Time limit for commencement of recovery for tds

Ex. Mr.X has been served a notice u/s. 201 for interest on late payment of TDS for FY 2005-06 on 24.1.2012. So thats almost six years after the end of the FY!! But still the interest was paid within the time limit as per the notice. The notice also directed Mr.X to file a correction return for the relevant quarter.

But the correction statement wasn't filed. Thereafter another notice was served to him u/s. 221 for being in default of non-filing of the correction return.

My questions: (i) What is the time period within which a recovery of interest of the said interest can be made i.e. is it correct if the ITO demands for interest after almost 6 yrs of end of the financial year??

(ii) Can a notice u/s. 221 be served for non filing of the correction return because as far as I remember the said section imposes penalty only in case of default in payment of taxes, etc.

Thanks.

Mr.Rajat

Section 221 is placed in Chapter XVII-(Collection and Recovery of Tax)- of Income Tax Act, 1961. Section 221 speaks of Penalty payable when tax in default.

As you said the notice u/s 221 can be issued only for the defaults in payment of taxes not for the default for filing returns etc., The default for payment of tax may result for non-filing of returns etc.,

As long as the tax payment is in default the notice can be served on the assessee. No time limit is specified either in the section itself or at any other place in Chapter XVII.

If the tax in default is wholly reduced the penalty levied and paid will be refunded to the assessee. Please see sub-section (2) of section 221.

Best Wishes

Sathikonda