A.S. KRISHNA AND COMPANY PRIVATE LIMITED, GUNTUR. V. DEPUTY COMMISSIONER OF INCOME TAX2[1] GUNTUR.

ITTA/138/2011

AI Insights

The case involves A.S. Krishna And Company Private Limited, the appellant, contesting the interest charged on unpaid tax from the original assessment order dated 25.03.1991 for the Assessment Year 1988-89. The dispute centered on whether the interest should be calculated from the date of the original demand notice or from a subsequent date following a re-assessment. The Income Tax Appellate Tribunal, Visakhapatnam, had previously ruled that the interest is chargeable from the original demand date, which was upheld by the High Court of Andhra Pradesh. The court examined the interpretations of various orders and assessments, particularly focusing on the implications of the orders passed by the Commissioner of Income Tax (Appeals) and the subsequent assessments by the Deputy Commissioner of IT.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 683462 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 06-10-2023
• Assessment Year: misc
• Other Referred Cases: Vikrant Tyres Ltd. v. First Income Tax Officer
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: M KIRANMAYEE
• Assessee Lawyers: LAKSHMI KUMARAN SRIDHARAN
• Keywords: Assessment Order; Income Tax; Miscellaneous Application; Rectification Application; Interest on Unpaid Tax
• Section: 220(2)

