1985 (3) TMI 117 - AT - Income Tax

Summary

Issues:
- Relief on account of interest charged under section 220(2) of the Income-tax Act, 1961.
- Calculation and issuance of interest notices by the Income Tax Officer (ITO) under rule 118 and rule 119.
- Compliance with statutory provisions regarding the calculation of interest payable by the assessee.

Analysis:

The judgment by the Appellate Tribunal ITAT Jabalpur pertains to appeals by the revenue and cross-objections by the assessee regarding the order of the Commissioner (Appeals) for the assessment years 1972-73 and 1973-74. The main issue raised by the revenue was the relief granted by the Commissioner (Appeals) concerning interest charged under section 220(2) of the Income-tax Act, 1961. The Tribunal noted that the figures of interest relief needed verification, and the focus was on the principles involved rather than the specific amounts. The Tribunal highlighted the importance of Section 220, which deals with the collection and recovery of tax, and the relevant rules 118, 119, and 119A of the Income-tax Rules, 1962.

Regarding the calculation and issuance of interest notices, Rule 118 mandates the ITO to calculate interest payable under section 220(2) at the end of each financial year if the tax amount remains unpaid. Similarly, Rule 119 outlines the procedure for calculating interest when a recovery certificate is issued. The Tribunal emphasized that the ITO must comply with these rules and issue notices of demand under Section 156 for each financial year to calculate interest accurately. Failure to follow these procedures can result in incorrect interest calculations, as seen in the case before the Commissioner (Appeals).

The Tribunal found that the ITO had not calculated interest as required by Rule 118 and had erroneously calculated interest for the entire period under Rule 119. The Commissioner (Appeals) rightly directed the ITO to recalculate the interest in accordance with the relevant rules. The Tribunal concluded that there was no valid reason to interfere with the Commissioner (Appeals) order, as it was based on correct application of the law. Additionally, the Tribunal dismissed the cross-objections by the assessee, stating that they were infructuous as no relief was sought.

In conclusion, the appeals by the revenue and the cross-objections by the assessee were dismissed by the Appellate Tribunal ITAT Jabalpur, emphasizing the importance of accurate calculation and issuance of interest notices by the ITO in compliance with the statutory provisions.