IT demand payment under protest

I have received a rectification order u/s 154 to pay an amount of 35000+. However there is an error in the IT computation by the department. I have filed for rectification but without assigning any reason or basis, the department sent again the demand. They have also adjusted my current year refund partly to the demand. I have applied to AO. Meanwhile can I pay the amount under protest or any other head pending my appeal with AO, JCIT and ITAT in that order? If I win the appeal would they refund the total amount recovered and paid by me in protest? Meanwhile they are adding 1% int per month increasing the penalty hugely. Is there any advise from any qualified professional in the forum?