2019 (10) TMI 1230 - HC - Income Tax

Premature demand of Interest u/s 220 - original assessment order was set aside and still pending for adjudication - Sale of property by auction and adjust the sale proceeds towards the Income tax dues - petitioner submitted that the tenure of the communication challenged in this writ petition would show that the second respondent has already taken a decision to levy interest from 01.03.1999 onwards and therefore, the petitioner has rightly filed the present writ petition - HELD THAT - Stand taken by the Revenue in their counter in respect of the impugned communication dated 05.06.2018, it clearly indicates that it is only a tentative calculation made and that the final working of interest chargeable would be computed only after payment of outstanding tax and the same would be communicated to the petitioner by way of an order/proceedings. Hence, find that the present writ petition challenging the impugned communication is highly premature. Accordingly, this Writ Petition is disposed of, without expressing any view on the merits of the contentions raised by both parties, however, by granting liberty to the petitioner to work out his remedy as and when the demand of interest is made by issuing an order/proceedings.

Summary

Issues:
Challenge to communication requesting redemption of documents and calculation of interest under Section 220(2) of the Income Tax Act, 1961.

Analysis:
The petitioner challenged a communication from the second respondent dated 05.06.2018, requesting redemption of documents for the sale of property to adjust income tax dues, including interest calculated from 01.03.1999. The petitioner contended that interest should only be calculated from the final assessment order dated 30.10.2009, not from 01.03.1999. The main argument was based on the original assessment order being set aside. The petitioner sought a direction to recalculate interest under Section 220(2) for the block assessment period from 01.04.1986 to 31.03.1996.

The second respondent, in their counter affidavit, clarified that the communication was not a final order but a tentative calculation of interest liability based on available records. They stated that the final interest calculation would be done after the payment of outstanding tax demand and communicated through an order or proceedings. The respondent emphasized that the communication was not an order and, therefore, premature for the petitioner to challenge in a writ petition.

During the proceedings, the petitioner's counsel argued that the communication indicated a decision to levy interest from 01.03.1999, justifying the writ petition. However, they acknowledged the petitioner's objections regarding the calculation date of interest. The standing counsel for the respondents reiterated that the communication was tentative and not a final order, with the actual interest calculation to be determined after payment of outstanding tax dues and communicated through an order or proceedings.

In the judgment, the court noted that the communication in question was a tentative calculation, and the final interest chargeable would be determined only after the payment of outstanding tax. The court found the writ petition challenging the communication premature and disposed of it without expressing any view on the merits of the contentions raised by both parties. The petitioner was granted liberty to seek remedy when the demand for interest is made through an order or proceedings, clarifying that the disposal of the writ petition would not hinder the Revenue from collecting tax dues through legal means.