Tax demand Notice – Demand notice under Income Tax by officer

Income Tax Demand Notice: An income tax demand notice will be sent to the taxpayer if their income tax return contradicts with the assessment made by an income tax officer. You may be surprised to receive an intimation/notice from the income tax department even if you have filed your income tax returns within the due date. You would not be sure about what it is the demand notice, how to respond to a tax demand notice, what are the types of notices type. Lets solve your question through this article.

Notice of Tax demand under different section of Income Tax

1. Intimation Under Section 143(1)

After having filed your ITR, it is electronically processed by the Central Processing Centre(CPC). The income is computed after making the following adjustments to the total income in the return:

• Any arithmetical error in the return;
• An incorrect claim (provided the incorrect claim is apparent from the information filed);
• Disallowance of incorrectly claimed loss or expenditure;
• Any income which has not been included in the return.

Upon successful processing of the return an intimation under section 143(1) is issued by the CPC under any of the three instances:

• There is tax liability to be paid;
• A refund has been determined;
• There is no refund or demand, but there is an increase or reduction in the amount of loss.

2. Notice Under Section 143(2) for Scrutiny 

The purpose of this notice is to notify the assessee, that the return filed has been picked for scrutiny. It is pertinent to note that the section under which it will be scrutinized is different from the one in which the notice has been issued. Via detailed scrutiny, the assessing officer intends to be assured that you have not done any of the following:

• Understated your income;
• Claimed excessive loss; or
• Paid lesser taxes

Through this notice, the taxpayer is required to respond to the questionnaire issued along with the documents required by the income tax department. The assessing officer is supposed to service this notice within 6 months after the completion of the assessment year to which it pertains.

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3. Notice Under Section 148 for income escaping Assessment

An assessing officer may have a reason to believe that you have not disclosed your income correctly and therefore, you have paid lower taxes. Alternatively, you may not have filed your return at all, even if you must have filed it as per law. This is termed as income escaping assessment. Under these circumstances, the assessing officer is entitled to assess or reassess your income, according to the case. Prior to making such an assessment or reassessment, the assessing officer should serve a notice to the assessee asking him to furnish his return of income. As per amendment in the Finance Act 2021, with effect from 1st April 2021, the time limit up to which the assessing officer can re-open the assessment of the taxpayer is as follows;

1. Up to three years from the end of the relevant assessment year in normal cases and 
2. Beyond three years but not more than ten years from the end of the relevant assessment year, if the assessing officer has material evidence that income of Rs. 50 lakhs or more for a financial year has escaped assessment.

Read Also: ITR-U: Last date to File ITR for FY 2019-20, 2020-21 and 2021-22

4. Notice Under Section 245 regarding off setting of refunds against remaining tax payable  

If the assessing officer has reason to believe that tax has not been paid for the previous years and he wants to set off the current year refund against that demand, a notice under Section 245 can be issued. However, the adjustment of demand and refund could be done only if you have been provided proper notice and an opportunity to be heard. The timeline to respond to the notice is 30 days from the day of receipt of the notice. If you do not respond within the aforesaid timeline, the assessing officer can consider this as consent and proceed with the assessment.

Read Also: Income Tax Notice for mismatch between annual information statement and Form 26AS

5. Notice Under Section 142(1)

A notice under section 142(1) can be issued under two circumstances:

• If you have filed your return, but the assessing officer requires additional information and documents; or
• If you have not filed your return, but the assessing officer wants you to file it.

The information is called for, to enable the officer to make a fair assessment. Being non-responsive to this notice has consequences,

• A penalty of Rs 10,000 can be levied for each such failure
• Prosecution which may extend up to 1 year
• Both of the above

6. Notice under Section 139(9) for filing a Defective Return  

Every person in a company or a firm or any other person is required to furnish a return of income if its income exceeds the maximum amount, which isn’t chargeable to income tax. When the Assessing Officer finds any defect in the return of income furnished by the assessee, he intimates to the assessee by issuing a notice under section 139(9) giving the assessee an opportunity to rectify the defect within fifteen days or within further time period which the AO may allow on assessee’s request. 

If the assessee fails to rectify the error within the prescribed time frame, the return is considered invalid and shall be treated as if the assessee had not furnished the return at all. However, the Assessing Officer may condole the delay in furnishing the rectified return if the assessee furnishes the return after the expiry of fifteen days/the further period allowed but before the Assessment is conducted by the AO.

Read More at : Income Tax: Defective Return notice received? How to respond to it

7. Notice for Demand under Section 156 – Income Tax Notices

Notice under this provision is served when an order is passed by a Court, Tribunal or Authority to pay any tax, interest, penalty, fine or any other sum. The AO specifies the amount payable to the assessee in the notice issued under this provision. The assessee is required to deposit the amount so ascertained in the order within thirty days from the date of income tax notice.

However, no time frame is provided within which the notice should be served. If the assessee delays in payment of tax, the assessee will be deemed to be a defaulter and liable to pay simple interest @ 1% per month or part thereof. Further, penalty under section 1 of section 221 may also be imposed.  

How to respond to an Outstanding Demand?

The Taxpayer can submit the response online to the outstanding demand by either choosing to ‘Agree’ or ‘Disagree’ with the demand. The steps the following steps for Responding to the Outstanding Demand are:

1. Logon to ‘e-Filing’ Portal https://www.incometax.gov.in/iec/foportal/​
2. Go to the ‘e-File’ menu and Click ‘Response to Outstanding Demand’. You will see the following details displayed-Assessment year, Section code, Demand notification number, Date on which demand is raised, Outstanding demand amount, Uploaded by, Rectification rights, Response.
3. Click the hyperlink ‘Submit’ located under ‘Response’ column (To respond for the Outstanding Demand)

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What are the options to respond to Demand Notice?

1. Choose any one of the listed responses.

• Demand is partially correct
• Demand is correct
• Disagree with demand
• Demand is not correct but agree for adjustment

1. On choosing ‘Demand is correct’, click on ‘Submit’ button to ‘Confirm’ and complete the response submission process.

Note:

• If you confirm ‘Demand is correct’ then you cannot disagree with the demand again.
• If any refund is due, the refund will be adjusted against the outstanding demand.
• The taxpayer can pay the demand by clicking the link under ‘Pay Tax’ option.

2. On choosing ‘Disagree with demand’, Select the appropriate reason from the list and fill all the applicable fields, upload the necessary supporting documents and ‘Submit’ the response.

3. On choosing ‘Demand is partially correct’, Enter the ‘Amount which is correct’ and the ‘Amount which is incorrect’ will be auto filled. Select the appropriate reason from the list and fill all the applicable fields, upload the necessary supporting documents and ‘Submit’ the response.

4. On choosing ‘Demand is not correct but agree for adjustment’, Select the appropriate reason from the list and fill all the applicable fields, upload the necessary supporting documents and ‘Submit’ the response.

Read also: Avoid income tax notices, understand how to report bank FD interest on your ITR

2. A success message along with Transaction ID is displayed on successful submission of the response.

Note :
• To View the submitted response go to ‘e-File’ > ‘Response to Outstanding Demand’ and click on the ‘View’ link under the ‘Response’ column and in the new page click on the ‘Transaction Id’ hyperlink.
• For the demand which is shown to be uploaded by AO, then the rectification right is with Assessing Officer and for the demand against which there is no ‘Submit’ response available is already confirmed by the Assessing Officer. Kindly contact your jurisdictional Assessing Officer for clarification. ​

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