Case Note & Summary
The case involved an appeal by the Commissioner of Income Tax against the decision of the Income Tax Appellate Tribunal (ITAT) regarding interest liability under the Income Tax Act, 1961. The assessment year in question was 1994-95, with an initial assessment order passed on 28/2/1997, which assessed the income at Rs.2.05 crores and raised a demand of Rs.1.76 crores. Following an appeal, the CIT(A) reduced the income to Rs.18.30 lakhs, and the ITAT later set aside the original assessment order, directing a fresh assessment. A new assessment order was issued on 24/12/2006, assessing the income at Rs.44.88 lakhs and raising a demand of Rs.22.02 lakhs. The assessee paid the amount beyond thirty days from the service of the new demand notice. The assessing officer claimed that interest under Section 220(2) should be calculated from the original demand notice date, while the CIT(A) and ITAT held it should be from the new demand notice date. The court analyzed the provisions of the Income Tax Act, particularly Sections 156 and 220, concluding that the liability for interest arises only after the new demand notice. The appeal was dismissed, affirming the ITAT's decision.
Headnote
A) Taxation - Interest Liability - Fresh Assessment Order - Liability to pay interest arises after thirty days from the service of the fresh demand notice - Income Tax Act, 1961, Sections 220(1), 220(2) - The court held that the liability to pay interest under Section 220(2) arises only after the expiry of thirty days from the service of the demand notice dated 24/12/2006, not from the original demand notice dated 28/2/1997, as the original assessment order was set aside and a fresh assessment was made. Held that the ITAT's decision was justified (Paras 7-8).
Issue of Consideration
Whether the ITAT was justified in holding that the assessee was liable to pay interest under Section 220(2) of the Income Tax Act, 1961 after thirty days from the service of the fresh demand notice dated 24/12/2006.
Final Decision
The court dismissed the appeal, affirming the ITAT's decision that interest under Section 220(2) arises only after thirty days from the service of the demand notice dated 24/12/2006.
Law Points
- Interest liability
- demand notice
- assessment order
- Income Tax Act
- 1961
- Section 220(1)
- Section 220(2)
- Section 156
