The Income Tax department uses demand and recovery procedures when the tax liability and the actual tax amount paid do not match. After conducting audit and assessment of the taxpayer, the tax official sends a notice to the taxpayer demanding payment of the taxes owed. This can happen in the following cases:
- Unpaid or short paid tax or incorrect refund, where there are no fraudulent activities.
- Unpaid or short paid tax or incorrect refund that involves fraudulent activities.
- Failure to deposit tax with the government, despite collecting the appropriate amount.
- Making payments for SGST transactions where IGST had to be paid or vice versa.
If the due amount is not paid, the IT department will begin its recovery procedure.