TaxTMI 
TaxTMI 
Examination of Notice of Demand Provisions in Indian Tax Statutes : Clause 289 of the Income Tax Bill, 2025 Vs. Section 156 of the Income-tax Act, 1961
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....rovisions, although similar in their foundational objective, reflect evolving policy perspectives, technological advancements, and administrative requirements. This commentary offers a detailed, clause-wise analysis of Clause 289, a comparative study with Section 156, and a discussion on their broader legal and practical implications. Objective and Purpose The legislative intent behind both Clause 289 and Section 156 is to establish a clear, legally binding process for notifying taxpayers of their dues under the Act. The notice of demand is not merely an administrative formality; it is a statutory precondition for the enforcement of tax recovery. The provisions ensure that taxpayers are informed of the quantum of liability, the basis for ....
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....e, ensuring that the taxpayer is formally notified before any recovery proceedings commence. * Prescribed Form: The requirement that the notice be in a prescribed form ensures uniformity and reduces ambiguity, facilitating both administrative efficiency and taxpayer understanding. Sub-section (2): Deemed Notice of Demand for Certain Intimations Clause 289(2) provides that where any sum is determined to be payable by the assessee, deductor, or collector u/s 270 or 399, the intimation under those sections shall be deemed to be a notice of demand for the purposes of Clause 289. * Deeming Fiction: This sub-section introduces a legal fiction by treating certain intimations as equivalent to a formal notice of demand. This is particularly re....
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....From the date of sale of such specified security or sweat equity share by the assessee; * From the date the assessee ceases to be an employee of the employer who allotted or transferred the securities. * Policy Rationale: This deferment acknowledges the illiquid nature of such compensation and the challenges faced by start-up employees in liquidating shares to pay taxes. It balances the government's interest in tax collection with the need to foster start-up growth and employee retention. Comparative Analysis: Clause 289 of the Income Tax Bill, 2025 vs. Section 156 of the Income-tax Act, 1961 1. Scope and Structure Both provisions are fundamentally similar in their core structure, requiring a notice of demand for any sum payable ....
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....he 2025 Bill increases the deferment period by 12 months, providing greater relief to start-up employees. This reflects a policy shift towards further supporting start-up ecosystems and recognizing the longer gestation periods for liquidity events in start-ups. * Terminology: The 2025 Bill uses "tax year" and references its own start-up definition (section 140), while the 1961 Act uses "assessment year" and section 80-IAC. This is primarily a modernization and harmonization of terminology. * Nature of Income: Both provisions refer to income in the nature of specified securities or sweat equity shares, but the 2025 Bill references section 17(1)(d), while the 1961 Act references section 17(2)(vi). This reflects the new Bill's reorgani....
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....he liability, the notice of demand serves as the starting point for appeals or rectification proceedings. For Tax Authorities * Administrative Efficiency: The provisions allow for uniform, system-driven issuance of notices, reducing manual errors and expediting the recovery process. * Legal Safeguard: Proper issuance of notice of demand is a legal safeguard, ensuring that recovery actions are not challenged on procedural grounds. For Start-up Ecosystem * Employee Retention and Incentivization: The extended deferment period in the 2025 Bill is likely to enhance the attractiveness of ESOPs and sweat equity as compensation tools. * Liquidity Management: Employees can defer tax payments until a liquidity event, reducing the financial ....