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Sec 201

CA Amit Kumar Khaitan (Research Analyst) (360 Points)

27 February 2010

U/S 201, the assessee is considered as assessee in default FIRST. Then again, interest is also separately stated under the section. As per my knowledge, assessee in default is penalised u/s 220 and 221 both, hewnce the interest u/s 200(1A) seems like double imposition of interest.. please clarify

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CA Amit Kumar Khaitan (Research Analyst) (360 Points)
Replied 27 February 2010

sorry, i meant Sec 201(1A)

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Chintan Shah (-) (534 Points)
Replied 28 February 2010

Dear Friend Amit,

Section 220 is applicable where pursuant to an order made by the AO (under various sections such as 143(3), 147 r.w.s. 143(3), etc.) a notice of demand is issued to the assessee u/s 156 and the assessee fails to pay tax as specified in such demand within a time limit (generally 30 days) specified in such demand. Further Section 221 reads as follows:

221. ⁸[(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 arrears⁹ and the amount of interest payable under sub-section (2) of section 220, be liable, by way of penalty, to pay such amount as the ¹⁰[Assessing] Officer may direct¹¹, and in the case of a continuing default, such further amount or amounts as the ¹²[Assessing] Officer may, from time to time, direct, so, however, that the total amount of penalty does not exceed the amount of tax in arrears :

This means the penalty under this section is leviable if the assessee is deemed to be in default u/s 220(4) and not u/s 201(1A).

Futher the reason for deeming the assessee in default u/s 201(1A) is not to charge penalty but to initiate recovery against the assessee under various sections of income tax act by various modes such as attachment of movable or immovable property, arrest of assessee, etc.

Hope this will clear your doubt...

Regards

Chintan