Have you received a Notice of Income Tax Demand?

As explained in the previous blog, if there is any difference in the tax as per ITR filed by us and the calculations made by CPC / Income Tax officer while processing the ITR, the same is intimated to us vide intimation u/s 143(1). If this difference results in some tax payable by us, this is called Income Tax Demand and a notice u/s 156 may be issued. Even intimation u/s 143(1) is sufficient for you to get alert and understand that some additional tax liability has arisen.

Now, what should you do when a Demand of Income Tax has been ascertained and communicated?

No need to panic as this can all be corrected if there is a mistake!

You need to first read the intimation line by line, compare with the ITR filed and try to understand the cause of demand. The demand is generally due to following reasons:

a) Credit for TDS / Advance Tax paid by you / on your behalf is not allowed by CPC
b) Difference in interest payable calculated u/s 234A, 234B and 234C as compared to interest calculated by you
c) Some income has been taken twice / wrongly by CPC
d) Some deductions u/s 80C / other chapter VIA deductions are not allowed by CPC


What should be done if the demand is incorrect / is the result of some mistake by CPC?

If the demand is due to error in processing of ITR by CPC, you should file a "Rectification Request u/s 154". This should be filed online for all ITR filed online. There is a comprehensive procedure for doing this and you have to select the reason of error from the drop down lists and file it.

This Rectification Request is processed by CPC and the error should get corrected in due course of time. This is communicated to you by a order u/s 154.

If the error still persists / is only partially corrected, you may file Rectification Request once again following the same process.


What if there is no error in the order and Demand is actually payable?

If you are satisfied with the order and accept that the demand is payable, you may pay this through challan ITNS280 as per order. The payment should be done under the Type of Payment "Tax on regular Assessment (400)".


Is it enough to just pay and relax or what should I do further to ensure that it is nullified in IT records?

The demand once paid should be intimated to CPC by filing a Rectification Request online and mention the challan paid. This should be ensured that all the challans paid including the ones paid by you earlier for this assessment year as advance tax / self assessment tax should be mentioned here.

The other alternative is to file a letter with your assessing officer mentioning the details of demand raised and the challan paid and get the acknowledgement.

Both should result in nullifying the demand.

I hope the demand notices will not give you sleepless nights now.

These are my personal views and should not be considered as legal advise. You are requested to consult a professional before acting on this blog. 

For any query / suggestion on my blogs, feel free to write to me at piyushsgarg@gmail.com.

Are you done with filing? Is it complete yet?

I hope most of us who were to file their ITR in Jul would have done that or would be doing that in next couple of days as the date is extended to 5th Aug. But is your filing really over at uploading the ITR on Income Tax website (which we commonly know as e-filing now). The answer is "No".

What is left then if this uploading does not complete the filing process?

The uploading of ITR only completes part of the obligation. The ITR ones uploaded generates an Acknowledgement "ITR V" which needs to be printed and signed within 120 days of uploading it and to be sent physically (not scanned) to CPC, Bangalore at the address mentioned in the ITR V itself. If this does not reach CPC within 120 days, the return uploaded becomes invalid and is treated as if it is never filed.


Does this sending completes my part of work or it gets completed when it reaches CPC?

Since it is sent through post and CPC handles bulk, the chances of this getting lost somewhere in the process exist and you need to track this till it reached CPC, Bangalore and a confirmation is issued by them. This can be checked online in your e-filing login. Now, CPC sends confirmation through SMS and e-mails both. If it does not reach, even if you have sent it, you may have resend it and track it till receipt is issued by CPC.


Is it over now, after receipt is issued by CPC?

Yes, the filing process is over and now you can wait for your refund / confirmation that there is no demand from CPC which takes few months. CPC processes these ITRs filed by you and confirms if the ITR filed is accepted by them as it is / some changes are made by them.
An intimation u/s 143(1) is issued by CPC after it is processed which has 2 columns - 1 shows the numbers as mentioned by you in your ITR and the other mentions the numbers as calculated by CPC. If both are same, it is accepted as it is, but if CPC has calculated separate numbers, there is some issue and you may have to get that corrected / pay extra tax as demanded by CPC in the intimation u/s 143(1).

How to get the demand rectified if there is any mistake in CPC calculations, we shall discuss in next blog.

These are my personal views and should not be considered as legal advise. You are requested to consult a professional before acting on this blog. 

For any query / suggestion on my blogs, feel free to write to me at piyushsgarg@gmail.com.