Section 156 of the Income Tax Act, 1961, governs the issuance of demand notices by the Assessing Officer (AO) to taxpayers for unpaid taxes, interest, penalties, or other dues. It formalizes the process of notifying taxpayers about their outstanding liabilities and specifies the timeline for compliance.
1. Key Provisions of Section 156
(A) Purpose of the Notice
- A demand notice under Section 156is issued when any sum (tax, interest, penalty, etc.) becomes payable due to:
- Assessment orders(e.g., under Sections 143(3), 144).
- Reassessment orders(Section 147).
- TDS/TCS defaults(Sections 200A, 206CB).
(B) Content of the Notice
The notice must include:
- Taxpayer’s details(Name, PAN, Address).
- Breakdown of dues(Tax + Interest + Penalty).
- Due date(typically 30 days from receipt).
(C) Legal Effect
- Notices under Sections 143(1), 200A(1), and 206CB(1)are deemed as Section 156 notices.
2. Common Reasons for Receiving a Notice
- Discrepancies in filed returns(e.g., unreported income, incorrect deductions).
- TDS/TCS mismatches(Form 26AS vs. ITR claims).
- Disallowed exemptions(e.g., Section 80C, HRA).
3. How to Respond to a Section 156 Notice?
Taxpayers can choose one of four options on the e-filing portal:
- Agree and Pay: Accept the demand and pay online.
- Partially Agree: Pay the accepted portion and contest the rest.
- Dispute Entirely: Provide evidence (e.g., challan details, appellate orders).
- Adjust Against Refunds: Consent to adjust dues against pending refunds.
Steps:
- Log in to the e-filing portal.
- Navigate to “Pending Actions” → “Response to Outstanding Demand”.
- Upload supporting documents (if disputing).
4. Consequences of Non-Compliance
- Interest @1% per monthunder Section 220(2) for delayed payment.
- Penalty up to 100% of duesunder Section 221.
- Recovery actions(e.g., bank account attachment)
