Ita/961/2006 Of The Commissioner Of Income Tax v. M/S Jindal Aluminium

IN THE HIGH COURT OF KARNATAKA, BANGALORE DATED THIS THE 18 DAY OF JULY, 2012 PRESENT THR HON'BLE MR. JUSTICE K.SREBDHAR RAO ANT) THR HON'BLE MR. JUSTICK B.MANOHAR 1.T.A. No. 961 OF 2006 BE TW BE 1.The Commissioner of Income Tax,Central Circle,Central Circle, C.R.Building, Queens Road, Bangalore. 2.The Deputy Commissioner of Income Tax,Circle — 11(3),Circle — 11(3), C.R. Building, Queens Road, Bangalore. Appellants (By Sri G. Kamaladhar, Advocate) ANT) M/s. Jindal Aluminium, Jindal Nagar,Tumkur Road,Bangalore. Respondent. (By Sri 8S. Parthasarathi, Advocate) This I.T.A. is filed U/s.260-A of I.T. Act, 1961 arising|Outot Order|datedIY29Q-1IO-2passed1n ITA.No.6/Bang/2004 for the Assessment Year 1989-90, prayingthat this Hon’ble Court may be pleased to: (i) formulate thesubstantial questions of law stated therein and (11) allow theappeal and set aside the order passed by the ITAT, Bangalorein ITA No.6/Bang/2004 dated 29-12-2005 and confirm theorder passed by the Appellate Commissioner confirming theorder passed by the Dy. Commissioner of Income Tax, Circle— 11(3), Bangalore, in the interest of justice and equity. This appeal is coming on for hearing this day,|SREEDHAR RAO, J..,delivered the following: JU DGMENT The assessee is qa manutacturer in aluminiumproducts. The assessee had paid advance tax and TDS forthe assessment year 1989-90. The returns were filed. Theassessment order is made. [It was found that the assessee 1sentitled to refund of Rs.25,00,000/- and odd. The refund isalso given to the assessee. The Assessing Officer finds thatthe order of refund made is illegal and that assessee was infact liable to pay tax of Rs.40,00,000/- and odd and issuednotice U/s.154 of the Income Tax Act. iaThe Assessing Officer after passing the order hasheld that the assessee is liable to pay additional tax ofRs.40,00,000/- and the demand notice was issued. The assessee did not pay the amount within the period stipulatedin the demand notice. The assessee filed an appeal before theCommissioner of Income Tax. The appeal was allowed. Thedemand notice was set aside.| 3.At the instance of revenue the Tribunal set asidethe order of Commissioner of Income Tax and restored thedemand of the Assessing Officer holding that assessment ofadditional tax liability of Rs.40,00,000/- and odd is soundand proper. The Assessing Officer pursuant to the order ofthe Tribunal, called upon the assessee to pay the assessedtax amount with interest at 12% p.a. from the date of issueof notice U/s.194 of the Act. The assessee had paid the taxliability and disputes levy of interest. The Tribunal hadfound the assessee is not liable to pay interest on thedemand notice issued U/s.154 of the Act. 4The revenue aggrieved by the said order, hasfiled this appeal and the following question of law is framed: 6Whether the Appellate Tribunal was rightin holding that the demand created pursuant tothe order of Assessment/processing of return hasbeenreversed|by.theAppellate|Commissioner no interest under Sec.220(2) of the Act can be levied even when the order of the|Appellate Commissioner has been set aside by|the Appellate Tribunal and original order of the|Assessing Officer restored?9 5It is the contention of the appellant that the|provisions of Sec.220(2) stipulates that if any amountspecified in the demand notice issued U/s.156 of the Act isnot paid within the period stipulated, the assessee shall beliable to pay interest at one per cent for every month or partof the month comprised in the period commencing from thedate immediately following the end of the period mentionedin sub-section (1) and ending with the day on which theamount is paid. In other words, the interest becomechargeable from the date of expiry of notice period till|payment. 6.It is the contention of the appellant that from the 5It is the contention of the appellant that the|provisions of Sec.220(2) stipulates that if any amountspecified in the demand notice issued U/s.156 of the Act isnot paid within the period stipulated, the assessee shall beliable to pay interest at one per cent for every month or partof the month comprised in the period commencing from thedate immediately following the end of the period mentionedin sub-section (1) and ending with the day on which theamount is paid. In other words, the interest becomechargeable from the date of expiry of notice period till|payment. 6.It is the contention of the appellant that from the date of expiry of the period stipulated in the demand noticeissued pursuant to the rectification order the assessee would be liable to pay interest from the said date till the date ofpayment. In this case, there is no allegation that theassessee had misrepresented the facts in furnishing thereturn while taking the refund order. The order of refund ismade because of the mistake on the part of the assessingauthority. Therefore, the rectification proceedings have beeninitiated. TIn the usual course, the assessee files returns.The Assessing Officer would pass assessment order. If thetax paid is equivalent to the liability, the Assessing Officer|would close the file for the assessment year. If there is anydeficit in payment, then he would issue demand notice topay the deficit tax within 30 days. If there is default inmaking payment, within the stipulated period, the assesseeis liable to pay interest on the deficit tax amount. Similar|procedure of issuing demand notice is also insisted in thecase of rectification proceedings. 