Section 154 of Income Tax Act (Rectification of mistakes)

The season of filing income tax returns generally begins the beginning of a new financial year. It is important to file correct and accurate income tax returns to safeguard yourself from scrutiny or notices by department of income tax. After completion of ITR filing the department makes processing of the ITR and sends intimation of such processing to taxpayers. The intimation contains information of the return submitted by taxpayer and the information available with the department.

In case of mismatch in the information, taxpayer has either an option to rectify the mistake or accept the same and complete required compliance. 

Rectification under Section 154:
Section 154 of the Income Tax Act typically deals with rectification of mistakes. In income tax laws, mistakes can occur due to various reasons, such as errors in computation, incorrect application of provisions, or incorrect data entry. Section 154 provides a mechanism for rectifying such mistakes.

A rectification request can be filed only for the returns which are processed by the CPC. Mistakes for which a rectification request can be filed could include errors in calculation, omissions, or incorrect entries in tax returns or other documents submitted to tax authorities. If there is a change in income upon rectification of mistake, then a Revised return needs to be filed.

Which orders can be rectified under section 154?:

With a view to rectifying mistakes apparent from records, the income tax authority may:

  • Amend order passed under provisions of the Income Tax Act
  • Amend intimation sent under section 200 A (1)
  • Amend intimation or any deemed intimation sent under section 143 (1)
  • Amend any intimation that has been sent under section 206CB

It is important to note that Notice under Section 154 can be issued up to 4 years after the end of a particular financial year wherein the rectification order had been passed. If the taxpayer raises an amendment request, the department is bound to respond within six months of receipt of request.  

Who can file rectification request?:
Rectification of return can be done by :

  • Taxpayer filing the Return
  • Assessing officer can suo-moto rectify a mistake appearing on the face of record

Process to file a rectification online?

Let us look at how to file a rectification online.

  • Login to Income Tax portal, click on “Services” tab and open “Rectification” option
  • Raise a new request for rectification
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  • Choose type of Tax and Assessment year
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  • Choose type correction needed to be made
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After completion of putting information wherever required and correcting mistake the request needs to be submitted and e-verified accordingly. In case of any demand payable the same needs to paid.

Once the rectification request has been submitted, a mail or message will be sent notifying a 15-digit reference number.

It’s important to note that rectification under Section 154 cannot be used to alter the substance of an assessment or to correct mistakes that require a detailed examination of facts. For substantial changes, the taxpayer may need to go through the process of appeal or revision as per the provisions of the Income Tax Act. The rectification can be initiated by the assessing officer suo-motu (on their own), or upon an application made by the assessee. The rectification can lead to adjustments in the tax liability, refund, or any other relevant aspect affected by the mistake.

About Author:
CA Chinmay Shirish Agate
Chinmay Agate is a Practicing Chartered Accountant having 4+ years of experience and expertise in the field of Direct Taxation and Auditing compliances. In the past, he worked in various CA firms and comes with wide industry experience from services, retail to manufacturing to trading where he has handled various complex assignments. He has keen interest in Forex and Derivative knowledge as well as fundamental analysis.

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