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Download Full Text of the Judgement - TaxGuru

Download Full Text of the Judgement - TaxGuru

8ITA No.3360/Mum/20103.2

8ITA No.3360/Mum/20103.2 We have perused the records and considered the rival contentions carefully.The dispute is regarding levy of interest u/s. 220(2) of the Income Tax Act, 1961.Under the said section, interest at a specified rate is chargeable in case thedemand raised on the assessee as per the demand notice is not paid within the timeallowed in the notice. The issue raised in this ground is as to when the originalassessment has been set aside by Tribunal and fresh assessment has been made bythe A.O., the period for levy of interest u/s.220(2) should be reckoned from thedate of default as per the original assessment order or as per the freshassessment order. We find that this issue has already been examined by the CBDTwho had clarified the issue vide Circle No.334 Dt.3.4.1982, the relevant portion ofwhich is reproduced below for ready reference :“ (2) These issues were comprehensively examined in consultation withthe Ministry of Law and the Board has been advised :(i) Where an assessment order is cancelled under section 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 furtherappeals / revisions), no interest under section 220(2) can be chargedpursuant to the original demand notice. The necessary corollary of thisposition will be that even when the assessment is reframed, interest canbe charged only after the expiry of 35 days from the date of service ofdemand notice pursuant to such fresh assessment order.(ii) Where the assessment made originally by the Income Tax Officer iseither varied or even set aside by one appellate authority but, on furtherDownload Source- www.taxguru.in

9ITA No.3360/Mum/2010appeal, the original order of the Income Tax Officer is restored either inpart or wholly, the interest payable under section 220(2) will becomputed with reference to the due date reckoned from the originaldemand notice and with reference to the tax finally determined. Thefact that during an intervening period, there was no tax payable by theassessee under any operative order would make no difference to thisposition.(3) The foregoing legal position will apply mutatis mutandis to theproceedings under other direct taxes also.”3.3 In view of the Circular No.334 Dt.3.4.1982 of CBDT, in case, the assessmentis set aside by CIT(A) and setting aside become final, interest under section220(2) has to be charged only after expiry of 35 days from the date of service ofdemand notice pursuant to the fresh assessment order. But in case the order ofCIT(A) is subject matter of further appeal and the Tribunal has restored theorder of Assessing Officer either in part or wholly, the interest payable undersection 220(2) will be computed with reference to the due date reckoned fromoriginal demand notice and with reference to the tax finally determined in theassessment. In the present case, the original order of assessment was confirmedby CIT(A) but on further appeal, the Tribunal set aside the order of CIT(A) andthe issue restored to the Assessing Officer. Therefore in terms of the Circularof CBDT (supra), the interest under section 220(2) has to be charged only inDownload Source- www.taxguru.in

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