JP Narayanaswamy, Bangalore V. Assistant Commissioner of Income tax, Bangalore

ITSSA 11/BANG/2014

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 0974 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 22-06-2015
• Assessment Year: misc
• Appeal Filed On: 15-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR SHANKAR PRASAD
• Assessee Lawyers: C RAMESH
• Keywords: Recovery proceedings; Application of stay; Reason to believe
• Section: 143(3); 12; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T . (S.S) A. NO. 11 /BANG/20 1 4 ( BLOCK PERIOD : 1.4.1991 TO 27.4.2001 ) SHRI J.P. NARAYANASWAMY, NO.219, 3 R D & 4 TH FLOOR, JP CORP., BELLARY ROAD, SADASHIVANAGAR, BANGALORE - 560 0 80 . APPELLANT. PAN AATPN 4281F VS. ASST . COMMISSIONER OF INCOME TAX, C IRCLE 8(1) , BANGALORE. .. RESPONDENT. APPELLANT BY : SHRI C. RAMESH, C.A. R E SPONDENT BY : DR.SHANKAR PRASAD, JCIT (D.R) . DATE OF H EARING : 22.6.2015. DATE OF P R ONOUNCEMENT : 4.9 .201 5 . O R D E R PER SHRI JASON P. BOAZ , A.M . : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMI SSIONER OF INCOME TAX (APPEALS) - VII, BANGALORE DT.7.7.2014 FOR THE BLOCK PERIOD 1.4.1991 TO 27.4.2001. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER : - 2.1 THERE WAS A SEARCH ACTION CONDUCTED IN THE ASSESSEE'S CASE ON 27.4.2001 PURSUANT TO WHIC H ASSESSMENT PROCEEDINGS WERE INITIATED AND COMPLETED UNDER SECTION 158BC RWS 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') VIDE ORDER DT.30.4.2013. THE MATTER WAS CARRIED IN APPEAL BEFORE THE CIT (APPEALS) WHO CONFIRMED THE ORDER OF ASSESSMENT AND DISMISSED THE 2 IT (SS) A NO. 11 /BANG/201 4 ASSESSEE'S APPEAL. ON FURTHER APPEAL BY THE ASSESSEE, THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN ITS ORDER IN IT(SS)A NO.152/BANG/2004 GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE. THE ASSESSING OFFICER PASSED THE ORDER GIVING EFFECT TO TH E ORDER OF THE TRIBUNAL ON 26.7.2005 WHICH RESULTED IN REFUND TO THE ASSESSEE, AS THE ASSESSEE HAS MADE PART PAYMENT OF THE DEMAND ORIGINALLY RAISED BY THE ASSESSING OFFICER. 2.2 REVENUE PREFERRED AN APPEAL AGAINST THE ORDER OF THE TRIBUNAL BEFORE THE HON'BLE HIGH COURT OF KARNATAKA. THE HON'BLE HIGH COURT VIDE ORDERS IN ITA NO.3027/2005 DT.11.11.2011 PARTLY ALLOWED REVENUE S APPEAL, AND THEREBY PARTIALLY WITHDREW THE RELIEF GRANTED TO THE ASSESSEE BY THE TRIBUNAL. THE ASSESSING OFFICER PASSED AN ORDER DT.22.3.2012 GIVING EFFECT TO THE ORDER OF THE HIGH COURT IN WHICH INTEREST UNDER SECTION 220(2) OF THE ACT WAS CHARGED TO THE EXTENT OF RS.1,19,89,939. THIS ORDER WAS RECTIFIED UNDER SECTION 154 OF THE ACT VIDE ORDER DT.27.7.2012 REVISING THE INT EREST CHARGEABLE UNDER SECTION 220(2) OF THE ACT TO RS.3,50,63,200. 