CHAPTER XVII - COLLECTION AND RECOVERY OF TAX | D.—COLLECTION AND RECOVERY
CHAPTER XVII - COLLECTION AND RECOVERY OF TAX | D.—COLLECTION AND RECOVERY
Section 220 — When Tax Payable and When Assessee Deemed in Default
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live; the foundational recovery provision. Fixes the 30-day period to pay a notice of demand under section 156, the consequences of non-payment, and the points at which an assessee is 'deemed in default'.
Finance Act, 2026: AMENDED. A new fourth proviso to sub-section (2) is inserted (deemed) w.e.f. 1 March 2026: no interest under section 220(2) is chargeable on a demand raised on account of penalty under section 270A — for assessments under section 143 / reassessments under section 147 made on or after 1 April 2027 — up to the date of the order under section 250 [CIT(A)], or up to the date of the order under section 254 [ITAT] where the assessment was in pursuance of DRP directions under section 144C.
Mechanism: Demand → 30 days to pay (s.156/220(1)) → mandatory interest @1% p.m. on default (220(2)) → discretionary waiver (220(2A)) → instalments (220(3)) → deemed default (220(4)/(5)) → stay/'not in default' pending first appeal (220(6)) → relief for blocked foreign income (220(7)).
Litigation profile: Heavily litigated — among the most fought provisions in the recovery chapter, chiefly on (i) levy and computation of 220(2) interest, (ii) waiver of interest under 220(2A), and (iii) stay of disputed demand and the '20%' controversy under 220(6) read with CBDT instructions.
A. COMMENTARY
Scheme of the section
Section 220 is the gateway to the entire collection-and-recovery machinery. Once a notice of demand under section 156 is served, the sum (other than advance tax) must be paid within thirty days. The Assessing Officer may, with the previous approval of the Joint Commissioner and on a recorded belief that revenue would be prejudiced, shorten that period (first proviso to sub-section (1)). Sub-section (1A), introduced after ITO v. Seghu Buchiah Setty, keeps a demand alive through appeals so that a fresh notice need not be issued each time the figure changes; it dovetails with the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964.
Interest under sub-section (2)
Interest at one per cent per month (one-and-a-half per cent for periods straddling 31 March 1989) is automatic and compensatory: it runs from the day after the 30-day period expires until payment. Its levy is mandatory and requires no separate order, but it presupposes a subsisting, unsatisfied demand. Where the original demand was paid in full and a later demand arises only on revival of an order, no interest can be charged on the amount already paid (Vikrant Tyres). Sub-sections (2B) and (2C) bar double interest where interest has already been charged under section 201(1A) or section 206C(7) on the same amount for the same period.
The Finance Act, 2026 fourth proviso
The newly inserted fourth proviso narrows the interest base in a specific situation: for section 143 assessments and section 147 reassessments made on or after 1 April 2027, no section 220(2) interest is charged on a demand attributable to a penalty levied under section 270A for the period up to the first-appeal order (section 250), and up to the Tribunal's order (section 254) in DRP-route cases under section 144C. The object is to spare the assessee compensatory interest on a penalty demand while the very leviability of that penalty is still being tested in appeal.
Waiver or reduction of interest — sub-section (2A)
The Principal CCIT/CCIT/PCIT/CIT may reduce or waive 220(2) interest only if all three cumulative conditions are met — genuine hardship, default due to circumstances beyond the assessee's control, and co-operation in inquiry/recovery. B.M. Malani (SC) construes 'genuine hardship' purposively as genuine difficulty and warns that ownership of large assets does not per se negate hardship; the discretion is to be exercised judicially, and an application cannot be rejected by a cryptic, unreasoned order. The proviso fixes a twelve-month outer limit for disposal.
Stay and 'assessee not in default' — sub-section (6)
Pending a first appeal under section 246/246A, the Assessing Officer may, in his discretion and on conditions, treat the assessee as not in default for the disputed amount. The discretion must be exercised on a speaking order weighing the prima facie case, balance of convenience and irreparable injury (KEC International; UTI Mutual Fund). CBDT Office Memoranda of 29 February 2016 and 31 July 2017 (15%/20% deposit) are administrative guides only: the Supreme Court in LG Electronics held they do not fetter the authority's power to grant stay on a lesser deposit, and the High Courts have repeatedly deprecated mechanical insistence on 20%.
