2024 (5) TMI 1071 - AT - Income Tax

Interest levied u/s 220(2) on non-payment of FBT demand, including interest - as against refund due, an amount was adjusted, which comprised of outstanding Fringe Benefit Tax (FBT) demand u/s 115WE - case of the assessee that no intimation or notice of demand was served on the assessee qua the FBT liability - As submitted, suo motu, the assessee deposited FBT demand , despite that, FBT demand was again recovered from the refund due along with the interest levied u/s 220(2) - HELD THAT - There cannot be levy of interest under section 220(2) of the Act for alleged non-payment of FBT liability. Furthermore, the record reveals that once the assessee came to know the fact that the demand relating to FBT liability was appearing in the portal of the Income Tax Department, it had opened a communication channel with the AO continuously seeking information regarding service of intimation and demand notice creating such liability. However, the requests of the assessee failed to evoke any response from the AO. These are admitted facts on record on record as learned first appellate authority has not disputed assessee s claim. The reason for negating assessee s claim is, the assessee was aware of the tax liability uploaded by Revenue on e-filing portal. Mere reflection of demand on e-filing portal does not absolve Revenue from properly serving the intimation and demand notice qua the FBT liability pertaining to assessment year 2009-10. Pertinently, in course of hearing of the present appeal, a report of the AO was called for with regard to assessee s claim of non-service of intimation and demand notice pertaining to FBT liability. However, the Revenue has failed to furnish any material before us, which can establish that the intimation and demand notice concerning FBT demand was ever served on the assessee. Though, it may be a fact that the assessee might have discharged the FBT liability appearing on the portal of the Income Tax Department in the year 2018, but that act of the assessee, by itself, cannot fasten interest liability under section 220(2) of the Act upon the assessee. Assessee appeal allowed.

Summary

Issues Involved:
The core issue in this case pertains to the chargeability of interest u/s 220(2) of the Income-tax Act, 1961.

Chargeability of Interest u/s 220(2):
The appellant, a resident corporate entity, filed its return of income for the assessment year 2017-18, which was processed under section 143(1) of the Act. An amount was adjusted from the refund due, including interest under section 220(2) on an outstanding Fringe Benefit Tax (FBT) demand. The appellant contended that no demand notice concerning the interest component of the FBT demand was served on them. The Commissioner (Appeals) directed the Assessing Officer to give credit for the payment made by the appellant and set off the demand. The Commissioner held that interest u/s 220(2) shall be chargeable till the date of payment of demand and that the issue related to the FBT demand for a previous year cannot be the subject matter of the appeal for the current assessment year.

Validity of Intimation and Demand Notice:
The appellant argued that the intimation under section 115WE(1) was issued after the limitation period and was not communicated along with the demand notice. The appellant contended that uploading the demand status on the Income Tax Department portal does not substitute valid service of the intimation and demand notice. The appellant relied on legal provisions and court decisions to support their argument.

Decision:
The Tribunal observed that the appellant had paid the FBT liability for the relevant year through a challan in 2008, and the department had wrongly adjusted it against income tax liability, creating an alleged FBT demand with interest. The Tribunal found that the appellant had discharged its FBT liability in 2008 itself and had continuously sought information regarding the demand notice. The Tribunal held that the mere reflection of demand on the portal does not absolve the Revenue from properly serving the intimation and demand notice. Therefore, the Tribunal directed the Assessing Officer to delete the demand and refund the amount adjusted against the refund due for the assessment year in question.

Conclusion:
The appeal was allowed, and the demand for interest u/s 220(2) was directed to be deleted, with the amount adjusted to be refunded to the appellant.