805/CBDT. - Income Tax - 805/CBDT

INSTRUCTION NO. 805/CBDT Dated : November 27, 1974 Section(s) Referred: 220(2) Statute: Income - Tax Act, 1961 Reference is invited to Board's Instruction No.478 (F.No.404/54/72-ITCC) dated the 25th November, 1972. 2. In continuation of the above, your attention is drawn to the provisions of Rule 118 of the Income Tax Rules, 1962. According to Rule 118(1), ITO is under an obligation to calculate interest under sub-section (2) of Section 220 at the end of each financial year if the amount of tax, penalty or other sum in respect of which such interest is payable has not been paid in full before the end of any such financial year, and issue notice of demand under section 156 to the assessees in respect of the said interest. If, however, the aforesaid amount of tax, penalty or other sum is paid up before the end of any financial year, the ITO shall calculate interest upto the date of payment and issue demand notice under section 156 of the IT Act accordingly.(Rule 118 (2). 3. It has come to the notice of the Board that whereas interest is generally charged by the ITOs at the time of issue of certificate to the TRO inaccordance with Rule 119 of the IT Rules, 1962, interest is not regularly charged under Rule 118. 4. The Board desire that in cases where interest has to be charged by the ITO upto the 31st day of March of each financial year in respect of demands outstanding on that date, he should calculate interest issue demand notice within a period of thirty days from the end of the financial year i.e., upto the 30th day of April. In cases where interest has to be calculated and charged by the ITO upto the date of payment which falls prior to the 31st day of March, interest should be calculated and charged within a week of the date of final payment. 5. These instructions should be brought to the notice of all the Income Tax Officers in each charge.