Interest under section 220(2) cannot be levied when both the original and restored tax demands were timely paid.

Interest under section 220(2) was held not leviable where the assessee had paid the original demand in time, received a refund after appellate relief, and also paid the fresh demand raised after restoration of the assessment within the prescribed time. Section 220(2) applies only when the amount demanded under section 156 remains unpaid and the assessee continues in default, and it cannot be enlarged by equitable interpretation. Section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964 was treated as applying only where an original demand had remained unsatisfied and was later restored by a higher forum. On these facts, no interest could be charged.

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Issues: Whether interest under section 220(2) of the Income-tax Act, 1961 can be levied when the assessee had complied with the original demand notice and had also satisfied the fresh demand notice issued after the assessment was restored.

Analysis: Section 220(2) applies only where the amount specified in a notice of demand under section 156 is not paid within the prescribed time and the assessee continues in default. On the facts, the original demand had been paid promptly, the tax was later refunded pursuant to appellate relief, and the subsequent demand raised after the Revenue succeeded in reference was also paid within time. A taxing provision cannot be expanded by equitable interpretation, and interest can be charged only when the statute clearly authorises it. Section 3 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964 was held to operate only where an original demand notice had remained unsatisfied and was restored by a higher forum, not where the demand had already been fully discharged.

Conclusion: Interest under section 220(2) could not be demanded from the assessee on these facts.

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