Section 220(2)

Section 220(2) — the law in short

What the courts have decided on section 220(2), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• B.M. Malani v CIT Supreme CourtHelps taxpayer
  The Commissioner refused to waive the interest on my demand because I own property worth crores. Is owning assets an answer to genuine hardship?
  No, not by itself. The Supreme Court set aside the High Court's judgment and remitted the waiver application to the Commissioner to be considered afresh. Genuine means real, not fake, not a ruse; genuine hardship means a genuine difficulty; and it does not follow that a person holding large assets can never be in difficulty merely because he could sell them and pay. The Court also held that the authority had to take into account what the assessee had actually offered to do - here, that he had asked the department to sell the securities it had seized and appropriate the proceeds towards his tax - and that the department's silence on that offer told against it.
• M/s. Vikrant Tyres Ltd v The First Income Tax Officer - no s.220(2) interest where the original demand was paid on time Supreme CourtHelps taxpayer
  I paid the original demand in full, got a refund when I won in appeal, and repaid on a fresh demand after losing in reference. The department now wants s.220(2) interest for the period in between. Must I pay it?
  No. The Supreme Court held that the condition precedent for s.220(2) is a notice of demand under s.156 AND a default in paying the amount demanded within the time allowed. Where the assessee satisfied the original demand promptly and later satisfied the fresh demand promptly, there was no default at any point, and s.220(2) cannot be invoked for the period during which the refunded money was in his hands.
• Imperial Chit Funds (P) Ltd v. Income Tax Officer, Ernakulam (Supreme Court, 19 March 1996) — the amount the liquidator must set aside under section 178(3) stands outside the winding up, and if he does not set it aside he is personally liable Supreme CourtHelps departmentSuperseded by amendment
  I am the official liquidator. The Income-tax Officer has notified an amount under section 178(2) and is demanding payment now, before the list of creditors is settled. Can he do that, or must he prove his claim in the winding up like everyone else?
  On the law as it stood before the Insolvency and Bankruptcy Code, he could. The Supreme Court dismissed the liquidator's appeal and affirmed the Kerala High Court Full Bench, holding that the amount set aside by the liquidator under section 178(3) is marked off as outside the area of the winding up proceedings and the jurisdiction of the winding up court, that on a total view of the statutory provisions the Income Tax Department is treated as a 'secured creditor', and that the crucial words in section 178(3) and 178(4) are that the Official Liquidator 'shall set aside' the amount notified by the Income Tax Officer and that if it is not so done the Official Liquidator is personally liable to pay the amount of tax which the company would be liable to pay. The Court held that the decisions of the Mysore, Calcutta, Rajasthan, Gujarat and Delhi High Courts to the contrary did not lay down the correct law.
• Jitendra M. Doshi v CCIT High CourtHelps departmentNo later treatment found
  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.
• Rajeev Behl v PCIT High CourtHelps departmentNo later treatment found
  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?
  No. The burden under s.179(1) is on the director to prove that the non-recovery cannot be attributed to his gross neglect, misfeasance or breach of duty - it is not for the Revenue to prove that he was guilty of it. And a private arrangement between directors, even one affirmed by an arbitral award upheld by the High Court, governs rights in personam and cannot bind a statutory authority; income-tax liability cannot be apportioned by private agreement.
• Girnar Investment Ltd v CIT High CourtHelps department
  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?
  Yes, on this decision, and the reason matters. The Delhi High Court held that where an assessment is restored on appeal the original demand revives from inception, so interest under s.220(2) runs on the unpaid amount from the expiry of thirty days from the notice of demand, and an intervening appellate order in the assessee's favour — even one that wiped out the demand and produced a refund — makes no difference to the liability for interest. The boundary of the holding is that the assessee here had not paid the full demand: where the demand was satisfied in full and promptly, Vikrant Tyres Ltd. v. First ITO [2001] 247 ITR 821 (SC) holds that no interest can be charged, and this judgment distinguishes that case rather than displacing it.
• Maheshwari Agro Industries v Union of India High CourtHelps taxpayer
  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?
  Yes. The Rajasthan High Court held that the first appellate authority - the Commissioner (Appeals) or Deputy Commissioner (Appeals) - has inherent, implied and ancillary power to stay recovery of a disputed demand while an appeal under section 246 or 246A is pending, even though the Act confers no express power. It followed ITO v. M.K. Mohammed Kunhi. It also held that section 220(6) is not a stay power at all but a discretion not to treat the assessee as in default, and that on a high-pitched assessment - in the spirit of CBDT Instruction No.95 of 1969, where the assessed income is twice the returned income or more - that discretion should ordinarily be exercised in the assessee's favour.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.