Law: Income Tax Act, 1961

Section: 220(2),260,156,154,155,250,254,262,264,2 45,221,146,214,215,244

Section 220(2) of the Income-tax Act, 1961 - Collection and recovery of tax - Interest payable when assessee deemed in default - Assessment years 1977-73, 1978-79 and 1980-81 - Assessee complied with demands created in original assessment proceedings by paying tax due - AAC set aside said demands and, consequently, taxes paid were refunded to assessee - Tribunal upheld order of AAC - However, High Court set aside orders of appellate authorities and restored assessment orders - Thereafter fresh demands were raised and assessee paid tax due - Whether assessee was also liable to pay interest under section 220(2) in respect of assessed tax for period commencing with refund of taxes as a consequence of first appellate order till taxes were finally paid after disposal of references - Held, yes FACTS The ITO assessed the assessee and issued demand notices to it. The assessee complied with the demands by paying the tax due. However, the AAC allowed the appeals filed by the assessee against the assessment orders and, consequently, the taxes paid were refunded to the assessee. The Tribunal, on further appeal by the revenue, upheld the order of the AAC. However, the High Court set aside the orders of the appellate authorities and restored the orders of the assessing authority. Thereafter fresh demands were raised and the assessee paid the taxes assessed. Later on, the revenue demanded interest from the assessee in respect of the assessed tax for the period commencing with the refund of the taxes as a consequence of the first appellate order till the taxes were finally paid after the disposal of the reference. On writ, the assessee contended that he was not at all in default and the original demands did not survive at all because he paid the taxes in compliance with those demands consequent to the order of the appellate authority and, therefore, this was not a case where he failed to comply with the demands issued. On the other hand, the revenue contended that the order of assessment, appellate orders and the order made on the reference resulting in the consequential order were only different steps in the same proceedings and the ultimate order would relate back to the…

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