8.The provisions of Sec.154(6), 196 and 220(1) &| (2) of the Income Tax Act reads thus: “754. | Rectification ot mistake:- (6)Where any such amendment hasthe effect of enhancing the assessment or|reducing a refund already made or otherwise|increasing the liability of the assessee or the|deductor, the Assessing Officer shall serve on|the assessee or the deductor, as the case may bea notice of demand in the prescribed form|specifying the sum payable, and such notice ofdemand shall be deemed to be issued undersection 156 and the provisions of this Act shall|apply accordingly.9 “156.Notice of demand:-| When any tax, interest, penalty, fine or|any other sum is payable in consequence of anyorder passed under this Act, the AssessingOfficer shall serve upon the assessee a notice ofdemand in the prescribed form specifying the|sum so payable. ProvidedthatwhereanySUTI1S determined to be payable by the assessee or bythe deductor under sub-section (1) of section143 or sub-section (1) of section 2OOA, the,intimation under those sub-sections shall bedeemed to be a notice of demand for the purposeof this section.9 6990.assessee deemed in detault:- When tax payable and when) (1)|Any amount, otherwise than by way|of advance tax, specified as payable in a notice|of demand under section 156 shall be paidwithin thirty days of the service of 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 thirtydays 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 aperiod less than the period of thirty days|aforesaid, as may be specified by him in the|notice of demand. (2) If the amount specified in any noticeof demand under section 156 is not paid within|the period limited under sub-section (1), the|assessee Shall be liable to pay simple interest at one percent for every month or part of a month|comprised in the period commencing from the|day immediately following the end of the period|mentioned in sub-section (1) and ending with)the day on which the amount is paid: (2) If the amount specified in any noticeof demand under section 156 is not paid within|the period limited under sub-section (1), the|assessee Shall be liable to pay simple interest at one percent for every month or part of a month|comprised in the period commencing from the|day immediately following the end of the period|mentioned in sub-section (1) and ending with)the day on which the amount is paid: Provided that, where as a result of anorder under section 154, or section 155, orsection 250, or section 254, or section 260, or section 262, or section 264 or an order of the|settlement Commission under sub-section (4) of section 245D, the amount on which interest waspayable under this section had been reduced,the interest shall be reduced accordingly and theexcess interest paid, if any, shall be refunded: Provided further that, in respect of any|period commencing on or before the 3][&-]day ofMarch, 1989 and ending after that date, such|interest shall, in respect of so much of such|period as falls after that date, be calculated at)the rate of one and one-half per cent for every|month or part of a month,9 QOThe combined reading of Sec.194(6) and Sec.220would disclose that in case of rectification order calling forpayment of enhanced tax or reduced refund, the demandnotice can be issued as required U/s.196 of the Act. Thesub-section 2 otf Sec.220 mandates that if the amountspecified is not paid within the stipulated time, it attracts theinterest at 12% p.a. It is the contention of the assessee thatthe rectification order was set aside by the Commissioner ofIncome Tax and it was restored by the Tribunal. Therefore, ifthe interest liability if any shall be from the date of order ofthe Tribunal which directs restoration of the order oftAssessing Officer and not from the date of the order of theAssessing Officer. The contention of the assessee isuntenable. Whenever the Assessing Authority restores theorder of the subordinate authority, the order of restorationwill be effective from the date of order of subordinateauthority and not from the date of restoration made by theTribunal in the appeal. In the instant case, the assessee wasin fact liable to pay higher tax and not entitled to any refund.The impugned order was passed and demand notice was| issued. Obviously, the assessee has not paid tax demandedin the notice within the stipulated period. The sub-section 2of Section 220 would apply and assessee would liable to payinterest from the date of expiry of demand notice U/s.196 tillits payment apart from paying tax liability. Accordingly, theappeal is allowed. The question of law is answered in favourof the revenue. NM* od/-.JUDGEod/-.JUDGE