Section 156 demand notice requires an existing liability order; nil assessment without reassessment makes it invalid.

A notice of demand under Section 156 of the Income-tax Act is valid only when tax, interest, penalty, fine or another sum is payable pursuant to an existing assessment or other order. Where the original scrutiny assessment under Section 143(3) resulted in nil demand, full disclosure had been made, and no reassessment under Section 147 had been initiated, Section 156 could not be used as a standalone recovery measure. On those facts, the delayed demand notice was without jurisdiction and invalid, because no operative order existed creating any enforceable liability.

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Issues: Whether a notice of demand issued under Section 156 of the Income-tax Act, 1961 was valid when the original assessment under Section 143(3) of the Act had resulted in nil demand and no reassessment under Section 147 had been initiated.

Analysis: The return and assessment records showed full disclosure of material facts, including the dividend distribution issue, and the assessment was completed after scrutiny under Section 143(3) with nil liability. A notice of demand under Section 156 can be issued only when tax, interest, penalty, fine, or any other sum is payable in consequence of an existing order under the Act. In the absence of any assessment or reassessment order creating a demand, Section 156 could not be invoked as a standalone recovery measure. The notice was also issued years after the assessment without reopening proceedings under Section 147, and the same material had already been considered in the original assessment. The reliance placed on the cited Supreme Court decision did not assist the revenue because the factual setting was materially different.

Conclusion: The notice of demand was without jurisdiction and invalid, and the challenge succeeded.

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