Notice against demand under section 156 of the Income Tax Act,1961

The official document, issued by the Assessing Officer, signifies that you have a tax liability, whether it's due to tax assessments, penalties, interest, or fines resulting from orders under the Income Tax Act. In this comprehensive guide, we'll explore the purpose and nuances of Section 156 notices and how to respond effectively.

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Table of Content

Understanding Section 156 Notices:

How to Respond to an Outstanding Demand Notice:

Scenario 1: Affirming the Accuracy of the Tax Liability and accepting Demand is correct

Scenario 2: Express Dissent with the Tax Demand either wholly or partly

Time Limit for Response:

Consequences of Delay and Penalty for Delay:

Conclusion:

Most Asked Questions

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Understanding Section 156 Notices:

Section 156 notices, also known as income tax demand notices, play a pivotal role in the tax ecosystem. They serve as formal notifications of your outstanding tax obligations, providing a breakdown of the amounts owed and specifying a due date. Income tax demand notice under section 156 of the Income Tax Act is sent to you when the Assessing Officer (A.O.) demands payment of any taxes, interest, penalties, fines, or other amounts that you are required to pay as a consequence of an order made in accordance with the Income Tax Act. Notice of demand under section 156 of the Income Tax Act shall be interpreted as notice for sum payable under sections 143(1), 200A (1), and 206CB (1). After receiving this notification, you have 30 days to settle the amount due. Nonetheless, in certain situations, the A.O. may grant a thirty-day term if he has good reason to think that doing so will harm the Income Tax Department. We may request that you deposit the money in fewer than 30 days if the Joint Commissioner of Income Tax (JCIT) has given its prior consent.

How to Respond to an Outstanding Demand Notice:

When you receive an outstanding demand notice from the tax authorities, it's essential to address it in an appropriate manner. To respond effectively to an outstanding demand notice, follow these steps :

1. Reviewing the Notice Carefully to understand the details of the outstanding amount, the assessment year, and the reasons for the demand. Ensure that the notice is genuine.

2. Evaluating the Demand by Assessing the Validity of the Demand Upon Evaluation, there can be the following Responding Options for a Taxpayer.

3. Affirm the Accuracy of the Tax Liability.

4. Acknowledge Partial Accuracy of the Tax Demand.

5. Express Dissent with the Tax Demand.

6. Concede Inaccuracy in the Tax Demand but Consent to Adjustments.

Here's a general outline of the steps to follow:

Step 1: Log in to the income tax portal using your credentials.

Step 2 : Go To “Pending Actions Tab” Click on “Response to Outstanding Demand.”

Choose your demand for a particular A.Y.

Scenario 1: Affirming the Accuracy of the Tax Liability and accepting Demand is correct

Click on: 1. Pay Now: to directly pay the demand 2. Submit Response: For attaching a preferable response

After clicking on “Submit Response.”

You can choose “Demand is Correct” if you agree with CPC Demand and click on “Pay Now.”

If you already paid earlier, then you can add challan details.

Scenario 2: Express Dissent with the Tax Demand either wholly or partly

Select the suitable reason that best reflects your circumstances:

Choose the appropriate category that aligns with your situation and provide the necessary details accordingly:

1. If the demand has already been paid, select the relevant option based on your specific scenario and provide the Challan Identification Number (CIN), BSR code, payment date, challan serial number, and the paid amount.

2. If the demand has been reduced through a rectification or revision, furnish the order date, revised demand amount, and details of the Assessing Officer (AO).

3. If the demand has been reduced due to an appellate order and further action is pending, specify the order date and provide details of the appellate authority and the reference number of the order.

4. If an appeal has been filed, select the appropriate option depending on the status (e.g., stay petition filed, stay granted, installment facility granted).

5. If a rectification or revised return has been filed with the Centralized Processing Center (CPC), include additional information related to the filed revised return.

6. In the case of a rectification application submitted to the assessing officer, mention the application date and provide any remarks or comments if applicable.

7. If none of the above reasons apply to your situation, select the "Others" option and provide a comment or explanation as needed.

Once you select the reason, to need to enter the details

You will be required to enter challan details as shown below

Once you enter challan details, keep a check on the two amounts shown in the orange box, they should match

After clicking on “Submit”, you will get a response submission confirmation

After successful acceptance by CPC, you will receive an order stating the demand as “NIL” or “0”

Time Limit for Response:

The Income Tax Act grants you 30 days from the date of notice to pay the outstanding amount. In exceptional cases, the Assessing Officer, with prior approval from the Joint Commissioner of Income Tax, can reduce this period. If necessary, you can apply for an extension before the 30-day limit expires.

Consequences of Delay and Penalty for Delay:

Delay in payment comes with its share of consequences:

- Interest u/s 220(2): A monthly interest rate of one per cent is applicable on the overdue amount, even if an extension or instalment payment has been approved.