2.3 AGGRIEVED BY THE ABOVE ORDER PASSED UNDER SECTION 154 OF THE ACT DT.27.7.2012, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (APPEALS) VI, BANGALORE. THE LEARNED CIT (APPEALS) VIDE ORDER DT.7.6.2014 UPHELD THE ORDER OF THE ASSESSING OFFICER IN RESPECT OF THE CHARGING OF INTEREST UNDER SECTION 220(2) OF THE ACT. 3.1 AGGRIEVED BY THE ORDER OF THE CIT (APPEALS) VI, BANGALORE DT.7.6.2014, THE ASSESSEE HAS PREFERRED THIS APP EAL RAISING THE FOLLOWING GROUNDS : - 1. THE ORDER OF THE LEARNED CIT (APPEALS) IS OPPOSED TO THE FACTS OF THE CASE AND LAW APPLICABLE TO IT. 2. THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE LEVY OF INTEREST UNDER SECTION 220(2) OF THE ACT, RIGHT FROM THE DATE OF ORIGINAL DEMAND I.E. 30.4.2003 UP TO THE DATE 3 IT (SS) A NO. 11 /BANG/201 4 OF GIVING EFFECT TO THE ORDER OF THE HIGH COURT IGNORING THE FACT THAT CONSEQUENT TO GIVING EFFECT TO THE ORDER OF THE TRIBUNAL ON 26.7.2005 THERE WAS NO DEMAND PAYABLE AND HENCE FROM 26.7.2005 NO INTEREST COULD BE LEVIED. 3. THE LEARNED CIT (APPEALS) ERRED IN IGNORING THE FACT THAT CONSEQUENT TO GIVING EFFECT TO THE ORDER OF THE TRIBUNAL ON 26.7.2005, THE APPELLANT WAS ISSUED A REFUND AND FROM THAT DATE THE APPELLANT COULD NOT HAVE BEEN TREATE D AS AN ASSESSEE IN DEFAULT. 4. THE LEARNED CIT (APPEALS) ERRED IN IGNORING THE RATIO LAID DOWN BY THE HON'BLE HIGH COURT OF KERALA IN THE CASE OF INCOME TAX OFFICER VS. A.V. THOMAS & CO. (1986) 160 ITR 818 (KER). 5. THE LEARNED CIT (APPEALS) ERRED IN IG NORING THE RATIO LAID DOWN BY THE HON'BLE HIGH COURT OF KERALA IN THE CASE OF P.P. KOYA VS. CIT, CALICUT IN ITA NO.1428 OF 2009. 6. THE LEARNED CIT (APPEALS) ERRED IN NOT APPRECIATING THE POSITION OF LAW THAT, THE PROVISIONS OF SECTION 220(1A) OF THE ACT , SPECIFYING THAT, IN CASES WHERE APPEALS ARE FILED, THE DEMAND WOULD BE VALID TILL THE DISPOSAL OF APPEAL BEFORE THE LAST APPELLATE AUTHORITY WAS INTRODUCED ONY BY FINANCE ACT, 2014 W.E.F. 1.10.2014 IMPLYING THAT, PRIOR TO THIS AMENDMENT THIS WAS NOT THE POSITION OF LAW. 7. THE LEARNED CIT (APPEALS) ERRED IN NOT APPRECIATING THE POSITION OF LAW THAT, ONLY AFTER AMENDMENT BY INTRODUCING SECTION 220(1A) OF THE ACT, W.E.F. 1.10.2014, THE PROVISIONS OF SECTION 3 OF TAXATION LAWS (CONTINUATION AND VALIDATION OF RECOVERY PROCEEDINGS) ACT, 1964 IS MADE APPLICABLE TO THE TAXES DEMANDED, WHICH EMPOWERS THE ASSESSING OFFICER TO LEVY INTEREST RIGHT FROM THE DATE OF ISSUE OF ORIGINAL DEMAND AND THIS POSITION OF LAW CANNOT BE APPLIED PRIOR TO 1.10.2014. 