2009 TAX. L. R. 261 ::(2008) 306 ITR 86

Orissa High Court

Hon'ble Judge(s): A. K. Ganguly, B. N. Mahapatra , JJ

( A ) Income Tax Act (43 of 1961) S. 234 -B; — Interest — Failure to pay advance tax — Waiver of interest under Ss. 234-B and 234-C cannot be allowed by invoking Notification No. F.400/234/95-IT(B), Dt. 23-5-2006 issed by C.B.D.T. when no cash was seized during seizure operation so that same be allowed to be utilized for payment of advance-tax — In fact due date for payment of advance-tax had already expired before date of search operation. 234-C and S. 119 read with C.B.D.T. Notification No. 400/234/95-IT(B), Dt. 23-5-2006. (Paras7)

( B ) Income Tax Act (43 of 1961) S. 220 (2), 154. — Interest — Levy of under S. 220(2) in proceedings under S. 154 initiated at the instance of assessee — Is illegal.Also, in the absence of service of notice of demand as provided under S. 156 of the Act for the amount of interest levied under Sec. 220(2), the said amount is not enforceable. Notice under Sec. 156 is mandatory before initiating recovery proceedings. Moreover, since interest under S. 220(2) of the Act has been levied for the first time in an order passed under Section 154 affecting adversely the interest of the petitioner, principles of natural justice demands that the petitioner should have been given an opportunity of being heard, which has been violated in the present case. Such an opportunity of being heard has been contemplated in sub-section (3) of Section 154 where an amendment has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee. (1991) 187 ITR 594 (Ori.); 2002 Tax LR 84 (SC) and 1987 Tax LR 408 (Ori.), Followed. (Paras13to16)The Assessing Officer cannot assume jurisdiction to levy interest under Section 220(2) of the Income-tax Act (1961); in a proceeding under Section 154 of the Act, that too initiated at the instance of the assessee for its benefit. In the present case, interest under Section 220 (2) of the Act has been levied for the first time on 31-3-2006 in an order passed under Secti....