THE issues before the Bench are - Whether when the assessee submits revised return after making self-assessment u/s 140A, he is liable to pay interest u/s 220(6) from the date of his filing revised returns or from the date of determination of his final tax liability and Whether a notice u/s 156 is obligatory if any interest liability is determined to be due from the assessee. And the verdict goes in favour of the assessee.
Facts of the case
Assessee had filed his self-assessed ROI quantifying at Rs.1,44,74,480/-, which was assessed at Rs.1,45,40,721/- u/s 143(3). Subsequentally it was reopened u/s 148 and ex parte order was passed. Then the assessee submitted another ROI of Rs.1,96,91,399/-. After several rounds of appeals etc., ultimately the tax liability of the assessee was determined by the appellate order. As the facts of the case were clear the decisions of the lower authorities were not reiterated by the High
Court.
Before HC, the Revenue's counsel submitted that as per the provisions of section 140A, the assessee assessed himself to be liable to pay tax and interest on his income to the tune of Rs.1,96,91,399/- and in his revised returns of income, he did not pay interest over the said amount in view of his revised returns. Therefore, the assessee was statutorily “an assessee deemed to be an assessee in default” in respect of tax and interest amount which he did not pay.Thus, it was contended that the assessee was defaulter in view of sub-section (3) of section 140A from the time when he was supposed to pay tax and interest and he did not pay the interest and therefore, automatically without any order of any authority, he was liable to pay the interest. It was also pointed out that in this case, no order u/s 156 was required to be passed by any AO demanding the tax or interest liability to the assessee, when the assessee was liable to pay tax and interest by his own assessment u/s 140A. Therefore, without there being any notice u/s 156, the assessee was liable to pay the tax and interest. However, the assessee since has paid the tax amount, he was liable to pay interest only now.
On the other hand, the assessee's counsel submitted that admittedly a notice u/s 156 was, in fact, issued and served upon the assessee only after appellate order, because of the reason that by final order, the assessee's liability crystallized and before that, assessee's liability had not attained finality and crystallized in quantified form. Therefore, in case of self-assessment, one can assess his income and submit the returns accordingly along with the proof of payment of tax and if there is delay, with proof of payment of interest. It is submitted that in the case of self-assessment by the assessee but crystallizing tax liability of the assessee by final order, the interest can be levied u/s 220(2) only after service of demand notice demanding specified amount, which the assessee was required to pay within the stipulated period of 30 days and in default thereof, he is liable to pay the interest.
Having heard the matter, the High Court held that;
++ it is clear from section 140A that the assessee is liable to assess his income and to pay tax calculated according to the above provisions together with interest as payable and is required to pay tax in advance before furnishing returns and returns shall be accompanied with the proof of payment of such tax and interest. Such aggregate of tax and interest as deposited by the assessee is required to be adjusted to reply against tax and then surplus against interest as per Explanation appended to section 140A. In spite of declaring such assessee to be a defaulter, in the same section 140A liability of the interest has not been created on such unpaid amount and Explanation appended to section 140A only provided that the amount so paid by the assessee u/s 140A shall be adjusted against tax liability and excess shall be against interest liability. For creating interest liability, a separate provision has been made under the heading “Calculation and Recovery” by section 220;
++ Subsection (2) of section 220, which is sought to be applied by the Revenue, provides that if the amount as specified in the notice of demand under section 156, is not paid within the period limited under section (1), the assessee shall be liable to pay simple interest at the stipulated rate of interest from the date specified. Sub-section (1) of section 220 provides that any amount, otherwise than by way of advance tax, specified as payable in a notice of demand under section 156, shall be paid within thirty days of the service of the notice upon the assessee. Therefore, all tax liability, except advance tax, have been made liable to be followed by a notice u/s 156 and only when the assessee fails to comply with the conditions of the notice u/s 156 and fails to pay the due amount, then he is liable to pay interest. No other provision has been shown to us creating any liability for self-assessment default cases and for deemed defaulter u/s (3) of section 140A. Undisputedly notice u/s 156 was given to the assessee after final assessment order. The authorities below were, thus, right in holding that the assessee in the present case was liable to pay interest from the date of the order
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