Notice for Demand Under Section 156 of the Income Tax Act

What is Section 156 of Income Tax Act?

Notice for income tax demand notice under section 156 of the 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

To respond to the demand, you need to first review the notice carefully and understand the details of the outstanding amount. Assess the validity of the income tax demand after evaluating it. Later, respond to the taxpayer from the responding options given above.

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

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

Step 3: Click on submit response

Case 1 - Demand is Correct

If the demand is correct and you accept the demand, simply click on -

• Pay now - to directly pay the demand
• Submit response - for attaching a preferable response

Once you have clicked on submit response, you can choose ‘demand is correct’ if you agree with CPC demand and click on ‘pay now.’

If you have already paid the outstanding amount, you can add challan details.

Case 2 - Disagree with demand wholly or partially

Select the suitable reason

After selecting the reason, enter the details of challan

The image below shows the challan details that you might have to enter.

Once you enter the challan details, check the outstanding amount and click on submit.

After clicking submit, you will get a confirmation of the response submission.

Once it is accepted by CPC you will receive an order saying that the demand is ‘nil’ or ‘0’.

Steps to Respond to Notice Using Different Options

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:-

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.

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

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.

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.

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.

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

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.

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).

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.

Click Confirm to 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.

After Submission, you will get this type of info in response to 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

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.

Section 156 notice is a crucial part of income tax compliance. Timely and accurate responses help avoid additional financial burden and legal consequences. By understanding the process of response and acting promptly, you can avoid such notices and ensure a smooth tax journey. If you are still not sure how to respond to an income tax notice and need professional help, you can get in touch with our tax experts, who will not only help you respond to the notice but also help with maintaining documentation and compliance. Book an online CA now!