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TMI Blog2012 (10) TMI 327X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the CIT(A) vide order dated 22.9.1995. Consequent to the ITAT order, the A.O. passed an order under Section 254/251/143(3) dated 3.1.2003, whereby the total income was determined at Rs.3,66,010/- and tax liability was revised. Besides the tax, interest under Section 234B, 234C and 220(2) amounting to Rs.77,712/-, 9,054/- and Rs.3,02,918/- have also been levied. The liability and demand of tax as well as levy of interest under Section 234B, 234C and also 220(2) are all disputed in this appeal. 3. This appeal has been admitted on the following questions of law:- "(i) Whether, it was open to the Tribunal to examine the maintainability of the appeal of the assessee before the Commissioner of Income Tax (Appeals) against the order dated 3.1.03? (ii) Whether, the appeal filed by the assessee against the order dated 3.1.03 was not-maintainable under section 246 of the Act though that appeal had been filed against the order passed under Sections 254/251/143 (3) of the Act to challenge the liability of tax and also of interest? (iii) Whether, the interest under Section 220(2) of the Act could be demanded from the date of original demand note though the assessment order creating s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order dated 3.1.2003 under appeal before me. The interest u/s 234C is to be charged with reference to the income shown in the return at Rs.18,840/-. If there is any default under this section, such interest cannot be charged with reference to assessed income. The I.T.O. is directed to verify and if interest u/s 234C has been charged with reference to assessed income is should be brought down and re-calculated with reference to the returned income. Subject to this remark the charging of interest u/s 234B and 234C are confirmed. Now I come to the interest charged u/s 220(2) at Rs.3,02,918/-. The demand was raised by order dated 3.1.2003 where the income was assessed at Rs.3,66,010/-. The income was no doubt enhanced by the Hon'ble I.T.A.T. and the heavy relief allowed by the CIT(A) stood withdrawn. Even then interest u/s 220(2) has to be calculated from the expiry of period of 30 days from the date of service of the demand notice dated 3.1.2003. The interest charged before this period cannot be sustained and has to be cancelled in view of the decision of the Hon'ble Supreme Court in the case of Vikrant Tyres Ltd. Vs First ITO(2001) 247 ITR 821. The above decision squarely appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee no steps can be taken because there is no debt due by him." 12. The law laid down in the above case do not apply to the facts of case because the original notice of demand to the assessee was sent on 31.3.1995, which was served on him. So it was his liability to pay the tax as per the demand notice within a period of 30 days from the service. Admittedly the tax was not paid by the assessee, hence the interest has been charged on the delayed payment. 13. In Central Provinces Manganese Ore Co. Ltd. (supra), Hon'ble Supreme Court has held as under:- "Interest is levied under section 139(8) or section 215 of the Income-tax Act, 1961, because by reason of the omission or default mentioned in the respective provision, the Revenue is deprived of the benefit of the tax for the period during which it has remained unpaid. The levy of interest is part of the process of assessment. Although sections 143 and 144 do not specifically provide for the levy of interest and the levy is, in fact, attributable to section 139(8) or section 215, it is nevertheless a part of the process of assessing the tax liability of the assessee. Inasmuch as the levy of interest is a part of the process of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of one and one-half per cent for every month or part of a month." 17. Sub section (1) of Section 220 provides as under:- "220-(1) Any amount, otherwise than by way of advance tax, specified as payable in a notice of demand under section 156 shall be paid within thirty days of the service of the notice at the place and to the person mentioned in the notice : Provided that, where the Assessing Officer has any reason to believe that it will be detrimental to revenue if the full period of thirty days aforesaid is allowed, he may, with the previous approval of the Joint Commissioner, direct that the sum specified in the notice of demand shall be paid within such period being a period less than the period of thirty days aforesaid, as may be specified by him in the notice of demand." 18. Learned counsel for the appellant has argued that the demand was made vide order dated 3.1.2003 hence 30 days time should have been granted for payment of tax and accordingly no interest prior to that could have been charged under Section 220(2) of the Income Tax Act because the net income was determined vide order dated 3.1.2003. 19. We have considered the rival submissions and the law relied upon b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority, but on further appeal, the original order of A.O. is restored either in part or wholly, the interest under Section 220(2) shall be computed with reference to the date reckoned from the original demand notice and with reference to the tax finally determined. 22. The appellant cannot take benefit of the time spent in the litigation because for the said period the department could not utilise the amount of tax. The rational behind the provisions of Section 220(2) to levy interest on delayed payment of tax is not to penalise the party but to make a provision for compensation for the department, on the failure of the assessee to make payment on the first notice of demand. The notice of demand dated 3.1.2003 cannot be said to be a first notice of demand because first notice of demand has already been issued to the assessee after completing the original assessment completed by the Dy. CIT(A), Gorakhpur. In these circumstances, there was no requirement in law to grant a further period of 30 days, after the service of the notice and thus it cannot be said that the demand has been raised for the first time on 3.1.2003. 23. In these circumstances, we do not find any substance in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment had no right to demand interest for the period commencing from the date of refund of the tax upon the appellate order till the taxes were finally paid after disposal of the reference. (ii) That section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, did not apply. That section only revived a notice of demand which had never been satisfied by the assessee and which notice got quashed during some stage of the challenge and finally the quashed notice got restored by an order of a higher forum. In such a situation, section 3 restored the original notice of demand which was never satisfied by the assessee and did away with the need to issue a fresh notice. That section could not be resorted to for reviving a demand notice which was already fully satisfied." 29. The above legal position is not applicable in the present case because in the case in hand, the demand was raised on 31.3.1995 which was not satisfied. The ITAT has considered all the aspects of the matter, and we agree with the findings of ITAT. 30. Considering all the facts and circumstances of the case and the provisions of appeal contained in Chapter XX of the Income Tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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