- (1.) Being aggrieved by an order made by the Division Bench of the High Court of Karnataka in Writ Petition Nos. 17068-70 of 1988, the appellant is before us in these appeals.
(2.) In respect of assessment years 1977-78, 1978-79 and 1980-81, assessment orders were served on the assessee-appellant and demand notices were issued - The appellant complied with the demands by paying the tax due. The appellate authority on an appeal preferred by the appellant, allowed the same and the taxes paid were refunded to the appellant. The appellate Tribunal dismissed the appeal filed by the Revenue and on a Reference made to the High Court, the same came to be allowed thereby upholding all the assessment orders. Thereafter, the Revenue made fresh demands and the assessee re-paid the taxes as assessed and demanded. However, the Revenue invoked Section 220(2) of the Income-tax Act, 1961 (the Act) and demanded interest in respect of the tax assessed for the period commencing with refund of the tax consequent upon the first appellate order till the taxes were finally paid after disposal of Reference.
(3.) The appellant challenged the said demand of interest in the above-mentioned writ petitions before the High Court, inter alia, contending that it was not at all in default because it had paid the taxes in compliance with the demands, hence, the original demands did not survive so this was not a case where it had failed to comply with the demand made under Section 156 of the Act. The Revenue contended that the order of assessment, the appellate orders and the order made on reference resulting in consequential order are only different steps in the same proceeding and the ultimate order relates back to the original order itself and that also in view of Section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964 (for short 'the Validation Act') the original demand notices got revived by operation of law and due effect had to be given to such revival. The High Court, however, held and sub-section (2) of Section 3 of the Validation Act kept alive the earlier demand notice even though payment in full was made pursuant to that demand and treated the same as due notice having been kept alive all along till the assessment order was upheld by the higher forum. On the above foundation, the writ petitions came to be dismissed.;