Penalty U/s. 221(1) for default in payment of demand cannot exceed tax amount

CIT Vs. Oryx Finance and Investment (P) Ltd. (Bombay High Court) On reading the provisions of section 221 conjointly with the definition of “tax” as detailed under section 2(43), the irresistible conclusion that can be drawn is that the phraseology “tax in arrears” as envisaged in section 221 of the Act would not take within its realm the interest component. It would be abundantly clear that the assessing officer can impose penalty for default in making the payment of tax, but the same shall not exceed the amount of tax in arrears. Tax in arrears would not include the interest payable...