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Facts
The assessee filed its return, which was processed under Section 143(1), accepting the returned income. Subsequently, following settlement of appeals under the Vivad Se Vishwas Scheme, a rectification order under Section 154 revised the assessed income. The Assessing Officer levied interest under Section 220(2) on the demand arising from the revised income.
Held
The Tribunal held that the assessee is entitled to a reduction in interest under Section 220(2) as the assessed income was reduced. However, it disagreed with computing the interest from the date of the rectification order. The issue of recomputation of interest was restored to the AO for fresh assessment.
Key Issues
Whether interest under Section 220(2) should be computed on the revised assessed income and from which date.
Sections Cited
250, 154, 220(2), 234C, 139(4), 143(1), 156
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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
Date of Hearing – 04/03/2026 Date of Order – 12/03/2026
O R D E R PER SANDEEP SINGH KARHAIL, J.M. The assessee has filed the present appeal against the impugned order dated 12.06.2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeal) – 53, Mumbai [“learned CIT(A)”], which in turn arose from the order passed under section 154 of the Act, for the assessment year 2021-22.
In this appeal, the assessee has raised the following grounds: - “
1. The Ld. CIT (Appeals) on the facts and circumstances of the case and in law has erred in upholding interest u/s 220 of the Income Tax Act, 1961, (A.Y. 2021-22) Ekataa Commercial Centre Private Limited when the demand has crystalized only after the order u/s 154 has been passed on 13.05.2025
2. The Ld. CIT (Appeals) on the facts and circumstances of the case and in law has erred in partially accepting the charge of interest under Section 234C by directing the AO to compute interest u/s 234C on the basis of tax due on returned income.”
During the hearing, the learned Authorised Representative (“learned AR”) wishes not to press the ground pertaining to the levy of interest under section 234C of the Act. Accordingly, the said ground is dismissed as not pressed.
The solitary grievance of the assessee, in the present appeal, pertains to the computation of interest under section 220(2) of the Act.
We have considered the submissions for both sides and perused the material available on record. The brief facts of the case are that for the year under consideration, the assessee filed its return of income under section 139(4) of the Act on 30.03.2022, declaring total income of Rs. 9,44,59,940/-. The return filed by the assessee was processed vide intimation dated 29.06.2022, issued under section 143(1) of the Act, accepting the returned income of the assessee and raising a demand of Rs. 2,97,33,970/-. Subsequently, the assessee filed a rectification application under section 154 of the Act, in view of the settlement of its appeals for assessment years 2013-14 and 2018-19 under the Direct Tax Vivad Se Vishwas Scheme, 2024. The Assessing Officer (“AO”), vide order dated 13.05.2025 passed under section 154 of the Act, revised the assessed income of the assessee for the year under consideration at Rs. (A.Y. 2021-22) Ekataa Commercial Centre Private Limited 7,71,35,481/-, after taking into consideration the resolution of tax dispute by the assessee for the assessment years 2013-14 and 2018-19 under the Direct Tax Vivad Se Vishwas Scheme, 2024. While computing the demand, inter alia, the AO levied interest under section 220(2) of the Act at Rs.1,01,09,550/-
From the perusal of the record, we find that no breakup of the computation of interest levied under section 220(2) of the Act was provided to the assessee along with the order passed under section 154 of the Act.
During the hearing, the learned AR submitted that since the assessee’s income has been reduced from Rs. 9,44,59,940/- to Rs. 7,71,35,481/-, the interest under section 220(2) of the Act should be correspondingly reduced. The learned AR further submitted that the said interest under section 220(2) of the Act also needs to be computed from the date of passing of the rectification order under section 154 of the Act and not from the date of processing of the return vide intimation issued under section 143(1) of the Act. On the other hand, the learned Departmental Representative (“learned DR”) vehemently relied upon the order passed by the lower authorities.
Having considered the submissions from both sides and perused the material available on record, from the plain reading of the provisions of section 220(2) of the Act, we find that the assessee is liable to pay simple interest at the rate prescribed, if the amount specified in the demand notice (A.Y. 2021-22) Ekataa Commercial Centre Private Limited issued under section 156 of the Act is not paid within the prescribed period. In the present case, there is no dispute regarding the fact that the returned income of the assessee was accepted vide intimation issued under section 143(1) of the Act, and a demand of Rs. 2,97,33,970/- was raised on the assessee. It is further evident from the record that pursuant to the rectification application filed by the assessee, the assessed income of the assessee for the year under consideration was revised at Rs. 7,71,35,481. Therefore, we find merits in the submission of the learned AR that the assessee is entitled to the relief qua the computation of interest under section 220(2) of the Act, as its assessed income has been reduced pursuant to the rectification order passed under section 154 of the Act. Thus, we direct that the interest under section 220(2) of the Act be computed considering the revised assessed income.
At the same time, we do not find any merit in the contention of the learned AR that the interest under section 220(2) of the Act should be computed from the date of the rectification order passed on 13.05.2025 instead of from the date of intimation issued under section 143(1) of the Act. The various decisions relied upon by the learned AR, during the hearing, pertain to cases wherein the original assessment order itself was set aside, and therefore, in such circumstances, the Hon’ble Courts directed that the interest under section 220(2) of the Act should be computed from the date of the fresh assessment order. However, in the present case, such are not the facts as the assessed income vide intimation issued under (A.Y. 2021-22) Ekataa Commercial Centre Private Limited section 143(1) of the Act has only been reduced vide order passed under section 154 of the Act. Therefore, we are of the considered view that the decisions relied upon by the learned AR are not applicable to the present case.
Since the details of computation of interest under section 220(2) of the Act is not coming out from the records and the Revenue has not also brought forth any evidence in support of such computation, in the interest of justice and fair play we deem it appropriate to restore this issue to the file of the jurisdictional AO for recomputation of interest under section 220(2) of the Act, as per law, after taking into consideration the revised assessed income of the assessee as per order passed under section 154 of the Act. With the above directions, the impugned order is set aside, and ground no. 1 raised in assessee’s appeal is allowed for statistical purposes. Needless to mention, no order shall be passed without affording reasonable opportunity of hearing to the assessee.
In the result, the appeal by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 12/03/2026