Commissioner of Income Tax vs Rajesh Kumar Dinesh Kumar

Both these appeals have been filed by the Revenue against the common order of the learned Tribunal dt. 20th July, 2007, and therefore, are being decided by this common order.

It is contended that the learned Tribunal was in error in holding that interest u/s 220(2) can be awarded only from the due date of demand notice issued for the reframed assessment order on the amount finally determined as taxable, and not from the due date of the original assessment order.

The necessary facts in brief are, that the AO made a block assessment vide order dt. 28th May, 1998, that assessment was set aside by the Tribunal, and the matter was sent back to the AO to examine the matter afresh. Thereafter, the assessment was again made for the same income. Again that order was set aside by the Tribunal vide order dt. 31st March, 2005, and the matter was restored to the file of the AO with certain directions. Thereafter, the AO passed a fresh assessment order determining the total undisclosed income at Rs. 35,63; 120. It may be noticed that earlier the income determined was at Rs. 1,56,36,101. The question that arises and arose before the Tribunal was, as to whether the interest on this amount of Rs. 35,63,120 is required to be computed from the date, the amount became due pursuant to the original assessment order dt. 28th May, 1998, or from the date when it became due pursuant to the fresh assessment order passed after remand. The learned Tribunal found relying upon the Circular No. 334, dt. 3rd April [(1982) 29 CTR (TLT) 48] that the matter is covered by para 2(i) thereof.

Learned Counsel for the Revenue contends that the matter is covered by para 2(ii) thereof and not sub-para (i).

In order to appreciate the contentions, we may gainfully quote the para 2 of the said circular in its entirety, which reads as under:

These issues were comprehensively examined in consultation with the Ministry of Law and the Board has been advised:

(i) where an assessment order is cancelled u/s 146 or cancelled/set aside by an appellate/revisional authority and the cancellation/setting aside becomes final (i.e. it is not varied as a result of further appeals/revisions), no interest u/s 220(2) can be charged pursuant to the original demand notice. The necessary corollary of this position will be that even when the assessment is reframed, interest can be charged only after the expiry of 35 days from the date of service of demand notice pursuant to such fresh assessment order.

(ii) where the assessment made originally by the ITO is either varied or even set aside by one appellate authority but, on further appeal, the original order of the ITO is restored either in part or wholly, the interest payable u/s 220(2) will be computed with reference to the due date reckoned from the original demand notice and with reference to the tax finally determined. The fact that during an intervening period, there was no tax payable by the assessee under any operative order would make no difference to this position.

After going through the said paras, it is clear that sub-para (ii) becomes applicable only in the eventuality, where the original assessment order is varied, or set aside by the appellate authority, and on further appeal the original order of the AO is restored, either wholly or in part. In the present case, it is not shown that the original assessment order was at all restored on further appeal against the order of the Tribunal, whether dt. 31st March, 2005, or the earlier one, whether wholly or in part, rather undisputedly that order of the Tribunal became final, and it was only in compliance of the order of the Tribunal, that fresh assessment order was passed.

In our view, in that event, the matter is squarely covered by the later part of sub-para (i), which comprehends a situation, where even when the assessment is reframed pursuant to setting aside of the order by the appellate Court.

Learned Counsel for the appellant relied upon the judgment of Hon''ble the Supreme Court in M/s. Vikrant Tyres Ltd. Vs. The First Income Tax Officer, Mysore,

Even after going through that judgment, we are of the view that, that judgment rather goes against the Revenue, and supports the impugned order of the Tribunal, instead of supporting the contentions of the Revenue. Thus, this contention doesn''t hold good.

So far as the other two questions framed in the appeals are concerned, having gone through the earlier order of the Tribunal dt. 31st March, 2005, which was made available for our perusal, in our view, we do not find any error in the finding recorded by the Tribunal.

The appeals thus, have no force and are dismissed summarily.