Sub-sections (3)–(5) and (7)
Sub-sections (3) and (5) permit instalments and visit default on the whole balance if an instalment is missed. Sub-section (4) is the operative 'deemed in default' trigger. Sub-section (7) protects an assessee whose foreign income cannot be remitted to India because the foreign law prohibits or restricts remittance — he is not treated as in default for the corresponding tax until the restriction is lifted.
B. STATUTORY TEXT (verbatim)
Reproduced as amended by the Finance Act, 2026. The fourth proviso to sub-section (2) shown below was inserted (and deemed inserted) by the Finance Act, 2026 with effect from 1 March 2026; the balance of the section is as amended up to the Finance Act, 2025.
When tax payable and when assessee deemed in default.
220. (1) Any amount, otherwise than by way of advance tax, specified as payable in a notice of demand under section 156 shall be paid within thirty days of the service of the notice at the place and to the person mentioned in the notice :
Provided that, where the Assessing Officer has any reason to believe that it will be detrimental to revenue if the full period of thirty days aforesaid is allowed, he may, with the previous approval of the Joint Commissioner, direct that the sum specified in the notice of demand shall be paid within such period being a period less than the period of thirty days aforesaid, as may be specified by him in the notice of demand.
(1A) Where any notice of demand has been served upon an assessee and any appeal or other proceeding, as the case may be, is filed or initiated in respect of the amount specified in the said notice of demand, then, such demand shall be deemed to be valid till the disposal of the appeal by the last appellate authority or disposal of the proceedings, as the case may be, and any such notice of demand shall have the effect as specified in section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964 (11 of 1964).
(2) If the amount specified in any notice of demand under section 156 is not paid within the period limited under sub-section (1), the assessee shall be liable to pay simple interest at one per cent for every month or part of a month comprised in the period commencing from the day immediately following the end of the period mentioned in sub-section (1) and ending with the day on which the amount is paid:
Provided that, where as a result of an order under section 154, or section 155, or section 250, or section 254, or section 260, or section 262, or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under this section had been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded :
Provided further that where as a result of an order under sections specified in the first proviso, the amount on which interest was payable under this section had been reduced and subsequently as a result of an order under said sections or section 263, the amount on which interest was payable under this section is increased, the assessee shall be liable to pay interest under sub-section (2) from the day immediately following the end of the period mentioned in the first notice of demand, referred to in sub-section (1) and ending with the day on which the amount is paid:
Provided also that in respect of any period commencing on or before the 31st day of March, 1989 and ending after that date, such interest shall, in respect of so much of such period as falls after that date, be calculated at the rate of one and one-half per cent for every month or part of a month.
Provided also that in respect of any assessment made under section 143 or reassessment made under section 147 on or after the 1st day of April, 2027, no interest shall be charged under this sub-section in respect of any demand raised on account of penalty levied under section 270A—
(a) up to the date of passing of the order under section 250;
(b) up to the date of passing of the order under section 254, where the assessment or reassessment has been made in pursuance to directions issued by the Dispute Resolution Panel under section 144C.
(2A) Notwithstanding anything contained in sub-section (2), the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may reduce or waive the amount of interest paid or payable by an assessee under the said sub-section if he is satisfied that—
(i) payment of such amount has caused or would cause genuine hardship to the assessee ;
(ii) default in the payment of the amount on which interest has been paid or was payable under the said sub-section was due to circumstances beyond the control of the assessee ; and
(iii) the assessee has co-operated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him:
Provided that the order accepting or rejecting the application of the assessee, either in full or in part, shall be passed within a period of twelve months from the end of the month in which the application is received:
Provided further that no order rejecting the application, either in full or in part, shall be passed unless the assessee has been given an opportunity of being heard:
Provided also that where any application is pending as on the 1st day of June, 2016, the order shall be passed on or before the 31st day of May, 2017.
(2B) Notwithstanding anything contained in sub-section (2), where interest is charged under sub-section
(1A) of section 201 on the amount of tax specified in the intimation issued under sub-section (1) of section 200A for any period, then, no interest shall be charged under sub-section (2) on the same amount for the same period.
(2C) Notwithstanding anything contained in sub-section (2), where interest is charged under sub-section (7) of section 206C on the amount of tax specified in the intimation issued under sub-section (1) of section 206CB for any period, then, no interest shall be charged under sub-section (2) on the same amount for the same period.
