Taxpayers Must Promptly Respond to Income Tax Department's Section 143(1) Intimations

For a taxpayer, filing their income tax return (ITR) is one of the most important annual compliance requirements. However, the job does not end there. Once an ITR is filed, the income tax department sends a Section 143 (1) intimation to taxpayers, informing whether the tax computation submitted in ITR has been accepted or not. If it is accepted, then no further action is required but if it's not accepted, it means you need to take proper action.

If your ITR computation is not accepted by the income tax department, it means either a separate tax notice can be sent to you or the tax department proposes to re-compute your computation and share a proposed computation. This proposed computation can also have a tax demand attached to it, which needs to be paid within the timeline specified in the tax notice (usually 30 days).

Read below to know more about Section 143 (1) intimation and what to do if your tax computation is not accepted by the income tax department.

Why does the I-T dept send Section 143 (1) intimation?

The income tax department sends a Section 143 (1) intimation to notify you whether your filed ITR's tax computation has been accepted or rejected. If it is rejected with a tax demand, you have the option to either accept it and pay the tax demand or fight it.

Amit Ganatra, Partner at Khaitan & Co, explains what can be done:

If the tax demand determined in the intimation is incorrect: The taxpayer should promptly examine the reasons for the tax demand and avail the appropriate statutory remedy, such as filing a revised return (wherever appropriate and if the timeline available), filing an online rectification request on the e-filing portal, physically filing a rectification application before the jurisdictional assessing officer (either suo moto or at the directions of CPC) and/or filing an appeal before the Commissioner of Income-tax (Appeals).

Where the taxpayer disputes the demand, it is also advisable to file for a stay of recovery of tax demand before the jurisdictional tax officer, as merely filing a rectification application or an appeal may not automatically suspend the recovery of the demand by the CPC.

If the demand determined in the intimation is correct: The taxpayer is ordinarily required to pay the demand within 30 days (or a lesser period, if prescribed) from the date of service of the intimation order.

If the taxpayer does not pay the demand within the stipulated period, simple interest at the rate of 1% for every month or part thereof under Section 220(2) of the Income-tax Act, 1961 (corresponding to Section 411(3)(a) of the Income Tax Act, 2025), begins to accrue on the outstanding amount.

Continued non-compliance may also result in adjustment of future tax refunds or other modes of recovery as permitted under the tax law.

You can be treated as assessee in default if tax demand is not paid

If the tax demand is not paid within the permitted time, interest under Section 220(2) may apply. The income tax department's guidance states that failure to pay the amount specified in a notice of demand within the allowed period attracts simple interest at 1% for every month or part of a month, from the day immediately after the due date until the date of actual payment.

Chartered Accountant Suresh Surana says: "Further, if the demand raised is not paid within the time prescribed in the notice of demand, the taxpayer may be treated as an assessee in default in accordance with Section 220(4) of the Income-tax Act, 1961."

If you are treated as assessee in default, then tax recovery proceedings can be initiated

A taxpayer may be classified as an 'assessee in default' because the Income-tax Act imposes a legal obligation to pay a tax demand within the prescribed time once a valid notice of demand has been served.

When a demand raised following a notice of demand under Section 156 remains unpaid beyond the stipulated period of 30 days from the date of service of the notice of demand, and no appropriate response or relief has been obtained, such as rectification, stay of demand, appellate protection, etc., the taxpayer is deemed to have failed to discharge a lawful tax liability.

Surana says: "In such circumstances as described above, the taxpayer may be treated as an assessee in default, empowering the income tax department to initiate recovery proceedings in accordance with the provisions of the Act."

Responding to Section 143 (1) intimation is required even if you disagree

Surana says that if the intimation shows a tax demand or a discrepancy that the taxpayer disagrees with, they must respond or pay within 30 days.

Surana says: "Ignoring a tax demand beyond this window can trigger a 1% per month interest penalty under Section 220 of Income-tax Act, 1961 (corresponding Section 411 of Income Tax Act, 2025), and the taxpayer may be legally classified as an 'assessee in default'."

Thus, an intimation under Section 143(1) of Income-tax Act (ITA), 1961 (corresponding sec. 270(1) of ITA 2025) showing a tax demand should be reviewed carefully rather than accepted at face value.

Pay the tax demand only after reconciling AIS, Form 26AS, and other documents and records showing you made a mistake

Surana says that before taking any action, the taxpayer should reconcile the demand with the income tax return filed, Form 26AS, AIS, TIS, tax payment challans, and other supporting records, as many demands arise due to TDS/TCS mismatches, non-reflection of tax payments, reporting differences, or processing adjustments made by the CPC.

If Section 143 (1) intimation results in a demand, it is generally treated along with a notice of demand under Section 156, which specifies the amount payable.

Under Section 220(1) of the Income-tax Act, 1961, the amount specified in a notice of demand is required to be paid within 30 days (or less as determined by the revenue) from the date of service of the notice, unless a shorter period is specifically mentioned with the prescribed approval.

Surana says: "Thus, where, after verification, the taxpayer concludes that the demand is correct, the outstanding amount should be discharged within the prescribed time limit."

What if the taxpayer wants to take legal steps after the intimation?

The mere fact that a taxpayer proposes to challenge a tax demand does not, by itself, suspend the operation of the tax demand or remove the obligation to address it.

Surana says that a tax demand arising from a Section 143(1) intimation and communicated through a notice of demand continues to remain legally enforceable unless it is modified, stayed, or otherwise set aside through the prescribed statutory process.

Further, Section 220(1A) of Income-tax Act, 1961 (corresponding to Section 411(2) of the Income Tax Act, 2025), specifically contemplates situations where an appeal or other proceedings are initiated and provides that the tax demand shall continue to remain valid until the final disposal of such proceedings.

Accordingly, taxpayers intending to contest the demand should take timely procedural steps, such as filing a rectification application, submitting a response to the outstanding demand, filing an appeal, or pursuing any other remedy available under the Act.

Surana says: "It is also important to note that the filing of an appeal does not automatically result in a stay of recovery; taxpayers may need to make a separate application seeking a stay of demand."

If no stay is granted/applied for tax demand, then interest can be levied after 30 days

Surana says that if no stay is granted/applied and the tax demand remains unpaid beyond the period of 30 days, interest under Section 220(2) of the Income-tax Act, 1961 (the corresponding Section 411(3) of the Income Tax Act, 2025), may continue to accrue at 1% per month or part thereof on the outstanding amount.

Surana adds that under Section 220(4) (the corresponding Section 411(10) of the Income Tax Act, 2025), the taxpayer may be treated as an assessee in default if the demand is not paid within the prescribed or extended period.

At the same time, the law provides relief in appropriate cases. Under Section 220(6) (the corresponding Section 411(12) of the Income Tax Act, 2025), where an appeal has been filed, the Assessing Officer has the discretion to treat the taxpayer as not being in default in respect of the amount under dispute, subject to such conditions as may be considered appropriate, during the pendency of the appeal.

How to disagree with this tax demand?

Ganatra says that the tax demand itself is not automatically suspended even if you file a revised ITR or online rectification request on the e-filing portal, or a physical rectification application before the jurisdictional assessing officer and/or file an appeal before the Commissioner of Income-tax (Appeals) or pursue any other legal remedy.

Ganatra says: "Unless the taxpayer obtains a stay of demand or the demand is rectified by the tax department, the outstanding demand continues to be payable."

After taking any of the aforesaid actions, the taxpayer is expected to go to the "response to outstanding demand" section in the portal and disagree with the demand and select reasons thereof (which are any of the above, such as rectification initiated, appeal filed, stay filed with AO, etc.)