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Issues Involved:
1. Demand of interest u/s 215 of the Income-tax Act, 1961. 2. Demand of interest u/s 220(2) of the Income-tax Act, 1961. 3. Maintainability of the writ petition. Summary: 1. Demand of Interest u/s 215 of the Act: The assessee challenged the demand of interest amounting to Rs. 6,44,055 for the period April 1, 1981, to June 30, 1982, u/s 215 of the Act. The assessee argued that the entire advance tax was paid before the end of the financial year, i.e., by March 31, 1981, and that the mere delay in payment by the specified dates in section 211 should not attract interest u/s 215. The court noted the preponderance of judicial authority supporting the assessee's view, citing various High Court judgments that payments made within the financial year should be considered as advance tax payments. Consequently, the court quashed the demand of interest u/s 215, stating that the demand was not sustainable as the payment made on March 13, 1981, was treated as part of the advance tax by the Department in earlier notices. 2. Demand of Interest u/s 220(2) of the Act: The assessee contested the demand of Rs. 4,98,488 for the period October 29, 1984, to July 29, 1988, u/s 220(2) of the Act, arguing that there was no notice of demand that remained unpaid for 35 days. The court referred to the Kerala High Court's judgment in K. P. Abdul Kareem Hajee v. ITO, which held that an assessment order remains provisional during the appeal period and becomes final upon the appellate authority's decision. The court concluded that the original demand notice, which lay in abeyance, stood revived upon the Tribunal's final order. The court rejected the argument that the demand could not be in operation until the Tribunal's order, stating that the provisions of section 220(2) were attracted. The court also clarified that the levy of interest is compensatory, not penal. Thus, the demand u/s 220(2) was sustained. 3. Maintainability of the Writ Petition: The Department argued that the writ petition was not maintainable due to the availability of an alternative remedy. The court noted that no appeal is provided against a notice of demand u/s 156 of the Act and that the challenge was confined to the demand of interest, not the assessment itself. Citing the Supreme Court's decision in Central Provinces Manganese Ore Co. Ltd. v. CIT, the court held that the writ petition was maintainable as no statutory appeal was available against such an order demanding interest. The court emphasized that the question of alternative remedy is a matter of discretion and not a rule of thumb. Conclusion: The writ petition was allowed partly. The demand of interest u/s 215 was quashed, while the demand u/s 220(2) was sustained. The parties were left to bear their own costs.
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