8. THE APPELL ANT CRAVES PERMISSION TO ADD, DELETE OR ALTER ANY OF THE GROUNDS AT THE TIME OF HEARING. THE ONLY ISSUE INVOLVED IN ALL THE ABOVE GROUNDS OF APPEAL IS THE CHARGING OF INTEREST UNDER SECTION 220(2) OF THE ACT; MORE PARTICULARLY THE PERIOD FOR WHIC H THE SAID INTEREST IS CHARGEABLE. 3.2.1 IT IS THE CONTENTION OF THE ASSESSEE THAT THE ASSESSING OFFICER HAS WRONGLY COMPUTED THE INTEREST UNDER SECTION 220(2) OF THE ACT, FROM THE DATE OF ORIGINAL DEMAND I.E. 30.4.2013 TILL THE DATE OF ORDER GIVING EFFECT TO THE ORDER OF THE HON'BLE HIGH COURT ON 22.3.2012. THE ASSESSEE SUBMITS THAT THE ORDER GIVING EFFECT TO THE ORDER OF THE CO - ORDINATE BENCH OF THE TRIBUNAL (SUPRA) WAS PASSED ON 26.7.2005, WHICH RESULTED IN A REFUND TO THE ASSESSEE. ACCORDING TO THE ASSESSEE, SINCE THERE WAS NO DEMAND SUBSISTING AS ON 26.7.2005 AND THEREAFTER, INTEREST 4 IT (SS) A NO. 11 /BANG/201 4 UNDER SECTION 220(2) OF THE ACT WAS NOT CHARGEABLE FOR THE PERIOD FROM 26.7.2005 TO 22.3.2012. 3.2.2 THE LEARNED CIT (APPEALS) DID NOT ACCEPT THE CONTENTIONS O F THE ASSESSEE AND UPHELD THE ACTION OF THE ASSESSING OFFICER IN CHARGING INTEREST UNDER SECTION 220(2) OF THE ACT FOR THE ENTIRE PERIOD FROM 30.4.2013 TILL 22.3.2012. WHILE DOING SO, THE LEARNED CIT (APPEALS) HAD EXAMINED THE DECISION OF THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF VIKRANT TYRES LTD. REPORTED IN 202 ITR 451 AND SUBSEQUENTLY OF THE HON'BLE APEX COURT IN THE CASE OF VIKRANT TYRES LTD. VS. ITO REPORTED IN 247 ITR 821 (SC). IN THIS CITED CASE, THE HON'BLE HIGH COURT HAD UPHELD THE CHAR GING OF INTEREST FROM THE DATE OF ORIGINAL DEMAND NOTICE TILL THE DATE OF ORDER GIVING EFFECT TO THE APPELLATE ORDER. THE HON'BLE APEX COURT HAD REVERSED THE DECISION OF THE HON'BLE HIGH COURT AND CANCELLED THE SAID CHARGING OF INTEREST. 3.2.3 THE L EARNED CIT (APPEALS) DISTINGUISHED THE FACTS OF THE CASE DECIDED BY THE HON'BLE APEX COURT WITH THE FACTS OF THE ASSESSEE'S CASE. THE LEARNED CIT (APPEALS) OBSERVE D THAT IN THE CITED CASE, I.E. VIKRANT TYRES LTD. (SUPRA), THE ENTIRE DEMAND RAISED BY THE DE MAND NOTICE WAS PAID BY THE TAXPAYER AND THE DECISION OF THE HON'BLE APEX COURT WAS RENDERED IN THE CONTEXT OF THE ENTIRE DEMAND RAISED BY THE DEMAND NOTICE BEING PAID AND NO PART OF THE DEMAND WAS OUTSTANDING. HOWEVER, IN THE CASE ON HAND, ONLY PART OF T HE DEMAND RAISED BY THE DEMAND NOTICE WAS PAID AND NOT THE ENTIRE DEMAND AND IN THAT VIEW OF THE MATTER, THE LEARNED CIT (APPEALS) HELD THAT THE DECISION OF THE HON'BLE APEX COURT WAS NOT APPLICABLE TO THE ASSESSEE'S CASE. 5 IT (SS) A NO. 11 /BANG/201 4 3.3.1 BEFORE US, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE PUT FORTH ORAL AND WRITTEN SUBMISSIONS . WHILE REITERATING THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW, THE