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Income Tax Appellate Tribunal, DELHI BENCH ‘I-1’, NEW DELHI
ORDER
Per N. K. Saini, AM:
This is an appeal by the assessee against the assessment order dated 14.02.2014 u/s 154/254/143(3)/144C of the Income Tax Act, 1961 (hereinafter referred to as the Act).
Following grounds have been raised in this appeal: “1(a) On facts of the case and in law, the learned Assessing Officer has erred in wrongly levying interest under section 220(2) of the Act from the period commencing immediately following 30 days from the date of service of notice of demand under section 156 of the Act issued pursuant to order passed under section 144C/143(3) of the Act dated
27. October 2010.
2 Transcend MT Services Pvt. Ltd. 1(b) On facts of the case and in law, the learned Assessing Officer has erred in not appreciating that the order dated 27 October 2010 has already been set-aside by the Hon'ble ITAT vide its order dated 30 June 2011 for fresh examination by the Hon'ble DRP and the learned Assessing Officer. 1 (c) On facts of the case and in law, the learned Assessing Officer has erred in not appreciating that the interest under section 220 of the Act ought to be computed after 30 days from the date of service of notice of demand dated 30 April 2013. The appellant carves leave to add to and / or to alter, amend, rescind, modify, the grounds herein above or produce further documents before or at the time of hearing of the appeal.”
3. From the aforesaid grounds, it is gathered that the only grievance of the assessee relates to the levying of interest u/s 220(2) of the Act.
Facts of the case in brief are that the assessment in this case was completed u/s 143(3)/144C of the Act on 30.04.2013 after making the adjustment on account of arm’s length price of Rs.1,74,03,385/-. The AO also charged the interest u/s 220(2) of the Act from November 2010. The contention of the assessee in the grounds of appeal
is that the order dated 27.10.2010 passed by the AO was set aside by the ITAT vide order dated 30.06.2011 for fresh examination by the DRP &
3. Transcend MT Services Pvt. Ltd. the AO and thereafter the AO passed the assessment order on 30.04.2013. Therefore, interest u/s 220(2) of the Act ought to have been computed after 30 days from the date of service of notice of demand dated 30.04.2013.
During the course of hearing the ld. Counsel for the assessee submitted that the AO levied the interest from the date of service of original demand notice dated 27.10.2010 and ignored the Circular No. 334 dated 03.04.1982 issued by the CBDT which provides that the interest ought to have been charged only after the expiry of 35 days from the date of service for demand when the assessment was re-framed (copy of the said Circular was furnished which is placed on the record). The reliance was also placed on the judgment of the Hon’ble Supreme Court in the case of Vikrant Tyres Ltd. Vs ITO reported at (2001) 247 ITR 821.
In his rival submissions the ld. DR supported the impugned order passed by the AO.
We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the original assessment order, in compliance to the directions of 4 Transcend MT Services Pvt. Ltd. the DRP u/s 144C(5) of the Act was passed by the AO on 27.10.2010. Against the said assessment order, the assessee filed an appeal before the ITAT wherein vide order dated 30.06.2011 the assessment order was set aside to the file of the DRP with a direction to pass a speaking order. In compliance to the said order, the DRP passed the order dated 26.02.2013. Thereafter, the AO passed the assessment order dated 30.04.2013. However, the assessee vide application dated 17.07.2013 requested a rectification for the payment of Rs.20,00,000/- which was not considered while raising the demand of tax and interest u/s 234B of the Act. The AO accepted the said request and rectified the assessment order dated 30.04.2013 by passing the order dated 14.02.2014 u/s 154/254/143(3)/144C of the Act, along with the said order the AO issued the demand notice u/s 156 of the Act as well as computation of tax in ITNS-150 and also levied the interest u/s 220(2) of the Act from November 2010 i.e. 30 days after passing the original assessment order dated 27.10.2010.
Now the grievance of the assessee is that the said original assessment order dated 27.10.2010 was set aside by the ITAT and again the assessment was re-framed vide order dated 30.04.2013. Therefore, the interest could have been charged only after the expiry of 35 days from the date of 5 Transcend MT Services Pvt. Ltd. service of demand notice pursuant to such fresh assessment order.
To resolve this controversy, it is relevant to discuss the Circular No. 334(F.No. 400/3/81-ITCC), dated 03.04.1982 issued by the CBDT wherein it has been clarified as under:
“1. Doubts have been raised as to the quantum of interest chargeable under section 220(2) when the original assessment order passed by the Income-tax Officer is— (a) cancelled by him under section 146; b) set aside/cancelled by an appellate/revisional authority and such appellate/revisional order has become final; or (c) set aside by one appellate authority but, on further appeal, the order setting aside the assessment is varied by the second appellate authority and the demand gets finally determined.
2. These issues were comprehensively examined in consultation with the Ministry of Law and the Board has been advised: 1. 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 further appeals/revisions), no interest under 6 Transcend MT Services Pvt. Ltd. section 220(2) can be charged pursuant to the original demand notice. The necessary corollary of this position will be that even when the assessment is reframed, interest can be charged only after the expiry of 35 days from the-date of service of demand notice pursuant to such fresh assessment order.
2. Where the assessment made originally by the Income-tax Officer is either varied or even set aside by one appellate authority but on further appeal, the original order of the Income-tax Officer is restored either in part or wholly, the interest payable under section 220(2) will be computed with reference to the due date reckoned from the original demand notice and with reference to the tax finally determined. The fact that during an intervening period, there was no tax payable by the assessee under any operative order would make no difference to this position.
The foregoing legal position will apply mutatis mutandis to the proceedings under other direct taxes also.”
From the above Circular which is binding on department, it is crystal clear that where an assessment order is set aside why an appellate authority and the setting aside became final, no interest u/s 220(2) of the Act can be charged pursuant to the original demand notice and the necessary corollary of the proposition will be that even when the assessment is reframed, interest can be charged only after the expiry of 35 7 Transcend MT Services Pvt. Ltd. days from the date of service of demand notice pursuant to such fresh assessment order.
In the present case, the original assessment order 27.10.2010 was set aside by the ITAT vide its order dated 30.06.2011 and nothing was brought on record to substantiate that the said order dated 30.06.2011 was challenged by the department. Therefore, the said order attained finality. In compliance to the order of the ITAT, the DRP directed the AO vide order dated 26.02.2013 to complete the assessment. In compliance to the said directions, the AO passed the assessment order dated 30.04.2013 and re-framed the assessment. Therefore, as per the aforesaid Circular No. 334(F.No. 400/3/81-ITCC), dated 03.04.1982 which is binding on the department, the interest u/s 220(2) of the Act can be charged only after expiry of 35 days from the date of service of demand notice pursuant to such fresh assessment order dated 30.04.2013 and not the original assessment order dated 27.10.2010. We, therefore, considering the totality of the facts, direct the AO to levy the interest u/s 220(2) of the Act as per the above said direction given by the CBDT in Circular No. 334 dated 30.04.1982.
8 Transcend MT Services Pvt. Ltd. 12. In the result, appeal of the assessee is allowed. (Order Pronounced in the Court on 28/02/2017)