How to Respond to a Demand Notice from Income Tax Department?

What is demand notice in income tax?

Income Tax Demand Notice. If a taxpayer's income tax return is in conflict with the assessment made by an Income Tax Officer, the taxpayer will be issued an income tax demand notice. Income tax demand notice is issued if the taxpayer has deposited a lesser tax than what he/she is liable to pay.

The Income Tax Department (IT Department) checks the income declarations and tax paid to see if all these details match. Only then the IT Department will accept the tax return filed as per Section 143(1). If the taxes paid are found to be less than what you owe, they will issue you a demand notice.

1. How to respond to Demand Notice from the IT Department?

Your jurisdictional Income Tax Officer (ITO) will upload the Demand Notice online. You can access the content of this notice by logging into your e-filing account on the website www.incometaxindiaefiling.gov.in, where you can record your responses.

2. Step -

Step 1: Login to your e-filing account on www.incometaxindiaefiling.gov.in with user ID and password.

Step 2: Click on ‘E-file’ and go to ‘Respond to Outstanding Tax Demand’.

             You will see the following details displayed-

• Assessment Year
• Section Code
• Demand Notification Number
• The date on which demand is raised
• Outstanding Demand notice
• Uploaded by
• Rectification Rights 
• Response - submit & view

Step 3: Click on ‘Submit’ for the relevant assessment year. Choose one of the options mentioned below-

• Demand Is Correct
• Demand is Partially correct
• Disagree with Demand

3. What are the options to respond to Demand Notice?

Option 1 – Demand is correct

Step 1: When you select this option, a pop-up screen appears with a message ‘If you confirm, demand is correct then you can’t disagree with the demand’.

Step 2: Click on the ‘Submit’ button.

Step 3: A success message will be displayed.

Step 4: If a refund is due, the outstanding amount and the interest will be adjusted against the refund due. Otherwise, you must pay the demand immediately. 

Option 2 – Demand is partially correct

If the taxpayer selects "Demand is partially correct", then "Amount which is correct" and "Amount which is incorrect" has to enter. Rectification / Revised Return has been filed at CPC. Rectification has been filed with Assessing Officer.

Step 1: You will see two fields to enter a correct and incorrect amount.

Step 2: Once you enter the amount in the fields, you must choose a reason for stating the department’s calculation to be partially correct.

• Demand Has Already Been Paid- 

Provide the challan an Identification number. Also, mention the BSR code, Date of payment, The serial number of challan & Amount. If challan Identification Number is not available, mention that demand has been paid by challan and CIN is not available. Also, mention the date of payment and the amount payable.

• Demand has already been reduced by rectification/revision - 

Provide the date of order, demand amount, details of assessing officer who has rectified. Next upload rectification/ appeal effects order passed by Assessing Officer.

• Demand has already been reduced by appellate order but appeal effect has to be given by the department –

 Provide the date of order and the appellate order passed by (details of the appellate authority, and the reference number of order).

• An appeal has been filed and stay petition has been filed, or stay has been granted by, or installment has been granted by- 

Provide the date of filing of the appeal, appeal pending with appellate authority e.g., CIT(A) or ITAT, stay petition filed with details of the office. If the stay has been granted, you must also upload a copy of the stay order.

• Rectification/revised return has been filed at CPC- 

The following details are required additionally -

• Filing type
• E-filed acknowledgment number
• Remarks (comments, if any of the taxpayer)
• Upload challan copy
• Upload TDS certificate
• Upload letter requesting rectification copy
• Upload indemnity bond

Rectification has been filed with assessing officer –

 Mention the date of application and remarks (comments, if any of the taxpayer).

Option 3 – Disagree with the Demand

Step 1: Upon choosing this option, you must provide details of why you disagree with the department’s call.

Step 2: You must also provide reasons for your disagreement with the available options.

Step 3: Submit your response to viewing a success screen with a transaction ID.

Step 4: You can revisit the response when you click on ‘View’ under the ‘Response’ tab.

Step 5: You can view the serial number, transaction ID, date of response, and response type will be displayed.