Interest under Section 220(2) of the Act cannot be levied based on a set aside original assessment order when a fresh assessment is made following a remand.

JUDGMENT

Manmeet Pritam Singh Arora, J. Present appeal has been filed by the Revenue under Section 260A of the Income Tax Act (`Act') challenging the order dated 10th November, 2021 passed by the Income Tax Appellate Tribunal (`ITAT') in ITA No. 5781/Del/2017 for the Assessment Year (`AY') 2004-05.

2. Briefly stated, the pertinent facts are that, the Assessee is engaged in the business of network design, management, communication, connectivity services and related products. The Assessee filed its return of income for the relevant year on 30th October, 2004 declaring an income of Rs.29,30,15,180/-, however, the income of the Assessee was assessed at Rs.32,15,72,740/- by the Assessing Officer (`AO') vide original assessment order dated 28th December, 2006.

2.1. Aggrieved by the said order, the Assessee filed an appeal before the Commissioner of Income Tax (Appeals), [`CIT(A)'], which upheld the order of the AO and confirmed the additions. Thereafter, an appeal arose before the ITAT and the Tribunal vide its order dated 30th September, 2014, set aside the original assessment order dated 28th December, 2006, and restored the matter to the file of the AO for determining the issue of taxability of the amounts received as brand building fund, the allowability of brand building expenses as well as a separate claim for other expenses.

2.2. On remand, the AO on the 29th March, 2016 reframed the assessment and passed a fresh assessment order under Section 143(3) of the Act read with Section 254 of the Act. The AO reconfirmed the disallowance of brand expenses for a sum of Rs.2,66,42,537/- and the total income was determined as Rs.31,96,57,720/-.

2.3. In the Income Tax Computation Form (ITNS 50) issued pursuant to the aforesaid assessment order, the AO levied interest under Section 220(2) of the Act and raised a demand of Rs.1,75,74,756/- computed on the basis of the original assessment order dated 28th December 2006.

2.4. It is the levy of interest under Section 220(2) of the Act, which is the subject matter of controversy in the present appeal.

2.5. Aggrieved by the aforesaid levy of interest and the assessment order dated 29th March, 2016, the Assessee challenged the same before the CIT(A). The CIT(A) vide order dated 12th June, 2017 allowed the appeal of the Assessee and deleted the levy of interest under Section 220(2) of the Act.

2.6. Aggrieved by the order of the CIT(A), deleting the levy of interest, the Revenue filed an appeal before the ITAT. The ITAT vide the impugned order dated 10th November, 2021 dismissed the appeal and held that the interest under Section 220(2) of the Act can be charged only after expiry of the period of 30 days from the date of service of demand notice issued pursuant to the fresh assessment order dated 29th March, 2016.

3. Learned counsel for the Revenue states that the ITAT erred in holding that the interest under Section 220(2) is chargeable only from the date falling 30 days after service of the notice of demand as a result of fresh assessment order under 254/143(3) of the Act, ignoring the proviso to Section 220(2) that mandates that the interest is only required to be reduced as a result of reduction in the income under Section 254. Further, he states that the ITAT failed to note that the original assessment dated 28th December, 2006 in the present case, was neither cancelled nor fully set aside. He states that the interest under Section 220(2) of the Act is attracted from the expiry of the period of 30 days from the issuance of the income tax computation form, even after the matter was remanded by the tribunal to the AO for fresh consideration, inasmuch as the tax liability of the Assessee on remand remained the same and addition remained under the same head, the Assessee is liable to pay interest in relation to the demand issued pursuant to the original assessment order dated 28th December, 2006. He relied on the judgment of the Supreme Court in the matter of Vikrant Tyres Ltd. v. First