(3) Without prejudice to the provisions contained in sub-section (2), on an application made by the assessee before the expiry of the due date under sub-section (1), the Assessing Officer may extend the time for payment or allow payment by instalments, subject to such conditions as he may think fit to impose in the circumstances of the case.
(4) If the amount is not paid within the time limited under sub-section (1) or extended under sub-section (3), as the case may be, at the place and to the person mentioned in the said notice the assessee shall be deemed to be in default.
(5) If, in a case where payment by instalments is allowed under sub-section (3), the assessee commits defaults in paying any one of the instalments within the time fixed under that sub-section, the assessee shall be deemed to be in default as to the whole of the amount then outstanding, and the other instalment or instalments shall be deemed to have been due on the same date as the instalment actually in default.
(6) Where an assessee has presented an appeal under section 246 or section 246A the Assessing Officer may, in his discretion and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired, as long as such appeal remains undisposed of.
(7) Where an assessee has been assessed in respect of income arising outside India in a country the laws of which prohibit or restrict the remittance of money to India, the Assessing Officer shall not treat the assessee as in default in respect of that part of the tax which is due in respect of that amount of his income which, by reason of such prohibition or restriction, cannot be brought into India, and shall continue to treat the assessee as not in default in respect of such part of the tax until the prohibition or restriction is removed.
Explanation.—For the purposes of this section, income shall be deemed to have been brought into India if it has been utilised or could have been utilised for the purposes of any expenditure actually incurred by the assessee outside India or if the income, whether capitalised or not, has been brought into India in any form.
C. AUTHORITIES
Authorities are grouped by the three principal battlegrounds — interest under 220(2), waiver under 220(2A), and stay/recovery under 220(6) — followed by the demand-survival line.
1. Levy and computation of interest under section 220(2)
Vikrant Tyres Ltd. v. First ITO (2001) 247 ITR 821 (SC)
Holding Section 220(2) presupposes an unsatisfied demand. Where the assessee had paid the originally demanded tax within time and the demand was merely revived later (after the assessment was disturbed and restored), no interest under section 220(2) could be levied on the amount already paid; section 3 of the Validation Act, 1964 only revives an unsatisfied notice and cannot be used to charge interest on a demand already satisfied.
Use The leading authority that 220(2) interest cannot run on a demand that stood paid; cited wherever the Revenue seeks interest on revival of an old, satisfied demand.
Girnar Investment Ltd. v. CIT (2012) 340 ITR 529 (Delhi)
Holding Interest under section 220(2) is compensatory and runs for the whole period the demand remained unpaid, including a period during which recovery was kept in abeyance or the demand was not enforceable; the assessee cannot avoid interest for the period of indulgence granted to him.
Use Marks the outer reach of 220(2): non-enforceability of the demand for a period does not, by itself, stop interest from running, distinguished from cases where the demand was actually satisfied.
ITO v. Seghu Buchiah Setty (1964) 52 ITR 538 (SC)
Holding Where an assessment (and hence the demand) is reduced in appeal, the original notice of demand cannot survive for the reduced figure without a fresh notice; default and recovery must rest on a valid subsisting demand.
Use The decision that prompted the 1964 Validation Act and section 220(1A); essential background to the survival of a demand through appeals.
Holding 'Genuine hardship' must be construed purposively as genuine difficulty; the three statutory conditions are cumulative and the discretion must be exercised judiciously. The mere fact that an assessee owns large assets does not lead to the conclusion that he can never be in difficulty; but compulsion to pay an unjust due is also relevant to hardship.
Use The anchor authority on 220(2A); used both to resist mechanical rejection of waiver and to insist that all three conditions be addressed.
CIT v. Sant Lal (2020) 423 ITR 1 (Delhi)
Holding Reiterates that the waiver discretion under 220(2A) is to be exercised on the statutory conditions and on a reasoned consideration of the assessee's circumstances rather than mechanically.
Use Recent High Court application of the Malani principles; cited for the requirement of a reasoned order on a waiver application.
3. Stay of disputed demand and 'not in default' — section 220(6)
KEC International Ltd. v. B.R. Balakrishnan (2001) 251 ITR 158 (Bombay)
Holding Laid down guidelines for disposal of stay applications: the authority must briefly set out the issue and the prima facie case, consider whether the points are covered by precedent, weigh the balance of convenience and irreparable injury, and pass a speaking order; recovery should not be mechanical.
