Understand this confusing IT notice

This query is : Resolved

Lokesh (Querist)
Follow

18 February 2026 Received this confusing IT notice. It says the tax is paid but still asking showcause.

Subject: Show Cause Notice for proposed penal action for non-payment of Advance
Tax – reg.
Sir/Madam,
On verification of records for the A.Y. 2025-26, it is noticed that you had taxable
income giving rise to liability for payment of advance tax in accordance with sections
208 to 211 of the Income-tax Act, 1961. However, no/insufficient advance tax was
paid within the prescribed due dates.
It is observed that the tax liability was subsequently discharged by you through
payment of Self-Assessment Tax under section 140A along with applicable interest.
While the payment of tax and interest has been taken on record, the same does not
by itself constitute compliance with the statutory requirement of timely payment of
advance tax instalments.
In view of the above facts, the circumstances leading to non-payment/short payment
of advance tax require examination to determine whether any proceedings under the
Income-tax Act, 1961 are warranted.
You are therefore requested to submit your explanation, if any, along with supporting
evidence, within 10 days of receipt of this notice as to why appropriate action as per
the provisions of the Act should not be considered in your case.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
Follow

18 February 2026 This notice is a Show Cause Notice (SCN) for a potential penalty under Section 221 of the Income-tax Act, 1961. While you have already paid the principal tax and mandatory interest (Sections 234B and 234C) via Self-Assessment Tax, the department is now questioning why you failed to pay it as Advance Tax during the financial year.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
Follow

18 February 2026 Why you received this notice
Deemed Default: Under Section 218, if you were liable to pay Advance Tax but did not do so by the prescribed deadlines, you are "deemed to be an assessee in default".
Penalty vs. Interest: Paying interest under Sections 234B/234C is a mandatory compensatory charge for the delay. However, a penalty under Section 221 is a discretionary punitive measure that can be up to 100% of the tax amount in default.
Non-Automatic Compliance: The law specifically states that paying the tax after the due date (as you did via Self-Assessment) does not automatically exempt you from a penalty for the initial default.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
Follow

18 February 2026 You must submit an explanation through the Income Tax e-Filing Portal under Pending Actions > e-Proceedings. Your goal is to prove "good and sufficient reasons" for the delay to avoid the penalty.
Common "Reasonable Causes" to mention (if applicable):
Unexpected Income: If your tax liability arose from a sudden transaction late in the year (e.g., unexpected capital gains or a late-year bonus) that could not have been estimated earlier.
Financial Hardship: Documented business losses, medical emergencies, or severe liquidity issues.
Clerical Errors: A genuine misunderstanding of tax provisions by a first-time taxpayer.
No Intent to Evade: Highlight that you have already voluntarily discharged the full liability along with applicable interest under Section 140A.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
Follow

18 February 2026 If the Assessing Officer (AO) is satisfied with your "good and sufficient reasons," the proceedings will be dropped.
If the explanation is rejected, the AO may levy a penalty, though it cannot exceed the amount of tax that was in arrears.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now