ASSESSEE ASSAILED THE DECISION OF THE LEARNED CIT (APPEALS) ON THE ISSUE OF INTEREST CHARGED UNDER S ECTION 220(2) OF THE ACT. IT WAS SUBMITTED THAT SOON AFTER RAISING OF THE ORIGINAL DEMAND, THE ASSESSEE HAD APPROACHED THE ADDL. CIT WHO HAD GRANTED PERMISSION TO PAY THE OUTSTANDING DEMAND IN INSTALMENTS AND SUBSEQUENTLY THE TRIBUNAL HAD GRANTED STAY ON DEMAND, ON CONDITION OF PART PAYMENT OF DEMAND WHICH WAS DULY COMPLIED WITH BY THE ASSESSEE. AS PER THE ASSESSEE, DUE TO THE FACT THAT THE ASSESSEE WAS GRANTED INSTALMENTS TO MAKE THE PAYMENTS OF TAX AND WAS GRANTED STAY OF DEMAND THEREAFTER, THE ASSESSE E WAS NEVER IN DEFAULT AND THEREFORE INTEREST UNDER SECTION 220(2) OF THE ACT WAS NOT CHARGEABLE. FURTHER, IT WAS SUBMITTED THAT AFTER GIVING EFFECT TO THE ORDER OF THE TRIBUNAL, THERE WAS NO DEMAND OUTSTANDING AND HENCE THE QUESTION OF CHARGING INTEREST UNDER SECTION 220(2) OF THE ACT AFTER 26.7.2005 DOES NOT ARISE. 3.3.2 THE LEARNED AUTHORISED REPRESENTATIVE ALSO CONTENDED THAT THE LEARNED CIT (APPEALS) HAD MISDIRECTED HERSELF IN INTERPRETING THE DECISION IN THE CASE OF VIKRANT TYRES LTD. (SUPRA), I N THE MANNER DONE BY HER. IT WAS CONTENDED THAT THE SAID DECISION WAS RENDERED IN THE CONTEXT OF THE PARTICULAR SET OF FACTS OF THAT CASE WHEREIN THE ENTIRE DEMAND HAS BEEN PAID. IT IS SUBMITTED THAT THE FACTS OF THE ASSESSEE'S CASE IS DIFFERENT; WHEREIN PART OF THE DEMAND WAS PAID AND THE ASSESSEE WAS EITHER GRANTED INSTALMENTS OR WAS GRANTED CONDITIONAL STAY ON RECOVERY OF DEMAND AND THEREFORE THE RATIO LAID DOWN IN THE CASE OF VIKRANT TYRES LTD. (SUPRA) CANNOT BE RELIED ON COMPLETELY. IT WAS SUBMITTED THAT SINCE THE HON'BLE APEX COURT HAD NOT 6 IT (SS) A NO. 11 /BANG/201 4 ADDRESSED THE ISSUE IN THE CONTEXT OF THE FACTS OF THE ASSESSEE'S CASE, THE SAID DECISION CANNOT BE APPLIED TO THE FACTS OF THE ASSESSEE'S CASE. IT WAS CONTENDED THAT THE DECISION OF THE HON'BLE HIGH COURT OF KAR NATAKA IN THE CASE OF P.P. KOYA V CIT (2010) 46 DTR 357 (KER) IS APPLICABLE TO THE ASSESSEE'S CASE, AS THE FACTS IN THE CITED CASE ARE SIMILAR TO THOSE OF THE CASE ON HAND. 3.4 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE PLACED STRONG RELIANCE ON THE IMPUGNED ORDER OF THE LEARNED CIT (APPEALS). 3.5.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. THE DISPUTE IN THE CASE ON HAND IS REGARDING THE CHARGING OF INTEREST UNDER SECTION 220(2) OF THE ACT. AS PER SECTION 220(2) OF THE ACT, INTEREST AT A SPECIFIED RATE IS CHARGEABLE IN CASE THE DEMAND RAISED ON THE ASSESSEE AS PER THE DEMAND NOTICE IS NOT PAID WITHIN THE TIME SPECIFIED IN THE NOTICE. 