SHRI AMBICA MILLS LTD VS INCOME TAX OFFICER
1994 P T D 656
[203 I T R 84]
[Gujarat High Court (India)]
Before M.B. Shah and V.H. Bhairavia, JJ
SHRI AMBICA MILLS LTD
Versus
INCOME TAX OFFICER
Special Civil Application No. 1722 of 1983, decided on 22/01/1992.
Income-tax---
----Recovery of tax---Interest---Levy of interest under S.220(2), Indian Income Tax Act, 1961---Condition precedent---Failure to comply with notice of demand---Indian Income Tax Act, 1961, S.220(2).
Interest can be recovered under section 220(2) of the Indian Income Tax Act, 1961, only if the assessee fails to comply with the notice of demand issued under section 156 of the Indian Income Tax Act:
Where the petitioner had complied with the notice of demand issued under section 156 of the Income Tax Act and, therefore, there was no question of applying the provisions of subsection (2) of section 220 of the Income Tax Act, the order levying interest under, section 220(2) was liable to be quashed.
Bharat Commerce and Industries Ltd. v. Union of India (1991) 188 1TR 277 (Delhi) and ITO v. A.V. Thomas and Co. (1986) 160 ITR 818 (Ker.) ref.
J.P. Shah for Petitioner.
M.J. Thakore instructed by M/s. R.P. Bhatt & Co. for Respondent
JUDGMENT
M.B. SHAH, J.---The petitioner has challenged the order (Exh. J) dated January 5, 1983, passed under section 220(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Income Tax Act"), passed by the Income Tax Officer, Companies Circle VII, Ahmedabad. The said order reads as under:
"Order under section 220(2) of the Income Tax Act:
The assessment for the year 1974-75 was finalized on September 20, 1977, determining the tax payable at Rs.10,83,746. The notice of demand under section 156 of the Act was issued and served on September 27, 1977.
The Commissioner of Income-tax (Appeals), vide his Order No.CIT(A)IV/VII-119/77-78, dated October 31, 1979, reduced the total income to Rs.2,04,40,553 and it resulted in a refund of Rs.18,05,379.
The Income Tax Appellate Tribunal, Ahmedabad Bench `A', vide its Order No. I.TAs. Nos. 54 and 56 Ahd/1980, dated April 1, 1982; redetermined the total income at Rs.2,18,58,538 and the tax payable at Rs.5,65,045.
Simple interest at 12% per annum is levied in terms of section 220(2) read with rule 118(1). The interest payable under section 220(2) is computed with reference to the due date reckoned from the original demand notice (i.e. November 1, 1977) and with reference to the tax finally determined (Rs.8,66.048).
Interest chargeable comes to Rs.5,10,378.
Issue notice of demand and challan."
It is the contention of learned counsel for the petitioner that the aforesaid order is on the face of it illegal because, at no point of time, the petitioner has failed to comply with the notice of demand issued under section 156 of the Income Tax Act. For the aforesaid purpose, he relied upon the following facts:
For the assessment year 1974-75, the petitioner was required to pay tax of Rs.1,35;89,562. It had paid in all Rs.1,26,05:916. An assessment order was passed on September 20, 1977. Thereafter, a notice of demand for the balance of tax payable of Rs:10,83,745 was issued on September 27, 1977. The petitioner had complied with the said notice of demand and paid the amount as per the said notice of demand. Thereafter, an order (Exh. B) under section 154 of the Income Tax Act was passed on March 22, 1979. Additional tax of Rs.14,483 was demanded for which a notice of demand was issued and the petitioner paid it in time. Finally, as per the Tribunal's direction, revised assessment order (Exh. G), dated October 12, 1982 was passed. As per the revised assessment order, the petitioner was required to pay Rs.8,05,048 and interest of Rs.2,07;680 under section 244(1A) of the Income Tax Act. That means the petitioner was required to pay Rs.10,72,648. For the aforesaid amount a notice of demand (Exh. H), dated October 12, 1982, was issued. The petitioner paid the said amount also within time. The aforesaid facts are not denied by the respondent.
In view of the above undenied facts, it is apparent that, at no point of time, the petitioner has failed to comply with the notice of demand issued under section 156 of the Income Tax Act. In spite of the aforesaid facts, the respondent passed the impugned order (Exh. J), dated January 5, 1986, under section 220(2) of the Income Tax Act, demanding interest of Rs.5,10,373 on Rs. 6,55,048 at the rate of 12-1/2% per annum. Learned counsel for the petitioner submitted that the aforesaid impugned order is, on the face of it, illegal and requires to be quashed and set aside.
Considering the provisions of section 220, subsection (2) of the Income Tax Act, it is apparent that, if the assessee fails to comply with the notice of demand under section 156 of the Income Tax Act within 35 days of service of notice, the assessee is liable to pay simple interest at the rate of 12-1/2% per annum (at present 18%) for the period after 35 days till the date on which the amount is paid. The relevant part of subsection (2) of section 220 of the Income Tax Act reads as under:
"(2) If the amount specified in any notice of demand under section 156 is not paid within the period limited under subsection (1), the assessee shall be liable to pay simple interest at one and one-half per cent. 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 subsection (1) and ending with the day on which the amount is paid."
From the aforesaid provisions, it is apparent that interest can be recovered only if the assessee fails to comply with the notice of demand issued under section 156 of the Income Tax Act. It is also apparent, as stated above, that the petitioner had complied with the notice of demand issued under section 156 of the Income Tax Act, and therefore, there is no question of applying the provisions of subsection (2) of section 220 of the Income Tax Act.
As the provisions are absolutely unambiguous and clear, in our view, it is not necessary to refer to the decision of the Kerala High Court in the case of ITO v. A.V. Thomas and Co. (1986)160 ITR 818 and the decision of the Delhi High Court in the case of Bharat Commerce and Industries Ltd. v. Union of India (1991) 188 ITR 277.
In the result, this special civil application is allowed. The order (Exh.J), dated January 6, 1983, under section 220(2) of the Income Tax Act passed by tree Income Tax Officer, Companies Circle VII, Ahmedabad, demanding interest of .Rs.5,10,378 from the petitioner is quashed and set aside. Rule is made absolute with no order as to costs.
At the time of admission, this Court has passed the following interim order:
"Rule expedited.
Interim relief refused on the condition that in case the petitioner succeeds ultimately, the amount of Rs.5,10,378 shall be refunded to the petitioner with interest at the rate of 12% per annum on the said amount."
In view of the aforesaid interim order, the respondent is directed to refund the amount of Rs.5,10,378 with interest at the rate of 12% per annum on the said amount.
M.B.A./146/T.F?????????????????????????????????????????????????????????????????????????????????? Order accordingly.