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Section 154 of Income Tax Act: Filing Rectification u/s 154(1)

Updated: May 22


Section 154 of Income Tax Act: How to File Rectification u/s 154(1)

Filing income tax is a complex process, and there is always a chance of an error during it. Such discrepancies can sharply increase your tax liability or lower your refund down the road. Fortunately, you can make an application for rectification of mistakes under section 154 of the Income Tax Act to address such concerns.

 

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Once you file your return, the IT department processes it and sends an intimation containing details of the return submitted and the numbers to the department. A mismatch happens when there is a difference between them. In this case, you may either file a rectification request or agree with the demand and pay the tax you are asked for.

In this guide, we will share everything about filing rectification under section 154 of the Income Tax Act. 


Understanding Section 154 of the Income Tax Act

Section 154 entails the rectification of errors and discrepancies related to income tax records. Further, it addresses inaccuracies in IT records due to the errors made by the assessing officer. The provision facilitates the amendment of orders issued under Sections 143(1), 200A(1), and 206CB(1). It includes notices issued before a case is scrutinized and errors in TDS and TCS statements.

Here are the features of Section 154:  

  • A notice under section 154 can be issued only by an authorized officer

  • In case a rectification increases the tax liability or reduces the refund, it is crucial to provide notice

  • An application for rectification has to be disposed of within six months the end of the month when it is received

  • Where rectification is done on its own, it can be done four years from the end of the financial year in which the rectification order is passed

  • An order that is a subject matter of revision or appeal cannot be rectified

  • Excess refund credited to the taxpayer’s account is demanded through Section 154 of the IT Act 

  • The Commissioner (Appeals) can rectify the mistake if any order is passed by him


Errors that Can be Addressed by Filing a Rectification

An apparent mistake in your Income Tax Return can be corrected by filing a rectification request under section 154(1). Here are a few instances of the errors that can be addressed by filing a rectification:

  • An arithmetic mistake

  • A clerical error

  • A factual error

  • An error due to missing out on compulsory provisions of the law

For example, you can seek correction of a mismatch in tax credit or advance tax, incorrect gender, or absence of additional details for capital gains when filing your return. You cannot use rectification requests for changing address details or bank accounts of your IT return. 


Orders that can be rectified Under Section 154

Besides rectification of errors, Section 154 can be used for addressing orders. Here are the ones that can be corrected on request or at the officer’s discretion:

  • Any order passed under provisions of the Income-tax Act

  • An intimation or deemed intimation u/s 143(1)

  • An intimation sent u/s 200A(1) in relation to TDS

  • An intimation sent u/s 206CB(1) in relation to TCS

Who can file the Rectification under section 154?

A return can be rectified under section 154 by

  • A person filing the return

  • An IT authority can rectify a mistake appearing on the face of the record on its own


When can a rectification request be filed?

When it comes to filing a rectification request, you can do it only for returns already processed in CPC, Bangalore. Conversely, a rectification should not be filed if income is changed on rectifying a ‘mistake’. In that case, you will have to file a Revised Income Tax return. New exemptions or deductions are not permitted in this situation. 


Procedure for an Application of Rectification

As a taxpayer, you must be well-versed in the order against which you want to apply for rectification. Further, consider the following things before making an application for rectification under Section 154.

  • Confirm the presence of errors and account for them accurately to ensure that you file for a rectification application for the right reasons. At times, you may feel that certain mistakes exist in the IT department’s orders. However, inaccurate calculations are made on the assessee’s part in most cases. 

  • Ensure that the discrepancy is apparent from the tax records. Additionally, it should not require involvement in the form of debate, elaboration, or investigation.

  • You can easily file a rectification application online but remember to be familiar with the process before going ahead.

Any rectification that may enhance assessment, increase tax liability, or lower refund can be made only after the authority issues a notice to the taxpayer about its intention. 


How to file rectification under section 154 online?

You can file a rectification application online through the Income Tax website. Here are the steps you need to follow to file a request under Section 154(1) of the Income Tax Act:


Step 1: Login to the official website of the IT department.


Login to the official website


Step 2: Navigate Go to ‘Services’ in the main menu.


Go to ‘Services’


Step 3: Click on ‘Rectification’ in the dropdown menu.