Use The foundational guidelines on how a stay/'not in default' application must be dealt with; routinely applied across High Courts.
UTI Mutual Fund v. ITO (2012) 345 ITR 71 (Bombay)
Holding Supplemented KEC International: no recovery should be made before the time to file an appeal expires and a stay application is disposed of, followed by a reasonable time to approach a higher forum; stay may be granted even absent financial hardship; coercive steps need brief recorded reasons.
Use The most-cited modern statement of recovery discipline pending appeal; the practitioner's template for resisting premature coercive recovery.
PCIT v. LG Electronics India Pvt. Ltd. (2018) 303 CTR 649 (SC)
Holding The CBDT Office Memoranda directing deposit of 20%/15% for stay do not fetter the power of the Assessing Officer or the Commissioner to grant stay on deposit of a lesser amount; on the facts of an individual case a smaller deposit, or none, may be ordered, with reasons.
Use The Supreme Court answer to the '20% is mandatory' myth; the cornerstone of every modern stay application.
Bhupendra Murji Shah v. DCIT (2018) 410 ITR 96 (Bombay)
Holding The Assessing Officer is not justified in mechanically insisting on payment of 20% of the demand merely on the strength of the CBDT OM; doing so defeats the very purpose of a stay application, which must be decided on its merits.
Use Frequently cited High Court authority against rubber-stamp 20% orders.
Maharashtra Industrial Development Corporation v. CIT (2018) (Bombay)
Holding An order disposing of a stay application must objectively consider the prima facie case on merits, financial hardship and the balance of convenience; a cryptic order directing deposit without such consideration is unsustainable.
Use Used to set aside non-speaking stay orders.
Mrs. Kannammal v. ITO (2019) 413 ITR 390 (Madras)
Holding Payment of 20% of the disputed demand is not a pre-condition for grant of stay; the authority must apply its mind to the three classic parameters and pass a reasoned order.
Use A clear High Court statement that 20% is not a threshold; useful outside Bombay/Delhi.
CHAPTER XVII - COLLECTION AND RECOVERY OF TAX | D.—COLLECTION AND RECOVERY
Section 220 — When Tax Payable and When Assessee Deemed in Default
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Live; the foundational recovery provision. Fixes the 30-day period to pay a notice of demand under section 156, the consequences of non-payment, and the points at which an assessee is 'deemed in default'.
Finance Act, 2026: AMENDED. A new fourth proviso to sub-section (2) is inserted (deemed) w.e.f. 1 March 2026: no interest under section 220(2) is chargeable on a demand raised on account of penalty under section 270A — for assessments under section 143 / reassessments under section 147 made on or after 1 April 2027 — up to the date of the order under section 250 [CIT(A)], or up to the date of the order under section 254 [ITAT] where the assessment was in pursuance of DRP directions under section 144C.
Mechanism: Demand → 30 days to pay (s.156/220(1)) → mandatory interest @1% p.m. on default (220(2)) → discretionary waiver (220(2A)) → instalments (220(3)) → deemed default (220(4)/(5)) → stay/'not in default' pending first appeal (220(6)) → relief for blocked foreign income (220(7)).
Litigation profile: Heavily litigated — among the most fought provisions in the recovery chapter, chiefly on (i) levy and computation of 220(2) interest, (ii) waiver of interest under 220(2A), and (iii) stay of disputed demand and the '20%' controversy under 220(6) read with CBDT instructions.
A. COMMENTARY
Scheme of the section
Section 220 is the gateway to the entire collection-and-recovery machinery. Once a notice of demand under section 156 is served, the sum (other than advance tax) must be paid within thirty days. The Assessing Officer may, with the previous approval of the Joint Commissioner and on a recorded belief that revenue would be prejudiced, shorten that period (first proviso to sub-section (1)). Sub-section (1A), introduced after ITO v. Seghu Buchiah Setty, keeps a demand alive through appeals so that a fresh notice need not be issued each time the figure changes; it dovetails with the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964.
