Section 220

Section 220 — the law in short

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

• ITO, Kolar v Seghu Buchiah Setty Supreme CourtHelps taxpayerSuperseded by amendment
  My assessment was reduced in appeal after the officer had already sent a recovery certificate to the Collector and my property was attached. Can he carry on with the old certificate?
  No, on the law as it then stood. By a majority the Supreme Court held that once the assessment order is revised in appeal, the notice of demand founded on it, the default and the recovery proceedings that followed are superseded. There cannot be two defaults in respect of one liability, so the officer must serve a fresh notice of demand for the amount now due, give the assessee an opportunity to pay, and only then treat him as in default. The Mysore High Court had rightly quashed the certificates and the attachment. Shah J dissented, holding that a modification which does not vacate the assessment leaves the earlier default intact.
• S.P. Velayutham v ACIT High CourtHelps taxpayerHigh Courts differ
  I admitted the tax in my return but could not pay it. Can that be prosecuted as a wilful attempt to evade payment under s.276C(2)?
  No, not on default alone. The Madras High Court held that a prosecution under s.276C(2) for wilfully attempting to evade payment of tax cannot be launched against an assessee who has merely defaulted in paying tax on time; without mens rea there is no wilful attempt.
• Harsh Dipak Shah v Union of India (Gujarat) High CourtHelps taxpayerNo later treatment found
  Is 20% a floor? Can the Commissioner order me to deposit less — 5% or 10% — pending appeal?
  Yes. The Gujarat High Court held there is nothing magical about the figure of 20%: it is a starting point, not a floor, and the authority may direct 5% or 10% instead if the equities so require. The discretion under s.220(6) is coupled with a duty to be exercised judicially on prima facie case, financial stringency and balance of convenience. Note the limits of what that reasoning produced here: of the three writ applications heard together the Court allowed only Special Civil Application No. 19804 of 2021, setting aside the order and remitting it for fresh consideration, and in the two connected applications it expressly declined to interfere having regard to the quantum of the amount involved, leaving those applicants to move the Commissioner (Appeals).
• Vodafone India Services Pvt Ltd v Union of India (Gujarat) High CourtHelps taxpayerNo later treatment found
  The AO rejected my stay application in a few lines and told me to pay 20%. Can that order stand?
  No. An order under s.220(6) that brushes aside the assessee's submissions and mechanically directs payment of 20% is not a speaking order and will be quashed. The Gujarat High Court also held that a penalty demand is not 'tax', so the CBDT's 20% benchmark and the parameters that govern a tax demand do not simply carry across to a penalty appeal.
• Mrs. Kannammal v ITO High CourtHelps taxpayer
  The stay order just says 'pay 20% as per Board's circular'. Is that a decision?
  No. Stay applications must be decided by reference to prima facie case, financial stringency and balance of convenience, and communicated as a speaking order. CBDT circulars are guidelines and cannot substitute those basic tests.
• Statutory position — s.115P interest at one per cent a month and s.115Q deeming the company an assessee in default on unpaid DDT CBDT Circulars & InstructionsCuts both waysSuperseded by amendment
  My company paid its dividend distribution tax late. What interest runs, from when, and what can the Department do to recover the tax itself?
  Section 115P charges simple interest at one per cent for every month or part of a month on the unpaid tax on distributed profits, running from the date immediately after the last date on which the tax was payable under s.115-O(3) — fourteen days from the earliest of declaration, distribution or payment — and ending on the date the tax is actually paid. Section 115Q then deems the principal officer and the company to be an assessee in default in respect of the amount payable, and applies all the provisions of the Act for the collection and recovery of income-tax.
• CBDT Office Memoranda of 1 June 2015 and 11 March 2016 — TDS credit mismatch CBDT Circulars & InstructionsHelps taxpayer
  Is there anything binding on the assessing officer that stops him enforcing a demand caused by my deductor's failure to deposit?
  Yes. The Board told field officers in terms that s.205 bars a direct demand where tax has been deducted from the assessee's income, and that a demand on account of tax credit mismatch cannot be enforced coercively. It had to say it twice — the 2016 Office Memorandum was issued because officers were not following the 2015 letter.
• Statutory position — s.115QA(3), s.115QB and s.115QC: the fourteen-day payment window on buy-back tax, one per cent a month interest, and the principal officer who becomes an assessee in default CBDT Circulars & InstructionsCuts both ways
  The company paid its buy-back consideration months ago and has only now been told it owes tax under section 115QA. How long did it have, what interest runs, and who can the department recover from?
  This machinery bites only on buy-backs that s.115QA governs, which means buy-backs before 1 October 2024; for a buy-back on or after that date there is no company-level charge to collect, because the second proviso to s.115QA(1) disapplies the section. Within that window, s.115QA(3) requires the principal officer of the domestic company AND the company to pay the tax to the credit of the Central Government "within fourteen days from the date of payment of any consideration to the shareholder on buy-back of shares". Section 115QB imposes simple interest at one per cent for every month or part of a month on unpaid tax, running from the day immediately after the last date on which the tax was payable to the date it is actually paid. Section 115QC then provides that where the principal officer and the company do not pay, "he or it shall be deemed to be an assessee in default in respect of the amount of tax payable by him or it and all the provisions of this Act for the collection and recovery of income-tax shall apply".

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.