Show-Cause Notices in Tax Law: 2025 Rules, Deadlines & Relief

Understanding Show-Cause Notices in Tax Law: A Practical Guide

Navigating tax compliance just got more complex with recent legal shifts. If you've received a show-cause notice (SCN), you're not alone—thousands of taxpayers face these each year. This isn't about dry legal jargon; it's about protecting your business from unexpected penalties. Let's break down what's changed and what you must know.

What Exactly Is a Show-Cause Notice?

An SCN is your formal heads-up from tax authorities—like the GST department—that something’s amiss in your filings. Think of it as a legal "explain yourself" letter. It does two critical things:

Flags specific violations: Maybe you underpaid tax or claimed ineligible input tax credits.
Gives you a fighting chance: You get to present your side before penalties hit.

Ignore this notice? Big mistake. As one tax consultant put it: "An SCN ignored is an open invitation for ex-parte orders, frozen bank accounts, or even cancelled GST registration".

The 2024–2025 Game Changers

Deadlines Are Now Non-Negotiable

For non-fraud cases (Section 73):

SCNs for FY 2020–21 had to land by November 28, 2024. Anything later? Tossed out by courts, as the Andhra Pradesh High Court confirmed in February 2025.

For fraud cases (Section 74):

Authorities must issue notices at least 6 months before the 5-year limitation window slams shut.

Penalty Relief Just Got Easier

Pay early, save big:

Before SCN arrives: 0% penalty for non-fraud cases; just 15% for fraud.
Within 60 days of notice: 0% (non-fraud), 25% (fraud).
After 60 days: 10% (non-fraud, min. ₹10k), 50% (fraud).

Courts Are Drawing Hard Lines

Judges aren’t tolerating sloppy paperwork or overreach:

GKN Driveshafts v. ITO (Landmark ruling): Tax officers can’t sneak in new demands beyond the SCN’s original scope.
Kerala High Court (June 2024): Using Form GST-REG-31 (meant for suspension) instead of Form GST-REG-17? Entire proceedings scrapped. Vague notices? Equally doomed.
Andhra Pradesh HC (2025): Hammered home the November 28, 2024, deadline for FY 2020–21 SCNs. Miss it? Notice killed.

What’s New on the Legislative Front?

Union Budget 2024

Proposed Section 74A to standardize demand notice timelines starting FY 2024–25.
Penalty payment window doubled from 30 to 60 days.

GST Council’s Gift

Full waiver of interest/penalties for FY 2017–18 to 2019–20 if you clear dues by March 31, 2025. But stay alert—CBIC’s official nod is pending.

Supreme Court’s Pragmatic Move

Reassessment notices under old income tax laws? They’re now valid under Section 148A of the new regime. The court acknowledged tax officers’ "bona fide mistakes," giving them 30 days to share evidence with taxpayers, who then get 2 weeks to respond.