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Rectification of Income Tax Return u/s 154

Updated on: 21 May, 2024 01:23 PM

You must have come across a situation in which you have filed your ITR and later realized that you need to make some corrections. In such a case, you can file a rectification under section 154 of the Income Tax Act.

Rectification is normally done after receiving intimation u/s 143(1) for mistakes, which you can apparently notice from the available documents. But, if there is an error or omission, then revision of ITR is required and not rectification.

Once you file an Income Tax Return, the ITD processes it and sends an intimation. The intimation contains the details of the return you have submitted. In case of a mismatch, section 154 comes into effect.

Let's understand the procedure and various aspects related to rectification in detail.

What is Section 154?

  • Only an authorized officer can issue a notice under section 154 of Income Tax Act.
  • If such a rectification results in an increase or decrease in the tax liability or a reduction of refund, then it becomes important to provide notice.
  • Excess refund credited to the account of the taxpayer shall be demanded through Section 154 of income tax.
  • The taxpayer’s application for rectification should be disposed off within 6 months of the end of the month in which the application is received.
  • Where rectification is done on its own, then such rectification can take place up to four years from the end of the FY in which the rectification order is passed.
  • Any order which is a subject matter of appeal or revision cannot be rectified.
  • If any order is passed by the Commissioner (Appeals), then he too can rectify the mistake.

What Errors can be Corrected by Filing a Rectification?

The Income Tax Department allows a rectification request when there is a mistake in your Income Tax Return. The following errors can be rectified by filing a rectification request -

  • An error of fact
  • An arithmetic mistake,
  • A small clerical error
  • Error due to overlooking of compulsory provisions of law.

When and Who Can File the Rectification?

A rectification request can only be filed for returns that are already processed in CPC Bangalore. If there is a change in the income upon rectification, instead of a rectification request, a revised ITR should be filed. Also, no new deductions or exemptions are allowed to be claimed.

A rectification request can be filed by a person -

  • Who is filing the return
  • The Income Tax Authority can also rectify a mistake on its own if it appears on the face of the record.

Orders Which can be Rectified u/s 154

The key lies in the fact that rectification cannot be made freely for any mistake. Also, there is a specified process through which rectification can be resorted to. The following orders can be rectified on request or on the discretion of the income tax officer as per section 154

  • Any order passed under any provisions of the Income-tax Act
  • Any intimation or deemed intimation under section 143(1)
  • Any intimation sent under section 200A(1) in relation to the processing of TDS return
  • Any intimation under section 206CB(1) in relation to the processing of TCS return

“Return processed at CPC can only be Rectified. Even if it is a belated return.”


Rectification of an Order Which was Subjected to Appeal or Revision

Rectification u/s 154 can be done for any matter that is not considered and decided in appeal/ revision. Further, any matter which has already been considered and decided in any proceedings by way of appeal or revision, the rectification of such matter is not possible under section 154.

Example:

Suppose the A.O.(Assessing officer) has made the following adjustments to the returned income of PQR Ltd.

  • Certain expenses of Rs. 1,00,000 were disallowed.
  • Addition u/s 43B made for Rs 1,25,000 as proof of payment was not furnished.

Now, the following is the current position of the assessee, i.e., PQR Ltd.

  • The assessee has already filed an appeal against the first matter of disallowing Rs 1,00,000 expenditure, and the appeal is decided against the assessee.

On submitting the rectification application, the Assessing Officer rejected the same, giving reasoning that this particular case has already been decided by the appellate authority; hence, no rectification request can be admitted in such a scenario.


How to File a Rectification Online?

The power to seek rectification is mutual. This means it can also be exercised by an IT officer if he finds the necessity of corrections in his decision. You can easily raise an online request for rectification by following the simple series of steps mentioned below:

  1. log in to the e-filing portal with a valid user ID and password.
  2. Click on the ‘Services’ drop-down and select Rectification from it.
  3. Click on ‘New request’ on the rectification page.
  4. a. Once on the ‘New Request’ page, your PAN number gets auto-filled. Now, you have to select between wealth tax and Income Tax.
    b. Select assessment year from the drop-down menu and click ‘continue.’
  5. The rectification requests can be classified as follows -
    Income Tax Rectification Reprocess the return
    Tax credit mismatch correction
    Additional information for 234C interest
    Status Correction
    Exemption section correction
    Return data correction (Offline)
    Return data correction (Online)
    Wealth Tax Rectification Reprocess the Return
    Tax Credit Mismatch Correction
    Return Data Correction (XML)

5.1 Income Tax Rectification - Reprocess the Return

  • Select Reprocess the return as the request type.
  • Submit the rectification request.
  • On submitting the request, you are taken to the e-verification page.

5.2 Income Tax Rectification - Tax Credit Mismatch Correction

  1. Select tax credit mismatch correction as the request type
  2. The schedules are auto-populated based on the records available in the corresponding processed return.
  3. Select the schedule and click on ‘edit’ or ‘delete’ to make changes.
  4. Enter details in these schedules - TDS on salary details, TDS on other than salary details, TDS on transferring immovable property, TCS, self-assessment details, or advance tax. Click ‘save as draft.’
  5. Click Continue to submit the request.

Generation of reference number ensures the successful submission of your rectification request with the IT Authorities. Order under section 154 will be received by you after the request is processed successfully.

