2015 (9) TMI 500 - HC - Income Tax

Rectification of mistake - interest under Section 220(2) of the Act was charged from the date of the original Assessment Order dated 26.3.1992.- Held that - In the instant case, the original demand pursuant to the first Assessment Order dated 26.3.1992 was duly satisfied and the amount was refunded pursuant to the first rectification order passed under Section 154 on 15.9.1994. In similar circumstances, the Supreme Court in the case of Vikrant Tyres Limited ( 2001 (2) TMI 129 - SUPREME Court ) the Supreme Court held that where the original demand was satisfied and the amount was paid by the assessee interest could not be payable from the original date of demand if levied subsequently. The Supreme Court found that the condition precedent for invoking the said Section was only if there was a default in payment of the amount demanded under a notice by the revenue within the stipulated period therein and if such a demand was not satisfied then Section 220(2) could be invoked. In the light of the aforesaid decision, we find that the original demand pursuant to the Assessment Order dated 26.3.1992 was paid by the assessee and the demand was satisfied. Subsequently when a fresh order was passed by the Assessing Officer on 1.12.1995 imposing a fresh demand interest could only be levied, if any, after 30 days from 1.12.1995, if it was not paid within the said period. No substantial question of law arises.

Summary

Issues:
1. Rectification of Assessment Order under Section 154 of the Income Tax Act.
2. Charging of interest under Section 220(2) from the date of the original Assessment Order versus the revised order under Section 154.

Issue 1: Rectification of Assessment Order under Section 154:
For the Assessment year 1989-90, the assessee filed an application under Section 154 of the Income Tax Act, claiming a mistake in the Assessment Order passed on 26.3.1992. The application was allowed, leading to a Revised Assessment Order dated 15.9.1994, resulting in a nil assessment and issuance of refund vouchers totaling &8377; 2,48,33266/- and &8377; 76,04,798. Subsequently, another notice under Section 154 was issued on 16.10.1995, followed by a rectification order on 1.12.1995, leading to a fresh revised notice of demand and Challan. The applicant challenged the charging of interest from 1992, which was dismissed in the first appeal but allowed in the Second Appeal before the Tribunal.

Issue 2: Charging of interest under Section 220(2):
The Department appealed under Section 260(A) of the Income Tax Act, arguing that interest under Section 220(2) should be charged from the date of the original Assessment Order dated 26.3.1992, not from the revised order under Section 154 dated 1.12.1995. The High Court, after considering the arguments, referred to a Supreme Court decision in Vikrant Tyres Limited Vs. I.T.O.,247 I.T.R. 821. The Supreme Court held that interest could only be levied if there was a default in payment within the stipulated period. In the present case, as the original demand was satisfied after the first Assessment Order and rectification, interest could only be imposed from the date of the subsequent order on 1.12.1995.

In conclusion, the High Court found that as per the Supreme Court decision and the facts of the case, no substantial question of law arose for consideration. Therefore, the appeal was dismissed, affirming that interest under Section 220(2) was chargeable from the date of the revised order under Section 154, not from the original Assessment Order.