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.

Sometimes there may be a mistake in any order passed by the Assessing Officer. In such a situation, mistakes which are apparent from the record can be rectified under Section 154. The provisions relating to rectification of mistakes under Section 154 are discussed in this article.

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• Below are some of the primary points of this section.
• The IT department is liable to issue an order regarding inaccurate information to avoid discrepancies.
• It is mandatory for the IT department to send an email 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.
• The 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, the 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 the IT department.
  
• The IT department must dispose of the applications made by assesses within 6 months from the end of the month in which the application is received.
  
• 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 authorized to rectify the errors in 2 ways-
  • On his or her own motion
  • An application made by taxpayers

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

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)
• Authorized 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

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

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After assessing the return, the 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.

Before making any rectification application the taxpayer should keep the following points in mind.  

• The taxpayer should carefully study the order against which he wants to file the application for rectification.  
  
• Many times the taxpayer may feel that there is any mistake in the order passed by the Income-tax Department but actually the taxpayer’s calculations could be incorrect and the CPC might have corrected these mistakes. For e.g. the taxpayer may have computed incorrect interest in return of income and in the intimation the interest might have been computed correctly.  
  
• Hence, to avoid application of rectification in above discussed cases the taxpayer should study the order and should confirm the existence of mistake in the intimation, if any.  
  
• If he observes any mistake in the order then only he should proceed for making an application for rectification under Section 154.  
  
• Further, he should confirm that the mistake is one which is apparent from the records and it is not a mistake which requires debate, elaboration, investigation, etc. The taxpayer can file an online application for rectification of the mistake. Before making an online application for rectification the taxpayer should refer to the rectification procedure prescribed on the official website. 
  
• For rectification of intimation under Section 200A(1)/206CB online correction statement is to be filed; the procedure thereof is given on the website.
  
• An amendment or rectification which has the effect of enhancing the assessment or reducing a refund or otherwise increasing the liability of the taxpayer (or deductor) shall not be made unless the authority concerned has given notice to the taxpayer or the deductor of its intention to do so and allowed the taxpayer (or the deductor) a reasonable opportunity of being heard.
  

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