In a nutshell, the Rectification of the income tax return gives you and the income tax officer the same right to make corrections in the return. You cannot seek corrections after 4 years from the end of the financial year (from the passing of the order sought to be rectified).


Pre-Requisites to File Online Rectification Request U/s 154

For filing a valid Rectification Request u/s 154 following pointers should be adhered to

  • The Income Tax Return corresponding to the relevant Assessment Year should have been processed in CPC, Bangalore.
  • The Income Tax Department must have issued either intimation u/s 143(1)/154.
  • In case Intimation u/s 143(1)/154 is not available; then you can apply for a new service request for intimation on the ITR e filing website.
  • In case you have mistakenly submitted/uploaded the wrong documents, you can withdraw your rectification request by the end of the day of the request. And submit a new rectification request.
  • Submission of Rectification can also be made in cases where rectification rights are transferred to AO.
  • Only online rectification can be filed in the case of electronic returns.
  • You can file a rectification request only if the previous rectification request is processed (if any)
  • You need not upload an XML file in case you are correcting Tax Credits.
  • You should be a registered user on an efiling portal to file rectification requests.
  • In case the refund has been adjusted against the demand of other Assessment Years. In such a case, if problems are related to the other assessment year, then rectification requests should be filed for the other assessment years, i.e., the demand year, and not for the current year.

Example: For F.Y.2021-22, an income tax refund amounting to Rs.45,000/- was arising. However, there was a demand pending for F.Y. 2017-18 amounting to Rs. 15,000 due to TDS not reflecting in 26AS, but now Form 26AS is updated.

While the return for F.Y. 2021-22 was processed, CPC adjusted the demand of Rs. 15,000 for F.Y. 2017-18 with a refund of F.Y. 2018-19 and the net amount of refund issued Rs. 30,000/- Now, in this case, a rectification request should be filed for F.Y. 2014-15.

The ITR filing season is here, and the Income Tax Department has already started online ITR filing for individuals. Whether you want to file your ITR for FY 23-24 or need tax consultation, you can contact our tax experts, who will help you with end-to-end ITR filing services. File ITR Now to avoid last-minute hassle and get your refund quickly.


Frequently Asked Questions

Q- How do I withdraw a rectification request?

Taxpayers can withdraw the rectification request within the end of the day of the request.


Q- How do we raise a rectification request for Tax credit mismatch?

It can be done by making a login into the income tax site and selecting the income tax credit mismatch under ‘Rectification’ in the ‘e-file’ tab, and then filling in the required details as explained above.


Q- Is it possible to change the assessment year in ITR (already verified and got intimation)?

No, this cannot be done now, as filing revised returns for previous years is not permitted under the law.


Q- Can an appeal be filed with CIT after a rectification return?

Yes, an appeal can be filed against the rectification order.


Q- I got an excess income tax refund credited to my bank. I filed a revised return. But before processing it, I got an excess refund in my bank account. What should I do?

Either pay the excess refund amount at the time of filing the revised return and enter the challan details while filing the revised return. Alternatively, after processing of revised return, there will be an outstanding demand for the amount of excess refund in Intimation u/s 143(1) for the revised return, and you need to pay the same later on receipt of Intimation.


Q- What is the process to intimate tax department if tax refund is less than claimed in ITR?

If you have received less refund, then while processing the return, the income tax department may have some outstanding demand which is intimated through intimation under 143(1). To review this, log in to your income tax portal> My Account>Tax credit mismatch. If you agree, then select agree, and if not, you have to provide reasons for the same.


Q- I’m getting an invalid CPC communication reference number while filing rectification for income tax return. What should I do?

Communication reference no. auto-populates after the selection of the year for which rectification is to be filed. Also, it can be traced from the order/ intimation received for which rectification is to be filed.


Q- How do I pay outstanding demand on 154?

Tax Demand can be paid via Challan 280. This challan can be filled online from TIN-NSDL website, and demand can be paid via online banking/debit card, etc.


Q- What is the time limit for rectification under section 154?

Rectification can be made upto 4 years from the end of the financial year in which the order sought to be rectified was passed. Suppose the order for which you want to submit a rectification request was issued in the Financial Year 2015-16. Then you can submit a rectification request u/s154 for 4 years, i.e., till 31st March 2020.


Q- What is intimation under Section 154?

Sometimes there may be a mistake in any order passed by the Assessing Officer. In such a situation, mistakes that are apparent from the record can be rectified under section 154.


Q- How do you file rectification?

Rectification can be filed online after making a login on your income tax India e-filing account. For the step-by-step process, please refer above.


Q- What is the difference between revised return and rectification return?

Revised returns can be filed before the completion of the assessment or before the end of the respective assessment year, whichever is earlier. However, rectification can be filed after processing the return or after receiving intimation u/s 143(1). It can be filed upto 4 years from the end of the financial year in which the order sought to be amended was passed.


Q- Can appeal be filed against intimation u/s 143 (1)?

Yes, an appeal can be filed against the intimation u/s 143 (1) before the CIT(A).


Q- Is the Latest communication reference number required for submitting rectification u/s 154?

There is no requirement to quote the communication reference number for submitting a rectification request u/s 154 online as per the new changes, as the latest communication reference number auto-populates.


CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.

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