Bombay High CourtThe Commissioner Of Income Tax vs M/S. Chika Overseas Pvt. Ltd on 18 November, 2011Bench:J.P. Devadhar,A.R. Joshi1                                itxa3737-10

    sas
                   IN THE HIGH COURT OF JUDICATURE AT BOMBAY




                                                                                 
                        ORDINARY ORIGINAL CIVIL JURISDICTION

                         INCOME TAX APPEAL NO.3737 OF 2010




                                                         
          The Commissioner of Income Tax-1, Mumbai                     ..Appellant.

                       V/s.




                                                        
          M/s. Chika Overseas Pvt. Ltd.                                ..Respondent.

          Mr. Vimal Gupta for the appellant.




                                              
          Ms. Aarti Vissanji with S.P. Mehta for the respondent.
                               ig         CORAM : J.P. DEVADHAR AND
                                                  A.R. JOSHI, JJ.
                             
                                          DATED :      18TH NOVEMBER, 2011
            

          ORAL JUDGMENT (PER J.D. DEVADHAR, J.)1.          Whether the ITAT was justified in holding that the assessee





          was liable to pay interestu/s.220(2)of the Income Tax Act, 1961 ('the

          Act' for short) after thirty days from the service of the fresh demand

          notice dated 24/12/2006 pursuant to the fresh assessment order passed





          underSection 143(3)of the Act, is the question raised in this appeal.2.          The assessment year involved herein is AY 1994-95.3.          Initially, by an assessment order passed underSection 143::: Downloaded on - 09/06/2013 17:55:59 :::2                                  itxa3737-10

    (3) of the Act on 28/2/1997, the income for the assessment year in

    question was assessed at Ra.2.05 crores and by a demand notice dated




                                                                            
    28/2/1997, demand of Rs.1.76 crores was raised against the assessee.On appeal filed by the assessee, the CIT(A), by his order dated 8/9/1997

    partially allowed the claim of the assessee, as a result whereof the




                                                   
    income was reduced to Rs.18.30 lakhs.          Lateron, the ITAT set aside

    the assessment order dated 28/2/1997 and directed the assessing

    officer to pass fresh assessment order.4.
                        
                 Accordingly, the matter was heard afresh and by a fresh
                       
    assessment order dated 24/12/2006 the assessing officer assessed the

    income at Rs.44.88 lakhs and raised a demand of Rs.22.02 lakhs. The
      

    assessee paid the amount beyond thirty days from the service of the
   



    demand notice dated 24/12/2006.         The assessing officer held that the

    assessee was liable to pay interest underSection 220(2)of the Act after





    thirty days from the service of the original demand notice dated

    28/2/1997.    Challenging the aforesaid order, the assessee filed an

    appeal before the CIT(A) who held that the assessee is liable to pay





    interest after thirty days from the date of service of demand notice dated

    24/12/2006 and not after thirty days from the service of demand notice

    dated 28/2/1997. The said order was upheld by the ITAT. Challenging

    the aforesaid order, the revenue has filed the present appeal.5.           The argument of the revenue is that even though the original::: Downloaded on - 09/06/2013 17:55:59 :::3                                 itxa3737-10

    assessment order dated 28/2/1997 was set aside by the ITAT, once the

    fresh assessment order is passed, the demands arising therefrom would




                                                                            
    relate back to the date of service of the original demand notice. In the




                                                    
    present case, the original demand was served on 28/2/1997 and,

    therefore, interest underSection 220(2)would be leviable after thirty




                                                   
    days from 28/2/1997.6)          We see no merit in the above contention.             UnderSection




                                       
    156of the Act, service of the demand notice is mandatory.Section
                        
    220(2)of the Act provides that if the amount specified in any notice of
                       
    demand underSection 156is not paid within the period prescribed

    under sub-section (1) ofSection 220, then, the assessee shall be liable
      

    to pay simple interest at the rate prescribed therein.7)          In the present case, it is not in dispute that the original





    assessment order dated 28/2/1997 was set aside by the ITAT with a

    direction to pass fresh assessment order. Accordingly, fresh assessment

    order was passed on 24/12/2006 and the demand notice was served on





    24/12/2006. As perSection 220(1)of the Act, the assessee was liable

    to pay the amount of demand within thirty days from the service of

    demand notice dated 24/12/2006. It is only if the assessee fails to pay

    the amount demanded, within thirty days of the service of the demand

    notice dated 24/12/2006 as stipulated underSection 220(1)of the Act,::: Downloaded on - 09/06/2013 17:55:59 :::4                                 itxa3737-10

    the assessee was liable to pay interest underSection 220(2)of the Act.If the liability to pay interest underSection 220(2)arises after thirty days




                                                                             
    of the service of the demand notice dated 24/12/2006, the question of




                                                     
    demanding interest for the period prior to 24/12/2006 does not arise at

    all.   Neither the assessment order dated 24/12/2006 nor the demand




                                                    
    notice dated 24/12/2006 required the assessee to pay interest after thirty

    days from the date of service of the original demand notice dated

    28/2/1997.     Since the demand itself was crystallized under the




                                        
    assessment order dated 24/12/2006 and the assessee underSection
                         
    220(1)of the Act had time to pay that demand upto thirty days of the
                        
    service of the demand notice dated 24/12/2006, the argument of the

    revenue that the assessee was liable to pay interest underSection
      

    220(2)of the Act, for the period prior to the crystallization               of the
   



    demand on 24/12/2006 cannot be sustained. Therefore, in the facts of

    the present case, the decision of the ITAT in holding that the assessee is





    liable to pay interest underSection 220(2)of the Act from the end of the

    period mentioned inSection 220(1)of the Act i.e. thirty days after the

    service of notice of demand dated 24/12/2006 till the date on which the





    amount demanded was paid cannot be faulted.8.           In the result, we see no merit in the appeal and the same is

    hereby dismissed with no order as to costs.(A.R. JOSHI, J.)                                     (J.P. DEVADHAR, J.)::: Downloaded on - 09/06/2013 17:55:59 :::