Section 154 of Income Tax Act

Section 154 of Income Tax Act pertains to rectifying mistakes in an income tax return or assessment. It allows the taxpayer or the tax assessing officer to correct any mistakes or errors in the return or assessment within a specified period. It can include mistakes in computation, errors in claiming deductions or credits, and other similar issues. Depending on the nature of the mistake, the taxpayer or the assessing officer can make the rectification and is subject to certain conditions and limitations.

Know about: section 54 of income tax act

Section 154 of Income Tax Act: An overview

Section 154 of the Income Tax Act allows correcting any errors or omissions that may have been made in the original return or assessment by the taxpayer or the tax department. Under this section, the taxpayer or the tax department can apply to the Assessing Officer (AO) to rectify the mistake. The AO can then make the necessary correction and issue a revised assessment order. This section applies to both direct and indirect taxes.

Section 154 of Income Tax Act: Features

• Section 154 of the Income Tax Act pertains to the Income Tax Officer’s (ITO) power to rectify an assessment order.
• As per Section 154 of the ITA, rectifying any mistake or error in any order or direction passed by the Income Tax Department.
• The rectification order can be passed by the ITO, Assistant Commissioner of Income Tax (ACIT), or the Commissioner of Income Tax (CIT).
• An appeal can be made to the Income Tax Appellate Tribunal (ITAT) against the rectification order.
• This section applies to the assessing officer and the commissioner of income tax.
• The rectification can also be made for any omission or wrong statement in the assessment order.
• The mistake or error must be apparent from the record of the case, and the rectification can only be made within four years from the end of the relevant assessment year.
• The rectification can be made by the assessing officer or the commissioner suo motu or on an application made by the taxpayer.
• The rectification can be made for mistakes or errors in various orders or directions, including assessment orders, penalty orders, and interest orders.
• The rectification can be made for any apparent mistake from the record, including a mistake in the computation of income, tax liability, or any other error in the assessment order.
• The rectification can be made without issuing a notice to the taxpayer if the mistake or error is apparent from the record.
• The rectification order passed under this section can be appealed to the higher authorities as per the Income Tax Act.

Who may file a rectification under Section 154?

Eligibility to file a rectification under Section 154 of the ITA, 1961, is limited to the person whose return of income has been processed under Section 143(1) or Section 143(3) of the Act. The rectification can be filed to correct any mistake apparent from the records in the original return of income. The rectification must be logged within four years from the relevant assessment year’s end. The person must furnish any additional documents or evidence required to support the rectification.

Section 154 of Income Tax Act: How to file rectification 

To file a rectification under Section 154 of the Income Tax Act, an individual must first log in to their account on the e-filing portal of the Income Tax Department. Once logged in, they should select the option for “Rectification” from the menu and then select “rectification under Section 154.” The individual will then be prompted to fill in the details of the mistake or error that needs to be rectified, along with any supporting documentation. 

After you submit the rectification request, the Income Tax Department will process it and issue a response. If the rectification request is accepted, the individual’s original tax return will be corrected, and if it is rejected, the individual will be allowed to appeal the decision.

Section 154 of Income Tax Act: Things to remember 

Some key things to remember about this section include the following:

• The correction must be made within four years after the completion of the relevant assessment year.
• In order to avoid any confusion, the correction must be submitted in the same format as the initial return.
• The tax liability or refund arising from the correction will be calculated based on the original return, not the corrected one.
• If the correction results in additional tax liability, interest may be charged under Section 156.
• The amendment should not be made to claim any additional or new relief or deduction.
• If the correction results in a refund, it will be paid without interest.
• The assessing officer or the commissioner must pass the rectification order. And it depends on the nature of the mistake and the amount involved.
• The rectification order is subject to appeal and can be challenged in the higher courts.

It is important to note that Section 154 is only to correct errors or omissions, not to make changes to the original return to reduce tax liability or increase a refund. It is considered tax evasion and may result in penalties and prosecution.

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