3.5.2 THE ASSESSEE HAD RELIED ON THE DECISION OF THE HON'BLE HIGH COURT OF KERALA IN THE CASE OF ITO V A V THOMAS (1986) 160 ITR 818 (KER). A SIMILAR ISSUE HAD BEEN DECIDED BY THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF VIKRANT TYRES LTD. (SUPRA) IN WHICH THE HON'BLE HIGH COURT HAD UPHELD THE CHA RGING OF INTEREST UNDER SECTION 220(2) OF THE ACT. ON APPEAL, HON'BLE APEX COURT, HOWEVER, DID NOT CONCUR WITH THE DECISION OF THE HON'BLE HIGH COURT OF KARNATAKA, BUT RATHER AGREED WITH THE STAND OF THE KERALA HIGH COURT IN THE CASE OF A.V. THOMAS (SUPRA ). 3.5.3 THE LEARNED CIT (APPEALS), HOWEVER, HAS DISTINGUISHED THE APPLICABILITY OF THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF VIKRANT TYRES LTD. (SUPRA) TO THE CASE ON HAND ON THE 7 IT (SS) A NO. 11 /BANG/201 4 GROUND THAT A CONDITION PRECEDENT IN THE SAID DECISION IS THE PAYMENT OF FULL AMOUNT OF TAX DUE AS PER THE ORIGINAL DEMAND NOTICE WITHIN THE TIME ALLOWED AS PER SUCH NOTICE. IN OTHER WORDS, IT IS THE VIEW OF THE LEARNED CIT (APPEALS) THAT THE DECISION OF THE HON'BLE APEX COURT IS APPLICABLE ONLY IF THE DEMAND H AS BEEN FULLY PAID AS PER THE DEMAND NOTICE. SINCE IN THE CASE ON HAND , THE ENTIRE TAX RAISED AS PER THE DEMAND NOTICE HAS NOT BEEN PAID IN FULL WITHIN THE TIME ALLOWED IN THE NOTICE; BUT RATHER ONLY A PART OF THE TAXES WERE PAID, THE DECISION OF THE HON'B LE APEX COURT IN THE CASE OF VIKRANT TYRES LTD. (SUPRA) WOULD NOT APPLY TO THE CASE ON HAND. 3.5.4 WE FIND THAT IN THE DECISION CITED BY THE ASSESSEE IN THE CASE OF P.P. KOYA (SUPRA), THE HON'BLE KERALA HIGH COURT HAS MADE A SIMILAR DISTINCTION. WHILE REFERRING TO THE CASES OF A.V. THOMAS (SUPRA) AND VIKRANT TYRES LTD. (SUPRA), THE HIGH COURT DID NOT CONSIDER THE DECISIONS BY OBSERVING THAT BOTH THE DECISIONS ARE CASES WHERE THE FULL AMOUNT OF TAX HAS BEEN PAID IN TERMS OF THE DEMAND NOTICE. THEREFOR E, THE DISTINCTION MADE BY THE CIT (APPEALS) IS AS PER THE DECISION RELIED UPON BY THE ASSESSEE HIMSELF AND WE FIND NO INFIRMITY IN THE DECISION OF THE LEARNED CIT (APPEALS) IN THIS REGARD. 4. TWO ISSUES REMAIN BEFORE US FOR CONSIDERATION : - (I) THE CONTENTION OF THE ASSESSEE THAT IT WAS GRANTED INSTALMENTS AND STAY DURING THE PERIOD WHEN THE DEMAND SUBSISTED AND HENCE THERE WAS NO DEFAULT WARRANTING THE CHARGING OF INTEREST UNDER SECTION 220(2) OF THE ACT; AND (II) THE DECISION OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF P.P. KOYA (SUPRA), WHICH HAS HELD THAT SECTION 220(2) DOES NOT APPLY FOR THE PERIOD AFTER THE ASSESSEE WAS GRANTED A REFUND, 8 IT (SS) A NO. 11 /BANG/201 4 BECAUSE THERE WAS NO SUBSISTING DEMAND AND CONSEQUENTLY, THE ASSESSEE CANNOT BE SAID TO BE A DEFAULTER. 