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TMI Blog1976 (5) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... e Official Liquidator on the following dates indicated against the respective assessment years : Asst. yr. Date of asst. order. Date of service of demand notice Date on which the demand was payable u/s 220(1) 1967-68 30-9-72 3-10-72 6-11-72 1968-69 31-10-72 9-11-72 14-12-72 1969-70 31-10-72 9-11-72 14-12-72 1970-71 31-10-72 9-11-72 14-12-72 3. In accordance with sub-s. (1) of s. 220, the aforesaid demands, according to the ITO, were to be paid "within 35 days of the service of the notice "as indicated in Col. 4 of the chart above. Inasmuch as the said amounts were not paid within the time specified above, the ITO proceeded to charge interest from the appellant in accordance with the provisions of sub-s. (2) of s. 220, and the orders charging interest where passed in the last week of March, 1974. 4. On receipt of the aforesaid orders passed by the ITO under sub-s. (2) of s. 220 of the IT Act, 1961, the appellant moved application under s. 154 of the IT Act, 1961 stating that the aforesaid charging of interest was a mistake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the quantification of a demand or creation of a demand which can only be created by the issue of a notice under s. 156 once an assessment has been framed, the issue of notice under s. 156 is obligatory. The time limit for payment of the demand laid down in s. 220(1) is also obligatory unless it is courtailed by the proviso to s.220(1) and the charging of interest after the expiry of 35 days of the service of the demand notice under s. 156 is also obligatory under s. 220(2). There is no opinion or discretion with the ITO not to charge this interest. Although s. 220 is incorporated under the heading Collection Recovery this sub-section is not really a mode for recovery of tax but it simply lays down a time limit for payment of the demand notified by a notice under s. 156 and provides for charging interest after the expiry of the statutory period of 35 days. Thus this not a proceeding for recovery of the demand. Any step taken under s. 221 or 222 of subsequent sections of the Chapter can be termed as legal proceedings for recovery of tax. There is not bar on quantification of demand of tax and the interest due thereon. Only the recovery of the demand is stayed till the leave to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue after income-tax has been determined and its payment demanded from the liquidator. It would be open to the liquidation Court then to decide how for under the law the amount of income-tax determined by the Department should be accepted as a lawful liability on the funds of the company in liquidation. At that stage the winding up court can fully safeguard the interests of the company and its creditors under the Act". 8. It was also pointed out that in the aforesaid decision, their Lordships of the Supreme Court have quoted with approval the following observations of their Lordships of the Mysore High Court in the case of Mysore Spun Silk Mills Ltd. (In Liquidation) 68 ITR 295 (Mys) : " The collection of tax can only be by securing in orders of the winding up Court for payment of tax in the light of the appropriate provisions of the Companies Act". Referring to the above opinion of the Mysore High Court, their Lordships of the Supreme Court observed as follows : " So far as the collection of the tax assessed is concerned, there can scarcely be any difficulty in agreeing with the view taken there" (in above). Distinguishing the two stages of framing the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with proof of debts and their payment in Liquidation. Sec. 49E can be reconciled with ss. 228 and 229 by holding that s. 49E applies when insolvency rules do not apply". 9. On behalf of the Department, the aforesaid contentions of the learned Chartered Accountant were opposed and reliance was placed on the order of the learned AAC. It was pointed out that so far as the IT Act was concerned, it was a self contained code and in so far as the ITO has done what the code required him to do, it could not be said that the ITO s action was erroneous. It was also urged by the learned Departmental Representative that in any case, the point in issue was highly debatable and as such the provisions of s. 154 would not apply. Those provisions were meant, according to him, to rectify the mistakes apparent from record and the mistakes which needed long drawn out process of reasoning, and interpretation of the various statutes could not be rectified under s. 154. 10. We have carefully examined the rival contentions. Their Lordships of the Supreme Court in the case of S.V. Kondaskar vs. V.M. Deshpande, 84 ITR 685 (SC) clearly lay down the dividing line between the stage upto which the companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of law and so are applicable to all the assessee in all the circumstances but that in the case of Companies under liquidation there is a special law which operates and which decides as to what amount is payable, when and in what manner this special law will have priority over the general provisions of the IT Act. We are, therefore, of the opinion that the ITO did not have right to charge interest from the assessee Company under liquidation in terms of sub-s. (2) of s. 220, as in view of the enunciation of law by their Lordships of the Supreme Court in 83 ITR 685 (SC) and in 57 ITR 331, the position of law is self evident now, therefore, the order of the ITO were clearly a mistake apparent from record and as such have rectified them under s. 154. 11. The contention of the learned Departmental Representative that the mistake is not patent from the record because it requires a good deal of debate to appreciate the controversy is also not correct, because once the issue is concluded by the observations of their Lordships of the Supreme Court, no debate on the point is possible. The Lordships have, as pointed out by us above, clearly laid down the line upto which the IT Act has as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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