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Picture this - you received a letter of demand, you don’t have the funds to repay and have absolutely no clue about what to do next. In such circumstances, legal experts may come for your rescue, by getting into the technicalities of such demand notice.
A letter for demand or demand notice is a written request made by a creditor to the debtor conveying the demand for repayment of a particular debt. The contents of such demand notice indicate the names of parties involved, the details of debt incurred, along with the due date for repayment. While the purpose of demand notice remains the same, that is to get the payment done, the reasons for such debt may vary. It may be for Income Tax, demand notice for loan repayment from the bank, one under insolvency law, etc.
If someone owes another a certain amount and has failed to repay in a timely manner, the same may be demanded through a demand notice in law. The creditor usually intimates the debtor through the letter of demand regarding the amount due, eventually warning for initiating legal action in case of failure to repay the dues. Such a legal notice for recovery of money sent through a lawyer serves as an evidence in future legal proceedings.
If a person or an organization obtains a secured loan from a bank, and fails to repay the same, while missing out on three consecutive EMIs (Equated Monthly Instalments), the bank may declare such a loan account as NPA (Non-Performing Asset). At such a point, the person concerned may receive a demand notice for loan repayment from the bank. The demand notice for repayment requires the person to pay a certain amount to the bank to remove the NPA status, and often demand full repayment of loan.
Section 156 of the Income Tax Act, 1961 empowers the Assessing Officer to send a demand notice when a sum in the form of tax liability, penalty, interest, etc. is payable by any person or organization as per the provisions of the Act. If you are wondering how to respond to a demand notice from the Income Tax Department, Tax Consultants can assist with the same based on the particulars of the liability.
A demand notice for outstanding amount must be complied with or responded to within 30 days of such notice, as provided under Section 156 of Income Tax Act.
While ignorance is bliss in many cases, but not recommended in this one. A demand notice in law holds importance and not receiving or deliberately avoiding the same does not help the case. The sender will still have receipts to show various modes used to communicate the demand notice, while proving that the same was avoided, making a negative pointer for the debtor’s case.