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Introduction: 

Upon filing an Income Tax Return (ITR), the tax department thoroughly reviews the submission and subsequently issues an intimation notice containing the taxpayer’s return details. In case of any discrepancies identified by the Assessing Officer, several options are available to rectify them: either agreeing with the demands of the IT department and making the necessary payment, or initiating a rectification process. Section 154 of the Income Tax Act specifically addresses errors arising from the tax returns of an assessee. For a comprehensive understanding of this vital provision, continue reading this article

Section 154:

Section 154 pertains to rectifying errors in tax details and also covers rectification of orders issued by an Assessing Officer. This encompasses corrections for orders passed under Sections 206CB(1), 200A(1), and 143(1).

However, only glaring errors from the intimation notice are eligible for rectification. Sections 206CB(1) and 200A(1) entail the processing and rectification of errors in TCS (Tax Collected at Source) and TDS (Tax Deducted at Source) statements, while Section 143(1) pertains to summary assessment and the issuance of intimation notices.

Features of Section 154: 

Here are some fundamental features of this section:

• Taxpayers may also submit an application to the income tax authority seeking rectification.
• Under this provision, the tax department may request additional refunds if the refund amount decreases upon reassessment.
• When a correction is required spontaneously, the matter can typically be resolved within four years from the end of the relevant tax year when the rectification order was issued.
• A commissioner has the authority to issue an order for correcting mistakes, which can be initiated either upon a taxpayer’s application or independently.
• Only an authorized officer is empowered to issue a notice under Section 154.
• Taxpayers must receive notifications regarding rectifications through mail or postal service. These notifications may involve changes such as an increase in tax liability or a decrease in the refund amount.
• A taxpayer’s application for correction must be resolved within six months from the end of the month in which they submitted the application.
• Rectifications cannot be used to correct revisions or appeals.

Errors Subject to Correction Under Section 154: 

Section 154 of the Income Tax Act addresses the following errors for correction:

• Clerical errors are considered for correction.
• Factual mistakes are eligible for correction.
• Arithmetic errors are subject to correction.
• A mistake resulting from the disregard of mandatory legal provisions.
• A Mismatch  in advance tax payments.
• The specified gender is incorrect.
• Additional information regarding capital gains is missing while filing the ITR.

List of Orders:

The following orders are eligible for rectification under the notice or order of an Income Tax Officer or Assessing Officer:

• Any notice issued under Section 143(1)
• Any notice issued under Section 206CB(1) pertaining to TCS returns.
• Any order issued under the provisions of the Income Tax Act.
• Any intimation issued under Section 200A(1) regarding TDS returns.

Steps for Filing Correction Request under Section 154:

Follow the guidelines below to file for rectification under Section 154 of the Income Tax Act:

Step 1:Access the income tax portal by logging in.

Step2: Select “Rectification” from the drop-down option under “e-file.”

Step 3:Select ‘Income Tax’ for the ‘Order/Intimation to be rectified’ and provide the assessment year for which you are filing rectification.

Step 4: Click ‘Continue’ to proceed to the next page.

Step 5: Select the ‘Request Type’ based on the reason for the correction.

Step 6: After specifying the reason, choose ‘Return Data Correction (XML)’.

Step 7: You can select up to four reasons for rectification.

Step 8: Select the schedules in the ITR that are being modified.

Step 9: Upload the rectification XML file now.

Step 10: Click on ‘Only Reprocess the return’ if needed (no need to upload ITR).

Upon submission, you will receive a Reference Number, and your application will be forwarded to Bangalore, CPC. Following examination of the request, the tax authority will issue an order.

Factors to Consider Before Filing a Rectification: 

When filing a rectification request under Section 154 of the Income Tax Act, you are required to adhere to the following terms and conditions:

• If you have received a digital return, online rectification is the only available filing option.
• IT returns for the relevant assessment year must have undergone processing.
• If rectification rights are transferred to the Assessing Officer, a rectification request must also be submitted in such instances.
• To file a rectification request, you must be a registered user on the e-filing portal.
• The intimation must be issued by the Income Tax department under either Section 143(1) or Section 154.
• The intimation must be issued by the Income Tax department under either Section 143(1) or Section 154.
• If you had any pending refunds or demands that have been adjusted for the current assessment year, your rectification request should be submitted only for that respective assessment year.
• Rectification requests are only permitted under specific conditions known as “mistakes apparent from records.” These records include documents such as Form 16, Form 26AS, deduction proofs, income statements, and others that serve as the basis for rectification.

Differences between Revised Return and Rectification:

Rectification can only be initiated after the return is processed or upon receipt of an intimation under Section 143(1). If rectification is sought for an order, it must be filed within 4 years from the end of the financial year in which the order requiring rectification was passed. However, a revised return can be filed before the assessment is completed or before the end of the relevant assessment year, whichever occurs first.

Conclusion: 

Taxpayers must carefully calculate the tax implications and exemptions before filing income tax returns. The Income Tax Act‘s Section 154 only promotes incorrect fixes that are evident from tax records. A correction request needs to be created online if your ITR was submitted online. Before submitting an application for rectification, thoroughly read the IT department’s requirements.