5.1 SECTION 220, SO FAR AS IT RELATES TO OUR PURPOSE, READS AS UNDER : - '220 (1) ANY AMOUNT, OTHERWISE THAN BY WAY OF ADVANCE TAX, SPECIFIED AS PAYABLE IN A NOTICE OF DEMAND UNDER S. 156 SHALL BE PAID WITHIN THIRTY DAYS OF THE SERVICE OF THE NOTICE AT THE PLACE AND TO THE PERSON MENTIONED IN THE NOTICE : PROVIDED THAT, WHERE THE ASSESSING OFFICER HAS ANY REASON TO BELIEVE THAT IT WILL BE DETRIMENTAL TO THE REVENUE IF THE FULL PERIOD OF THIRTY DAYS AFORESAID IS ALLOWED, HE MAY, WITH THE PREVIOUS APPROVA L OF THE DY. COMMISSIONER, DIRECT THAT THE SUM SPECIFIED IN THE NOTICE OF DEMAND SHALL BE PAID WITHIN SUCH PERIOD BEING A PERIOD LESS THAN THE PERIOD OF THIRTY DAYS AFORESAID, AS MAY BE SPECIFIED BY HIM IN THE NOTICE OF DEMAND. (2) IF THE AMOUNT SPECIFIED IN ANY NOTICE OF DEMAND UNDER S. 156 IS NOT PAID WITHIN THE PERIOD LIMITED UNDER SUB - S. (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 DA Y IMMEDIATELY FOLLOWING THE END OF THE PERIOD MENTIONED IN SUB - S. (1) AND ENDING WITH THE DAY ON WHICH THE AMOUNT IS PAID : PROVIDED THAT, WHERE AS A RESULT OF AN ORDER UNDER S. 154, OR S. 155, OR S. 250, OR S. 254, OR S. 260, OR S. 262, OR S. 264 OR AN OR DER OF THE SETTLEMENT COMMISSION UNDER SUB - S.(4) OF S. 245D, THE AMOUNT ON WHICH INTEREST WAS PAYABLE UNDER THIS SECTION HAD BEEN REDUCED, THE INTEREST SHALL BE REDUCED ACCORDINGLY AND THE EXCESS INTEREST PAID, IF ANY, SHALL BE REFUNDED :'. SUB - S. (4) READ S THUS : '(4) IF THE AMOUNT IS NOT PAID WITHIN THE TIME LIMITED UNDER SUB - S. (1) OR EXTENDED UNDER SUB - S. (3), AS THE CASE MAY BE, AT THE PLACE AND TO THE PERSON MENTIONED IN THE SAID NOTICE THE ASSESSEE SHALL BE DEEMED TO BE IN DEFAULT.' 5.2 TO COMPL ETE THE NARRATION, SECTION 221 OF THE ACT PROVIDES FOR THE LEVY OF PENALTY WHEN THE ASSESSEE IS IN DEFAULT OR IS DEEMED TO BE IN DEFAULT IN MAKING PAYMENT OF TAX. THIS PENALTY IS IN ADDITION TO THE AMOUNT OF ARREARS AND INTEREST PAYABLE U/S.220(2) OF THE ACT. THE LANGUAGE OF SECTION 221 OF THE ACT INDICATES THAT DISCRETIONARY POWER IS GIVEN TO THE ASSESSING AUTHORITY TO LEVY THE PENALTY. THE SUBSEQUENT PROVISIONS OF SECTION 222 OF THE ACT AND THE SUBSEQUENT 9 IT (SS) A NO. 11 /BANG/201 4 SECTIONS PROVIDE FOR THE COLLECTION AND RECOVER Y MEASURES ONCE THE ASSESSEE HAS BEEN HELD TO BE IN DEFAULT. 5.3 FROM THE ABOVE PROVISIONS, IT IS CLE A R THAT THE STAY OF DEMAND AND GRANT OF INSTALMENTS FOR PAYMENT OF THE OUTSTANDING DEMAND IS WITHOUT PREJUDICE TO THE PROVISIONS FOR CHARGING INTE REST U/S.220(2) OF THE ACT. MERELY BECAUSE THE ASSESSEE WAS GRANTED STAY OF RECOVERY OF DEMAND OR INSTALMENTS FOR PAYMENT OF DEMAND, IT CANNOT BE SAID THAT THE DEMAND ITSELF WAS NOT DUE. THE DEMAND RAISED ALWAYS SUBSISTED. IT IS ONLY THAT THE ASSESSEE WAS PROTECTED FROM RECOVERY MEASURES BY NOT CONSIDERING HIM AS AN ASSESSEE IN DEFAULT. IN THIS VIEW OF THE MATTER, THE CONTENTION OF THE ASSESSEE THAT THERE WAS NO DEFAULT ON THE PART OF THE ASSESSEE IS WITHOUT BASIS AND IS NOT ACCEPTABLE. 