Comparison of Section 73 and Section 74 (Demand and Recovery)
Brief difference between Section 73 and Section 74
Pradeep Sharma
5/8/20243 min read
Demand and Recovery (Comparison of Section 73 and Section 74)
Section 73 and Section 74 both gives power to proper officer to issue show cause notice for demand, but still has both differentiate from each other.
Reason of issuing show cause notice {Sub section (1)}
Section 73
The proper officer will issue show cause notice when he believes that assessee
has not been paid tax or
short paid or
erroneously refunded, or
where input tax credit has been wrongly availed or utilized
For any reason other than reason of fraud or any wilful-misstatement or suppression of facts to evade tax.
Show Cause notice will be issue in DRC-01 (as summary notice)
Section 74
Proper officer will issue show cause notice
for the same reason as mentioned in section 73
but for reason of fraud or any wilful-misstatement or suppression of facts to evade tax.
Show Cause notice will be issue in DRC-01 (as summary notice)
Amount in Show Cause Notice {Sub Section (1)}
Section 73
Amount in show cause notice will
disputed tax
Interest thereon U/s 50 (18%)
Specified penalty in Section 122(2)(a) {i.e. Rs 10,000 or 10% of tax whichever is higher)
Section 74
Amount in show cause notice will
disputed tax
Interest thereon U/s 50 (18%)
Penalty equivalent to tax specified in notice
Time period of issue notice {Sub Section (2)}
Section 73
The SCN shall issue at least 3 months prior to time limit specified in Sub Section (10) for issuance of order.
(i.e. proper officer has at least 3 months for call the information to satisfy himself regarding demand)
Section 74
The SCN shall issue at least 6 months prior to time limit specified in Sub Section (10) for issuance of order.
(i.e. proper officer has at least 6 months for call the information to satisfy himself regarding demand)
Summary SCN {Sub Section (3)}
Section 73
When notice serve under sub section (1) in DRC-01 then details of such demand will communicate in DRC-02
Section 74
same as section 73
Deemed Notice {Sub Section (4)}
Section 73
Statement in notice under sub section (3) will be deemed to SCN issued in sub section (1)
Section 74
same as section 73
Payment before service of SCN {Sub Section (5)}
Section 73
The person can pay
tax + interest U/s 50
before service of notice under subsection (1) and statement under sub section (3)
and will inform to proper officer in writing
*tax will ascertain by assesse himself or by proper officer
Section 74
The person can pay
tax + interest U/s 50 + penalty (15% o tax)
before service of notice under subsection (1) and statement under sub section (3)
and will inform to proper officer in writing
*tax will ascertain by assesse himself or by proper officer
Not service of notice {Sub Section (6)}
Section 73
On receipt of information under sub section (5) proper officer will not issue
notice under sub section (1)
statement under sub section (1)
or penalty under any provision or rules
Section 74
On receipt of information under sub section (5) proper officer will not issue
notice under sub section (1)
statement under sub section (1)
or penalty under any provision or rules
Demand not fully paid {Sub Section (7)}
Section 73
On the receipt of information under sub section (5)
if in opinion of proper officer tax is short paid then
he shall proceed to issue notice under sub section (1).
Section 74-Same as section 73
9. Payment after service SCN { Sub section (8) }
Section 73
Tax U/s (1) & (3) + Interest U/s 50 paid < 30 days of Notice
No penalty will levied &
Proceeding deemed to be conclude
Section 74
Tax U/s (1) & (3) + Interest U/s 50 paid < 30 days of Notice
No penalty will levied &
Proceeding deemed to be conclude
10. Order of demand { Sub section (9) }
Section 73
After consideration representation (reply) of person
Officer will determine the tax, interest and penalty (10% or Rs. 10,000 whichever is higher)
By issuing order
Section 74
After consideration representation (reply) of person
Officer will determine the tax, interest and penalty
By issuing order
11. Time of Order { Sub section (10) }
Section 73
Order < 3 years
From due date of furnish Annual return
For F Y in respect of tax
Or date of refund
Section 74
Order < 5 years
From due date of furnish Annual return
For F Y in respect of tax
Or date of refund
12. Penalty { Sub section (11) }]
Section 73
Penalty will be payable
If tax under sub section (9)(order) not paid < 30 days from notice
Section 74
Penalty will be payable 50%
If tax under sub section (9) (order) paid < 30 days from notice