Rectification of mistake under section 154 of Income Tax Act, 1961

RECTIFICATION OF MISTAKE UNDER SECTION 154 OF INCOME TAX ACT, 1961

Once you file an income tax return the Income Tax Department processes the return and sends an intimation. The intimation contains details of the return submitted by you and the numbers that the department has.

If there is a mismatch i.e. a demand or higher refund than what you had claimed in the return you can do the following –

File a rectification request
Agree with demand and pay the tax.

What Errors can be corrected by filing a Rectification?

A rectification request under section 154(1) is allowed by the Income Tax Department for correcting mistakes when there is an apparent mistake in your Income Tax return.

The following errors can be taken care of by filing a rectification –

an error of fact
an arithmetic mistake
a small clerical error
an error due to overlooking compulsory provisions of law.

Here are some examples of these errors are –

a mismatch in tax credit
advance tax mismatch
gender mentioned incorrectly
additional details not submitted for capital gains at the time of filing return

When can rectification be filed?

A rectification request can be filed only for returns which are already processed in CPC, Bangalore. If on rectifying a ‘mistake’ there is a change in Income – a rectification should not be filed. In this case, a Revised Income Tax Return should be filed. No new deductions or exemptions are allowed to be claimed.

Who can file the Rectification?

A rectification can be filed by you or an Income Tax Authority can on its own rectify a mistake which is apparent.

Should Rectification be Filed Online?

If the Income Tax Return was filed online then an online rectification has to be filed.

Order which can be rectified under section 154

With a view to rectifying any mistake apparent from the record, an income-tax authority may, –

a) Amend any order passed under any provisions of the Income-tax Act.

b) Amend any intimation or deemed intimation sent under section 143(1).

c) Amend any intimation sent under section 200A(1) [section 200A deals with processing of statements of tax deducted at source i.e. TDS return].

d) amend any intimation under section 206CB. (*) Under section 200A, a TDS statement is processed after making correction of any arithmetical error in the statement or after correcting an incorrect claim, apparent from any information in the statement

Under section 200A, a TDS statement is processed after making correction of any arithmetical error in the statement or after correcting an incorrect claim, apparent from any information in the statement

Similarly a new section 206CB is inserted by Finance Act, 2015 to provide for the processing of TCS statement. If due to rectification of mistake, the tax liability of the taxpayer is enhanced or refund is reduced, the taxpayer shall be given an opportunity of being heard.

Rectification of order which is subject to appeal or revision

If an order is the subject-matter of any appeal or revision, any matter which is decided in such an appeal or revision cannot be rectified by the Assessing Officer. In other words, if an order is subject matter of any appeal, then the Assessing Officer can rectify only those matters which are not decided in such appeal.

Initiation of rectification by whom

The income-tax authority can rectify the mistake on its own motion.

The taxpayer can intimate the mistake to the income-tax authority by making an application to rectify the mistake.

If the order is passed by the Commissioner (Appeals), then the Commissioner (Appeals) can rectify mistake which has been brought to notice by the Assessing Officer or by the taxpayer

Time-limit for rectification

No order of rectification can be passed after the expiry of 4 years from the end of the financial year in which order sought to be rectified was passed. The period of 4 years is from the date of order sought to be rectified and not 4 years from original order. Hence, if an order is revised, set aside, etc., then the period of 4 years will be counted from the date of such fresh order and not from the date of original order.

In case an application for rectification is made by the taxpayer, the authority shall amend the order or refuse to allow the claim within 6 months from the end of the month in which the application is received by the authority.

The procedure to be followed for making an application of rectification

Before making any rectification application the taxpayer should keep 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, 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 mistake.
Before making an online application for rectification the taxpayer should refer to the rectification procedure prescribed at https://incometaxindiaefiling.gov.in/ For rectification of intimation under Section 200A(1)/206CB online correction statement is to be filed; the procedure thereof is given at http://contents.tdscpc.gov.in/en/filing-correction-etutorial.html
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.