5.4 IN T HE DECISION IN THE CASE OF P.P. KOYA (SUPRA), THE HON'BLE HIGH COURT OF KERALA HELD THAT SECTION 220(2) OF THE ACT DOES NOT APPLY FOR THE PERIOD AFTER THE ASSESSEE WAS GRANTED A REFUND BECAUSE DURING SUCH PERIOD THERE WAS N O SUBSISTING DEMAND AND CONSEQUEN TLY THE ASSESSEE CANNOT BE HELD TO BE A DEFAULTER. EVEN IN THE ABOVE CITED DECISION, THE HON'BLE HIGH COURT KERALA HAD OBSERVED THAT : - (I) THE NOTICE OF DEMAND WILL SURVIVE; AND (II) DEFAULT IS A NECESSARY PRECONDITION FOR DEMAND OF INTEREST U/S.220 (2) OF THE ACT. 5.5 THE FACTS OF THE ABOVE CITED CASE VIZ. P.P. KOYA (SUPRA) ARE DIFFERENT FROM THE FACTS OF THE ASSESSEE'S CASE ON HAND. IN THAT CASE, THE TAXPAYER WAS GRANTED RELIEF AT THE FIRST APPELLATE STAGE AND REFUND WAS GRANTED TO THE TAXPA YER. ON FURTHER APPEAL BEFORE THE TRIBUNAL REVERSED THE ORDER OF THE LEARNED CIT (APPEALS) AND THE ORIGINAL ASSESSMENT AND THE ORIGINAL DEMAND WAS 10 IT (SS) A NO. 11 /BANG/201 4 RESTORED. THE MATTER ATTAINED FINALITY AT THE TRIBUNAL STAGE. IN THE FACTS OF THAT CASE, THE HON'BLE HIGH COURT HELD THAT INTEREST U/S.220(2) OF THE ACT CANNOT BE CHARGED AFTER REFUND WAS GRANTED TO THE TAXPAYER, AS NO DEMAND WAS SUBSISTING. HOWEVER, IN THE CASE ON HAND, THE MATTER TRAVELLED TO THE HIGH COURT AND THE HON'BLE HIGH COURT VACATED THE RELIEF GR ANTED BY THE TRIBUNAL AND RESTORED THE ADDITION MADE BY THE ASSESSING OFFICER. CONSEQUENTLY, THE REFUND GRANTED WAS ALSO CANCELLED AND THE ORIGINAL DEMAND WAS REVIVED. IN SUCH A SCENARIO, IT WOULD NOT BE APPROPRIATE TO ARGUE THAT THE DEMAND SUBSISTED IN THE TIME BETWEEN THE ORIGINAL DEMAND NOTICE AND THE FIRST APPEAL STAGE AND DID NOT SUBSIST BETWEEN THE TRIBUNAL ORDER AND THE ORDER OF THE HON'BLE HIGH COURT AND WAS AGAIN REVIVED AFTER THE HIGH COURT S ORDER. IN CASE THE HON'BLE HIGH COURT HAD CONFIRMED THE RELIEF GRANTED BY TRIBUNAL, THE INEVITABLE CONCLUSION WILL BE THAT THE ORIGINAL NOTICE OF DEMAND WILL SURVIVE AND THE DEFAULT EXISTED EVEN IN THE PERIOD BETWEEN THE ORDER OF THE TRIBUNAL AND THAT OF THE HON'BLE HIGH COURT AND THEREFORE INTEREST U/S.22 0(2) OF THE ACT WAS LIABLE TO BE PAID. ONCE THE TRIBUNAL S ORDER IS VACATED AND THE ORIGINAL ORDER IS REVIVED, THE ORIGINAL DEMAND THAT REMAINED UNPAID ALSO GETS REVIVED. THE PRINCIPLE OF CONTINUING LIABILITY IS APPLICABLE TO THE INCOME TAX ACT, BEING A SCHEDULED ACT. 5.6 THE PRINCIPLE OF CONTINUING LIABILITY WAS HIGHLIGHTED IN THE