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How to read section numbers: s.80C→s.123 means Section 80C of the Income-tax Act, 1961 is now Section 123 of the Income-tax Act, 2025 (in force from 1 April 2026). Returns for FY 2025-26 still use the old numbers; Tax Year 2026-27 onwards uses the new ones. Section Finder
DRC-01A — the pre-notice intimation
Before a show-cause notice, the officer may send DRC-01A with the proposed liability. Paying in full through DRC-03 at this stage, with interest, closes the matter in non-fraud cases; or reply in Part B with reasons.
Penalty under 74A
| Case | Penalty | Reduced if paid |
|---|---|---|
| Non-fraud | 10% of tax or ₹10,000, whichever is higher | Nil if tax + interest paid within 60 days of the notice |
| Fraud / suppression | Equal to the tax | 15% before notice; 25% within 60 days of notice; 50% within 60 days of order |
Replying in DRC-06
- Challenge limitation first — is the notice within 42 months (74A) or the 73/74 limits for older years?
- Respond issue-wise with reconciliations and invoices
- Seek a personal hearing — it is a right before an adverse order
- Order comes in DRC-07; appeal within 3 months
Worked example
Example
Example: A notice for FY 2024-25 demands ₹3.2 lakh for ITC claimed on invoices the supplier did not report. Paying ₹3.2 lakh with interest within 60 days removes the penalty; alternatively, proving receipt of goods and payment to the supplier can defend the credit.
Common mistakes
- Ignoring DRC-01A
- Missing the hearing date
- Not checking which section (73/74/74A) applies to the year
Frequently asked questions
Three months from the date of the order, before the Appellate Authority, with a pre-deposit of 10% of the disputed tax.
Last reviewed on 11 November 2026 by Vinay Jaglan, VJ & Associates. Law and portal screens change — verify before acting, or ask the office.
