A.S. Krishna And Company Private ... vs Deputy Commissioner Of Income ...
2023 Latest Caselaw 4727 AP

      HON'BLE SRI JUSTICE U.DURGA PRASAD RAO
                               AND

     HON'BLE SRI JUSTICE T. MALLIKARJUNA RAO



                       ITTA No.138 of 2011



JUDGMENT (Per Hon'ble Sri Justice U. Durga Prasad Rao)

The challenge in this appeal is to the order dated 15.09.2009

of the Income Tax Appellate Tribunal, Visakhapatnam (for short

"ITAT, Visakhapatnam bench") in M.P No.2/Vizag/2009 in ITA

No.679/vizag/2002 for the Assessment Year 1988-89.

2. In its order dated 17.10.2008 in ITA No.679/Vizag/2002, the

ITAT, Visakhapatnam bench while allowing the appeal filed by the

Revenue, set aside the order in ITA No.149/02-03, dated 18.07.2002

passed by the Commissioner of IT (Appeals), Guntur [for short

"CIT(A)"] and held that in terms of Section 220(2) of the IT Act, the

interest on unpaid tax is chargeable against the assessee from the

original Assessment Order dated 25.03.1991 of the AO but not on

the subsequent consequential order dated 28.03.1994 passed by him ::2::

in the light of the order dated 23.01.1992 of Commissioner

(Appeals).

Aggrieved, the assessee filed M.P. No.2/vizag/2009 seeking

rectification of the order in ITA No.679 on the contention that the

original assessment order dated 25.03.1991 was no more in vogue in

view of the order dated 23.01.1992 passed in appeal by the CIT(A)

and during the pendency of the appeal before the said authority, stay

of collection of demanded tax was granted and therefore the assessee

/ appellant cannot be treated as "assessee in default" in respect of the

demanded tax in terms of Section 220(6) of the IT Act, 1961.

However, the tribunal declined to consider the above request

on the ground that the CIT(A) in his order dated 23.01.1992 did not

set aside the entire assessment order dated 25.03.1991 to enable the

AO to reframe the assessment. On the other hand, it was only partly

allowed to enable the Assessing Officer to vary the assessment

originally made and not to take a re-look at all the issues which were

considered in the original assessment order. The tribunal further

observed that however in a subsequent appeal, in ITA No.149/02-03,

dated 18.07.2002 the Commissioner, IT (Appeals) had opined as if ::3::

in the earlier order his predecessor had set aside the entire

assessment and therefore subsequently assessment was done afresh

and in that view there was no notice pending against the assessee

until the fresh notice dated 28.03.1994 was issued and therefore levy

of interest U/s 220(2) of IT Act for the period prior to 28.03.1994

does not arise. The tribunal further observed that in the appeal i.e.,

ITA No.679/2002 carried out by the Revenue against the aforesaid

order, the tribunal clearly opined that the order of CIT(A) dated

23.01.1992 does not amount to cancellation/setting aside of the

assessment order and as a consequence the original demand notice

dated 25.03.1991 survives and interest has to be payable from that

date. On these observations MP No.2/2009 was dismissed.

Aggrieved, the assessee filed the instant ITTA.

3. Following substantial questions of law came up for

consideration:

(i) Whether the Tribunal is correct in holding that the interest under Section 220(2) is chargeable from the date of the demand notice dated 25.03.1991 that was set aside and ignoring that no tax is payable as per the order of the commissioner of Income Tax (Appeals) ?

::4::

(ii) Whether the tribunal is right in holding that despite the fresh demand notice dated 28.03.1994 issued after completion of the assessment as directed by the Commissioner, the liability for interest under Section 220(2) arises from 25.03.1991?

(iii) Whether the Tribunal is correct in holding that the interest under Section 220(2) is chargeable from the date of the demand notice dated 25.03.1991, although the appellant was not assessee in default in respect of the said demand during the said period?

(iv) Whether the Tribunal is right in refusing to rectify the order in ITA No.679/Vizag/2002 and rejecting the miscellaneous application M.P.No.2/Vizag/2009 without specifically considering the facts of the present case and giving a specific finding based on the relevant facts although it laid the proposition of law?

4. Heard arguments of Sri Lakshmi Kumaran Sridharan, learned

counsel for the appellant and Ms. M. Kiranmayee, learned Standing

Counsel for respondent. While the learned counsel for appellant

reiterated the grounds of appeal in his arguments, learned Standing

Counsel strenuously tried to support the impugned order.

5. Though different substantial questions of law are framed, they

pivot on the main point as to under law what is the effective date for

collection of interest on unpaid tax - whether it is from the date of

demand notice following the first Assessment Order or from the date ::5::

of demand notice pursuant to final Assessment Order. This aspect

needs examination in this appeal.

