Section 154

Section 154 of the Income Tax Act basically deals with the correction of any error that may or may not have occured in the income tax records of an individual. It also deals with the rectification of errors in the orders of the Assessing Officer.

Section 154 of the Income Tax Act, 1961, pertains to rectification of mistakes in the income tax records or an order passed by the Assessing Officer. Under Section 154, amendments can be made to orders issued under the Income Tax Act, sections 143(1), 200A(1) and 206CB(1). These cover notices issued as intimation before a case is taken up for scrutiny, and those issued for error in TDS and TCS statements.

Features of Section 154

The main points of interest in Section 154 are:

  • The tax authority can send an order under Section 154 either of their own volition or based on an incongruity noticed by the Income Tax Department. This could be an order requesting additional details, a mistake in gender, tax credit mismatch, refund mismatch or advance tax discrepancy, among others.
  • The taxpayer has to be notified before taking any action under this section, especially if the action results in “enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee or the deductor”. This means that if any amendment under Section 154 would result in higher taxes on the assessee, or increase the income or lower the tax exemptions, then the I-T Department is liable to send a written notice and allow the taxpayers to explain themselves, before taking an action. This notice will either come to the taxpayer by post or via email.
  • If an action under Section 154 could result in a reduction in taxes or an increase in exemptions, then the I-T Department is liable to provide refunds to the assessee.
  • If a refund has already been made by the department, but the amount of refund is reduced after the reassessment, then the department will demand from the taxpayer payment of the excess refund.
  • A notice under Section 154 can be issued only up to 4 years after the end of a particular financial year in which a rectification order was passed.
  • If the taxpayer raises an amendment request, the department is bound to respond within 6 months of receipt of such a request.

How To Apply For Rectification?

The process of filing an online rectification request for Sections 154 and 143(1) are the same as that in case of rectifying an Income Tax Return.

Before applying for rectification, you need to examine carefully the order against which you seek to file a rectification. You need to ensure that the calculations are correct and that all exemptions and deductions taken into consideration. It is possible that your calculations are wrong and the Centralised Processing Centre, Bengaluru, has made corrections to the tax statement. To cross-check this, compare your Income Tax Return with Form 26AS. Seek the help of a tax consultant if you are not sure.

If after checking, you still find a mistake in the tax details, you can apply for a rectification under Section 154. These mistakes cannot be additions or omissions in income or investment declaration. The Income Tax Act specifies that the mistakes for which rectification can be sought should be “one that is apparent from the records” and must not require any debate or investigation.

You can file a rectification application through the Income Tax e-filing website. Rectifications of intimation under Sections 200A(1) and 206CB will require an online correction statement to be filed.

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