Interest payable by the assessee [Section 220] [W.e.f. 1-10-2014]
The existing provision contained in section 220(1) and (2) are as under:
(1) Section 220(1) provides that any amount specified as payable in a notice of demand under section 156 shall be paid within thirty days of the service of notice at the place and to the person mentioned in the notice
. (2) Section 220(2) states that if the amount specified in the notice is not paid within the period, the assessee shall be liable to pay simple interest at 1% 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 section 220(1) and ending with the day on which the amount is paid.
(3) The first proviso to section 220(2) states that where as a result of an order under sections 154, 155, 250, 254, 260, 262, 264 or section 245D(4), the amount on which interest payable under this section had been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded.
Liability of the assessee to pay interest is based on the theory of continuity of the proceedings and the doctrine of relation back. Accordingly, section 220(1A) has been inserted so as to provide that 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 appeal by the last appellate authority or disposal of proceedings, as the case may be and such notice of demand shall have effect-as provided in section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964.
Further, existing second proviso under section 220(2) has been made as third proviso and a new second proviso has been inserted under section 220(2) to provide 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 section 220 is increased, the assessee shall be liable to pay interest under section 220(2) on the amount payable as a result of such order, from the day immediately following the end of the period mentioned in the first notice of demand referred to in section 220(1) section and ending with the day on which the amount is paid.BACK