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Responding to a Notice of Demand under Section 156 of the Income Tax Act

A Notice of Demand under Section 156 of the Income Tax Act, 1961 (the Act), is issued by the Income Tax Department (ITD) when there’s an outstanding tax liability on your end. This notice specifies the amount you owe, including taxes, interest, and penalty. It’s crucial to respond to this notice promptly to avoid further penalties and complications.

This article guides you through the process of replying to a Notice of Demand under Section 156.

Understanding the Notice:

• Carefully examine the Notice to understand the exact amount demanded and the breakdown (taxes, interest, penalty).
• The notice will also mention the last date for response and payment.

Responding to the Notice:

There are two primary ways to respond to the Notice:

• Online Response:

  • This is the recommended and convenient method.
  • Visit the Income Tax Department’s e-filing portal: https://www.incometax.gov.in/iec/foportal/
  • Login using your PAN (Permanent Account Number) as the user ID and password.
  • Navigate to the “Response to Outstanding Tax Demand” section.
  • Click on “Submit Response” for the relevant assessment year.

The portal will present you with options based on your agreement with the demand:

• • • Demand is Correct: Select this if you agree with the amount mentioned in the notice. You can then proceed to make the payment online using the available options. Keep a record of the transaction ID for future reference.
    • Demand is Partially Correct: Choose this if you agree with a part of the demand but have objections to a specific portion. You’ll need to provide reasons for your disagreement and upload supporting documents if applicable.
    • Disagree with Demand: Select this option if you believe the entire demand is incorrect. Similar to partial disagreement, provide detailed reasons and supporting documents for your claim.
    • Demand is not correct but agree for adjustment: This option allows you to propose an alternative tax amount you consider appropriate.

• Offline Response:

  • While less preferred, you can respond via paper form.
  • Download Form 28 from the ITD website or obtain it from an assessing officer.
  • Fill the form with details from the Notice and select the appropriate response option (as explained above for the online method).
  • Submit the completed form along with supporting documents to the Income Tax Department office mentioned in the Notice.

Important Points to Remember:

• Respond to the Notice within the stipulated timeframe. Delaying the response can attract further interest and penalties.
• If you agree with the demand and make the payment, ensure you have a receipt or confirmation for your records.
• For disagreements, provide clear and valid reasons with supporting documentation (proof of income, tax deductions claimed, etc.).
• Consider consulting a tax professional for guidance if the demand is complex or you require assistance with responding and filing any appeals.

By following these steps and adhering to the deadlines, you can effectively respond to a Notice of Demand under Section 156 and avoid any unnecessary complications with the Income Tax Department.