1984 (3) TMI 126 - AT - Income Tax

Summary

Issues:
- Appeal against order for payment of interest under section 220(2) of the IT Act, 1961.
- Appealability of the order for levying interest.
- Challenge to the liability to pay interest versus challenge to the quantum of interest.

Detailed Analysis:

1. The appeal before the Appellate Tribunal ITAT BOMBAY-E was directed against the order passed by the CIT (A)-VI Bombay, requiring the assessee to pay a specified amount within a set period, failing which interest at 12% per annum would be levied under section 220(2) of the IT Act, 1961.

2. The initial demand was modified by the Income Tax Officer (ITO) to credit a certain amount paid by the assessee, following which a revised demand was made. Despite the assessee complying with the revised demand within the stipulated time, the ITO levied interest under section 220(2) for the period from the initial demand date to the payment date.

3. The CIT (A) dismissed the appeal on the grounds that the order for levying interest under section 220(2) was not appealable as there was no challenge to the assessment leading to the tax demand. The assessee contended that the order was appealable as the challenge was to the liability to pay interest, not just the quantum of interest.

4. The Appellate Tribunal referred to a decision of the High Court of Bombay in a previous case, emphasizing that an appeal lies if the challenge is to the very liability to pay interest, not just the quantum. In the present case, the assessee argued that the revised demand superseded the initial demand, and since the amount was paid within the stipulated time, there was no liability to pay interest.

5. The Tribunal held that the appeal was maintainable as the challenge was to the very liability to pay interest, not just the quantum. Consequently, the order levying interest was cancelled as the amount had been paid within the specified period, rendering no interest chargeable under section 220(2) of the Act.

6. Therefore, the appeal was allowed in favor of the assessee, highlighting the distinction between challenging the liability to pay interest and challenging the quantum of interest, with the former being appealable according to the legal precedent cited.

This detailed analysis outlines the key issues raised in the appeal, the legal principles applied, and the Tribunal's decision in favor of the assessee based on the challenge to the liability to pay interest.