Income Tax Notices

Notice for Demand Under Section 156 of the Income Tax Act

Notice u/s 156 is sent by the income tax department asking to make payment to the department for any tax you are liable to or interest or penalty to be paid.

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Updated on: 12 Jul, 2024 03:02 PM

You receive an income tax Demand notice u/s 156 of the Income Tax Act when the Assessing Officer (A.O.) raises demand for any tax, interest, penalty, fine, or any other sum to be payable by you as a result of any order passed under the Income Tax Act.

Notice for sum payable u/s 143(1), 200A (1), 206CB (1) shall be deemed to be Notice of Demand u/s 156 of the Income Tax Act.

The amount you pay under this notice shall be paid within 30 days of receipt. However, the A.O., in some cases if he has a reason to believe that allowing a period of thirty days will be detrimental to the Income Tax Department. With prior approval from the Joint Commissioner of Income Tax (JCIT), we can ask you to deposit the amount in less than 30 days.

What is Section 156 of Income Tax Act?

Notice for income tax demand notice under section 156 of Income Tax Act is a notice issued by the Assessing Officer when any tax, interest, penalty, fine, or any other sum is payable by the assessee as a result of any order passed under the Income Tax Act. The notice specifies the amount and the due date of payment, which is usually 30 days from the receipt of the notice.

How to Respond to an Outstanding Demand Notice?

Four options are available for a taxpayer to respond against an outstanding income tax demand notice. Given below are the options:

  • Demand is correct.
  • The demand is partially correct.
  • Disagree with demand.
  • Demand is not correct, but agrees to adjustment

Step 1: Login into your income tax e-filing portal with your user ID and password.

income tax e-filing

Step 2: Select the option of Pending Actions-> Response to Outstanding Tax Demand

Response to Outstanding Tax Demand

Step 3: Click on submit response

submit response
submit response

Step 4: In the next step, you will be taken to the given below screen and the options discussed above will be displayed.

options discussed above will be displayed

Option 1: Now, if You Click on Demand is Correct

If you agree with the demand, select the Demand is Correct option and the disclaimer on the Response to Outstanding Amount page. “Once you submit the response as “Demand is correct”, then you cannot Disagree with Demand later on” as displayed here:-

click on Demand

On the same page, select the ‘Not paid yet’ option and click Pay Now; then, you will be taken to the e-Pay Tax page where you can make the tax payment. A success message and a Transaction ID are displayed upon successful payment. Please keep a note of the Transaction ID for future reference.

Transaction ID

If demand is already paid, select Yes, Already paid, and Challan has CIN. Click Add Challan Details.

Challan has CIN

To add the challan details, select Type of Payment (minor head), enter Challan Amount, BSR Code, Serial Number, select Date of Payment, and remarks if any(Optional). Click Attachment to upload the copy of the challan (Attachment can be in application/pdf format) and click Save.

challan details

NOTE:-

  • The maximum size of a single attachment should be 5 MB.
  • If you have multiple documents to upload, put them together in a zipped folder and upload the folder. The maximum size of all the attachments in a zipped folder should be 50 MB.

After entering the Challan details, click Submit to submit the response and the details of the challan entered.

details of challan

On successful validation, a success message is displayed along with a Transaction ID. Please keep a note of the Transaction ID for future reference as shown above.

Option 2: Disagree with demand (Either in partial or in full)

On the Response to Outstanding Amount page, select Disagree with the demand (Either in full or in part) option. Click Add Reasons.

Disagree with demand

To select the reason(s) for your disagreement, select from the options and click Apply. (You can select one or more options.)

select the reason

Reasons for Disagreement -

  • Demand has already been paid – Here, depending upon applicability 3 types of options are present, One should select the relevant option and then provide the (If available & applicable) Challan Identification Number (CIN), BSR code, date of payment, the serial number of challan and amount.
  • Demand has already been reduced by rectification/revision – Provide the date of order, demand amount after rectification, details of AO, etc.
  • Demand has already been reduced by appellate order. Still, the appeal effect has to be given by the department – Provide the date of order and the appellate order passed by (details of appellate authority and the reference number of order).
  • An appeal has been filed – Depending upon the status, one should select whether the stay petition was filed, or stay has been granted, or the installment facility was granted.
  • Rectification/revised return has been filed at CPC – If you select this reason, please provide additional information related to the revised return filed.
  • Rectification has been filed with the assessing officer – Mention the date of application and remarks (comments, if any of the taxpayer).
  • Others – If there is any other reason apart from mentioned above, then select this reason and provide your comment.

