Section 154 of the Income Tax Act

In some cases, it may so happen that an order containing mistakes is passed by the assessing officer. Section 154 provides an opportunity for the assessing officer to rectify any mistake or error that was done by him. It allows the officer to correct mistakes done by him. It also provides relief to the taxpayer from the tedious process of getting his accounts assessed once again.

Rectification of Mistake under Section 154

Income Tax Act provides for rectification of mistakes under Section 154. It is a rectification of mistake apparent from records. Orders issued under Sections 143(1), 200A (1) and 206CB (1) can be rectified. However, only those mistakes can be rectified that are apparent from the record. Section 143(1) deals with summary assessment; it is a notice issued post-filing of return. Section 200A (1) and 206CB (1) deal with intimations issued for error in TDS and TCS statements. This rectification of mistakes shall be done only after a return has been filed by the assessee; such return has been processed and an intimation is received by the taxpayer and such intimation has errors or mistake.

Features of Section 154

  • Notice under Section 154 can be issued by the authorized officer himself or by an application made to him by the taxpayer.
  • It is important to give a notice to the taxpayer in case such rectification results in enhancing the assessment increase of any tax liability or reduction of refund. Such notice can be issued either through sending an E-mail on the registered E-mail ID of the tax payer or at the registered address through postal mode.
  • Excess refund credited to the account of the taxpayer shall be demanded through Section 154.
  • Application made by taxpayer for rectification under Section 154 shall be disposed within 6 months from the end of the month in which such application is received.
  • Where rectification is done on suo moto basis, that is on its own, then such rectification is possible up to four years from the end of the financial year in which order to be rectified is passed.
  • Any order which is a subject matter of appeal or revision cannot be rectified. In simpler words, only those orders can be rectified which are not decided by appeal. Any point/matter of an order which is under appeal or revision cannot be rectified. Rectification can be done against other matters/ points of an order.
  • If any order is passed by Commissioner (Appeals), then he too has the authority to rectify the mistake, either on its own motion or on an application made to him by the taxpayer.

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The Procedure to be applied for making an application of rectification

  • The taxpayer should carefully go through the order against which rectification has to be filed.
  • The tax payer shall verify that the calculations made are correct so as to ensure that wrong applications are not made. Here, help of any tax consultant shall be seeked.
  • If any mistake is still observed, then the taxpayer should proceed for making an application for rectification under Section 154.
  • Also, it should be confirmed that the mistake is apparent from record. That is, such mistake shall not require debate, investigation or elaboration.

What are the errors that can be rectified?

Rectification request shall be allowed by the tax authorities only if the mistake is made apparent from record. The errors that can be rectified are:

  • an error of fact;
  • an arithmetical mistake;
  • a clerical error;
  • error that has occurred due to overlooking compulsory provisions of law.

The examples of the above mistakes or errors are:

  • Mismatch in taxes
  • Mismatch in tax credits etc.

Rectification request shall not be issued for change in details regarding bank account or address in the income tax account of the taxpayer.

Frequently Asked Questions

Whether a mistake apparent from record can be rectified?

Yes, mistake apparent from the record can be rectified.

Under which section can an error be rectified?

Errors can be rectified under section 154 of the Income Tax Act.

What is a rectification request?

As per the provisions of section 154(1) of the income tax act, a rectification is permissible by the Income Tax Department for amending any errors when there is an apparent error in the Income Tax Return filed by you.

Can an order be rectified if it is a part of the subject matter of appeal?

Any order which is a subject matter of appeal or revision cannot be rectified.

Can Income-tax authority rectify its order on its own?

Yes, Income Tax authority has the power to rectify its own order.

Who can apply for rectification of order?

Any taxpayer in case of whom an order containing error has been passed shall apply for rectification apart from tax authorities on suo moto basis.

What is the time limit to rectify an order if the application is made by the taxpayer?

The time limit for rectification of order, if the application has been made by taxpayer, shall be six months from the end of the month in which such application is received by the officer.

Can an online application be filed for rectification of mistake?

Yes, an option to file for online application is provided to the taxpayer. Online rectification procedure is easy to understand and execute, it is time-saving.

What is the procedure if rectification order has an effect of enhancing assessment, reducing the refund or increasing liability?

If an assessment order has the above-mentioned effects, then an opportunity of being heard shall be given to the taxpayer before passing such an order.

How to file online rectification?

  • Login to your account through Income tax website
  • Select tab E-file
  • From the drop down list, select rectification.
  • Select assessment year for which rectification has to be done.
  • Provide latest communication reference number as mentioned in the order received.
  • Click on validate button.
  • Select the ‘Rectification Request Type’. It shall be based on the reason for filing rectification.
  • On selecting the reason, tax payer shall be faced with options such as:

A. Taxpayer Correcting Data for Tax Credit mismatch only. Tax credit shall relate to Tax Deducted at Source, Tax Collected at Source or Income tax. Under this, tax payer can add a maximum of ten entries for each of the above mentioned taxes.

B. Taxpayer is amending the Data in Rectification. Under this option, select the reason for rectification by checking against the box in front of the box. A maximum of four reasons can be selected and XML has to be uploaded.

List of Reasons available under this option are:

  1. List of payments do not match as per CPC order.
  2. Income chargeable under the head profits and gains of business or profession has been wrongly considered.
  3. Request for cancellation of adjustment of earlier year/s demand.
  4. Income under the head Capital gains has been wrongly considered.
  5. Income under the head Income from house property has been wrongly considered.
  6. Current year losses were not set off currently.
  7. Brought forwards losses are incorrectly/partially allowed.
  8. There is variance in computation of tax.
  9. Gender was wrongly considered
  10. MAT credit has been incorrectly/partially allowed.
  11. Date of filing of return is within the due date however same has been taken as not within the due date.
  12. Requesting for claim of deduction
  13. Requesting for change in residential status.
  14. Requesting for reduction of tax rate as domestic company
  15. Requesting that income shown is not taxable as the society is registered u/s 12A or assessee is a non-resident.
  16. Income from salary does not match
  17. Income from other sources is considered wrongly
  18. Chapter VI A deduction is wrongly considered
  19. Profit before tax in Schedule BP is wrongly considered
  20. Others.

    C. No further Data Correction required. Reprocess the case. This option shall be selected if there is a tax credit mismatch or interest mismatch. Here, uploading of income tax return is not required. The tax payer shall select the checkbox for which reprocessing has to be done.

  • Select the submit button.
  • A dialogue box confirming TDS entries are as per Form 26AS shall appear.
  • If yes, then click Ok and proceed.
  • This shall lead the taxpayer to a page where on successful submission, a reference number shall be generated. Further, rectification request shall be sent online to CPC for processing.
  • After processing, rectification order shall be issued.

Whether appeal can be filed against order rectified under section 154?

Yes, appeal can be filed to higher authorities against order rectified under section 154.

Whether rectification of an order passed u/s 154 is valid due to subsequent change of law on retrospective basis?

If the assessment order is inconsistent with a specific provision as amended retrospectively, then undisputedly there is a mistake which is apparent on the record. In the light of the amended provision in retrospective effect, the assessment order as passed by the tax office will have to be revised. Therefore, in view of this, the assessing officer shall rectify order of assessment as per the later amendment of the law with retrospective effect.

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