- Penalty u/s 221: The Assessing Officer can levy a penalty, which could equal the demanded amount. However, no penalty is imposed if you can demonstrate that the default occurred for valid reasons.

Conclusion:

Section 156 notices are a critical aspect of income tax compliance. Timely and accurate responses are crucial to avoid additional financial burdens and legal repercussions. Whether you agree with the demand, have disagreements, or require an extension, understanding the process and acting prudently can help ensure a smooth and compliant tax journey.

Remember that in complex tax matters, seeking guidance from a tax professional or advisor is often a wise decision. This helps you navigate the nuances of Section 156 notices and related tax obligations effectively, keeping your finances and legal standing secure.

FAQs

Q1. What is a Section 156 notice under the Income Tax Act, 1961?

A Section 156 notice is an official communication from the Assessing Officer (A.O.) issued to taxpayers, notifying them of their tax liabilities, including tax, interest, penalties, fines, or other dues, resulting from orders passed under the Income Tax Act.

Q2. When does an assessee receive notice u/s Section 156 from the tax authorities?

You receive a Section 156 notice when the tax authorities determine that you owe a specific amount of tax or other liabilities following their assessment or audit.

Q3. What types of dues are covered in a Section 156 notice?

The following dues are covered by a Section 156 notice: 

• The total tax that the taxpayer is primarily responsible for paying in a given assessment year. 

• Any interest due under the Income Tax Act's many sections, including interest for late returns filing (Section 234A), interest for late advance tax payments (Section 234B), and interest for deferring advance tax payments (Section 234C). 

• Any penalties levied in accordance with the Income Tax Act for a variety of violations, including failure to file returns and income concealment. 

• Any fine that the tax authorities impose.

• The tax that domestic corporations must pay on the dividends they issue to their shareholders is known as the Distributed Profits Tax (DDT).

• Mutual funds are required to pay tax on income that is distributed to unit holders.

• Extra tax on fringe benefits is a tax on advantages that firms offer to their staff as a perk.

• Any amount that is not paid in full to the tax deducted at source (TDS).

• Any amount not paid by TCS that is collected.

Q4. How do I challenge income tax demand?

If you are unhappy with an order that an Assessing Officer (AO) has made, you can file an online appeal using Form 35 on the e-Filing platform. The Commissioner of Income Tax (Appeals) or the Joint Commissioner (Appeals) will hear the case.

Q5. Can income tax demand be paid in installments?

The assessee is only eligible to request an extension of time or the payment of the demand in installments provided he can provide a good explanation and enough proof to back up his request. At his discretion, the assessing officer may accept or reject the application.

Q6. How is the amount specified in the notice calculated?

The amount in the notice is calculated based on the tax authorities' assessment and calculations in accordance with the Income Tax Act.

Q7. Can the due date for payment of notice u/s 156 be extended?

Yes, you can apply to the Assessing Officer for an extension or request payment in instalments, but this should be done before the original 30-day deadline expires.

Q8. How to respond to a Section 156 notice?

You can respond by logging into your income tax e-filing portal and selecting the appropriate response option based on your agreement or disagreement with the demand.

Q9. Can the assessee disagree with the demand mentioned in the notice?

Yes, you can dispute the demand by selecting the "Disagree with Demand" option in your response and providing reasons for your disagreement.

Q10. How do you make payments for the demanded amount?

To make payments, log into the official Income Tax E-filing Portal using your user ID and password. Once logged in, you should navigate to the "Response to Outstanding Tax Demand" section. Depending on your situation, you'll choose the appropriate response option. If you agree with the demand, select "Demand is Correct. After providing the necessary details, you'll be directed to a payment page if you are making a payment. Here, you can proceed to electronically make the payment using the available payment methods. It's crucial to keep a record of the transaction, including the Transaction ID, as it serves as proof of your payment. Confirm your submission once the payment is made or the required details are submitted. You will receive a success message along with a Transaction ID upon successful submission.

Q11. What if I have already paid the demanded amount?

If you've already paid the amount, select the relevant option and provide details such as the Challan Identification Number (CIN), BSR code, date of payment, and the serial number of the challan.

Q12. What happens if my demand has already been reduced due to rectification or revision?

Provide the date of the order, the demand amount after rectification, and details of the Assessing Officer.

Q13. What if my demand has been reduced by an appellate order?

Provide the date of the order and the appellate order details, including the reference number and the authority that passed the order.

Q14. What should I do if I've filed an appeal regarding the demand?

Depending on the status of your appeal, select the relevant option, such as whether a stay petition was filed, a stay has been granted, or an instalment facility was granted.

Q15. What if I've filed a rectification or revised return with the assessing officer?

Mention the date of application and any remarks or comments related to the rectification or revised return filed.

Q16. What if my situation doesn't fit into any of the mentioned categories for disagreement?

If you have a unique reason for disagreement not covered in the options provided, select "Others" and provide your comment or explanation for the disagreement.