Interest under sub-section (2)
Interest at one per cent per month (one-and-a-half per cent for periods straddling 31 March 1989) is automatic and compensatory: it runs from the day after the 30-day period expires until payment. Its levy is mandatory and requires no separate order, but it presupposes a subsisting, unsatisfied demand. Where the original demand was paid in full and a later demand arises only on revival of an order, no interest can be charged on the amount already paid (Vikrant Tyres). Sub-sections (2B) and (2C) bar double interest where interest has already been charged under section 201(1A) or section 206C(7) on the same amount for the same period.
The Finance Act, 2026 fourth proviso
The newly inserted fourth proviso narrows the interest base in a specific situation: for section 143 assessments and section 147 reassessments made on or after 1 April 2027, no section 220(2) interest is charged on a demand attributable to a penalty levied under section 270A for the period up to the first-appeal order (section 250), and up to the Tribunal's order (section 254) in DRP-route cases under section 144C. The object is to spare the assessee compensatory interest on a penalty demand while the very leviability of that penalty is still being tested in appeal.
Waiver or reduction of interest — sub-section (2A)
The Principal CCIT/CCIT/PCIT/CIT may reduce or waive 220(2) interest only if all three cumulative conditions are met — genuine hardship, default due to circumstances beyond the assessee's control, and co-operation in inquiry/recovery. B.M. Malani (SC) construes 'genuine hardship' purposively as genuine difficulty and warns that ownership of large assets does not per se negate hardship; the discretion is to be exercised judicially, and an application cannot be rejected by a cryptic, unreasoned order. The proviso fixes a twelve-month outer limit for disposal.
Stay and 'assessee not in default' — sub-section (6)
Pending a first appeal under section 246/246A, the Assessing Officer may, in his discretion and on conditions, treat the assessee as not in default for the disputed amount. The discretion must be exercised on a speaking order weighing the prima facie case, balance of convenience and irreparable injury (KEC International; UTI Mutual Fund). CBDT Office Memoranda of 29 February 2016 and 31 July 2017 (15%/20% deposit) are administrative guides only: the Supreme Court in LG Electronics held they do not fetter the authority's power to grant stay on a lesser deposit, and the High Courts have repeatedly deprecated mechanical insistence on 20%.
Sub-sections (3)–(5) and (7)
Sub-sections (3) and (5) permit instalments and visit default on the whole balance if an instalment is missed. Sub-section (4) is the operative 'deemed in default' trigger. Sub-section (7) protects an assessee whose foreign income cannot be remitted to India because the foreign law prohibits or restricts remittance — he is not treated as in default for the corresponding tax until the restriction is lifted.
B. STATUTORY TEXT (verbatim)
Reproduced as amended by the Finance Act, 2026. The fourth proviso to sub-section (2) shown below was inserted (and deemed inserted) by the Finance Act, 2026 with effect from 1 March 2026; the balance of the section is as amended up to the Finance Act, 2025.
When tax payable and when assessee deemed in default.
220. (1) Any amount, otherwise than by way of advance tax, specified as payable in a notice of demand under section 156 shall be paid within thirty days of the service of the notice at the place and to the person mentioned in the notice :
Provided that, where the Assessing Officer has any reason to believe that it will be detrimental to revenue if the full period of thirty days aforesaid is allowed, he may, with the previous approval of the Joint Commissioner, direct that the sum specified in the notice of demand shall be paid within such period being a period less than the period of thirty days aforesaid, as may be specified by him in the notice of demand.
(1A) Where any notice of demand has been served upon an assessee and any appeal or other proceeding, as the case may be, is filed or initiated in respect of the amount specified in the said notice of demand, then, such demand shall be deemed to be valid till the disposal of the appeal by the last appellate authority or disposal of the proceedings, as the case may be, and any such notice of demand shall have the effect as specified in section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964 (11 of 1964).
(2) If the amount specified in any notice of demand under section 156 is not paid within the period limited under sub-section (1), the assessee shall be liable to pay simple interest at one per cent for every month or part of a month comprised in the period commencing from the day immediately following the end of the period mentioned in sub-section (1) and ending with the day on which the amount is paid:
Provided that, where as a result of an order under section 154, or section 155, or section 250, or section 254, or section 260, or section 262, or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under this section had been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded :
Provided further that where as a result of an order under sections specified in the first proviso, the amount on which interest was payable under this section had been reduced and subsequently as a result of an order under said sections or section 263, the amount on which interest was payable under this section is increased, the assessee shall be liable to pay interest under sub-section (2) from the day immediately following the end of the period mentioned in the first notice of demand, referred to in sub-section (1) and ending with the day on which the amount is paid:
Provided also that in respect of any period commencing on or before the 31st day of March, 1989 and ending after that date, such interest shall, in respect of so much of such period as falls after that date, be calculated at the rate of one and one-half per cent for every month or part of a month.
