Princess Usha Trust vs Commissioner of Income Tax

G.G. Sohani, Actg. C.J.

By this reference u/s 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), the Income Tax Appellate Tribunal, Indore Bench, has referred the following question of law to this court for its opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee had no right to appeal to the Commissioner of Income Tax (Appeals) against the levy of interest u/s 220(2) in respect of the assessment years 1973-74 and 1974-75?"

The material facts giving rise to this reference, briefly, are as follows :

In respect of the assessment years 1973-74 and 1974-75, notices of demand were served on the assessee u/s 156 of the Act for payment of the amount of tax found payable by the assessee. As the assessee failed to pay the amount demanded, the Income Tax Officer levied interest u/s 220(2) of the Act. Aggrieved by the order passed by the Income Tax Officer levying interest, the assessee preferred appeals before the Commissioner of Income Tax (Appeals). The appeals were, however, dismissed on the ground that an appeal from an order levying interest u/s 220(2) of the Act was not competent. The assessee thereupon preferred further appeal before the Tribunal. It was contended on behalf of the assessee that a substantial amount of refund was due to the assessee in estate duty proceedings and, therefore, if the amount of that refund was adjusted against the amount of Income Tax payable by the assessee, no interest could be levied. The Tribunal did not uphold this contention and dismissed the appeal. Aggrieved by the order passed by the Tribunal, the assessee sought reference and it is at the instance of the assessee that the aforesaid question of law has been referred to this court for its opinion.

Shri Mahajan, learned counsel for the assessee, contended that as the assessee was denying the liability to pay the amount of Income Tax demanded from the assessee, the appeal preferred by the assessee was competent u/s 246(c) of the Act. Learned counsel for the assessee placed reliance on the decision of the Supreme Court in Central Provinces Manganese Ore Co. Ltd. Vs. Commissioner of Income Tax, . In reply, it was contended on behalf of the Revenue that even assuming that a certain amount was due to the assessee by way of refund under the provisions of some other Act, the assessee was liable to pay interest u/s 220(2) of the Act and from an order passed in that behalf, the appeal preferred by the assessee was not competent.

Learned counsel for the assesses was unable to point out any provision of law, under which the amount, if any, refundable to the assessee under any other Act, could be set off against the amount of tax payable by the assessee under the Act. It was not disputed that the provisions of Section 245 of the Act were not attracted. Section 220(3) of the Act provides that if the amount specified in the notice of demand u/s 156 is not paid within 35 days of the service of notice, the assessee shall be liable to pay interest. The levy of interest, in the instant ease, was under the provisions of Sub-section (2) of Section 220 of the Act, The decision in Central Provinces Manganese Ore Co. Ltd. Vs. Commissioner of Income Tax, , is distinguishable on facts. In the instant case, the levy of interest was not a part of the process of assessment. By denying liability to pay interest u/s 220(2) of the Act, the assessee cannot be held to be denying its liability to be assessed under the Act. Section 246(c) of the Act was, therefore, not attracted. The Tribunal was, therefore, justified in holding that, on the facts and in the, circumstances of the case, the assessee had no right to prefer an appeal from the order levying interest under the provisions of Section 220(2) of the Act.

For all these reasons, our answer to the question referred to this court is in the affirmative and against the assessee. In the circumstances of the case, parties shall bear their own costs of this reference.