Waiver of interest on penalty demands independent consideration of statutory relief criteria under the Income-tax Act

Interest charged on a penalty amount under the Income-tax Act cannot be rejected for waiver or reduction merely on the reasoning that it is not a case of "penalty on penalty". The authority must separately examine the statutory conditions for relief under section 220(2A), and an order that does not disclose consideration of those criteria is legally unsustainable. The rejection order was therefore set aside, and the matter was remitted for fresh consideration with notice and opportunity to the taxpayer in accordance with law.

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Issues: Whether the order rejecting the application for waiver of interest levied on the penalty amount under section 220(2A) of the Income-tax Act, 1961, was sustainable when the authority had not considered the statutory conditions for waiver or reduction of interest.

Analysis: The application sought waiver of interest charged under section 220(2) of the Income-tax Act, 1961, and the authority rejected it on the ground that interest on penalty could not be treated as penalty on penalty. The rejection of that contention was upheld, but the authority was required to examine the separate statutory criteria for waiver or reduction under section 220(2A). As the order did not show consideration of those conditions, it was liable to be interfered with.

Conclusion: The rejection order was set aside and the application was remitted for fresh consideration with notice and opportunity to the petitioner in accordance with law.

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