Section 156 Demand Notice - Meaning, Response & Penalties A notice under Section 156 of the Income Tax Act is issued by the Income Tax Department when a taxpayer has an outstanding liability. This may arise from assessments, penalties, interest, or fines levied under various provisions of the Act. Section 156 Demand Notice - Meaning, Response & PenaltiesA notice underSection 156of the Income Tax Act is issued by the Income Tax Department when a taxpayer has an outstanding liability. This may arise from assessments, penalties, interest, or fines levied under various provisions of the Act.Thedemand notice u/ 156is issued by the assessing Officer (AO)when any sum becomes payable by the assessee due to an order passed under the Income Tax Act.
This could include tax, interest, penalties, fines, or any other amount owed.In fact, any notice for a payable amount issued underSection 143(1),Section 200A(1), orSection 206CB(1)is considered to be a demand notice underSection 156.Once this notice is received, the taxpayer is required to make the paymentwithin 30 days. However, if the AO believes that granting the full 30 days might adversely affect the interests of the Income Tax Department, they can, with prior approval from theJoint Commissioner of Income Tax (JCIT), require payment in a shorter time frame.What is Section 156 of the Income Tax Act?Section 156of the Income Tax Act pertains to thedemand noticeissued by the assessing Officer (AO)when a taxpayer is liable to pay any amount such as tax, interest, penalty, fine, or other dues arising from an order passed under the Income Tax Act. Once this notice is served, the assessee is required to clear the dues within30 daysfrom the date of receipt.Common Reasons for Receiving a Notice Under Section 156Assessment or Reassessment DiscrepancyIf the tax calculated by the department during assessment or reassessment differs from what was reported and paid by the taxpayer, a notice is issued for the outstanding amount.TDS MismatchA common cause is a mismatch between theTDS claimedin the income tax return and the TDS details available in the department’ records.Unreported IncomeIf the Assessing Officer finds that certain income sources werenot disclosedduring the return filing, tax will be demanded on such income through this notice.Disallowed ClaimsWhen the departmentdisallows deductions or exemptionsclaimed in the return (like under Section 80C, HRA, etc.), the resultant tax difference is raised via a demand notice under Section 156.How to Respond to an Outstanding Demand Notice?Taxpayers havefour optionsto respond to an income tax demand notice, depending on the accuracy and validity of the demand. These options are:Agree with the demandYou accept that the demand raised by the Income Tax Department is accurate.Partially agree with the demandYou acknowledge that a portion of the demand is correct, while the rest is disputed.Completely disagree with the demandYou believe the demand is incorrect and do not agree with any part of it.Demand is incorrect, but consent to adjustmentAlthough the demand may be inaccurate, you agree to adjust it against any refund due to you.Before choosing any of the above options,carefully review the notice, verify the details of the outstanding amount, and assess the accuracy of the claim.
After thorough evaluation, you can submit your response using the appropriate option through the income tax -filing portal.How to Respond to an Outstanding Demand Notice on the Income Tax PortalFollow these steps to respond to a demand notice under Section 156 through the income tax -filing portal:Step 1:Log in to the income tax -filing portalusing your user (PAN) and password.Step 2:Navigate to the“Pending Actions”tab and select“Response to Outstanding Tax Demand.”Step 3:Click on“Submit Response”to proceed.Case 1: If the Demand is CorrectIf you agree with the demand raised by the Income Tax Department:Click on“Pay Now”to directly clear the outstanding dues.Or choose“Submit Response”to proceed with recording your agreement.While submitting your response:Select“Demand is correct”if you fully accept the demand.Then click“Pay Now”to complete the payment process.If you have already paid the outstanding amount earlier, you can enter thechallan details(such as BSR code, challan number, amount, and date of payment) to record the payment.Case 2: If You Disagree with the Demand (Fully or Partially)Choose the appropriate reason for disagreement from the dropdown options.Enter thechallan detailsfor any payments already made that the system may not have considered.After entering all relevant information, review the outstanding demand and click on“Submit.”Once your response is submitted:You will receive aconfirmation messagefor the submission.After CPC (Centralized Processing Centre) reviews and accepts your response, you will receive an order stating that thedemand has been adjusted to ‘Nil’ (0),if applicable.Steps to Respond to Notice Using Different OptionsOption 1: If You Agree with the DemandSelect “Demand is Correct”When you agree with the demand, select the“Demand is Correct”option and acknowledge the disclaimer on the “Response to Outstanding Amount” page. The disclaimer reads:“Once you submit the response as ‘Demand is correct,’ you cannot later disagree with the demand.”Payment OptionsIf you have not made the payment yet, select“Not paid yet”and click on“Pay Now.”This will redirect you to thee-Pay Tax pagewhere you can make the payment.Upon successful payment, you will receive a success message and aTransaction .