Provided also that in respect of any assessment made under section 143 or reassessment made under section 147 on or after the 1st day of April, 2027, no interest shall be charged under this sub-section in respect of any demand raised on account of penalty levied under section 270A—
(a) up to the date of passing of the order under section 250;
(b) up to the date of passing of the order under section 254, where the assessment or reassessment has been made in pursuance to directions issued by the Dispute Resolution Panel under section 144C.
(2A) Notwithstanding anything contained in sub-section (2), the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may reduce or waive the amount of interest paid or payable by an assessee under the said sub-section if he is satisfied that—
(i) payment of such amount has caused or would cause genuine hardship to the assessee ;
(ii) default in the payment of the amount on which interest has been paid or was payable under the said sub-section was due to circumstances beyond the control of the assessee ; and
(iii) the assessee has co-operated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him:
Provided that the order accepting or rejecting the application of the assessee, either in full or in part, shall be passed within a period of twelve months from the end of the month in which the application is received:
Provided further that no order rejecting the application, either in full or in part, shall be passed unless the assessee has been given an opportunity of being heard:
Provided also that where any application is pending as on the 1st day of June, 2016, the order shall be passed on or before the 31st day of May, 2017.
(2B) Notwithstanding anything contained in sub-section (2), where interest is charged under sub-section
(1A) of section 201 on the amount of tax specified in the intimation issued under sub-section (1) of section 200A for any period, then, no interest shall be charged under sub-section (2) on the same amount for the same period.
(2C) Notwithstanding anything contained in sub-section (2), where interest is charged under sub-section (7) of section 206C on the amount of tax specified in the intimation issued under sub-section (1) of section 206CB for any period, then, no interest shall be charged under sub-section (2) on the same amount for the same period.
(3) Without prejudice to the provisions contained in sub-section (2), on an application made by the assessee before the expiry of the due date under sub-section (1), the Assessing Officer may extend the time for payment or allow payment by instalments, subject to such conditions as he may think fit to impose in the circumstances of the case.
(4) If the amount is not paid within the time limited under sub-section (1) or extended under sub-section (3), as the case may be, at the place and to the person mentioned in the said notice the assessee shall be deemed to be in default.
(5) If, in a case where payment by instalments is allowed under sub-section (3), the assessee commits defaults in paying any one of the instalments within the time fixed under that sub-section, the assessee shall be deemed to be in default as to the whole of the amount then outstanding, and the other instalment or instalments shall be deemed to have been due on the same date as the instalment actually in default.
(6) Where an assessee has presented an appeal under section 246 or section 246A the Assessing Officer may, in his discretion and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired, as long as such appeal remains undisposed of.
(7) Where an assessee has been assessed in respect of income arising outside India in a country the laws of which prohibit or restrict the remittance of money to India, the Assessing Officer shall not treat the assessee as in default in respect of that part of the tax which is due in respect of that amount of his income which, by reason of such prohibition or restriction, cannot be brought into India, and shall continue to treat the assessee as not in default in respect of such part of the tax until the prohibition or restriction is removed.
Explanation.—For the purposes of this section, income shall be deemed to have been brought into India if it has been utilised or could have been utilised for the purposes of any expenditure actually incurred by the assessee outside India or if the income, whether capitalised or not, has been brought into India in any form.
C. AUTHORITIES
Authorities are grouped by the three principal battlegrounds — interest under 220(2), waiver under 220(2A), and stay/recovery under 220(6) — followed by the demand-survival line.
1. Levy and computation of interest under section 220(2)
Vikrant Tyres Ltd. v. First ITO (2001) 247 ITR 821 (SC)
Holding Section 220(2) presupposes an unsatisfied demand. Where the assessee had paid the originally demanded tax within time and the demand was merely revived later (after the assessment was disturbed and restored), no interest under section 220(2) could be levied on the amount already paid; section 3 of the Validation Act, 1964 only revives an unsatisfied notice and cannot be used to charge interest on a demand already satisfied.
