2010 (6) TMI 768 - HC - Income Tax

Summary

Issues involved: Appeal against order of Tribunal holding appellant liable to pay interest u/s 220(2) of Income Tax Act for entire default period.

Summary:
The judgment pertains to an appeal against the Tribunal's order holding the appellant liable to pay interest under Section 220(2) of the Income Tax Act for the entire default period. The assessment related to the year 1994-95, with a total demand of Rs. 20,31,824, out of which the assessee paid Rs. 9,76,211, leaving a balance of Rs. 10,55,613. The appeal by the assessee was successful, resulting in a refund of Rs. 3,56,010. However, on departmental appeal, the original assessment and demand were restored, leading to the imposition of interest under Section 220(2) for the entire default period. The appellant challenged this decision through appeals but did not succeed. The court considered arguments based on relevant legal provisions and previous court decisions. It was observed that interest under Section 220(2) cannot be levied after a refund is granted, as there is no subsisting demand during that period. The court allowed the appeal in part, directing the assessing officer to revise the interest demand by excluding the period during which the amount was refunded to the assessee until the revival of the original demand based on the Tribunal's order.