Section 154 of the Income Tax Act 1961 offers significant relief to taxpayers by allowing them to rectify errors in their income tax records. Mistakes in tax reporting can lead to increased tax liabilities or reduced refunds, causing financial strain. This section allows authorities to correct such discrepancies, enabling taxpayers to claim the benefits they rightfully deserve.
Section 154 of the Income Tax Act 1961 deals with the rectification of errors in income tax records. It specifically addresses mistakes made by the assessing officer or discrepancies in official tax documents. Under this section, authorities can amend orders passed under Sections 143(1), 200A(1), and 206CB(1) of the Income Tax Act. This includes addressing notices issued before scrutinizing a case and correcting errors found in Tax Collected at Source (TCS) statements and Tax Deducted at Source (TDS) records.
Here are some key features of Section 154:
The Income Tax Department must respond to a rectification request within 6 months of receiving it.
The authorities can issue a notice under Section 154 within 4 years of the fiscal year for which they passed the order.
If the rectification leads to increased exemptions or reduced tax liabilities, the IT Department will provide a refund to the taxpayer. Conversely, if the taxpayer has already received a refund and the rectification reduces the approved amount, the taxpayer must repay the excess.
The Commissioner can rectify an order based on a taxpayer’s application or initiative.
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Section 154 allows taxpayers to submit a rectification request for evident errors in their income tax returns. Here are some common types of errors that can be corrected:
If the taxpayer has an order under appeal, the assessing officer can rectify only those matters that the appeal has not yet decided. This ensures that the rectification process does not conflict with ongoing legal proceedings.
The income tax authority can initiate rectification during their course of action, or the taxpayer can initiate it through an application. If the Appeals or Commissioner passes an order, discrepancies brought to their notice can be rectified accordingly.
The concerned authority cannot pass an order of rectification if more than 4 years have passed since the assessment year in question. The authorities calculate the 4-year period from the end of the fiscal year in which the taxpayer requested rectification. If the authorities set aside or revise an order, they begin the 4-year period from the date of the fresh order.
If a taxpayer applies for rectification, the authority must amend the order or deny the claim within 6 months of receiving the application.
Before applying for rectification under Section (U S) 154, taxpayers should consider the following:
Taxpayers should note that the concerned authority can only make a rectification that may increase tax liability or reduce tax refunds after issuing a notice to the taxpayer and providing an opportunity to present their view.
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It’s essential to distinguish between filing a revised return and a rectification request:
Revised Return: Taxpayers file this to correct omissions or incorrect statements in the original return. They can file a revised return data correction multiple times within the prescribed time limit, typically before the end of the assessment year.
Rectification Request: The taxpayer or the department can file this to correct discrepancies in the tax records. The department must respond to the rectification request within 6 months of receiving it, and the authorities can make rectifications up to 4 years from the end of the fiscal year.
Section 154 of the Income Tax Act 1961 is a vital provision for taxpayers, allowing them to rectify errors in their tax records. By understanding the process and features of this section, taxpayers can ensure accurate tax reporting and avoid unnecessary financial strain. The rectification process, while straightforward, requires careful attention to detail to ensure that all errors are accurately identified and corrected.
The time limit for filing a rectification request is 4 years from the end of the fiscal year in which the order is passed.
Yes, taxpayers can file a rectification request online through the Income Tax Department’s portal.
Section 154 allows rectification of factual errors, arithmetical mistakes, clerical errors, and errors due to the omission of mandatory provisions of law.
If a rectification leads to a decrease in the refund amount, the taxpayer must repay the excess amount that was previously refunded.
Yes, if a rectification reveals that the tax liability was previously understated, the concerned authority may increase the tax liability after issuing a notice to the taxpayer.
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