Interest under s. 220(2) is leviable for default in payment of tax from the date of default till the date of admission of application for settlement by Settlement Commission
In the case of: – ASSTT. CIT vs. SMT. LEONIE M. ALMEIDA, Decided by: ITAT, Mumbai, Block period 1st April, 1987 to 6th Nov., 1997, Decision dtd. 26th March, 2009
Gist of decision: The Commission after following procedure prescribed may proceed to deal with the application or may reject the application and therefore the demand raised by the AO in the assessment does not get vacated only on filing of application before the Settlement Commission. The Settlement Commission has jurisdiction over the assessee only when it decides to proceed with the application and admits the application under s. 245D(1). Once the application is admitted, the assessee is required to pay the additional demand on the basis of income disclosed in the application within 35 days of the order of the Commission under s. 245D(1) and in case the demand is not paid within the time allowed interest at prescribed rate is chargeable under 245D(2C). Similarly, when the Settlement Commission passes final order under s. 245D(4) the tax payable in pursuance of such an order is required to be paid by the assessee within 35 days of the receipt of copy of the order and for failure to do so, the assessee is liable to pay interest at the prescribed rate under s. 245D(6A). Thus the interest payable under s. 220(2) and the interest payable under ss. 245D(2C) and 245D(6) are in different contexts and have to be levied independently. In respect of demand raised in the assessment made before the admission of application for settlement under s. 245D(1), the AO is entitled to levy the interest under s. 220(2) till the date of admission under s. 245D(1). However, in case, in pursuance of the order of Settlement Commission, the demand raised in assessment is reduced, the interest would have to be revised accordingly. This has been made clear in the proviso to s. 220(2) as per which where as a result of order under ss. 154, 155 and 245D etc. amount on which interest is payable is reduced the interest would be reduced accordingly. Therefore the interest under s. 220(2) will be legally leviable from the date of default in payment of demand by the assessee till the date of admission of the application by the assessee by Settlement Commission under s. 245D(1).