Classic Papers Conveters P.Ltd. vs Commissioner Of Income Tax I Delhi
2011 Latest Caselaw 4295 Del

*        IN THE HIGH COURT OF DELHI AT NEW DELHI

+                 Writ Petition (Civil) No.6933/2007

%                                  Date of Decision: September 02, 2011

CLASSIC PAPERS CONVETERS P.LTD.              ..... Petitioner
                  Through  Mr. R.N. Mehta and Mr. Sunil
                           Goyal, Advocates.

                   versus

COMMISSIONER OF INCOME TAX I DELHI          ..... Respondent
                  Through Mr. Sanjeev Sabharwal, Advocate.

CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE SANJIV KHANNA

                                   ORDER

M/s. Classic Paper Converters Pvt. Ltd. has filed the present writ

petition for quashing of notices dated 23rd December, 2005 and 8th

December, 2006 issued by the Income Tax Officer, Ward-3(2), New

Delhi and the rectification order dated 25th January, 2007, which was

also passed by the same officer.

2. The petitioner contends that the respondents cannot levy interest

under Section 220(2) of the Income Tax Act, 1961 (for short, 'the Act')

and accordingly the two show cause notices under Section 221(1) of the

Act should be quashed.

3. For the assessment years 1994-95 and 1995-96, additions of

Rs.5,00,950/- and Rs.6,44,876/- was made by the Assessing Officer

disallowing the tour expenses of one of the directors of the petitioner,

who had visited USA, Canada and UK. The petitioner in the profit and

loss account had shown income of Rs.37,80,000/- from sub-letting of

space to a third party after taking a premises on lease from the director

of the company, who had gone abroad. The aforesaid addition was

deleted by the CIT (Appeals), but was confirmed by the Income Tax

Appellate Tribunal vide orders dated 19th April, 2004 and 29th April,

2004. The petitioner did not challenge the said orders and the additions

attained finality.

4. Penalty under Section 271(1)(c) of Rs. 2,59,240/- and Rs.

2,96,643/-for assessment years 1994-95 and 1995-96 were imposed and

were sustained in the first appeal. The petitioner did not file any further

appeal and the orders imposing penalty have attained finality. The

petitioner had filed an application under Section 273A of the Act for

waiver of penalty, which was dismissed. Challenge to the said order has

not been accepted in W.P.(C) No. 14320/2006, which has been disposed

of by us today. The order dismissing the application for waiver of

penalty under Section 273A of the Act has been upheld. It is, therefore,

clear that the demands both on account of additional tax and penalty of

Rs.2,59,240/- and Rs.2,96,643/- have to be paid by the petitioner.

5. The petitioner claims that after the assessment orders were passed,

notice of demand under Section 156 of the Act was issued to the

petitioner. However, the said notice of demand stood nullified once the

Commissioner of Income Tax (Appeals) deleted the additions. In this

connection, reliance is placed on the decision of the Supreme Court

Vikrant Tyres Ltd. Vs. First Income-Tax Officer, [2001] 247 ITR 821

(SC).

6. The respondent, on the other hand, has submitted that the said

decision will only apply in case demand had been paid in full at the

initial stage. However, when demand has not been paid in full, in view

of Section 3 of the Taxation Law (Continuation and Validation of

Recovery Proceedings) Act, 1964, the earlier notice under Section 156

of the Act stands revived. In this connection, they have relied on the

decision of the Kerala High Court in Indira Rani (B.) Vs. Commissioner

of Income Tax (Ker) [1999] 237 ITR 20 (Ker).

7. During the course of arguments today, learned counsel for the

petitioner has submitted that the tax demands as raised under Section

156 of the Act were initially paid. He states that he has been able to

locate original papers for demand in this regard. He has further stated

that for the two years in question about Rs.25,00,000/- and Rs.6,50,000/-

have been claimed and demanded as interest for the years 1994-95 and

1995-96 respectively. He submits that the petitioner would like to file an

application for waiver of interest under Section 220(2A) of the Act, if

required and necessary.

8. As far as notices dated 23rd December, 2005 and 8th December,

2006 are concerned, these are show cause notices, which have been

issued to show cause why penalty under Section 221(1) of the Act for

failure to deposit the tax should not be imposed. As these notices

are/were show cause notices, we do not see any reason to interfere at this

stage. However, as far as the order dated 25th January, 2007 is

concerned, the said order was passed under Section 154/254 of the Act

for rectification.

9. We have examined the order dated 25th January, 2007 and find

that the order is non-speaking and non-reasoned. It does not deal with

the various contentions and issues raised. The judgments referred to

above have not been considered and examined. As noticed above, the

petitioner has now contended that the demands were in fact paid.

Another question which may arise is whether these demands were fully

or partly paid and the effect of part payment, if any. As facts have not

been discussed and stated in this order, we are not inclined to examine

the case law relied upon and answer any question on hypothetical basis.

Accordingly, the writ petition is partly allowed and the order dated 25 th

January, 2007 is set aside and the matter is remitted. To cut short the

delay, the petitioner will appear before the Assessing Officer on 30 th

September, 2011 at 2 p.m., when a date of hearing will be given. The

application for rectification will be disposed of within four months from

30th September, 2011. It is open to the petitioner to file an application

under Section 220 (2A) of the Act, if so advised and necessary.

The writ petition is accordingly disposed of without any order as

to costs.

SANJIV KHANNA, J.

CHIEF JUSTICE September 02, 2011/NA