Tax notices + litigation · Income Tax Notice
Section 156 (now 289), Demand notice: pay or dispute within 30 days
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Facts
156 is a demand notice, the IT department has assessed that you owe a specific amount of tax, interest, and/or penalty. This comes after a 143(3) (now Sec 270(10)) or 147 assessment order.
Provisions and law
- IT Act 1961, Sec 156 (now 289) | Sec 220 (interest on demand) | Sec 221 (penalty for non-payment)
Analysis
You have two options within 30 days: (1) Pay the demand, if you agree it's correct. Pay on IT portal under "e-Pay Tax." Get a challan receipt. (2) File an appeal (CIT(A)), if you dispute the demand. On filing CIT(A), you can request a stay of demand (usually 20-25% of demand must be paid as a pre-condition for stay). If you miss 30 days: 1% per month interest under Sec 220(2) starts running. If you still don't pay, Sec 221 penalty can be levied up to the amount of the demand.
Conclusion
- Demand ≤₹1L and you agree: Pay immediately. Done.
- Demand is clearly wrong (AIS mismatch): File 154 rectification. Request demand stay pending rectification.
- Demand is from assessment order you dispute: File CIT(A) within 30 days. Pay 20% and request stay on balance.
- Cannot pay and appeal pending: Apply for installment plan under Sec 220(3), AO can grant. Rare but available.
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