2017 (11) TMI 1424 - HC - Income Tax

Maintainability of appeal before CIT(A) against Levy of interest u/s 220(2) - enhanced assessment - AO directed that interest u/s 220(2) chargeable on the amount demanded u/s 156 - appeal maintainable under clause (c) to Section 246(1) - Held that - The order under Section 154 of the Act had the effect of enhancing the assessment. Such orders are appealable on all aspects decided and adjudicated. The order under Section 154 of the Act had also specifically dealt with and examined the question of interest u/s 220(2) of the Act and the date from which the interest was chargeable. The direction to charge interest was specifically given in the order under Section 154 of the Act. The claim and contention of the appellant assessee to the contrary was rejected and disallowed. The assessing officer had refused to accept the contention made by the assessee that interest would not be chargeable under Section 220(2) of the Act, until and unless there was non-payment pursuant to the order passed. This is a peculiar case wherein the question of levy of interest under Section 220(2) of the Act, which is payable on non payment, was decided, levied and imposed in the order under Section 154 of the Act. In the present case, there was a specific direction and finding in the order passed under Section 154 in respect of charging interest under Section 220(2) of the Act. Consequently, the direction for payment of interest which was contested by the appellant-assessee would be appealable under clause (c) of Section 246 (1) of the Act. - Decided in favour of assessee.

Summary

Issues:
1. Appeal against the order under Section 154 of the Income Tax Act, 1961 for the assessment year 1989-90.
2. Chargeability of interest under Section 220(2) of the Act.
3. Maintainability of appeal under Section 246(1)(c) of the Act.
4. Interpretation of the effect of the order under Section 154 enhancing the assessment.

Analysis:
1. The appeal in question relates to the assessment year 1989-90 and arises from the order passed in ITA No. 3888/Del./1999. The substantial question of law framed for determination was whether the Tribunal was correct in holding that no appeal lies against the order under Section 154 of the Act. The assessing officer revised the assessment order for the year 1989-90, leading to the direction that interest under Section 220(2) was chargeable on the amount demanded under Section 156. The issue of chargeability of interest under Section 220(2) was central to this appeal.

2. The primary contention revolved around the chargeability of interest under Section 220(2) of the Act. The appellant challenged the direction to charge interest in the order under Section 154, arguing that interest was not leviable. The Commissioner of Income Tax (Appeals) allowed the appeal, stating that interest under Section 220(2) is chargeable only when there is non-payment pursuant to a notice under Section 156. However, the Revenue appealed before the Tribunal, which held that the first appeal challenging the levy of interest under Section 220(2) was not maintainable before the Commissioner of Income Tax (Appeals).

3. The issue of the maintainability of the appeal under Section 246(1)(c) of the Act was crucial. The Tribunal's decision was based on the interpretation that the appeal was not maintainable before the Commissioner of Income Tax (Appeals). However, the High Court opined that the appeal would be maintainable under clause (c) of Section 246(1) as the order under Section 154 had the effect of enhancing the assessment, making it appealable on all aspects decided and adjudicated.

4. The interpretation of the effect of the order under Section 154 enhancing the assessment was pivotal. The High Court clarified that the order specifically dealt with the question of interest under Section 220(2) and the date from which the interest was chargeable. The direction to charge interest was contested by the appellant but was rejected by the assessing officer. The High Court held that the direction for payment of interest was appealable under clause (c) of Section 246(1) of the Act, emphasizing the importance of examining the specific findings in the order passed under Section 154.

In conclusion, the High Court ruled in favor of the appellant assessee, stating that the appeal was maintainable under Section 246(1)(c) and that the question of chargeability of interest under Section 220(2) would be examined by the Tribunal. The Court did not express any opinion on the contention regarding the levy of interest under Sections 215 and 217, leaving it to be examined by the Tribunal if raised.