CBDT CIRCULAR NO.334 DT.3.4.1982. THIS CIRCULAR (1982) 135 ITR (ST.) 10, QUOTED IN THE ORDER OF THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF VIBRANT TYRES LTD. (SUP RA) READS AS UNDER : - 'SUBJECT: LEVY OF INTEREST UNDER S. 220(2) WHEN THE ORIGINAL ASSESSMENT IS SET ASIDE INSTRUCTIONS REGARDING. DOUBTS HAVE BEEN RAISED AS TO THE QUANTUM OF INTEREST CHARGEABLE UNDER S. 220(2) OF THE IT ACT WHEN THE ORIGINAL ASSESSMENT ORDER PASSED BY THE ITO IS 11 IT (SS) A NO. 11 /BANG/201 4 (I) CANCELLED BY HIM UNDER S. 146 OF THE IT ACT; (II) SET ASIDE/CANCELLED BY AN APPELLATE/REVISIONAL AUTHORITY AND SUCH APPELLATE/REVISIONAL ORDER HAS BECOME FINAL; OR (III) SET ASIDE BY ONE APPELLATE AUTHORITY BUT, ON FURTHER A PPEAL, THE ORDER SETTING ASIDE THE ASSESSMENT IS VARIED BY THE SECOND APPELLATE AUTHORITY AND THE DEMAND GETS FINALLY DETERMINED. 2. THESE ISSUES WERE COMPREHENSIVELY EXAMINED IN CONSULTATION WITH THE MINISTRY OF LAW AND THE BOARD HAS BEEN ADVISED : (I) WH ERE AN ASSESSMENT ORDER IS CANCELLED UNDER 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 UNDER S. 220(2) CA N 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 UNDER 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 OPERA TIVE ORDER WOULD MAKE NO DIFFERENCE TO THIS POSITION.' 5.7 IN VIEW OF THE ABOVE, WE HOLD THAT THE LEARNED CIT (APPEALS) WAS RIGHT IN UPHOLDING THE DECISION OF THE ASSESSING OFFICER IN CHARGING INTEREST U/S.220(2) OF THE ACT FOR THE ENTIRE PERIOD FRO M THE DATE OF ORIGINAL DEMAND NOTICE TILL THE TIME WHEN THE ORDER GIVING EFFECT TO THE HON'BLE HIGH COURT OF KARNATAKA WAS PASSED. 6. IN GROUND NOS.6 & 7 OF THE APPEAL, THE ASSESSEE HAS RAISED THE ISSUE THAT THE PROVISIONS OF SECTION 220(1A) OF THE ACT ; IN TERMS OF WHICH THE DEMAND WOULD BE VALID TILL THE DISPOSAL OF APPEAL BEFORE THE LAST APPELLATE AUTHORITY WAS INTRODUCED ONLY IN FINANCE ACT, 2014 W.E.F. 1.10.2014 AND THEREFORE DOES NOT APPLY TO THE CASE ON HAND. WE, HOWEVER, FIND FROM A PERUSAL OF THE IMPUGNED ORDER THAT THE LEARNED CIT (APPEALS) HAS NEITHER INVOKED THE PROVISIONS OF 12 IT (SS) A NO. 11 /BANG/201 4 SECTION 220(1A) OF THE ACT NOR EVEN DISCUSSED THE SAME WHILE DECIDING THE ISSUE. WE ARE OF THE VIEW THAT THE ISSUE RAISED BY THE ASSESSEE DOES NOT REQUIRE ADJUDICATI ON FOR DECIDING THE ISSUE AT HAND AND THESE GROUNDS AT S.NOS.6 & 7 ARE THEREFORE DISMISSED AS INFRUCTUOUS. 7. IN THE RESULT, THE ASSESSEE'S APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH SEPT., 2015. SD/ - (P. MADHAVI DEVI) JUDICIAL MEMBER SD/ - (JASON P BOAZ) ACCOUNTANT MEMBER *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE. (TRUE COPY) BY ORDER ASST. REGIST RAR, ITAT, BANGALORE