Interest u/s 220(2) to Be Recomputed on Reduced Income Post Rectification u/s 154 – ITAT Mumbai

Case Reference

Ekataa Commercial Centre Private Limited Vs DCIT (ITAT Mumbai)
Assessment Year: 2021-22
Order Date: 12/03/2026
Arising from: Order dated 12.06.2025 passed under Section 250 of the Income Tax Act, 1961 by CIT(A)-53, Mumbai, which in turn arose from an order under Section 154 of the Act.

Background and Key Facts

This case came before the Income Tax Appellate Tribunal (ITAT), Mumbai Bench, by way of an appeal filed by the assessee against the order of the learned Commissioner of Income Tax (Appeals) – 53, Mumbai.

The sequence of events leading to the dispute is as follows:

  1. The assessee filed its return of income under Section 139(4) of the Income Tax Act, 1961 on 30.03.2022, declaring a total income of Rs. 9,44,59,940/-.
  2. The return was processed vide intimation dated 29.06.2022 under Section 143(1) of the Act, wherein the declared income was accepted and a tax demand of Rs. 2,97,33,970/- was raised.
  3. Subsequently, the assessee filed a rectification application under Section 154 of the Act, in connection with settlement of its appeals for assessment years 2013-14 and 2018-19 under the Direct Tax Vivad Se Vishwas Scheme, 2024.
  4. The Assessing Officer (AO), vide order dated 13.05.2025 under Section 154, revised the assessed income downward to Rs. 7,71,35,481/-, duly accounting for the dispute resolution under the Direct Tax Vivad Se Vishwas Scheme, 2024.
  5. While computing the revised demand, the AO levied interest under Section 220(2) of the Act amounting to Rs. 1,01,09,550/-, without providing any detailed breakup or basis for such computation to the assessee.

Grounds of Appeal

The assessee raised the following grounds before the ITAT:

"1. The Ld. CIT (Appeals) on the facts and circumstances of the case and in law has erred in upholding interest u/s 220 of the Income Tax Act, 1961, when the demand has crystalized only after the order u/s 154 has been passed on 13.05.2025

  1. The Ld. CIT (Appeals) on the facts and circumstances of the case and in law has erred in partially accepting the charge of interest under Section 234C by directing the AO to compute interest u/s 234C on the basis of tax due on returned income."

Note: During the course of the hearing, the learned Authorised Representative (AR) chose not to press the ground relating to interest under Section 234C of the Act. Accordingly, that ground was dismissed as not pressed. The sole surviving issue before the Tribunal was the computation of interest under Section 220(2) of the Act.

Arguments Advanced

Assessee's Contentions

The learned AR put forth two primary arguments: