2014 (11) TMI 223 - HC - Income Tax

Alternate remedy available - Order of the Settlement Commission Demand of interest for delayed payment of tax u/s 220(2) Direction made to file revision in front of CIT - Held that - In terms of Section 220, an assessee will be treated as an assessee in default when he does not pay the tax liability in respect of a demand raised by an demand notice u/s 156 - There is a difference between the interest payable u/s 220 and the interest payable u/s 234B, which deals with interest for defaults in payment of advance tax, as the interest u/s 220 continuous still all the outstanding demand including the interest is cleared, while Section 234B would be chargeable for short-fall in the payment of advance tax till the date of regular assessment - Therefore, the date of intimation under Section 143(1) of the Act would be relevant for the purpose of interest under Section 220 of the Act - the rationale behind the provisions of Section 220 of the Act to levy interest on delayed payment of tax is not to penalise the party but to make a provision for compensation for the department on the failure of the assessee to make payment on the first notice of demand. As pointed out in the case of Vikrant Tyres Ltd., vs. ITO 2001 (2) TMI 129 - SUPREME Court - the condition precedent u/s 220 is that there should be a demand notice and there should be a default in paying the amount so demanded within the time stipulated in the notice - the communication dated 31.03.2008, is a consequence to the order passed by the Settlement Commission dated 18.03.2008 - Therefore, the interpretation given by the petitioner for computation of the period for the purpose of levy of interest cannot be adjudicated in a Writ Petition and the petitioner has to necessarily avail the remedy available under the Act thus, the petitioner is directed to file a Revision before the Commissioner of Income Tax under Section 264 of the Act Decided against assessee.

Summary

Issues Involved:
1. Demand for interest under Section 220(2) of the Income Tax Act, 1961.
2. Compliance with the order of the Settlement Commission.
3. Adjustment of refunds against tax liabilities.
4. Availability of alternative remedies under Section 264 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Demand for Interest under Section 220(2) of the Income Tax Act:

The petitioner challenged the order dated 12.06.2012, which demanded interest under Section 220(2) for delayed payment of tax. Section 220(2) stipulates that if the amount specified in any notice of demand under Section 156 is not paid within the period limited, the assessee shall be liable to pay simple interest for every month or part of a month from the end of the period mentioned until the amount is paid. The petitioner argued that the tax liability was fully paid by July 2007, and since the consequential demand was raised on 31.03.2008, there was no delay in remittance, and hence, no interest was leviable. The court noted that the interest demanded was for the period from 01.04.2006 to July 2007, and the petitioner did not pay the tax without default. Therefore, the interpretation for the levy of interest could not be adjudicated in a Writ Petition and needed to be addressed through the remedies available under the Income Tax Act.

2. Compliance with the Order of the Settlement Commission:

The petitioner filed an application before the Settlement Commission, which settled the issue by accepting the revised offer of additional undisclosed income. The Settlement Commission directed the Commissioner of Income Tax to compute the total income, tax, interest, and penalty payable and communicate the same to the petitioner. The petitioner contended that the respondent did not act as per the directions of the Settlement Commission and raised a demand for interest under Section 220, which was not in accordance with the Settlement Commission's order. The court observed that the Settlement Commission's order was complied with, and the details were communicated to the petitioner. The court directed the petitioner to work out the remedy in accordance with the law if aggrieved.

3. Adjustment of Refunds against Tax Liabilities:

The respondent adjusted the refunds due to the petitioner for various assessment years against the tax liabilities. The petitioner argued that the tax liability had been fully paid, and there was no demand payable, hence, interest under Section 220 did not arise. The respondent, in their counter affidavit, stated that the refunds for certain assessment years were adjusted against the pending demand, and the loss carried forward was set off against the business income for subsequent years. The court noted that the respondent had duly adjusted the refunds and communicated the details to the petitioner. If the petitioner had any grievance, they were directed to seek remedy under the provisions of the Income Tax Act.

4. Availability of Alternative Remedies under Section 264 of the Income Tax Act:

The court highlighted that Section 264 provides for the revision of orders by the Commissioner of Income Tax. The petitioner could have availed this remedy if aggrieved by the demand for interest. The court directed the petitioner to file a revision petition under Section 264 within three weeks, and the Revisional Authority was instructed to entertain the petition without rejecting it on the grounds of limitation and to consider it on merits.

Conclusion:

The court concluded that the issues raised by the petitioner involved mixed questions of fact and law, which could not be adjudicated in a Writ Petition. The petitioner was directed to file a revision petition under Section 264 of the Income Tax Act, and the Revisional Authority was to consider the petition on merits. The Writ Petition was disposed of with no costs.