6. Admittedly in this case original assessment order for the AY

1988-89 was passed on 25.03.1991 by the Deputy Commissioner of

IT (Assts). Aggrieved, the assessee filed appeal No.6 before CIT

(A) and vide order dated 23.01.1992 the said authority in respect of

capital gain and adhoc compensation, held that it was necessary to

set aside the assessment order and directed the AO to go into the

facts and apply the correct law and assess the capital gains.

7. Subsequently, the DCIT passed the consequential assessment

order dated 28.03.1994 and gave effect to the appellate order and

determined the additional compensation at Rs.62,61,883/- and

interest on additional compensation at Rs.9,51,341/-. He collected

some amounts and as the demanded amount as per the original

assessment order dated 25.03.1991 was not paid, the AO charged

interest U/s 220(2) of the IT Act reckoning from the original date of

demand i.e., 25.03.1991.

8. After turn of some events, the assesse filed ITA No.149/02-03

before the CIT(A) and the date of computation of interest is ::6::

concerned, the CIT(A) in his order dated 18.07.2002 has observed

that in the earlier order dated 23.01.1992 the then CIT(A) has set

aside the original assessment order and thereby assessment was done

afresh and there was no notice enforceable against the assessee until

28.03.1994 and therefore the tax in default could be raised from

28.03.1994 but not prior to it.

9. The said order was challenged by the Revenue in ITA

No.679/vizag/2002 before ITAT, Visakhapatnam bench. The said

authority while interpreting the order of the CIT (A) dated

23.01.1992, held that the CIT(A) has affirmed the action of AO on

certain minor issues regarding depreciation etc., but the said

authority has not set aside the entire assessment order to enable the

AO to reframe the assessment. On the other hand, the said order

was passed by the CIT(A) only to enable the AO to vary the

assessment originally made but not to take a re-look on all the issues

which were considered in the original assessment order. On such

premise and considering the judgment of the Apex Court in Vikrant ::7::

Tyres Ltd. v. First Income Tax Officer1 the Tribunal observed that

if there is a default on the part of the assessee to comply with the

original demand notice, the provisions of Taxation Laws

(Continuation and Validation of Recovery Proceedings) Act, 1964

shall apply, meaning thereby, interest has to be payable from the

original demand notice. So far as the instant case is concerned, the

tribunal observed that the assessee has not paid the tax as per the

original assessment order dated 25.03.1991 till 11.10.1996 and there

was default on his part and hence the provisions of validation Act

applies in the instant case and consequently interest is chargeable

from the date of original demand notice in terms of Section 220(2)

of the IT Act. The tribunal accordingly allowed the appeal filed by

the Revenue and set aside the order dated 18.07.2002 passed by

CIT(A).

10. Thus we have divergent interpretations on the order dated

23.01.1992 passed by CIT(A). While the subsequent CIT(A), in his

order in ITA No.149/02-03 dated 18.07.2002 opined that the entire

[2001]247ITR821(SC) = MANU/SC/1556/2001 ::8::

assessment was set aside in the order dated 23.01.1992, in

oppugnation, the tribunal in its order dated 17.10.2008 in ITA

No.679/2002 held that the CIT(A) did not set aside the entire

assessment order to reframe the assessment but only passed an order

to enable the AO to vary the assessment on the aspects of capital

gain and additional interest etc. In the light of the aforesaid

divergent views, we have carefully gone through the order dated

23.01.1992 of CIT(A). No doubt in para-5 of the order the said

authority mentioned as if it was necessary to set aside the assessment

order. However, the said observation cannot be read in isolation.

On the other hand, when the entire order was read in conjunction, as

rightly observed by the tribunal, the CIT(A) gave main thrust on the

computation of capital gain and interest addition. In that view, it

cannot be contended that the said authority wanted to expunge the

entire assessment order dated 25.03.1991. In fact in the

consequential order the Deputy Commissioner of IT arrived at an

increased amount of Rs.62,94,117/- as against the original capital

gains of Rs.56,26,695/-. Therefore it is not a case of setting aside of

the entire assessment order. The original assessment order dated ::9::

25.03.1991 and consequent demand notice, therefore stood valid.

Since the petitioner did not pay the tax amount till 11.10.1996, in

terms of the judgment in Vikrant Tyres Ltd's case (supra 1) of

Apex Court and Section 220(2) of the IT Act, the appellant /assessee

is liable to pay interest from the date of original demand i.e.,

25.03.1991. The order impugned does not suffer the vice of illegality

or irregularity.

11. Accordingly the appeal is dismissed. No costs.

As a sequel, interlocutory applications, pending if any shall

stand closed.

_________________________ U. DURGA PRASAD RAO, J

__________________________ T. MALLIKARJUNA RAO, J 06.10.2023 krk ::10::

HON'BLE SRI JUSTICE U.DURGA PRASAD RAO AND

HON'BLE SRI JUSTICE T. MALLIKARJUNA RAO

ITTA No.138 of 2011

06th October, 2023

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