Section 154 of the Income Tax Act: How To File Rectification Under Section 154(1)?

Once an Income Tax Return (ITR) is filed and verified, it is taken up for processing by the Centralised Processing Centre (CPC) of the Income Tax Department. The CPC thoroughly scrutinises the tax return to ensure there are no errors, omissions or mistakes.

However, if there are any discrepancies in the return, the CPC shall pass an order under section 154 of the Income Tax Act or issue an intimation under section 143(1) highlighting them. In such cases, the taxpayer can file a request for rectification to correct the errors.

Here is everything you need to know about section 154 of the Income Tax Act and how to file a rectification request through the income tax e-filing portal.

Read More About-eFiling Income Tax

What Is Section 154 of the Income Tax Act?

Section 154 of the Income Tax Act of 1961 deals with provisions that enable tax authorities to correct mistakes in any order or intimation passed by them. However, for the tax authorities to rectify errors or mistakes made in the intimation or order, the concerned taxpayer must file a rectification request through the income tax portal.

Here is a hypothetical example of how a rectification request under section 154(1) of the Income Tax Act works.

Assume that you filed an income tax return claiming business expenses to the tune of ₹5 lakh as a deduction to reduce your taxable income. The assessing officer (AO) disallows the deduction ₹5 lakh claiming it was not spent for the purpose of business. Due to this, you are now required to pay an additional tax of about ₹50,000.

Since there is an error in the assessment, you decide to file a rectification request under section 154 of the Income Tax Act. Along with the rectification request, you attach documentary evidence proving that the expenses were incurred in connection with your business.

After reviewing the request, the AO decides to rectify their order and allow the ₹5 lakh as a deduction from your total business income and cancels the demand for additional tax payment. The assessing officer then passes a rectification order u/s 154.

When Should You File a Rectification Request Under Section 154 of the Income Tax Act?

As a taxpayer, you can only file a rectification request under certain circumstances. Here is a quick overview of what they are.

• An income tax return must have been filed with the Income Tax Department (ITD).
• The income tax return must have been processed by the Centralised Processing Centre (CPC).
• An intimation under section 143(1) or section 154 of the Income Tax Act must have been passed by the CPC.
• There must be an apparent mistake or error in the intimation or order passed by the CPC or in the computation of income or tax liability.

Note: A rectification request under sec 154 of the Income Tax Act can only be filed within four years from the end of the financial year in which the order or intimation was passed.

How to File a Rectification Request Under Section 154 of the Income Tax Act?

The process of filing a rectification request under section 154 of the Income Tax Act of 1961 is fairly simple. Here is a step-by-step guide that can help you initiate the request.

• Step 1: Visit the official Income Tax website and click on the ‘Login’ button at the top right corner of the webpage.
• Step 2: Enter your PAN and password to log into your income tax e-filing account.
• Step 3: Once you are logged in, click the ‘Services’ tab and then on ‘Rectification Of Order Passed By CPC’ under the ‘Rectification’ section.
• Step 4: Click on ‘New Request’.
• Step 5: Under the ‘Order passed under’ label, click on ‘Income Tax’.
• Step 6: Choose the assessment year for which you want to file the rectification under section 154 of the Income Tax Act and click ‘Continue’.
• Step 7: Select the type of rectification request from the following three options: Return Data Correction (Offline), Tax Credit Mismatch Correction or Reprocess the Return.
• Step 8: Follow the instructions displayed on the income tax website and enter all the relevant details including uploading documentary evidence to support your claim.
• Step 9: Submit the rectification request.

Once the rectification request is submitted, you will receive a transaction ID. You can use this ID to track the progress of your request. Alternatively, you can also track the progress by clicking on the ‘Rectification Of Order Passed By CPC’ under the ‘Services’ tab of your income tax e-filing account.

Conclusion

The Centralised Processing Centre (CPC) may at times make mistakes or omissions when processing your income tax return. As a taxpayer, you have the right to file a rectification request against errors in tax return processing as per section 154 of the Income Tax Act. By following the online rectification process explained above, you can correct such mistakes promptly and ensure accuracy in tax assessments.

FAQs