Section 270A penalty
This query is : Resolved
11 November 2025
Sir, in one of the Asstt.Year we have prefered an appeal against the penalty order u/s.270A. Notice u/s.156 speaks that if the demand is not paid within 30 days, then simple interest could be charged u/s.220(2), again furthere to say that provisions of U/s.221 would attract that penalty would also attracted. Here my doubt is, if I succeed in the appeal, then, penlaty will be deleted. If I do not succeed, then as I understand that the penalty levied by the AO remains same. But how come, penalty carries the simple interest U/s.220(2) and again penlaty carries U/s.221 ie the further penalty. Kindly help me out in this regard sir.
12 November 2025
Interest Under Section 220(2)
Section 220(2) deals with interest for late payment of any tax, interest, or penalty that has been demanded through a notice of demand (like under Section 156).
If the penalty is not paid within the period specified (usually 30 days), simple interest at 1% per month is charged from the expiry of the period until the payment is made .
If you succeed in your appeal and the penalty is deleted, the demand itself becomes void and no interest under Section 220(2) is payable.
If your appeal fails and the penalty stands, the interest will be calculated from the original due date till the actual date of payment.
Section 220(2) deals with interest for late payment of any tax, interest, or penalty that has been demanded through a notice of demand (like under Section 156).
If the penalty is not paid within the period specified (usually 30 days), simple interest at 1% per month is charged from the expiry of the period until the payment is made .
If you succeed in your appeal and the penalty is deleted, the demand itself becomes void and no interest under Section 220(2) is payable.
If your appeal fails and the penalty stands, the interest will be calculated from the original due date till the actual date of payment.
12 November 2025
Penalty Under Section 221
Section 221 empowers the Assessing Officer (AO) to levy a further penalty for non-payment of demand, unless the assessee proves there was a "good and sufficient reason" for non-payment.
This is a separate penalty for being in default, and is in addition to the interest under Section 220(2).
The AO has discretion to levy this further penalty, but it cannot exceed the amount of arrears (the unpaid demand).
If the penalty itself is deleted after appeal, Section 221 penalty will also be vacated as there remains no arrear.
Section 221 empowers the Assessing Officer (AO) to levy a further penalty for non-payment of demand, unless the assessee proves there was a "good and sufficient reason" for non-payment.
This is a separate penalty for being in default, and is in addition to the interest under Section 220(2).
The AO has discretion to levy this further penalty, but it cannot exceed the amount of arrears (the unpaid demand).
If the penalty itself is deleted after appeal, Section 221 penalty will also be vacated as there remains no arrear.
12 November 2025
Interest and Additional Penalty are Consequences of Default Only
If the appeal succeeds, neither Section 220(2) interest nor Section 221 penalty is payable, as the original penalty demand doesn't survive.
If the appeal fails, Section 220(2) interest becomes payable on the unpaid penalty, and the AO may levy a separate penalty under Section 221 for the default in payment.
Both are independent: Section 220(2) is interest for late payment; Section 221 is a further penalty for being in default.
If the appeal succeeds, neither Section 220(2) interest nor Section 221 penalty is payable, as the original penalty demand doesn't survive.
If the appeal fails, Section 220(2) interest becomes payable on the unpaid penalty, and the AO may levy a separate penalty under Section 221 for the default in payment.
Both are independent: Section 220(2) is interest for late payment; Section 221 is a further penalty for being in default.
12 November 2025
- If appeal is pending, you may request a stay on recovery to avoid 220(2) interest and 221 penalty.
- If no stay is granted, and you don’t pay within 30 days:
- Interest u/s 220(2) starts accruing.
- AO may initiate proceedings u/s 221 for further penalty.
- If appeal succeeds, entire penalty demand (and consequential interest/penalty) is extinguished.
- If appeal fails, you must pay:
- Original penalty u/s 270A
- Interest u/s 220(2)
- Any penalty u/s 221, if levied
- File a stay petition with CIT(A) or AO citing hardship and merit of appeal.
- If stay is granted, 220(2) interest and 221 penalty are deferred.
- If not, consider provisional payment to avoid compounding liability.
- Keep documentation of appeal and stay requests to defend against 221 proceedings.
- If no stay is granted, and you don’t pay within 30 days:
- Interest u/s 220(2) starts accruing.
- AO may initiate proceedings u/s 221 for further penalty.
- If appeal succeeds, entire penalty demand (and consequential interest/penalty) is extinguished.
- If appeal fails, you must pay:
- Original penalty u/s 270A
- Interest u/s 220(2)
- Any penalty u/s 221, if levied
- File a stay petition with CIT(A) or AO citing hardship and merit of appeal.
- If stay is granted, 220(2) interest and 221 penalty are deferred.
- If not, consider provisional payment to avoid compounding liability.
- Keep documentation of appeal and stay requests to defend against 221 proceedings.
12 November 2025
Sir, the provisions of sections referred are very droconian right. Becuase, the penalty is a penalty ony, again on the penalty levying the interest and again penalty on penalty is not actually correct. what is your opinion sir. Can we challange them through the writs sir.
12 November 2025
Penalty can be levied (optional) over default at any time, if it is intentional; even courts have approved it. Filling writ over it may not be fruitful. Assessee is given chance to defend its cause of delay.
12 November 2025
Sir, can I pay the penalty under protest, so that if I lost the appeal, the amount paid gets set off. If I win the appeal, then, I can go for refund.
12 November 2025
Personally, I don't prefer. Rather request for stay on recovery for interest and additional penalty based on appeal filed.
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