Income Tax Taxation

Notice for Demand under section 156

The Income-tax Department checks the income declared and tax paid by the person with the details available with them. As per the Income-tax Act 1961, if there is a discrepancy in the amount calculated and the amount paid by the respective person, the notice for demand under section 156 is issued.

Why notice for Demand under Section 156 is issued?

While processing the Income Tax return of the taxpayer, if the tax department comes to know that more tax is due from the respective taxpayer than paid by him/her and the same is declared in the Income-tax return, then the respective taxpayer would normally get a demand notice.

Once the discrepancy is found, the intimation will be sent to the taxpayer regarding the same through the below-mentioned mode-

• Via email and SMS under section 143(1).
• An Online account on the e-filing website.

As per the recent income tax laws, the time limit to respond to the demand notice is 30 days.

Note – In case, if the person does not respond to the notice within the stipulated time, the Income-tax department will take strict action against the taxpayer.

Why Section 143(1) is relatable with Section 153 of the Income-tax Act, 1961?

If the intimation u/s 143(1) is issued to the respective taxpayer for a tax demand, then this intimation becomes Notice of Demand and which will be treated as Notice of demand u/s 156. Accordingly, a taxpayer will be required to pay the entire amount within the time mentioned in the notice.

Steps required to be followed by the taxpayer to respond to a tax demand notice using E-filing website

The following steps are required to be followed by the taxpayer to respond to a tax demand notice using E-filing website-

1. On E-filing website, login to the account by entering the respective credentials i.e.-
2. Login ID
3. Password
4. Captcha Code.
5. After Login the account, click on the ‘E-File’ tab and select ‘Response to Outstanding Tax Demand’ option.
6. After selecting the Response to Outstanding Tax Demand’ option. An outstanding tax demand notice will appear on the screen with the following details such as
7. Assessment year (AY),
8. Section under which the notice has been served to the taxpayer,
9. PAN and details of the Tax Payee i.e. Name
10. Demand identification number etc
11. The date on which demand is raised
12. Outstanding demand Amount
13. Uploaded by and Rectification Right
14. Response whether submit or view
15. Pay Tax.

• To submit a response, the taxpayer is required to click on the ‘Submit’ icon in the response column for the appropriate Assessment Year. The assessee has to select one of the options mentioned below-

1. Demand is correct -If the taxpayer selects the ‘Demand is correct’ option, then he will get a pop up with this message ‘If you confirm demand is correct then you cannot disagree with the demand’.

• I agree with the department’s calculations, the taxpayer is required to “Click on submit and will get a success message”. In case of any tax amount due, the taxpayer is required to pay it immediately.
• Further, click on the hyperlink given under the column ‘Pay Tax’.
• Click on ‘Confirm’ and the person will be re-directed to the TIN website of NSDL which will help you pay. The outstanding tax amount reflecting on the account.
• The taxpayer is required to make sure that the auto-populated information to be provided in the respective process is correct.
• Furthermore, the taxpayer will enter the bank details and will enter the captcha code to proceed further.
• Once the payment is made after clicking on the submit bank button, the person is required to submit the response under the ‘Response Column’.

• Demand is partially correct. If the taxpayer selects the ‘Demand is partially correct’ option, then two amounts of fields will appear on your computer screen.

A person is required to enter the amount which he believes is correct, as the amount in the incorrect column will be filled automatically as the difference between outstanding demand and correct amount.

Further, he is also required to select the reason to justify why the demand is partially correct. The reasons are mentioned on the portal which is as follows:

Taking into consideration the above-mentioned reason, the taxpayer is required to provide additional information.

• Disagree with demand – If the taxpayer selects the C option i.e. Disagree with demand, and feels that the tax demand raised by the department is incorrect, the taxpayer will select the respective option, ‘Disagree with the demand’ along with reasons as mentioned in option B.
• Demand is not correct but agrees for adjustment- By selecting the option D, the taxpayer is required to mention the reasons for disagreement.

After selecting any of the above-mentioned options, the taxpayer is required to click the ‘SUBMIT’. Once the Information is sent successfully by the taxpayer to the department, the transaction ID will be generated, and the taxpayer can check the response by clicking the ‘View’ in the response column with the help of transaction ID. To know the department response, a person can check the response from the account every 10-15 days.

Penal Provision in case of failure

If the person to whom the tax notice for demand under section 156 has been issued and he fails to pay the amount demanded within the time limit prescribed under the section, the respective taxpayer is liable for the below-mentioned penalties.

• Interest u/s 220– Interest at the rate of 1 % each month or part thereof is payable after the expiry of the 30 days’ time provided under section 156 tax notice.
• Penalty u/s 221- A penalty u/s 221 may be imposed by the assessing officer on the assessee but in any case, the amount should not be more than the amount demanded in the demand notice.