Mumbai ITAT allows Assessee’s appeal observing that the levy of interest under section 220(2) in the present case is impermissible in terms of statutory provisions; Highlighting that in the demand notice under section 156, the Assessing Officer mentioned “zero” demand, ITAT states that it is fairly well settled proposition that without a valid demand notice, no demand is enforceable; Noting the provisions of Section 220, ITAT observes that on a conjoint reading of provisions of sub-sections (1) & (2) of Section 220, the legal position that emerges is that if an amount specified in the demand notice is not paid within a specified period therein, then the Assessing Officer is competent to levy interest under section 220(2); Reiterating that in the demand notice issued along with the assessment order, Assessing Officer had specified “zero” demand, ITAT opines that the Assessee was not required to pay any amount as per the said demand notice; Tribunal emphasizes that long after the completion of assessment and issuance of demand notice, the Assessing Officer realizing its mistake committed in the computation part of the assessment order, and that too, based on a Revenue audit objection, passed a rectification order under section 154 revising the demand; Also, ITAT highlights that in the computation sheet attached to the rectification order under section 154, the Assessing Officer charged interest under section 220(2) for a period when no demand existed against the Assessee by virtue of a valid demand notice under section 156; ITAT asserts that the Assessee cannot be accused of violating the conditions under section 220(1), in order to empower the Assessing Officer to levy interest under section 220(2); Tribunal articulates that the Assessee cannot be made to suffer for the mistake committed by the Assessing Officer; ITAT outlines that the demand was created against the Assessee by virtue of rectification order passed under section 154 on 28.11.2024, and therefore the demand would fall due for payment only after expiry of 30 days of the date of fresh demand notice issued under section 156; Placing reliance on the Delhi High Court decision in Vodafone Mobile Service Ltd. v. Union of India (2013) 31 taxmann.com 213 (Del), ITAT asserts that the interest under section 220(2) cannot be charged for a period prior to it.

[In favour of assessee]
(Related Assessment year : 2021-22) - [Samsara Shipping (P) Ltd. v. ITO [TS-1710-ITAT-2025(Mum)] – Date of Judgement : 23.12.2025 (ITAT Mumbai)]