2012 (11) TMI 678 - HC - Income Tax

Interest u/s 220(2) for delayed payment of legitimate Government dues which always remained quantified to the extent of Assessee s liability to pay balance self-assessment tax in pursuance of revised return by him on 12.1.1984 - held that - all tax liability, except advance tax, have been made liable to be followed by a notice under section 156 and only when the assessee fails to comply with the conditions of the notice under section 156 and fails to pay the due amount, then he is liable to pay interest. No other provision has been shown to us creating any liability for self assessment default cases and for deemed defaulter under section (3) of section 140A. Undisputedly notice under section 156 was given to the assessee after final assessment order dated 24th March, 1992. The authorities were, thus, right in holding that the assessee in the present case was liable to pay interest from the date of the order dated 24th March, 1992. - Decided against the revenue.

Summary

Issues:
1. Interpretation of liability to pay interest under section 140A of the Income Tax Act, 1961.
2. Determination of the point from which interest is chargeable - from the date of filing revised returns or final appellate order.
3. Application of section 220(2) for charging interest on tax liability.

Issue 1: Interpretation of liability to pay interest under section 140A of the Income Tax Act, 1961:
The case involved a question regarding the liability of an assessee to pay interest under section 140A of the Income Tax Act, 1961. The Revenue contended that the assessee was deemed to be "an assessee in default" from the time he was supposed to pay tax and interest but failed to do so. The Revenue argued that the assessee's self-assessment of tax and interest on his income made him liable to pay interest from the date of such assessment, as per subsection (3) of section 140A. The court analyzed the provisions of section 140A, emphasizing that the assessee is required to self-assess tax and pay it without any order from the authority. The court noted that failure to pay self-assessed tax and interest deems the assessee to be in default, as per the statute.

Issue 2: Determination of the point from which interest is chargeable - from the date of filing revised returns or final appellate order:
The main issue was to determine the point from which interest is chargeable - whether from the date of filing revised returns or the date of the final appellate order. The court examined the provisions of section 140A and section 220(2) of the Act. The Revenue argued that the assessee should pay interest from the date of self-assessment, while the respondent contended that interest should be levied only after a demand notice is issued specifying the payable amount. The court observed that in cases of self-assessment, interest can be charged only after the service of a demand notice demanding the specified amount. In this case, the notice under section 156 was served after the final order dated 24th March, 1992, when the assessee's liability crystallized.

Issue 3: Application of section 220(2) for charging interest on tax liability:
The court analyzed section 220(2) of the Income Tax Act, which provides for charging simple interest if the specified amount in the notice of demand under section 156 is not paid within the stipulated period. The court noted that all tax liabilities, except advance tax, must be followed by a notice under section 156, and failure to comply with the notice conditions leads to interest liability. The court emphasized that interest liability in self-assessment default cases is not covered under section 140A but under section 220(2). Therefore, in this case, the assessee was held liable to pay interest from the date of the final assessment order dated 24th March, 1992.

In conclusion, the court dismissed the appeal, stating that the assessee was liable to pay interest from the date of the final assessment order.