The department had on March 21 asked the firm to submit the amount of Rs 2,000 crore in about a week's time, I-T department sources said today.
The Delhi High court has granted an interim stay of the demand after the mobilephone manufacturing company filed a petition challenging the order.
Nokia confirmed receiving the notice and said it is in "full compliance" with laws related to its business operations.
"Nokia confirms it has received an order from Indian tax officials. Nokia reiterates its position that it is in full compliance with local laws as well as the bilaterally negotiated tax treaty between the governments of India and Finland, and will defend itself vigorously.
"In this regard, Nokia filed a writ before the Delhi High Court last week and on Friday, March 22 the Court has issued notice to the Income Tax department to file its counter affidavit and has granted interim stay of the entire tax demand raised against Nokia till further orders," Nokia spokesperson said in a statement.
The IT department will soon file its reply in the Delhi High Court stating the provisions that "enable and authorise" it to issue such a time-bound notice, department sources said.
The notice has been issued by the I-T department after it completed its probe and had conducted a 'survey' operation on the premises of the Chennai in January this year.
The tax evasion, according to I-T department sources, pertains to royalty payment made against supply of software by the compamy's parent company which attracts a 10 per cent tax deduction under the Tax Deducted at Source (TDS) category.
The department has analysed the company's business statements since 2006, they said.
"Since establishing the Chennai factory in 2006, indeed since starting business operations in India in the mid-1990s, Nokia has been scrutinized by the authorities regularly and its policies have been validated by the Indian and Finnish Tax authorities in the normal course of tax proceedings.
"Nokia arrived in India 18 years ago and has grown to become a market leader, contributing to the rapid growth of the Indian economy. Nokia has invested over USD 330 million in Chennai since setting up the factory," the Nokia spokesperson said.
The I-T department, sources said, has got initial inputs about the company's operation after information was gathered by its investigation unit in Chennai.
"The Indian people, in turn, have shown their trust in us, recently voting Nokia the top trusted brand in the country," the Nokia spokesperson said.
"Nokia remains willing to cooperate fully with Indian tax authorities in accordance with all applicable laws. Nokia has enjoyed a long and fruitful relationship with India, and looks forward to a prompt and just resolution to this matter," the spokesperson added.