PRAKASH TUBES LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) This Petition under Article 226 of the Constitution of India seeks the issuance of a writ to waive the interest levied under Section 220 (2) of the Income Tax Act, 1961 (IT Act for short) pertaining to three consecutive years in respect of which the original Demand had already been paid. The Petitioner has contended that for the Assessment Years 1980-81, 1981-82 and 1982-83, the Revenue has raised a demand of Rupees 2,84,546/-, Rupees 6,95,479/- and Rupees 15,23,079/- respectively in regard whereof Demand Notices were served on 30.03.1983, 27.04.1983 and 27.04.1983 respectively. The Petitioner was under a bonafide belief that he was entitled to some additional relief under the unamended provisions of Section 80-J of the IT Act. As a consequence it had moved the Hon'ble Supreme Court of India through a writ petition in the course of the hearing of which the operation and effect of the amended provisions of Section 80-J of the IT Act had been stayed. The Petitioner had also moved applications dated 08.04.1983 and 25.05.1983 for the stay of the aforesaid Demand; and the same was stayed by the Inspecting Assistant Commissioner vide his letters dated 12.04.1983 and 01.06.1983 for a period of six months. These interim orders were further extended till 31.03.1985 vide orders dated 11.01.1985. However, on 25.01.1985 the Hon'ble Supreme Court was pleased to dismiss the Writ Petitions, upholding the validity of the retrospective amendment of Section 80-J of the IT Act. Mr. C.S. Aggarwal, learned Senior Counsel for the Petitioner, contends that the pending demands were thereupon paid on 4.3.1985. Subsequently, the Revenue issued a notice under Section 221(1) claiming amounts of Rupees 31,330/-, Rupees 1,06,761/- and Rupees 2,58,362/- ostensibly towards penalty although in the body of the notice Section 220 has been mentioned. Eventually, these demands were further raised to Rupees 46,889/, Rupees 1,19,410/- and Rupees 2,80,425/- chargeable under Section 220(2A) vide its Order dated 2.09.1985, indicating that the claim was towards interest.

(2.) The question posed before us is whether the Petitioner is entitled to waiver of the said interest under Section 220(2A) in light of the above mentioned facts; and whether interest can be levied without the service of a specific order raising the demand under Section 220(2A) of the Act together with a separate demand notice under Section 156 of the Act; and whether the impugned Order is liable to be set aside since the Assessee was not afforded any opportunity of personal hearing.

(3.) It has been contended on behalf of the Petitioner that inasmuch as interest has been charged for the period prior to 25.1.1985, till which date the interim Orders of the Supreme Court were effective, the demand is palpably illegal. The following Table will clarify the position:- <FRM>JUDGEMENT_199_ILRDLH19_2009Html1.htm</FRM> This contention raised on behalf of the Petitioner has only to be stated to be rejected forthwith, as it is devoid of all merits. The Petitioner was one amongst several others who had challenged the vires or the retrospective operation of Section 80-J of the IT Act. This challenge was decided on 25.1.1985 in Lohia Machines Ltd. vs- Union of India, [1985] 152 ITR 308. The opening sentence of this Judgment clarifies the controversy in these words "These writ petitions raise an interesting question of law relating to the interpretation of s.80J of the I.T. Act, 1961, and on the basis of certain interpretation, they challenge the validity of rule 19A of the I.T. Rules, 1962, and also call in question the constitutionality of the retrospective amendment made in s.80J, by the Finance (No.2) Act, 1980". The contention is that in the interregnum when interim orders passed by the Court were in operation it insulated the Petitioner from all claims on account of interest.