section 220(2) is justified.

2. Applicability of Section 3(3)(c) of the Interest Tax Act, 1974:
The assessee argued that under section 3(3)(c) of the Interest Tax Act, interest on interest cannot be levied. The Tribunal clarified that the case at hand pertains to the Income-tax Act and not the Interest Tax Act. The Tribunal emphasized that the provisions of the Income-tax Act must be interpreted independently and not in conjunction with the Interest Tax Act. Therefore, the argument based on section 3(3)(c) of the Interest Tax Act was deemed irrelevant to the present case.

3. Relevance of Supreme Court Judgments:
The assessee relied on several Supreme Court judgments to support their contention. The Tribunal analyzed these judgments in detail:
- Ganesh Dass Sreeram v. ITO: The Supreme Court held that interest for late filing of the return is compensatory and not penal. However, this case involved advance tax covering the entire assessed amount, which is not applicable here.
- CIT v. M. Chandra Sekhar: The Supreme Court ruled that penalty provisions do not apply when the return is filed within an extended period allowed by the Assessing Officer. The Tribunal found this case inapplicable as it dealt with penalty and not interest under section 220(2).
- Goodyear India Ltd. v. State of Haryana: The Supreme Court emphasized strict interpretation of tax statutes. The Tribunal agreed but reiterated that the Income-tax Act must be interpreted within its own provisions without reference to the Interest Tax Act.

Conclusion:
The Tribunal concluded that interest under section 220(2) can be levied on the amount specified in the demand notice, including interest levied under sections 217 and 234B. The arguments based on the Interest Tax Act and the cited Supreme Court judgments were found inapplicable. Consequently, the appeals filed by the assessee were dismissed as devoid of merit.