After selecting the appropriate reasons for your disagreement, select each reason you listed in Step 2 on the Response to Outstanding Amount page and enter the appropriate details for each reason.

appropriate reasons

Note: Completed status will be displayed against the reason you submitted the details.

After submission of details for all the reasons selected, click Pay Now to pay the remaining outstanding amount available in the payment summary (if you partially disagree).

Completed status

Note: You will be taken to the e-Pay Tax page, where you can make the tax payment. After payment, you will be taken to the Response to Outstanding Amount page; click Submit to submit your response.

submit your response

Click Confirm to confirm your submission.

confirm your submission

A success message and a Transaction ID are displayed on successful submission. Please keep a note of the Transaction ID for future reference.

success message

After Submission, you will get this type of info in response to outstanding demand:-

outstanding demand

Time Limit to Respond to the Demand

The assessee shall pay the amount of demand within 30 days from the date of service of notice. However, in some exceptional cases, the assessing officer may reduce the thirty-day period with prior approval of the joint commissioner.
An assessee can also apply to the AO to extend the time for payment or allow payment by installment, provided the application should be made before the expiry of thirty days.

Sample Notice Under Section 156

Sample notice under Section 156

Consequences of Delay/ Penalty for Delay

Interest u/s 220(2) – Interest at a rate of one percent per month or part of the month, which is payable after the expiry of 30 days. Such interest shall be payable by the assessee even if the Assessing Officer has approved the application for an extension of the time period for the payment or allowed payment in installments.

Penalty u/s 221 – A penalty may be imposed by the Assessing Officer up to the amount demanded in the income tax demand notice, provided a reasonable opportunity of being heard is given to the assessee. No penalty shall be levied if the assessee proves that the default was for good and sufficient reasons.

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FAQ’s on Section 156 of Income Tax Act

The types of dues covered in a Section 156 notice include:
  1. Income Tax: The primary amount of tax payable by the taxpayer for a particular assessment year.
  2. Interest: Any interest payable under the various provisions of the Income Tax Act, such as interest for delayed filing of returns (Section 234A), interest for delayed payment of advance tax (Section 234B), and interest for deferred payment of advance tax (Section 234C).
  3. Penalties: Any penalties imposed under the Income Tax Act for various defaults, such as failure to file returns, concealment of income, etc.
  4. Fine: Any fine levied by the tax authorities.
  5. Tax on Distributed Profits of Domestic Companies (DDT): Tax payable by domestic companies on the dividends distributed to shareholders.
  6. Tax on Distributed Income to Unit Holders: Tax payable by mutual funds on the income distributed to unit holders.
  7. Additional Tax on Fringe Benefits: Tax on fringe benefits provided by employers to their employees.
  8. Tax Deducted at Source (TDS): Any shortfall in TDS payments.
  9. Tax Collected at Source (TCS): Any shortfall in TCS payments.
You will receive an email from the IT department. The department also sends an SMS alert to the tax filer that the intimation notice has been sent to their registered email ID.
Notices sent by the department are not dependent upon the income of a person it depends upon how correctly the return is filed. So salaried people can also get departmental notices.
If the demand is not paid after the final notice, then the department will take action to recover the money by initiating recovery procedures.
If the assessee disagrees with the income tax demand notice, he can challenge the same to the next higher authority.
If the amount which is specified in the income tax demand notice is not paid within 30 days of service of notice, then the assessee becomes the assessee in default.
A revised return is filed to correct the issues in the original return and It's better you verify both returns to avoid any issues in the future.
To check the tax demand notice online, login to the Income Tax Site through PAN, Password and Captcha code and then select the Respond to Outstanding Tax Demand in Pending Actions.
You will be entitled to a formal legal action and it will be used against you in court.
If we don’t respond to the notice within the specified period in the notice, then the demand will be confirmed and will be adjusted against your refund (if any) or shown as demand payable against your PAN ( in case no refund is due).
To challenge an order passed by an Assessing Officer (AO) that you are aggrieved with, you can file an appeal online on the e-Filing portal using Form 35. The appeal will be heard by the Joint Commissioner (Appeals) or Commissioner of Income Tax (Appeals).
The assessee may apply for an extension of time or payment of demand in installments, but only if he has a valid reason and sufficient evidence to support his request. The assessing officer may grant or reject the application at his discretion.
CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.

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