2014 (7) TMI 209 - AT - Income Tax

Interest levied u/s 220(2) of the Act - Whether interest u/s 220(2) shall arise on a demand, originally satisfied and, accordingly, refunded to the assessee following the order/s by an appellate forum, since revived by an order/s by a higher forum Held that - The matter has been settled by the decision in Vikrant Tyres Ltd vs. ITO 2001 (2) TMI 129 - SUPREME Court - the condition precedent for invocation of section 220(2) is that there should be a demand notice (DN) and, further, a default in paying the amount so demanded - the demand notice stands satisfied in full within the time stipulated, there is no revival of demand upon a subsequent restoration by a higher appellate forum of the assessment in whole or in part, and a fresh notice of demand would be required to be issued toward recovery of the demand reviving subsequently - there is no question of levy of interest from the date immediately following the due date of payment as per the original demand notice. Where a demand notice has not been discharged in full, interest from an anterior date shall arise only to the extent the demand as finally arising is relatable to such unpaid/un-discharged demand - the liability to interest u/s 220(2) arises for such period, i.e., for which the demand actually outstands, when the whole or a part of the said demand becomes due for the payment in subsequent proceedings thus, the working of interest u/s 220(2) of the Act is directed Decided in favour of assessee.

Summary

Issues involved:
- Maintainability of interest levied by Revenue under section 220(2) of the Income Tax Act on the assessee for multiple assessment years.

Analysis:
1. Issue of Maintainability of Interest:
The judgment pertains to four appeals by the Assessee challenging the orders by the Commissioner of Income Tax (Appeals) dismissing the assessee's appeals contesting orders under section 154 of the Income Tax Act for the assessment years 1992-93, 1994-95, 1995-96, and 1996-97. The main issue is the legality of interest levied by the Revenue under section 220(2) on the assessee. The key question is whether interest under section 220(2) should be imposed on a demand that was initially satisfied and later refunded to the assessee due to orders by appellate forums, which were subsequently revived by a higher forum. Another aspect is whether the situation changes if the original demand was not satisfied within the prescribed time, leading to the assessee being deemed in default for a period. The judgment consolidates these appeals for a common decision.

2. Legal Analysis:
The Tribunal highlighted that the issue at hand is not appealable as it arises in rectification proceedings under section 154 of the Act. The decision rests on settled law, particularly the ruling in Vikrant Tyres Ltd vs. ITO [2001] 247 ITR 821 (SC), which clarifies the conditions for invoking section 220(2). The Tribunal emphasized that if the original demand notice (DN) is fully satisfied within the stipulated time, there is no revival of the demand upon subsequent restoration by a higher appellate forum. The Revenue's argument for interest from an anterior date is based on the original DN not being discharged in full or a delay in satisfaction, leading to default. However, the Tribunal held that interest under section 220(2) arises only for the period the demand remains unpaid or the assessee is in default beyond the prescribed time.

3. Decision and Conclusion:
After hearing the parties and reviewing the material, the Tribunal found no dispute regarding the tax figures and payment dates. Consequently, the Tribunal directed the calculation of interest under section 220(2) for the relevant years based on the principles discussed. Ultimately, the appeals by the assessee were disposed of in accordance with the aforementioned analysis. The order was pronounced openly on June 13, 2014.

This detailed analysis of the judgment provides a comprehensive understanding of the legal issues involved and the Tribunal's decision regarding the maintainability of interest levied by the Revenue under section 220(2) of the Income Tax Act for the specified assessment years.