Itta/138/2011 Of A.s. Krishna And Company Private Limited, Guntur v. Deputy Commissioner Of Income Tax2[1] Guntur

IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI FRIDAY ,THE SIXTH DAY OF OCTOBERTWO THOUSAND AND TWENTY THREE PRESENT honourable SRI JUSTICE U.DURGA PRASADRAO honourable SRI JUSTICE T MALLIKARJUNARAO INCOME TAX tribunal APPEAL NO: 138 OF 2011 Between: A.S. Krishna And Company Private LimitedP.B.No.62, Laxmipuram MainRoad, Guntur. AND ■..appellant Deputy Commissioner Of Income Tax 2[1] LaxmipuramMain Road, Guntur.Andhra Pradesh 522 007. ...RESPONDENTSagainst the ordeT^*ofthe'Tncomi^TaxP''®fe"'edK Sm-rrCommissioner of Income Tax (Assts^l SnorfafDepufy88-89, dated 25.03.1991)’ ^°'R No. 6/Counsel for the Appellant: SRI. LAKSHMI KUMARAN SRIDHARAN Counsel for the Respondents: Ms. M.Kiranmayee, Standing Counsel for Income Tax The Court made the following: JUDGMENT HON’BLE SRI JUSTICE U.DURGA PRASAD RAOAND 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 shortITAT, Visakhapatnam bench”)in M.P No.2/Vizag/2009in ITANo.679/vizag/2002 for the Assessment Year 1988-89. 2.In its order dated 17.10.2008 in ITA No.679A^izag/2002,[the]ITAT, Visakhapatnam bench while allowing the appeal filed by theRevenue, set aside the order in ITA No. 149/02-03,[dated 18.07.2002]passed by the Commissioner of IT (Appeals), Guntur [for shortCIT(A)”] and held that in terms of Section 220(2) of the IT Act, theinterest on unpaid tax is chargeable against the assessee[Ifom][ the]original Assessment Order dated 25.03.1991 of the AO[but not][ on]the subsequent consequential order dated 28.03.1994 passed by himITAT, Visakhapatnam bench while allowing the appeal filed by theRevenue, set aside the order in ITA No. 149/02-03,[dated 18.07.2002]passed by the Commissioner of IT (Appeals), Guntur [for shortCIT(A)”] and held that in terms of Section 220(2) of the IT Act, theinterest on unpaid tax is chargeable against the assessee[Ifom][ 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 inthelightof theorderdated23.01.1992of Commissioner(Appeals). Aggrieved, the assessee filed M.P. No.2/vizag/2009 seekingrectification of the order in ITA No.679 on the contention that theoriginal assessment order dated 25.03.1991 was no more in vogue inview 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, stayof collection of demanded tax was granted and therefore[the][ assessee]/ appellant cannot be treated as “assessee in default” in respect of thedemanded tax in terms of Section 220(6) of the IT Act,[1961.] However, the tribunal declined to consider the above requeston 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 theAO to reframe the assessment. On the other hand, it was only partlyallowedto enable the Assessing Officer to vary theassessmentoriginally made and not to take a re-look at all the issues which wereconsidered 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 However, the tribunal declined to consider the above requeston 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 theAO to reframe the assessment. On the other hand, it was only partlyallowedto enable the Assessing Officer to vary theassessmentoriginally made and not to take a re-look at all the issues which wereconsidered 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 intheearlierorderhispredecessorhadsetasidetheentireassessment 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 levyof 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) dated23.01.1992 does not amount to cancellation/setting[aside]of theassessment 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.Followingsubstantialquestionsoflawcameupforconsideration:consideration: (i)Whether the Tribunalis correct in holding that[the]interest underSection 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 asper the order of the commissioner of Income Tax (Appeals)[?] (ii)Whether the tribunal is right in holding that despite the fresh demandnotice 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?