Statutory interest under tax recovery provisions must be included in settlement scheme dues; procedural rules cannot narrow liability.

Interest payable under section 220(2) was held to be a statutory liability arising from non-payment of tax and therefore includible in the amount payable under the Kar Vivad Samadhan Scheme. Rule 119(3) of the Income-tax Rules was treated only as a mechanism for quantifying and recording the amount in the recovery certificate, not as a limitation on the scope of legally recoverable dues. The scheme was construed as a final settlement mechanism requiring all amounts legally payable to be taken into account, including interest, so interest could not be excluded by relying on rule 119(3).

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Issues: Whether interest payable under section 220(2) of the Income-tax Act, 1961 could be included while determining the amount payable under the Kar Vivad Samadhan Scheme notwithstanding rule 119(3) of the Income-tax Rules, 1962.

Analysis: The liability to pay interest on unpaid tax was treated as statutory and as arising from non-payment of the tax itself. Rule 119(3) was held to be only a mechanism for quantification and specification of the amount in the recovery certificate, and not a provision capable of limiting the scope of the statutory liability or the extent of sums to be considered for settlement under the scheme. The scheme was viewed as a final settlement mechanism under which all amounts legally payable had to be taken into account, including interest.

Conclusion: Interest under section 220(2) formed part of the amount payable under the scheme and could not be excluded by reliance on rule 119(3).

Ratio Decidendi: A procedural rule for quantification cannot cut down a statutory liability for interest, and amounts payable under a settlement scheme must include all legally recoverable dues.

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