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Section 154 of Income Tax Act

Last Update Date : April 25, 2018

Nobody is perfect in this world. Therefore, the occurrence of any discrepancies is quite natural. And who says that only the taxpayers make mistakes while filing their returns? It is also quite possible that there may be some mistakes that would happen from the hands of the Income Tax department. “To err is human and to persist the error is diabolical”. Hence, the Income Tax Department has made a provision for rectification of the mistakes occurred under the Section 154.

section 154

Section 154 Overview

The instance of errors in the official records of income tax or any mistake in the judgement passed by the Assessing Officer can be rectified under Section 154 of the Income Tax Act. The rectification can be asked for either by the individual against whom the judgement is passed or by the department itself if it finds any, during the processing of the return.

Mistake, Notice and Rectification

Mistake

Any incorrect information while filing your Income Tax Return will create some error during processing of the income tax. Because of this error, the taxpayer may receive a notice from the income tax department.

Notice

An intimation given by the Income Tax department to the taxpayer concerning the discrepancy found in the processing of his income tax return is known as a notice.

Rectification

The certain discrepancies found in the processing of income tax returns can be corrected. This process is called as Rectification.

Two ways can be used to rectify the notice

  • The Income Tax Department itself may send a rectification notice by itself if it finds any discrepancies in the process of filing of the return.
  • The taxpayer should apply online to make the department aware of this mistake.

Types of Errors for Rectification under Section 154

The types of errors that are allowed for rectification under section 154 are

  • Errors in the facts
  • Calculation mistakes
  • Minor clerical errors
  • Negligence towards mandatory provisions of law
  • Difference in the amount of advance tax
  • Difference in the amount of tax credit
  • Error in mentioning gender while filing a return
  • Non-submission of the additional details for capital gains

Features of Section 154

Under Section 154, the income tax authority can send an order to the taxpayer.

  • This order could because of some incorrect details found during the processing of the IT return like an error in gender, mismatch of the tax credit, mismatch in refund or discrepancy regarding advance tax.
  • This order can also be to fetch some additional details that are required by the department.
  • If any action taken under section 154 results in addition of tax payable, or deduction in the amount of exemptions, the IT department should notify to the respective taxpayer regarding the same and allow him to explain the discrepancy found.
  • If any action taken under the Section 154 results in a decrease in the amount of tax payable or increase in the amount of exemptions, then the IT Department should provide the refunds to the taxpayer.
  • If the amount of refund paid by the IT department is more than the actual refund amount to be paid, then the taxpayer should pay the balance amount back to the IT Department.
  • If the order is issued by the appeal, only the appeal can rectify it, and if the order is issued by the Assessing officer, only the assessing officer will be able to rectify it.

Who can file the Rectification under section 154?

There are two ways that a rectification can be made under Section 154

  • The income-tax authority can rectify the mistake on its own.
  • The taxpayer can file the mistake by making an application to rectify the mistake.
  • If the Commissioner passes the order, then the Commissioner can rectify a mistake which has been brought to notice by the Assessing Officer or by the taxpayer.

When can you file Rectification?

  • The order of rectification can be passed within a maximum of 4 years from the end of the financial year in which the notice for rectification was issued.
  • The period of 4 years is from the date of issue of rectification of notice and not the date of the notice issued.
  • If the order is revised, set aside, etc., then the interval of 4 years will be counted from the date of revised order.
  • If the taxpayer applies for the rectification, the Assessing Officer should either accept the rectification or refuse it within six months from the end of the month in which the rectification is filed.

Pre-requisites for filing Rectification

Before filing the rectification under Section 154, you need to keep in mind the pre-requisites to be considered.

  • The Income Tax Return for the Assessment Year should have been processed in CPC, Bangalore.
  • An Intimation under Section 143(1) OR an order under Section 154 passed by CPC, Bangalore for the e-Filed Income Tax return should be available with the taxpayer.
  • For online e-filing, online rectification is considered, and for offline e-filing, offline rectification is considered.
  • If the refund arising is used against the demand of other Assessment Years and the taxpayer is challenging it, then in that case
  1. Rectification application should be filed for the demand year, if CPC raised the demand, then the online application has to be filed.
  2. For the demand raised by the Field Assessing Officer, the application should be filed before him in person.
  • Latest CPC order communication number
  • Form 26 AS
  • New rectification request for same assessment year can be filed only after the processing of the previous request.
  • Time for withdrawal of the rectification request is 7 days from the date of e-Filing the Rectification.

Procedure for Filing Rectification under Section 154

  • Login to your income tax e-filing account.
  • Go to e-file and select rectification.
  • A dialogue box will appear.
  • In that dialogue box, enter your PAN, Assessment Year for which you are filing the rectification, CPC Communication Number in the notice received by you and the return that is to be rectified.
  • Select the rectification request type that you are applying. This category has three types
  1. The taxpayer is correcting data for Tax Credit Mismatch only. This is further divided into TDS, TCS and IT related details.
  2. The taxpayer is correcting data for rectification. Several reasons are displayed. You can select a maximum of 4 reasons.
  3. No further Data Correction required. Reprocess the case. In this select the category from Tax Credit Mismatch and Tax/Interest Computation whichever is applicable.

Check the TDS details on Form 26AS. After ensuring all the correct details are mentioned, click submit.

In case of any discrepancies which are mentioned under section 154 of the Income Tax Act, the IT department itself can rectify them, or the taxpayer can apply for rectification. The process of rectification is simple. The rectification can be filed only for the latest notice issued. H&R Block India has a dedicated team of tax experts who can file your tax returns and take care of the notices received along with filing a rectification return.

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