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 Tribunalis correct in holding that[the]interest underSection 220(2) is chargeable from the date of the demand notice dated25.03.1991, although the appellant was not assesseein defaultinrespect of the said demand during the said period?Section 220(2) is chargeable from the date of the demand notice dated25.03.1991, although the appellant was not assesseein defaultinrespect of the said demand during the said period? (iv) Whether the Tribunal is right in refusing to rectify[the][ order][ in][ ITA]No.679Wizag/2002andrejectingthemiscellaneousapplicationM.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?No.679Wizag/2002andrejectingthemiscellaneousapplicationM.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 StandingCounsel for respondent.While the learned counsel for appellantreiterated the grounds of appeal in his arguments, learned StandingCounsel 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 forcollection of interest on unpaid tax - whether it is from the date ofdemand notice following the first Assessment Order or from the date of demand notice pursuant to final Assessment Order.This aspectneeds examination in this appeal. 4.Heard arguments of Sri Lakshmi Kumaran Sridharan, learned counsel for the appellant and Ms. M. Kiranmayee, learned StandingCounsel for respondent.While the learned counsel for appellantreiterated the grounds of appeal in his arguments, learned StandingCounsel 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 forcollection of interest on unpaid tax - whether it is from the date ofdemand notice following the first Assessment Order or from the date of demand notice pursuant to final Assessment Order.This aspectneeds 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 ofcapital gain and adhoc compensation, held that it was necessary toset aside the assessment order and directed the AO to go into thefacts and apply the correct law and assess the capital gains.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 ofcapital gain and adhoc compensation, held that it was necessary toset aside the assessment order and directed the AO to go into thefacts and apply the correct law and assess the capital gains. 7.Subsequently, the DCIT passed the consequential assessmentorder dated 28.03.1994 and gave effect to the appellate[order][ and]determinedtheadditionalcompensationatRs.62,61,883/-andinterest on additional compensation at Rs.9,51,341/-.He collectedsome amounts and as the demanded amount as per the originalassessment order dated 25.03.1991 was not paid, the AO chargedinterest U/s 220(2) of the IT Act reckoning from the original date ofdemand i.e., 25.03.1991.order dated 28.03.1994 and gave effect to the appellate[order][ and]determinedtheadditionalcompensationatRs.62,61,883/-andinterest on additional compensation at Rs.9,51,341/-.He collectedsome amounts and as the demanded amount as per the originalassessment order dated 25.03.1991 was not paid, the AO chargedinterest U/s 220(2) of the IT Act reckoning from the original date ofdemand i.e., 25.03.1991. 8.After turn of some events, the assesse filed ITA No. 149/02-03beforethe CIT(A) and thedateof computation of interestisbeforethe CIT(A) and thedateof computation of interestis •• *6*• VF • • • concerned, the CIT(A) in his order dated 18.07.2002 has observedthat in the earlier order dated 23.01.1992 thethen CIT(A) has setaside the original assessment order and therebyassessment was doneafresh and therewasno notice enforceable against the assessee until28.03.1994 and therefore the tax in default could be raised from28.03.1994 but not prior to it. 8.After turn of some events, the assesse filed ITA No. 149/02-03beforethe CIT(A) and thedateof computation of interestisbeforethe CIT(A) and thedateof computation of interestis •• *6*• VF • • • concerned, the CIT(A) in his order dated 18.07.2002 has observedthat in the earlier order dated 23.01.1992 thethen CIT(A) has setaside the original assessment order and therebyassessment was doneafresh and therewasno notice enforceable against the assessee until28.03.1994 and therefore the tax in default could be raised from28.03.1994 but not prior to it. 9.Thesaidorder was challenged by the Revenuein ITANo.679/vizag/2002 before ITAT, Visakhapatnam bench.The saidauthority whileinterpretingthe order oftheCIT(A)dated23.01.1992, held that the CIT(A) has affirmed theaction