Section 154 of the Income Tax Act

What is Section 154 of the Income Tax Act?

Section 154 of the Income Tax Act, 1961, empowers income tax authorities to fix obvious mistakes in orders, assessments, or intimations related to your income tax.

If there is any visible error on your income tax order, you or the Income Tax Assessing Officer can request a correction. It is a way to ensure that the tax authorities have the correct information when determining your tax liability.

This provision allows for the revision of mistakes in order to ensure that the tax assessment is accurate and fair.

Errors You Can Correct by Filing Rectification under Section 154

Let us understand the mistakes or documents you can rectify under Section 154 of the Income Tax Act, 1961:

What Mistakes Can Be Rectified?

• Errors of Fact: Incorrect information about your income, deductions, exemptions, etc.

• Arithmetic Mistakes: Miscalculations in your tax liability.

• Clerical Errors: Typos or other minor mistakes in documents.

• Overlooked Provisions: Failure to consider relevant provisions of the law while assessing your tax.

What Documents Can be Rectified?

• Orders Passed by the Income Tax Authorities: This includes assessment orders, penalty orders, refund orders, etc.

• Intimations or Deemed Intimations Under Sections 143(1) and 200A(1): These are documents issued by the tax department informing you of your tax liability or refund due.

• Intimations Under Section 206CB(1): This relates to information regarding tax deducted at source.

Who is Eligible to File Rectification?

Under Section 154 of the Income Tax Act, 1961, both the Income Tax Authorities and the taxpayer are eligible to file for rectification:

• Income Tax Authorities: They can rectify mistakes on their own motion from the record in:

  • Any order passed under any provisions of the Income Tax Act.

  • Any intimation or deemed intimation sent under section 143(1).

  • Any intimation passed under section 200A(1) (dealing with processing of statements of tax deducted at source).

  • Any intimation under section 206CB.

• Taxpayer: You can file an application requesting rectification if you believe a mistake has been made in the following records:

  • Any order passed by the Assessing Officer (AO) related to your assessment.

  • Any intimation you receive under section 143(1) after the processing of your income tax return.

• Tax Deductor (for mistakes related to TDS): If you have deducted tax at source but believe a mistake was made, you can apply for rectification.

When Can I File Rectification?

There are specific time limits for filing rectification under Section 154 of the Income Tax Act, 1961, for both the Income Tax Authorities and the taxpayer:

1. For the Income Tax Authorities:

   • Tax authorities can rectify any mistake apparent from the record at any time. 

   • However, there are specific time limits for issuing revised orders after considering a rectification request:

     • For Rectification Requests Received by the Centralized Processing Center (CPC), Bangalore: Within 6 months from the end of the month, the request was received.

     • For Rectification Requests Received by an Assessing Officer: Within 6 months from the date of receipt.

2. For the Taxpayer:

   • You can file for rectification within 4 years from the end of the financial year in which the order sought to be rectified was passed.

   • For Example: For an order passed in the financial year 2023-24, you have until March 31, 2028, to file for rectification.

   • The 4-year period is counted from the date of the original order, even if it has been subsequently revised or set aside.

Steps to File a Rectification Online

You can follow the steps mentioned below to start the rectification process online:

Step 1: Log in to the official website of the Income Tax Department.

Step 2: Click on the "Services" section of the main menu and select "Rectification" from the dropdown bar.

Step 3: Press the "New Request" button.

Step 4: Under the "Order Passed Under" section, select the "Income Tax" option from the following options:

• Income Tax

• Wealth Tax

Step 5: Select the "Assessment Year" and press on "Continue".

Step 6: Now, you can make three different types of rectification requests:

Reprocess the Return:

• Select "Reprocess the Return" type request

• Submit your reprocessing request 

• Upon submission of this request, you are redirected to the e-verification page

Tax Credit Mismatch Correction:

• Select the "Tax Credit Mismatch Correction" request

• This auto-populates the schedules available in the return process, allowing you to edit or delete the details of the schedule.

• The following schedules are allowed for editing:

  • TDS on Salary

  • TDS on Other than Salary

  • TDS on Transfer of Immovable Property/Rent

  • TCS (Tax Collected at Source)

  • Advance Tax or Self-Assessment Tax

• Click on "Continue". You are redirected to e-verify.

Return Data Correction (Offline):

• You can also make an offline application for the rectification process by uploading an XML or JSON file request.

• You can submit a corrected JSON file for the following actions:

  • Fixing errors in email ID, mobile number, or address.

  • Rectifying TAN, assessment year, challan number, or BSR code in 'Schedule TDS' or 'Taxes Paid.'

  • Adjust the bank account number or IFS code in the bank details.

  • Correct any other details in the return that do not alter the gross total income or result in an excess refund claim compared to the previously submitted return.

• However, you cannot submit a rectification return for the following purposes:

  • Reporting Chapter VI deductions that were omitted in the original filing.

  • Claiming a loss in the rectification return that was overlooked in the initial filing.

  • Requesting additional TDS credit, claiming a missed tax payment challan, or seeking a tax credit/refund.

• To complete the process, validate the XML/JSON and re-upload the rectified XML/JSON.

• To generate a rectification XML/JSON file, the same steps are followed as creating a regular return XML/JSON file.

• You need to mention the reason to apply for a rectification return and upload the XML/ JSON file.

• Click on "Submit" and download the ARN copy for your reference in future.

• You are redirected to the e-verification page on successful submission.

NOTE: You need not re-enter all the data in the latest offline utility. Instead, you can download the JSON file of the last filed return, make the necessary corrections, and import it into the government's IT Utility.

Response to Outstanding Demand – After Filing Rectification

Once you submit the rectification JSON file, go to the 'Pending Actions' tab in the dashboard and click on 'Response to Outstanding Demand.' 

Further, follow the steps mentioned below to respond to any outstanding demand in the income tax assessment by the IT Department:

• Choose the demand for which you submitted a rectification return and click on 'Submit Response.'

• If you agree with the demand, select 'Demand is Correct.' Note that once submitted, you cannot disagree later.

• After selecting 'Demand is Correct,' choose 'Not paid yet' and click 'Pay Now' to proceed to the e-Pay Tax page.

• On the e-Pay Tax page, you can make the outstanding tax payment securely.

• If you have already paid, select 'Yes Already paid and Challan has CIN,' then add Challan Details, including:

  • Type of payment

  • Amount

  • BSR code

  • Serial number

  • Payment date

• Upload a copy of the challan (PDF) and click 'Save.'

• If you disagree with the demand, click on 'Add reason.

• Now, select 'Rectification/Revised Return filed at CPC' and enter the value of the disagreed demand.

• If submitting a rectification return, enter the rectification return acknowledgement number and click 'Submit.'

After submission, you receive a transaction ID confirmation. Save this for future communications with CPC.

In Summary

Section 154 of the Income Tax Act plays a pivotal role in rectifying errors and discrepancies in tax assessments. This provision empowers the Assessing Officer to amend tax orders to ensure accuracy and fairness in tax proceedings. Its significance lies in promoting transparency, rectifying unintentional mistakes, and upholding the principles of a just and equitable tax system.