Can the interest on my tax demand be waived because paying it is a genuine hardship?
Only if all three conditions in s.220(2A) are satisfied together — genuine hardship, default due to circumstances beyond your control, and cooperation in the inquiry or the recovery proceedings. Failing any one limb defeats the application, and the Bombay High Court will not re-appreciate a reasoned rejection by the Chief Commissioner.
Decided by the High Court (Bombay High Court — M.S. Sonak and Jitendra Jain JJ) on 2025-01-16, reported as [2025] 171 taxmann.com 50 (Bombay); [2025] 303 Taxman 338 (Bombay); 2025 SCC OnLine Bom 107; Writ Petition No. 1363 of 2021. It bears on section 220(2), section 220(2A) of the Income Tax Act 1961, in Demand, Recovery & Stay matters.
This is a revenue-favourable decision and it is in the library because it is what the Department will cite against a waiver application built on assertion. It matters for two reasons beyond the three-limb test: hardship has to be shown by credible, consistent and verifiable financial evidence, and inconsistent stands taken during the proceedings can sink both the 'beyond control' and the cooperation limbs. It also fixes the narrow scope of writ review over the Chief Commissioner's discretion.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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After a search on 26 July 2007 the assessee's movable assets — gold bars, jewellery, investments and cash aggregating Rs 71,35,730 — were seized. The assessment proceedings ended on 8 March 2010, and the assessee asked the Assessing Officer to encash the seized investments against the demand, repeating the request on 20 September 2013 and extending it then to the gold and other jewellery. After demands were raised he changed course: by letters of 13 October 2014, 10 February 2015 and 13 March 2015 he asked that the movable assets not be disposed of, and that they be held as security while his appeals and Tribunal proceedings were pending. He paid tax of Rs 91.83 lakhs, sold a jointly owned flat, and on 4 February 2019 applied under s.220(2A) for waiver of the s.220(2) interest, pleading that a senior citizen in poor health had been prejudiced by the department's failure to liquidate the seized assets. The Chief Commissioner rejected the application on 28 February 2020. The assessee died during the writ proceedings and his legal representatives pursued the petition.
The petition was dismissed. Section 220(2A) lays down three conditions and, following B.M. Malani, all three must co-exist before interest can be waived or reduced (paras 18 and 39). On the first, the assessee was asked for a balance sheet and said he was not required to prepare one; if he had none he should at least have made full disclosure of assets and liabilities through some acceptable material, and the burden of showing genuine hardship was his, so the finding against him was not perverse (paras 19, 20 and 29). On the second, no clear case was made that the seizure prevented payment: the investments were small relative to the demand, the sources of the Rs 91.83 lakhs actually paid were left unclear, and the Chief Commissioner's unchallenged finding that the gold and diamonds appreciated fast so that the assessee gained rather than lost was not perverse — no attempt was even made to show a fall in prices (paras 30 to 33). On the third the Court was more guarded: it said there could be two opinions, but the record showed inconsistent stands, including a plea not to sell diamond jewellery as Streedhan when CBDT guidelines excluded diamond jewellery from that description, a constant flip-flop on the sale of the bullion, and less than candid answers about sources of income, so the finding could not be called perverse either (paras 34 and 35). The Court did not itself find non-cooperation; it declined to disturb the officer's finding. It emphasised that it exercises no appellate jurisdiction in such matters and that judicial review is limited (paras 37 and 39).
The Court set out s.220(2A) in full and took the Supreme Court's decision in B.M. Malani as settling that the three conditions are cumulative (paras 17 and 18). It then tested the Chief Commissioner's order on each, asking only whether the findings were perverse or the discretion unreasonably exercised. Genuine hardship had to be proved by the assessee, and an assessee who files neither a balance sheet nor a statement of assets cannot complain that material found against him was not put to him, because the duty of candid disclosure was his in the first place (paras 20 and 29). On circumstances beyond control, the Court reconstructed the correspondence and found the instructions about the seized gold conflicting and contradictory, so the picture of a department ignoring repeated requests was not accurate (paras 23 to 27). It also gave weight to the unchallenged finding that the seized bullion and jewellery had appreciated (paras 32 and 33). It set aside the Chief Commissioner's reliance on the absence of wealth-tax returns, holding that even leaving that out the order stood (para 36). Chander Prakash Jain, relied on for the proposition that interest is payable where seized securities are not encashed despite request, was distinguished as decided on peculiar facts and as not involving s.220(2A) at all (para 38). The complaint of a breach of natural justice was described as feeble (para 37).
