Fresh demand after reassessment limits section 220(2) interest to default on the new notice of demand.

Where an appellate order leads to a fresh assessment and a fresh notice of demand under section 156, interest under section 220(2) arises only if the assessee defaults in paying that fresh demand within the statutory period. The earlier demand is superseded by the fresh assessment, so liability cannot be carried back to the original demand date. On the facts stated, the fresh demand was paid in time, making interest from the earlier date unsustainable and entitling the assessee to consequential relief.

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Issues: Whether interest under section 220(2) of the Income-tax Act, 1961 was payable from the date of the original demand after the appellate order resulted in a fresh assessment and a fresh notice of demand.

Analysis: The earlier demand stood superseded when the Assessing Officer passed a fresh assessment order after the appellate order and served a fresh notice of demand under section 156, requiring payment within 35 days. The case was not one of mere intimation under the Validation Act. On the clear language of section 220(2), liability to interest arises only if the amount specified in the fresh notice of demand is not paid within the stipulated period. Since the fresh demand was complied with in time, interest could not be charged from the date of the original demand.

Conclusion: Interest under section 220(2) was not leviable from the original demand date, and the assessee succeeded on the issue.

Final Conclusion: The demand for interest was unsustainable and the assessee was entitled to consequential relief.

Ratio Decidendi: Where a fresh assessment is made pursuant to an appellate order and a fresh notice of demand is issued, liability to interest under section 220(2) arises only on default in payment of the fresh demand within the statutory period, and not from the original demand.

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