Rectification in demand (section 156)

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If you've received a tax demand notice with interest calculated incorrectly under sections 134A and B, you can file a rectification request with the assessing officer. This process is separate from your appeal against the main assessment order. The officer can issue a rectification order to adjust the interest portion of the demand, even while your appeal is ongoing.

Naveen Kumar Jain

Naveen Kumar Jain (Querist)

27 January 2020 An assessee has received a notice under sec 156 for Tax to be paid along with interest u/s 134A and B after ITO passed order u/s 147/148.
While he has filed an appeal against the assessment order, he also has objection on calculation of interest u/s 134A and B. As per him interest is wrongly calculated and demand amount should be reduced; the main demand however will still be contested before CIT-A. The department is pressing for payment as demand is not yet stayed. How should he file for rectification of demand in respect of interest portion, even still objecting to main demand. What should be the procedure for asking for rectification of demand, while appeal is still pending.

Zeal Bangdiwala

Zeal Bangdiwala (Expert)

27 January 2020 You can file a rectification request before the assessing officer for the portion of re-calculating Interest. Simultaneously you can file appeal for the demand raised and just a point in the statement of facts that a rectification application has been filed only for recalculating the interest.

CA Madhvi

CA Madhvi (Expert)

27 January 2020 Rectification and appeal are separate proceedings under the Income Tax Act.You can file rectification before Juridical AO requesting to pass rectification order even when appeal is pending before CIT (A). The AO will pass rectification order u/s 154 and reduce the demand. One also needs to pay 20% of disputed demand during pendency of appeal. However, final demand will be determined after Order giving appeal effect passed by AO based on CIT(A)'s order.

Zeal Bangdiwala

Zeal Bangdiwala (Expert)

27 January 2020 It is not necessary to pay 20% of the demand for filing appeal. To grant the stay the AO insists to pay 20% demand as they been directed by the CBDT but in high pitched assessments where there is huge demand it is not feasible to pay 20% demand.

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