of AO oncertainminorissuesregardingdepreciationetc.,butthesaidauthority has not set aside the entire assessment order to enable theAO to reframe the was challenged by the Revenuein ITANo.679/vizag/2002 before ITAT, Visakhapatnam bench.The saidauthority whileinterpretingthe order oftheCIT(A)dated23.01.1992, held that the CIT(A) has affirmed theaction of AO oncertainminorissuesregardingdepreciationetc.,butthesaidauthority has not set aside the entire assessment order to enable theAO to reframe the assessment.On the other hand, the said orderwas passed by the CIT(A) only to enable the AO to vary theassessment originally made but not to take a re-look on all the issueswhich were considered in the original assessment order.On suchpremise and considering the judgment of the Apex Court in Vikrantwas passed by the CIT(A) only to enable the AO to vary theassessment originally made but not to take a re-look on all the issueswhich were considered in the original assessment order.On suchpremise and considering the judgment of the Apex Court in Vikrant Tyres Ltd. v. First Income Tax Officer’ the Tribunal observed thatif there is a default on the part of the assessee to comply with theoriginaldemandnotice,theprovisionsofTaxationLaws(Continuation and Validation of Recovery Proceedings) Act, 1964shall apply, meaning thereby, interest has to be payable[from][ the]original demand notice.So far as the instant case is concerned, theatribunal observed that the assessee has not paid the tax as per theoriginal assessment order dated 25.03.1991 till 11.10.1996 and therewas default on his part and hence the provisions of[validation][ Act]applies in the instant case and consequently interest is chargeablefrom the date of original demand notice in terms of Section 220(2)of the IT Act. The tribunal accordingly allowed the appeal filed bythe Revenue and set aside the order dated 18.07.2002 passed byCIT(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]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] 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]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] assessmentwassetasideintheorderdated23.01.1992,inoppugnation, the tribunalinits order dated17.10.2008in ITAN0.679/200'2 held that the CIT(A) did not set asidetheentireassessment order to reframe the assessment but only passed an orderto enable the AO to vary the assessment on the aspects of capitalgain andadditionalinterestetc.Inthelight of theaforesaiddivergent views, we have carefully gone through the[order dated]23.01.1992 of CIT(A).No doubt in para-5 of the order the saidauthority mentioned as if it was necessary to set aside the assessmentorder.However, the said observation cannot be read in isolation.On the other, hand, when the entire order was read in conjunction, asrightly observed by the tribunal, the CIT(A) gave main[thrust][ on][ the]computation of capital gain and interest addition.In that view,itcannot be contended that the said authority wanted to expunge theentireassessmentorderdated25.03.1991.Infactintheconsequential order the Deputy Commissioner of IT arrivedatanincreased amount of Rs.62,94,117/- as against the original capitalgains of Rs.56,26,695/-.Therefore it is not a case of setting aside ofthe entire assessment order.The original assessment order dated 25.03.1991 and consequent demand notice, therefore[stood][ valid.]Since the petitioner did not pay the tax amount till11.10.1996, interms ofthe judgment in Vikrant Tyres Ltd’s case (supra 1) ofApex Court and Section 220(2) of the IT Act, the appellant[/assessee]isliable to payinterest from the date of original demandi.e..25.03.1991. The order impugned does not suffer the vice of illegalityor irregularity. 11.Accordingly the appeal is dismissed. No costs. As a sequel, interlocutory applications, pending if any shallstand closed. SD/- S.V.S.R.MURTHYJOINT REGISTRARSECTION OFFICER //TRUE COPY// To, 'VisaKhapatna. Bench,2. The Commissioner of Income Tax (Appeals), GunturGuntur®"''Income Tax, (Assts.) Special Range,« TK^Ms.M.Kiranmayee, Advocate 6. Three CD Copies^Psr vna HIGH COURT DATED;06/1 0/2023 JUDGMENT ITTA.No.138 of 2011 tf\v-t DISMISSING THE ITTA oom(52 7 MAY 2G2^os