Judgement Text

"IN THE HIGH COURT OF ANDHRA PRADESH FRIDAY ,THE SIXTH DAY OF OCTOBER TWO THOUSAND AND TWENTY THREE PRESENT honourable SRI JUSTICE U.DURGA PRASAD honourable SRI JUSTICE T MALLIKARJUNA INCOME TAX tribunal APPEAL NO: AT AMARAVATI RAO RAO 138 OF 2011 Between: A.S. Krishna And Company Private Limited Road, Guntur. P.B.No.62, Laxmipuram Main ■..appellant AND Deputy Commissioner Of Income Tax 2[1] Laxmipuram Andhra Pradesh 522 007. Main Road, Guntur. ...RESPONDENTS against the ordeT^*ofthe'Tncomi^Tax P''®fe\"'ed K Sm-rr Commissioner of Income Tax (Assts^l Snorfaf Depufy 88-89, 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 RAO AND 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 short ITAT, Visakhapatnam bench”) in M.P No.2/Vizag/2009 in ITA No.679/vizag/2002 for the Assessment Year 1988-89. In its order dated 17.10.2008 in ITA No.679A^izag/2002, the 2. ITAT, Visakhapatnam bench while allowing the appeal filed by the Revenue, set aside the order in ITA No. 149/02-03, dated 18.07.2002 passed by the Commissioner of IT (Appeals), Guntur [for short CIT(A)”] and held that in terms of Section 220(2) of the IT Act, the interest 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 • •Jmt • 9 in the light of the order dated 23.01.1992 of Commissioner (Appeals). Aggrieved, the assessee filed M.P. No.2/vizag/2009 seeking rectification of the order in ITA No.679 on the contention that the original assessment order dated 25.03.1991 was no more in vogue in view 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, stay of collection of demanded tax was granted and therefore the assessee / appellant cannot be treated as “assessee in default” in respect of the demanded tax in terms of Section 220(6) of the IT Act, 1961. However, the tribunal declined to consider the above request on 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 the AO to reframe the assessment. On the other hand, it was only partly allowed to enable the Assessing Officer to vary the assessment originally made and not to take a re-look at all the issues which were considered 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 • • ^ m • in the earlier order his predecessor had set aside the entire assessment 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 levy of 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) dated 23.01.1992 does not amount to cancellation/setting aside of the assessment 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. Following substantial questions of law came up for 3. consideration: (i) Whether the Tribunal is correct in holding that the interest under Section 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 as per the order of the commissioner of Income Tax (Appeals) ? ::4 • • • • (ii) Whether the tribunal is right in holding that despite the fresh demand 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 Tribunal is correct in holding that the interest under Section 220(2) is chargeable from the date of the demand notice dated 25.03.1991, although the appellant was not assessee in default in respect of the said demand during the said period? (iv) Whether the Tribunal is right in refusing to rectify the order in ITA No.679Wizag/2002 and rejecting the miscellaneous application M.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 Standing Counsel for respondent. While the learned counsel for appellant reiterated the grounds of appeal in his arguments, learned Standing Counsel strenuously tried to support the impugned order. Though different substantial questions of law are framed, they pivot on the main point as to under law what is the effective date for 5. collection of interest on unpaid tax - whether it is from the date of demand notice following the first Assessment Order or from the date • • ^ • • of demand notice pursuant to final Assessment Order. This aspect needs 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 of capital gain and adhoc compensation, held that it was necessary to set aside the assessment order and directed the AO to go into the facts and apply the correct law and assess the capital gains. Subsequently, the DCIT passed the consequential assessment 7. order dated 28.03.1994 and gave effect to the appellate order and determined the additional compensation at Rs.62,61,883/- and interest on additional compensation at Rs.9,51,341/-. He collected some amounts and as the demanded amount as per the original assessment order dated 25.03.1991 was not paid, the AO charged interest U/s 220(2) of the IT Act reckoning from the original date of demand i.e., 25.03.1991. After turn of some events, the assesse filed ITA No. 149/02-03 8. before the CIT(A) and the date of computation of interest is • *6* • • • VF • • concerned, the CIT(A) in his order dated 18.07.2002 has observed that in the earlier order dated 23.01.1992 the aside the original assessment order and thereby afresh and there then CIT(A) has set assessment was done no notice enforceable against the assessee until 28.03.1994 and therefore the tax in default could be raised from 28.03.1994 but not prior to it. was 9. The said order was challenged by the Revenue in ITA No.679/vizag/2002 before ITAT, Visakhapatnam bench. The said authority while interpreting the order of 23.01.1992, held that the CIT(A) has affirmed the certain minor issues the CIT (A) dated action of AO on regarding depreciation etc., but the said authority has not set aside the entire assessment order to enable the AO to reframe the assessment. On the other hand, the said order was passed by the CIT(A) only to enable the AO to vary the assessment originally made but not to take a re-look on all the issues which were considered in the original assessment order. On such premise and considering the judgment of the Apex Court in Vikrant • • / • • Tyres Ltd. v. First Income Tax Officer’ the Tribunal observed that if there is a default on the part of the assessee to comply with the original demand notice, the provisions of Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964 shall apply, meaning thereby, interest has to be payable from the original demand notice. So far as the instant case is concerned, the a tribunal observed that the assessee has not paid the tax as per the original assessment order dated 25.03.1991 till 11.10.1996 and there was default on his part and hence the provisions of validation Act applies in the instant case and consequently interest is chargeable from the date of original demand notice in terms of Section 220(2) of the IT Act. The tribunal accordingly allowed the appeal filed by the Revenue and set aside the order dated 18.07.2002 passed by CIT(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 [2001]247ITR821(SC) = MANU/SC/15 56,^001 . .o.. • • O • • assessment was set aside in the order dated 23.01.1992, in oppugnation, the tribunal in its order dated 17.10.2008 in ITA N0.679/200'2 held that the CIT(A) did not set aside the entire assessment order to reframe the assessment but only passed an order to enable the AO to vary the assessment on the aspects of capital gain and additional interest etc. In the light of the aforesaid divergent views, we have carefully gone through the order dated 23.01.1992 of CIT(A). No doubt in para-5 of the order the said authority mentioned as if it was necessary to set aside the assessment order. However, the said observation cannot be read in isolation. On the other, hand, when the entire order was read in conjunction, as rightly observed by the tribunal, the CIT(A) gave main thrust on the computation of capital gain and interest addition. In that view, it cannot be contended that the said authority wanted to expunge the entire assessment order dated 25.03.1991. In fact in the consequential order the Deputy Commissioner of IT arrived at increased amount of Rs.62,94,117/- as against the original capital gains of Rs.56,26,695/-. Therefore it is not a case of setting aside of the entire assessment order. The original assessment order dated an ..Q.. • • ^ • • 25.03.1991 and consequent demand notice, therefore stood valid. Since the petitioner did not pay the tax amount till 11.10.1996, in terms of the judgment in Vikrant Tyres Ltd’s case (supra 1) of Apex Court and Section 220(2) of the IT Act, the appellant /assessee is liable to pay interest from the date of original demand i.e.. 25.03.1991. The order impugned does not suffer the vice of illegality or irregularity. 11. Accordingly the appeal is dismissed. No costs. As a sequel, interlocutory applications, pending if any shall stand closed. SD/- S.V.S.R.MURTHY JOINT REGISTRAR //TRUE COPY// SECTION OFFICER To, ' VisaKhapatna. Bench, 2. The Commissioner of Income Tax (Appeals), Guntur Guntur®\" '' Income Tax, (Assts.) Special Range, « TK ^ Ms.M.Kiranmayee, Advocate [OPUC] 6. Three CD Copies ^ Psr vna HIGH COURT DATED;06/1 0/2023 JUDGMENT ITTA.No.138 of 2011 o o (5 2 7 MAY 2G2^ m os tf v-t DISMISSING THE ITTA 4 "