M.M. Cherian, A.M. - (1.) THIS appeal has been filed by the assessee, Poyilakkada Fisheries Ltd., against the order of the CIT(A), Trivandrum, in respect of the asst. yr. 1977-78. The dispute in this appeal is regarding the levy of interest under s. 220(2) of the IT Act.
(2.) For the asst. yr. 1977-78 the assessee-company was assessed to tax under s. 143(3) of the IT Act on 14th August, 1980, and a demand notice was issued for payment of a total sum of Rs. 1,91,231 including interest under s. 139(8). On receipt of the demand notice, the assessee made application for stay on 15th September, 1980. The AO allowed the assessee to remit the tax in monthly instalments of Rs. 32,000 from October, 1980 onwards. The assessee remitted five instalments totalling Rs. 1,60,000. Meanwhile, the CIT(A) passed an order on 21st October, 1981, allowing the assessee's appeal. In giving effect to the appellate order, the AO refunded the sum of Rs. 1,60,000 paid by the assessee along with interest under s. 244(1A). The order of the CIT(A)was subsequently confined by the Tribunal by the order dated 12th June, 1985. The Department took the matter in reference before the High Court and by the order dated 25th June, 1990, the High Court reversed the order of the Tribunal. Consequently the Tribunal passed the order under s. 260(1) on 4th April, 1991. The AO, thereafter, passed the order on 26th November, 1992, in which a sum of Rs. 1,99,403 was determined as payable by the assessee. In addition, the AO also demanded a sum of Rs. 3,61,911 as interest under s. 220(2) for the period from 1st October, 1980 to 30th November, 1992. The assessee then made a petition under s. 154 pointing out that the levy of interest under s. 220(2) was not in order in view of the decision of the Kerala High Court in the case of ITO vs. A. V. Thomas & Co. (1986) 160 ITR 818 (Ker). The assessee's request for rectification under s. 154 was not allowed by the AO. The CIT(A) concurred with the AO and held that the levy of interest under s. 220 was justified and further the matter was debatable and not falling within the provisions under s. 154. Aggrieved with the order of the CIT(A) the assessee has filed this appeal before the Tribunal. At the time of hearing, Shri A. S. Narayanamoorthy, C.A., appeared before us on behalf of the assessee. The Revenue was represented by Smt. T. Prasannakumari.
(3.) THE assessee filed the return of income for the asst. yr. 1977-78 showing a loss of Rs. 1,46,463 after claiming deduction for purchase-tax liability. THE assessment was completed under s. 143(3) of the IT Act on 14th August, 1980, disallowing the purchase-tax liability and raising a demand of Rs. 1,91,231, including interest under s. 139(8). THE assessment was challenged in appeal before the CIT(A). Meanwhile on a petition filed by the assessee, the AO allowed the remittance of tax in monthly instalments of Rs. 32,000 each from October, 1980 onwards. Accordingly, the assessee paid five instalments totalling Rs. 1,60,000 leaving a balance amount of Rs. 31,231. THE CIT(A) passed the order on 21st October, 1981, allowing the assessee's appeal. THE AO gave effect to the appellate order and reduced the demand and also allowed refund of Rs. 1,60,000 along with interest under s. 244(1A) by his order dated 27th November, 1981. THE order of the CIT(A) was confirmed by the Tribunal by the order dated 12th June, 1985. THE Revenue took up the matter in reference and by the judgment dated 25th June, 1990, the High Court reversed the order of the Tribunal and held that purchase-tax liability was not to be allowed as a deduction. THE Tribunal passed consequential order under s. 260(1) on 4th April, 1991. THEreafter, the AO passed the order on 26th November, 1992, in which a sum of Rs. 1,99,403 was determined as payable by the assessee. THEre was also demand raised for a sum of Rs. 3,61,911 as interest under s. 220(2) for the period from 1st October, 1980 to 31st November, 1992. It appears that interest has been levied on the sum of Rs. 1,91,231, considering the period of default with reference to the date of the original demand till the date of passing of final order consequent to the judgment of the High Court. THE assessee's plea is that in view of the decision of the Kerala High Court reported in (1986) 160 ITR 818 (Ker) (supra) interest was not leviable for the period when there was no pending demand. THE CIT(A) held that the facts of the present case were different and so the above decision was not applicable. THE distinction as noted by the CIT(A) was that the assessee had not paid tax as per the assessment order, dated 14th August, 1980 and that there was only part-payment as per the instalments granted by the AO. According to the CIT(A), the levy of interest was in order as per the decision of the High Court in the case of K. P. Abdul Karim Haji vs. ITO (1983) 141 ITR 120 (Ker).;