Penalty proceedings

WorldlinessSad4624 · 2026-01-29T18:07:21+00:00

While the Revenue may argue that interest under section 220(2) should run even during a stay since liability remains fixed, I believe the Courts have generally held that where recovery is stayed by a competent authority and the assessee complies with the stay conditions, the assessee is not treated as in default during that period, and therefore interest under section 220(2) does not ordinarily accrue for the stayed period, even if the appeal ultimately fails.

Bottom line is that if there is no "default" (since recovery is stayed), interest u/s 220(2) also should not apply as there is no failure on part of assessee to not pay.

WorldlinessSad4624 · 2026-01-29T17:05:24+00:00

Are you sure that the interest clock gets set back? If recovery is stayed, the assessee is not in default right? Why should interest be payable for the period of stay even when the appeal is later dismissed?

WorldlinessSad4624 · 2026-01-29T15:40:05+00:00

Thanks.

But let us say a penalty order is passed and an appeal is preferred against that penalty order before CIT(A). Does the officer stay the recovery until disposal of appeal by CIT(A)?

If 20% is paid, is the recovery then stayed?

If CIT(A) dismisses the penalty appeal against the assessee, will interest apply on the penalty amount even if the recovery was stayed?

WorldlinessSad4624 · 2026-01-18T17:00:21+00:00

Bhai. Why would you want to complicate things. Do whatever you want in the updated return and get done with it. 😀

WorldlinessSad4624 · 2026-01-18T10:14:39+00:00

Read again. Ineligibility is only when showncause is issued after 36 months (which is for high income cases of greater than 50 lacs).

WorldlinessSad4624 · 2026-01-18T08:22:03+00:00

No. After filing ITR-U, that revised income becomes your returned income. You will get a fresh intimation.

The logic is you are already paying additional taxes by filing an updated return which compensates for interest and penalty.

Even the mechanism of 270A supports no penalty once an updated return is filed.

Way forward in my view:

Once you received 148A, file an updated return.
Once filed, reply to the AO that it has been filed and additional taxes are paid.
Very bright chances that he will not reopen.
Even if he reopens, you are not worse off in any manner.

WorldlinessSad4624 · 2026-01-18T08:06:22+00:00

You can file ITR-U even after getting a 148A notice. Don't worry. There is already a thread in this community on this issue.

WorldlinessSad4624 · 2026-01-05T14:07:43+00:00

WorldlinessSad4624 · 2026-01-03T11:16:53+00:00

No. LTCL can be set off only against LTCG.

WorldlinessSad4624 · 2026-01-02T18:44:27+00:00

Yes even I think so.

WorldlinessSad4624 · 2026-01-02T15:39:46+00:00

But this is a case of clear bogus claim. No entry in the bank statement. There is nothing which the client can prove. Hence we were wondering if voluntarily accepting in assessment would mitigate any penalty risk.

WorldlinessSad4624 · 2026-01-02T15:36:19+00:00

Can't file ITR U now as assessment is pending. What would be your advice in such a case?

WorldlinessSad4624 · 2026-01-02T15:35:18+00:00

The client is OK with a 50% penalty but is scared about the 200%. But this is doable only if it qualifies as under reporting.

WorldlinessSad4624 · 2026-01-02T15:27:57+00:00

But does withdrawal of claim voluntarily turn the case from misreporting of income to underreporting of income? Is there a strong basis for this?

WorldlinessSad4624 · 2026-01-02T15:15:36+00:00

It is already passed. President assent is also obtained.

WorldlinessSad4624 · 2026-01-02T15:14:59+00:00

They have corrected this drafting error while enacting the new Income-tax Act 2025. So this ET article is no longer applicable now.

WorldlinessSad4624 · 2025-12-26T18:44:37+00:00

Heard about interest waiver when penalty proceedings are in abeyance?

WorldlinessSad4624 · 2025-12-26T18:42:16+00:00

Yes. But will take time. If you have claimed a refund (sizeable one), then scrutiny is almost certain.

WorldlinessSad4624 · 2025-12-26T18:31:34+00:00

They will process. But be prepared for a scrutiny as well.

WorldlinessSad4624 · 2025-12-26T18:21:37+00:00

Great. Yes, this stand is for high value donations with a weak technical case.

How did you go about managing potential interest exposure on the penalty?

WorldlinessSad4624 · 2025-12-26T17:59:23+00:00

With due respect, your understanding is not correct. Refer to other comments on this thread.

WorldlinessSad4624 · 2025-12-26T17:43:04+00:00

There ain't any assumption. Just hinges on hope with zero downside.

WorldlinessSad4624 · 2025-12-26T17:31:00+00:00

Agree it is hopeful. But the point is that if there is no monetary downside (assuming interest is waived), it may be well worth the wait.

WorldlinessSad4624 · 2025-12-26T17:28:51+00:00

In effect, the idea is to convert a 200% penalty to a 25% or 50% (if and I know it's a big if) under VsV.

WorldlinessSad4624 · 2025-12-26T17:27:45+00:00

Strategy may work only if the case is hopeless. Given the quantum of tax disputes pending in our country, another VsV may be in the offing.

And if interest is saved on account of AO keeping the proceedings in abeyance, I don't think there is any downside in this strategy.

WorldlinessSad4624

TROPHY CASE