all three preconditions must coexist before a waiver order can be made under Section 220(2A) of the IT Act
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Handle my notice → Ask a CA on WhatsAppOnly if all three conditions in s.220(2A) are satisfied together — genuine hardship, default due to circumstances beyond your control, and cooperation in the inquiry or the recovery proceedings. Failing any one limb defeats the application, and the Bombay High Court will not re-appreciate a reasoned rejection by the Chief Commissioner. This was decided by the High Court (Bombay High Court — M.S. Sonak and Jitendra Jain JJ) and bears on section 220(2), section 220(2A) of the Income Tax Act 1961. It is reported as [2025] 171 taxmann.com 50 (Bombay); [2025] 303 Taxman 338 (Bombay); 2025 SCC OnLine Bom 107; Writ Petition No. 1363 of 2021. This is a revenue-favourable decision and it is in the library because it is what the Department will cite against a waiver application built on assertion. It matters for two reasons beyond the three-limb test: hardship has to be shown by credible, consistent and verifiable financial evidence, and inconsistent stands taken during the proceedings can sink both the 'beyond control' and the cooperation limbs. It also fixes the narrow scope of writ review over the Chief Commissioner's discretion. If it applies to you, the first step is this: Structure the waiver application limb by limb, with a separate section and separate evidence for hardship, for circumstances beyond control, and for cooperation.
After a search on 26 July 2007 the assessee's movable assets — gold bars, jewellery, investments and cash aggregating Rs 71,35,730 — were seized. The assessment proceedings ended on 8 March 2010, and the assessee asked the Assessing Officer to encash the seized investments against the demand, repeating the request on 20 September 2013 and extending it then to the gold and other jewellery. After demands were raised he changed course: by letters of 13 October 2014, 10 February 2015 and 13 March 2015 he asked that the movable assets not be disposed of, and that they be held as security while his appeals and Tribunal proceedings were pending. He paid tax of Rs 91.83 lakhs, sold a jointly owned flat, and on 4 February 2019 applied under s.220(2A) for waiver of the s.220(2) interest, pleading that a senior citizen in poor health had been prejudiced by the department's failure to liquidate the seized assets. The Chief Commissioner rejected the application on 28 February 2020. The assessee died during the writ proceedings and his legal representatives pursued the petition. The matter was decided on 2025-01-16 by the High Court (Bombay High Court — M.S. Sonak and Jitendra Jain JJ). On those facts the High Court held as follows. The petition was dismissed. Section 220(2A) lays down three conditions and, following B.M. Malani, all three must co-exist before interest can be waived or reduced (paras 18 and 39). On the first, the assessee was asked for a balance sheet and said he was not required to prepare one; if he had none he should at least have made full disclosure of assets and liabilities through some acceptable material, and the burden of showing genuine hardship was his, so the finding against him was not perverse (paras 19, 20 and 29). On the second, no clear case was made that the seizure prevented payment: the investments were small relative to the demand, the sources of the Rs 91.83 lakhs actually paid were left unclear, and the Chief Commissioner's unchallenged finding that the gold and diamonds appreciated fast so that the assessee gained rather than lost was not perverse — no attempt was even made to show a fall in prices (paras 30 to 33). On the third the Court was more guarded: it said there could be two opinions, but the record showed inconsistent stands, including a plea not to sell diamond jewellery as Streedhan when CBDT guidelines excluded diamond jewellery from that description, a constant flip-flop on the sale of the bullion, and less than candid answers about sources of income, so the finding could not be called perverse either (paras 34 and 35). The Court did not itself find non-cooperation; it declined to disturb the officer's finding. It emphasised that it exercises no appellate jurisdiction in such matters and that judicial review is limited (paras 37 and 39).
The Court set out s.220(2A) in full and took the Supreme Court's decision in B.M. Malani as settling that the three conditions are cumulative (paras 17 and 18). It then tested the Chief Commissioner's order on each, asking only whether the findings were perverse or the discretion unreasonably exercised. Genuine hardship had to be proved by the assessee, and an assessee who files neither a balance sheet nor a statement of assets cannot complain that material found against him was not put to him, because the duty of candid disclosure was his in the first place (paras 20 and 29). On circumstances beyond control, the Court reconstructed the correspondence and found the instructions about the seized gold conflicting and contradictory, so the picture of a department ignoring repeated requests was not accurate (paras 23 to 27). It also gave weight to the unchallenged finding that the seized bullion and jewellery had appreciated (paras 32 and 33). It set aside the Chief Commissioner's reliance on the absence of wealth-tax returns, holding that even leaving that out the order stood (para 36). Chander Prakash Jain, relied on for the proposition that interest is payable where seized securities are not encashed despite request, was distinguished as decided on peculiar facts and as not involving s.220(2A) at all (para 38). The complaint of a breach of natural justice was described as feeble (para 37). In the words reproduced by the source cited on this page: "all three preconditions must coexist before a waiver order can be made under Section 220(2A) of the IT Act" The decision followed or applied B.M. Malani v. CIT [2008] 174 Taxman 363 / 306 ITR 196 (SC).
