2002 (10) TMI 37

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..... ly with substantial delay. The Assessing Officer demanded interest amounting to Rs. 28,834 under section 201(1A) of the Income-tax Act. There is no dispute on the amount of interest computed under section 201(1A), if the assessee is otherwise liable. The only contention raised against the demand of penal interest is the limitation provided under section 231 of the Income-tax Act which stands deleted by the Direct Tax Laws (Amendment) Act of 1987, with effect from April 1, 1989. The assessee relied on two decisions of this court in Traco Cable Co. Ltd. v. CIT [1987] 166 ITR 278 and in CIT v. Meat Products Of India Ltd. [1997] 224 ITR 1. In first appeal, the appellate authority following the decision of this court referred to above held that .....

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..... rtment had time to initiate proceedings to recover interest even for the first year of default under section 231 up to March 31, 1990, The section was repealed, before the expiry of the period of limitation provided under section 231. The Department's contention is that it is entitled to the benefit of repeal of the section which has taken away the limitation. Therefore, according to standing counsel, after the repeal of section 231, the Department was still free to demand interest and therefore the demand of interest sought to be recovered by proceedings dated August 16, 1991, is within time. Of course in this case the question is only in respect of interest because the appellant-assessee had remitted tax deducted at source voluntarily, th .....

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..... therefore, the assessee can be treated as an assessee in default in terms of section 201 only in respect of tax payable. So far as interest is concerned, the same has to be demanded by the officer under section 201(1A) of the Income-tax Act. It is only after payment of tax by the assessee, the officer demanded interest by order dated August 16, 1991. Therefore, the limitation under section 231 so far as the interest is concerned applies only with reference to the date of demand. Since the date of demand itself is taken as the proceedings for recovery, the question of limitation does not apply at all in this case. Therefore, the assessee cannot contend that the assessee was an "assessee in default" and the limitation for recovery of interest .....

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