Step 4: Click on the ‘New Request’ button.


Click on the New Request Button

Step 5: Select ‘Order passed under’ as ‘Income Tax’. Opt for the relevant assessment year from the dropdown and continue.


Select ‘Order passed under’ as ‘Income Tax’ and select relevant year

For Rectification type 1 (Reprocess the return)

Step 6(1)- Select ‘Reprocess the Return ’ as the request type. Submit the request for reprocessing to be redirected to the e-verification page.


For Rectification type 2 (Tax credit mismatch)

Step 6(2)- Select ‘Tax Credit Mismatch Correction’ as the request type. This step will auto-populate schedules available in the processed return. It enables you to delete or edit the schedule details. The following schedules can be edited:

Click the ‘Continue’ button and e-verify.


For Rectification type 3 (Offline Return data correction/ return data correction XML/JSON)


Rectification type 3 (Offline Return data correction/ return data correction XML/JSON

You can only submit a rectified JSON to correct the following:

  • Address, mobile number, or email ID

  • TAN 

  • Assessment year

  • Challan number

  • BSR code in ‘Schedule TDS’ or ‘Taxes Paid’

  • Bank account number or IFS code

  • Any detail in the return that does not alter the gross total income or total income or lead to an excess refund claim compared to the submitted return

On the other hand, you cannot submit a rectification return in these cases:

  • Claim loss in the rectification return missed out in the already filed one

  • Report Chapter VI deductions left out in an already filed return

  • Claim additional TDS credit, a missed out tax payment challan, or tax credit/refund

You can download the JSON file of the filed return, import it into the government’s IT Utility, and make the necessary corrections to it. Validate the XML/JSON and re-upload the rectified version. Also, provide the reason for seeking rectification and click on the ‘Submit’ button after uploading the XML/JSON file.  In the end, download the ARN copy for future reference. You will reach the e-verification page on successful submission.


Rectification of an order subject to appeal or revision

Rectification under section 154 can be done for a matter not considered and decided in appeal or revision. On the other hand, rectification is not possible under section 154 if the matter has already been considered and decided by appeal or revision. For example, if the Assessing officer has made some adjustments regarding the returned income of an assessee and the assessee has filed an appeal against it which has been decided against them, no rectification request can be admitted.


FAQ 

Q1. How much time it takes to process a rectification request?

In case of an application for rectification, the authority has to amend the order or refuse it within 6 months from the end of the month when the application is received by the authority.

Q2. How to cancel a rectification request in income tax?

A rectification request can be withdrawn within the end of the day of the request.

Q3. What errors can be rectified when filing a rectification application under Section 154 (1)?

Factual errors, clerical errors, mathematical errors, and involuntarily overlooking certain compulsory legal provisions are some instances that can be rectified with an application under Section 154(1).

Q4. How can you intimate the IT department if your refund is less than claimed in ITR?

If you get less refund, the IT department may have some outstanding demand while processing the return. It is conveyed intimation under 143(1). You can review it by logging in to the income tax portal and navigating to Tax Credit mismatch under My Account. Select agree if you agree to the refund. If not, provide reasons for the same.

Q5. How should I pay the outstanding demand on 154?

You can pay tax demand via Challan 280, which can be filled out online from the TIN-NSDL website. You can pay it via online banking/debit card, etc.

Q6. How do you file rectification?

You can file a rectification online by logging in to the e-filing account and following the aforementioned steps. 

Q7. What is the time limit for rectification u/s 154?

The time limit for rectification under Section 154 is four years from the end of the financial year during which the particular order was passed. For example, you can submit a rectification request for an order issued in 2015-16 till 31st March 2020.

Q8. Can I file an appeal against intimation u/s 143 (1)?

Yes, you can file an appeal against the intimation u/s 143 (1) before the Commissioner of Income-tax (Appeals).

Q9. What is the difference between a rectification return and a revised return?

A rectification can be filed after the return is processed or after getting intimation u/s 143(1). Conversely, revised returns can be filed before the assessment is completed or at the end of the assessment year, whichever is earlier.

Q10. Can I file an appeal with CIT after a rectification return?

Yes, you can file an appeal against the rectification order.









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