It was decided by the High Court on 2025-01-16 and is reported as [2025] 171 taxmann.com 50 (Bombay); [2025] 303 Taxman 338 (Bombay); 2025 SCC OnLine Bom 107; Writ Petition No. 1363 of 2021. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 220(2), section 220(2A), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The petition was dismissed. Section 220(2A) lays down three conditions and, following B.M. Malani, all three must co-exist before interest can be waived or reduced (paras 18 and 39). On the first, the assessee was asked for a balance sheet and said he was not required to prepare one; if he had none he should at least have made full disclosure of assets and liabilities through some acceptable material, and the burden of showing genuine hardship was his, so the finding against him was not perverse (paras 19, 20 and 29). On the second, no clear case was made that the seizure prevented payment: the investments were small relative to the demand, the sources of the Rs 91.83 lakhs actually paid were left unclear, and the Chief Commissioner's unchallenged finding that the gold and diamonds appreciated fast so that the assessee gained rather than lost was not perverse — no attempt was even made to show a fall in prices (paras 30 to 33). On the third the Court was more guarded: it said there could be two opinions, but the record showed inconsistent stands, including a plea not to sell diamond jewellery as Streedhan when CBDT guidelines excluded diamond jewellery from that description, a constant flip-flop on the sale of the bullion, and less than candid answers about sources of income, so the finding could not be called perverse either (paras 34 and 35). The Court did not itself find non-cooperation; it declined to disturb the officer's finding. It emphasised that it exercises no appellate jurisdiction in such matters and that judicial review is limited (paras 37 and 39). It arises in Demand, Recovery & Stay matters, on section 220(2), section 220(2A) of the Income Tax Act 1961, and was decided by Bombay High Court — M.S. Sonak and Jitendra Jain JJ. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Keep one consistent position on record about seized assets — whether they should be liquidated against the dues or retained as security — because shifting instructions were held to cut against the applicant. Deal head-on with anything that contradicts distress, such as appreciation in the value of assets held by the Department. If the application is rejected, frame the challenge as perversity or non-consideration of material, since the court will not reweigh a reasoned order.
Validity check could not be completed. The report carries no later-treatment note and no case review of this decision, and no case applying, following or affirming it was found on the full read; nor was anything found about an appeal. The proposition it applies — that the three conditions in s.220(2A) are cumulative — is the Supreme Court's in B.M. Malani, which is undisturbed, and that is the authority to cite for it. What this judgment adds is on the evidential side and on the limits of judicial review. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judges are M.S. Sonak and Jitendra Jain JJ and the date is 16 January 2025, both confirmed from the judgment, so the case can now be cited by name and reporter citation. Note what the decision is and is not. It is a refusal to interfere with a discretionary administrative order on judicial review, not a ruling that this assessee failed to cooperate — on the third condition the Court said two opinions were possible and went no further than holding the Chief Commissioner's finding not perverse. It also discarded one of the Chief Commissioner's grounds, the absence of wealth-tax returns, and upheld the order without it. The authority the assessee relied on, Chander Prakash Jain, was distinguished as not a s.220(2A) case at all. No later decision applying or following this judgment was identified, and nothing was found about any further appeal. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The petition was dismissed. Section 220(2A) lays down three conditions and, following B.M. Malani, all three must co-exist before interest can be waived or reduced (paras 18 and 39). On the first, the assessee was asked for a balance sheet and said he was not required to prepare one; if he had none he should at least have made full disclosure of assets and liabilities through some acceptable material, and the burden of showing genuine hardship was his, so the finding against him was not perverse (paras 19, 20 and 29). On the second, no clear case was made that the seizure prevented payment: the investments were small relative to the demand, the sources of the Rs 91.83 lakhs actually paid were left unclear, and the Chief Commissioner's unchallenged finding that the gold and diamonds appreciated fast so that the assessee gained rather than lost was not perverse — no attempt was even made to show a fall in prices (paras 30 to 33). On the third the Court was more guarded: it said there could be two opinions, but the record showed inconsistent stands, including a plea not to sell diamond jewellery as Streedhan when CBDT guidelines excluded diamond jewellery from that description, a constant flip-flop on the sale of the bullion, and less than candid answers about sources of income, so the finding could not be called perverse either (paras 34 and 35). The Court did not itself find non-cooperation; it declined to disturb the officer's finding. It emphasised that it exercises no appellate jurisdiction in such matters and that judicial review is limited (paras 37 and 39).
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
The Commissioner (Appeals) wiped out my demand and the tax was refunded; then the Tribunal restored the assessment. Am I charged s.220(2) interest for the years in between?
My assessment is many times my returned income, the Assessing Officer has refused stay and attached my bank account. Can the Commissioner (Appeals) stay the demand while my appeal is pending?
The department is recovering the company's tax from me as a director. I resigned, and an MOU and an arbitral award put the tax liability on another director. Is that a defence under s.179?
I paid the demand on time, won in appeal, got a refund, then lost on reference and paid again on a fresh demand. Can the department charge me s.220(2) interest for the period in between?