Section 412 — When Tax is Payable and When Assessee is in Default | ITA 2025

Section 412 of the Income-tax Act, 2025 corresponds to s. 220 (FA 1987) of the Income-tax Act, 1961. STATUTORY ARCHITECTURE Section 412 establishes the timeline of demand. Tax raised by demand notice ( s. 156 ) is payable within 30 days…

Section 412 — - WHEN TAX IS PAYABLE AND WHEN ASSESSEE IS IN DEFAULT

Section 412 of the Income-tax Act, 2025 corresponds to s. 220 (FA 1987) of the Income-tax Act, 1961.

Statutory text — Income-tax Act, 2025

(1) When an assessee is in default or is deemed to be in default in making a payment of tax, he shall, in addition to the amount of the arrears and the amount of interest payable under section 411(3), be liable, by way of penalty, to pay—

(a) such amount as the Assessing Officer may direct; and

(b) in the case of a continuing default, such further amount or amounts as the Assessing Officer may, from time to time, direct.

(2) The total amount of penalty under sub-section (1) shall not exceed the amount of tax in arrears.

(3) No penalty under sub-section (1) shall be levied—

(a) unless the assessee has been given a reasonable opportunity of being heard;

(b) where the assessee proves to the satisfaction of the Assessing Officer that the default was for good and sufficient reasons.

(4) The assessee shall not cease to be liable to any penalty under sub-section (1) merely by reason of the fact that before the levy of such penalty he has paid the tax.

(5) Where as a result of any final order the amount of tax, with respect to the de- fault in the payment of which the penalty was levied, has been wholly reduced, the penalty levied shall be cancelled and the amount of penalty paid shall be refunded. Certificate by Tax Recovery Officer and validity thereof.

STATUTORY ARCHITECTURE

Section 412 establishes the timeline of demand. Tax raised by demand notice (s. 156) is payable within 30 days of service of notice. AO may extend or reduce. Failure renders the assessee an 'assessee in default' subject to recovery action under ss. 416-422 and interest at 1% per month under s. 412(2).

STAY OF DEMAND -- 220(6) ANALOG

Sub-section corresponding to 220(6) preserves AO's discretion to grant stay or treat-as-not-in-default during pendency of appeal. CBDT Office Memorandum dated 29-2-2016 + 31-7-2017 + 25-8-2017 prescribes 20% pre-deposit standard for stay; less in genuine hardship.

PRACTITIONER PLANNING NOTES

30-day default period: once expired, recovery proceedings can be initiated; no stay automatically.
Apply for stay under s. 412(6) [220(6)] within 30 days; deposit 20% conventionally.
Higher pre-deposit (50%+) for transfer pricing / search cases.
Stay application during appeal pendency can be filed before AO; appellate stay before CIT(A) under s. 360 / ITAT under s. 363.

CROSS-REFERENCES

s. 412 (default & demand timeline).
s. 415 / 416 (TRO recovery).
s. 220(6) / 416(6) (stay during appeal).

← All sections (537)Act 2025 hub

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
2025 provision	1961 counterpart
s. 412 -- When Tax is Payable and When Assessee is in Default	s. 220 (FA 1987)