Section 154 of Income Tax Act: Features & Rectification Process

In India, taxpayers may make errors while filing their income tax returns. During assessments, the concerned authority highlights such mistakes from the records. The taxpayers can rectify these errors under section 154 of Income Tax Act of 1961.

What Is Section 154 of Income Tax Act?

Section 154 of Income Tax relates to a rectification process of the errors in the official IT records in the judgement issued by an Assessing Officer. Under such circumstances, both taxpayers against whom the judgement is passed and the assessing department can request rectification during the return processing.

What Are the Features of Section 154 of Income Tax?

Below are some of the primary points of this section.

IT department is liable to issue an order regarding inaccurate information to avoid discrepancies.
It is mandatory for IT department to send an e-mail on the registered ID or letter at the registered residential address before taking any actions leading to increased tax amount or lower exemption for assesses.
IT department is liable to notify taxpayers regarding any action taken under section 154 related to the addition of tax payable or deductions in the exemption amount. Besides, IT department should allow taxpayers to describe such errors.
If excess funds are credited to a taxpayer’s account, it can be deemed under section 154.
Taxpayers must return excess refunds to IT department.
IT department must dispose of the applications made by assesses within 6 months from the end of the month of application received.
In case an appeal issues a notice, only the appeal can rectify it. The same applies if an Assessing Officer issues an order or notice.
Under suo moto basis, time limit for rectification under section 154 is up to 4 years from the end of the financial year in which the order is passed.
In case IT Commissioner passes an order, he or she is authorised to rectify the errors in 2 ways-
- On his or her own motion
- An application made by taxpayers
Any order under appeal or revision cannot be rectified.

Nevertheless, the list of errors taxpayers can rectify under section 154 of Income Act, 1961 is limited.

Who Is Eligible to File Rectification Under Section 154 of Income Tax?

Upon receiving the order or notice u/s 143(1) from CPC, the following parties can file rectification requests on the e-filing portal.

Registered taxpayers
ERIs (only those who have included client PAN)
Authorised representatives and signatories

In addition, the Income Tax authorities only permit rectification against the following errors.

Inaccurate information
Incorrect fact
Arithmetical errors
Discrepancies in taxes
Contradiction in tax credits
Specifying the wrong gender
Minor clerical mistakes
Laxity towards compulsory provisions of law
Not submitting additional credentials for capital gains

Income Tax department will notify concerned taxpayers about the occurrence of any of these errors.

How to File Rectification Under Section 154 Online?

After assessing the return, Income Tax department issues self-generated rectification orders or notices to respective taxpayers.

The below segment provides comprehensive insights to individuals looking for how to file rectification under section 154 online.

Step 1: Go to the official website of Income Tax.
Step 2: Log in or sign up for registration.
Step 3: Navigate to ‘My Account and click on ‘Request for intimation u/s 143(1)/154’.

Note: A small dialogue box will appear where you have to enter the PAN number.

Step 4: Choose the relevant assessment year and provide CPC Communication number to file rectification and click on ‘Continue’.
Step 5: Select among the 3 request types- ‘Return data Correction’, ‘Tax Credit Mismatch and Tax or Interest Computation’ and ‘Only Reprocess the return’, whichever applicable.
Step 6: On selecting ‘Return data Correction’, pick 4 reasons for rectification, include the schedules in the returns that need to be rectified and upload the XML.

Note: On selecting ‘Only Reprocess the return’, taxpayers do not need to upload their Income Tax returns.

Step 7: Check the TDS details in Form 26AS, re-check all your inputs and click on ‘Submit’

The IT department will generate a reference number once taxpayers complete the application process. This number will also be sent to CPC Bangalore for further processing.

Points to Consider While Applying for Rectification Order Under Section 154

Before applying for rectification under section 154 of Income Tax, one needs to be aware of the following points to streamline the application process.

The rectification process can only be filed against the latest issued notice.
There are 7 request types for Income Tax rectification, including-
- Reprocess the Return
- Additional Information for 234C Interest
- Tax Credit Mismatch Correction
- Return Data Correction (online)
- Return Data Collection (offline)
- Status Correction (applicable to ITR-5 and ITR-7)
- Exemption Section Correction (applicable to ITR-7 only)
Before CPC processes, taxpayers can submit a revised return if they identify any errors in the submitted income tax return.
No one can submit a rectification issue on e-filing in the event of manual or paper filing of return. Taxpayers can only submit their rectification request along with AO in paper mode.
DSC is mandatory for taxpayers audited u/s 44AB for file rectification requests.

Nonetheless, the Assessing Officer does not issue rectification under section 154 of the income tax act for any minor discrepancies. Instead, the department resolves it by themselves.

Frequently Asked Questions

All

Can I file an appeal against an income tax rectification order?

Yes, you can directly file an appeal to the CIT(A) against an intimation order issued by CPC.

Do I have to file a rectification to cancel the demand raised by CPC after I pay?

No, the demand will automatically adjust once you make the payment.

While filing a rectification request, which number is required?

The CPC Order No. or Intimation No. or DIN of the latest filed income tax return is essential while filing a rectification request.