Interest on Outstanding Tax Demand

This query is : Resolved

Madhav Singh (Querist)
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08 November 2022 Assessee filed ITR1 on his own on 18th Dec 2021 for AY 2021-22. On the same day (18th Dec 2021) he was intimated with an order of Rs 78,100. On the same day (18th Dec 2021) he paid the requested amount through challan. He has challan copy. However, he didn't submit the demand response.

Fast forward to June 2022: I filed his ITR3 for AY 2022-23. It took some time for his refund to process, but on 25th Oct 2022, he was notified through email that the refund for AY 2022-23 is proposed to be adjusted against the outstanding demand of AY 2021-22. So, I tried to submit the demand response for the same on his e-Filing portal. But still, the portal demands to pay interest accrued on the original demand.

The outstanding demand was already paid last year, but the response hasn't been submitted yet. Is the Income Tax Department within their rights to demand interest on the amount? Or this is a bug in their portal? What can be done in this case to waive off the interest?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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08 November 2022 No, Its not bug, but technically closure of demand as per your submission of response, so the interest gets calculated till the date of closure.

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