Law: Income Tax Act, 1961

Section: 156,220,220(2)

(a) Income-tax-Recovery of tax---Interest---Notice of demand---Amount of demand paid within time---Appeal from assessment order---Refund pursuant to appellate order---High Court---Reference--Assessment order confirmed-;Demand pursuant thereto---Amount paid within time---Original notice of demand does not revive ---Assessee not liable to pay interest for interregnum---Indian Income Tax Act, 1961, Ss. 156 & 220(2). (b) Income-tax---Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, S.3(2)---Scope of---Provisions apply only to case where the assessee does not pay pursuant to notice of demand---Revival of notice only in cases where validity of notice of demand is challenged---[Vikrant Tyes Ltd. v. First ITO (1993) 202 ITR 454 reversed]. In respect of certain assessment years assessment 'orders were served on the assessee and demand notices were issued and the assessee complied with the demands by paying the tax due thereunder within time. The appellate authority allowed the assessee's appeals against the assessment orders and the taxes paid by the assessee were refunded. The Appellate Tribunal dismissed the appeals of the Department; but, on a reference, the High Court upheld the assessment orders. Thereafter, the Department made fresh demands and the assessee repaid within time the taxes as assessed and demanded. The Department demanded interest under section 220(2) of the Income Tax Act, 1961, on the tax assessed for the period commencing from the date of refund of the tax upon the appellate order till the date of the taxes were finally paid after disposal of the reference. The assessee filed writ petitions in the High Court challenging the demand of interest, contending that it was not in default because it had paid the taxes in compliance with the original notices of demand and it had not failed to comply with the demand made under section 156. The High Court dismissed the writ petitions holding that section 3(2) of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964, kept alive the earlier demand notices even though payment in full had been made pursuant thereto and treated those earlier notices as…

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