Use The leading authority that 220(2) interest cannot run on a demand that stood paid; cited wherever the Revenue seeks interest on revival of an old, satisfied demand.
Girnar Investment Ltd. v. CIT (2012) 340 ITR 529 (Delhi)
Holding Interest under section 220(2) is compensatory and runs for the whole period the demand remained unpaid, including a period during which recovery was kept in abeyance or the demand was not enforceable; the assessee cannot avoid interest for the period of indulgence granted to him.
Use Marks the outer reach of 220(2): non-enforceability of the demand for a period does not, by itself, stop interest from running, distinguished from cases where the demand was actually satisfied.
ITO v. Seghu Buchiah Setty (1964) 52 ITR 538 (SC)
Holding Where an assessment (and hence the demand) is reduced in appeal, the original notice of demand cannot survive for the reduced figure without a fresh notice; default and recovery must rest on a valid subsisting demand.
Use The decision that prompted the 1964 Validation Act and section 220(1A); essential background to the survival of a demand through appeals.
2. Waiver or reduction of interest — section 220(2A)
B.M. Malani v. CIT (2008) 306 ITR 196 (SC)
Holding 'Genuine hardship' must be construed purposively as genuine difficulty; the three statutory conditions are cumulative and the discretion must be exercised judiciously. The mere fact that an assessee owns large assets does not lead to the conclusion that he can never be in difficulty; but compulsion to pay an unjust due is also relevant to hardship.
Use The anchor authority on 220(2A); used both to resist mechanical rejection of waiver and to insist that all three conditions be addressed.
CIT v. Sant Lal (2020) 423 ITR 1 (Delhi)
Holding Reiterates that the waiver discretion under 220(2A) is to be exercised on the statutory conditions and on a reasoned consideration of the assessee's circumstances rather than mechanically.
Use Recent High Court application of the Malani principles; cited for the requirement of a reasoned order on a waiver application.
3. Stay of disputed demand and 'not in default' — section 220(6)
KEC International Ltd. v. B.R. Balakrishnan (2001) 251 ITR 158 (Bombay)
Holding Laid down guidelines for disposal of stay applications: the authority must briefly set out the issue and the prima facie case, consider whether the points are covered by precedent, weigh the balance of convenience and irreparable injury, and pass a speaking order; recovery should not be mechanical.
Use The foundational guidelines on how a stay/'not in default' application must be dealt with; routinely applied across High Courts.
UTI Mutual Fund v. ITO (2012) 345 ITR 71 (Bombay)
Holding Supplemented KEC International: no recovery should be made before the time to file an appeal expires and a stay application is disposed of, followed by a reasonable time to approach a higher forum; stay may be granted even absent financial hardship; coercive steps need brief recorded reasons.
Use The most-cited modern statement of recovery discipline pending appeal; the practitioner's template for resisting premature coercive recovery.
PCIT v. LG Electronics India Pvt. Ltd. (2018) 303 CTR 649 (SC)
Holding The CBDT Office Memoranda directing deposit of 20%/15% for stay do not fetter the power of the Assessing Officer or the Commissioner to grant stay on deposit of a lesser amount; on the facts of an individual case a smaller deposit, or none, may be ordered, with reasons.
Use The Supreme Court answer to the '20% is mandatory' myth; the cornerstone of every modern stay application.
Bhupendra Murji Shah v. DCIT (2018) 410 ITR 96 (Bombay)
Holding The Assessing Officer is not justified in mechanically insisting on payment of 20% of the demand merely on the strength of the CBDT OM; doing so defeats the very purpose of a stay application, which must be decided on its merits.
Use Frequently cited High Court authority against rubber-stamp 20% orders.
Maharashtra Industrial Development Corporation v. CIT (2018) (Bombay)
Holding An order disposing of a stay application must objectively consider the prima facie case on merits, financial hardship and the balance of convenience; a cryptic order directing deposit without such consideration is unsustainable.
Use Used to set aside non-speaking stay orders.
Mrs. Kannammal v. ITO (2019) 413 ITR 390 (Madras)
Holding Payment of 20% of the disputed demand is not a pre-condition for grant of stay; the authority must apply its mind to the three classic parameters and pass a reasoned order.
Use A clear High Court statement that 20% is not a threshold; useful outside Bombay/Delhi.