Recovery: assessee in default — Section 220

What this section is

Section 220 deals with the consequences of non-payment of a notice of demand under Section 156. It provides for 1% per month interest on unpaid demand and treats the assessee as 'an assessee in default'. Sub-section (6) gives discretion to the AO to grant stay where an appeal has been filed.

When it is issued

Automatic, on lapse of 30 days from the Section 156 notice. A separate notice may be issued before recovery measures.

What you should do

1. 1File a stay application under Section 220(6) immediately on filing the appeal. Usually 20% deposit is required.
2. 2Where the demand is high-pitched (more than twice the returned income, per CBDT Instruction No. 1914 read with 96/2021), insist on stay even before 20%.
3. 3Track the demand status on the e-filing portal — 'agreed', 'disagreed', 'paid', 'stayed' must be correct.

Documents typically needed

• Section 156 notice and underlying order
• Appeal acknowledgement
• Stay application and 20% payment proof

Common mistakes

• Filing the stay application with the wrong officer — it must go to the AO, not CIT(A).
• Not making the 20% payment — without it, recovery proceeds notwithstanding the appeal.