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​RECTIFICATION US 154

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  • Correction under the Income Tax Act,1961
  • Hello readers, in any order passed by the Income Tax Authority concerned, we all understand rectification as correction, so let's review every clause of section 154 in detail with relevant judgment and my significant findings.
  • Now you can read the Bold Italic Act section and its clarification below:
  • (1) To rectify any obvious mistake reported by the Income Tax Authority referred to in section 116,
  • (A) Change any order passed
  • (B) Amendment or deemed intimation under section 143(1)
  • (C) Amendment under section 200A(1)
  • (D) amend any intimation under section 206CB, subparagraph (1).
  • If any MISTAKE APPARENT FROM RECORD is found, the Income Tax Authority referred to in section 116 (which does not include Tribunal) may amend any ORDER passed by it or Intimation under section 143(1) or 200A(1).
  • Note 1 – Order does not necessarily mean Original Order, it includes amended Order and Order. [Wire Industries Ltd. V(1995) 212 ITR 639 SC]
  • Note 2 – Obvious law error can not be rectified under section 154, while apparent record error can be rectified. [ITO V Bombay Dying & Mfg Co. Ltd 1958 34 ITR 143 SC, AIR 1958 SC 875, 1959 SCR 703]
  • Note 3 – Records must show that an error has occurred and that error can be rectified; reference to documents outside the record and the law is inadmissible when applying section 154. [CIT V Metal Pvt Ltd.(1999) 237 ITR 165 SC]
  • Note 4 – Mistake means commission that is not designed and obvious, something that has no two opinions or is debatable. [CIT V Lakshmi Prasad Lahkar(1996) 220 (GAU)]
  • (1A) Where the subject has been considered and settled in any proceedings by way of appeal or amendment related to an order referred to in sub-section ( 1), the passing authority can, for the time being, modify the order under the sub-section in respect of any matter other than the matter so considered and settled.
  • Where an assessee has re-appealed or revised any order referred to in sub-section ( 1), the authority to which the appeal or revision was lodged may rectify any error in the order against which the appeal was lodged, even if it is out of the grounds of appeal or revision.
  • (2) Under other provisions of this section, the authority concerned –
  • (A) may propose an amendment pursuant to subparagraph (1) and
  • (B) make such amendment to rectify any such error which the assessee [or deductor] purchased at the time of notification and, where the authority concerned is the Commissioner (appeals), the Assessing Officer.
  • Income Tax Authority MAY pass suo moto rectification order.
  • SHALL pass rectification order if Assessee notifies the error.
  • CIT (APPEALS) SHALL pass rectification order if it passes the order and error is purchased by Assessing Officer.
  • (3) An provision which has the purpose of raising the penalty or decreasing the reimbursement or otherwise increasing the assessee's (or deductor's) responsibility shall not be rendered under this section unless the authority concerned has informed the assessee (or deductor) of its intention to do so and has given the assessee or deductor a fair opportunity to do so.
  • No order shall be passed under this section without the opportunity to be heard, which increases the assessment or reduces the refund.
  • (4) Where amendments are made under this section, the Income Tax Authority concerned shall pass an order in writing.
  • The directions issued will be in writing only.
  • (5) Where such amendment is made under this section, the Income Tax Authority concerned shall pass an order in writing.
  • (6) If every other alteration has the intention of raising the payment or lowering the reimbursement, a notice of claim in the specified form stating the sum due and that notice of claim shall be considered to be given under section 156 and the requirements of the act shall extend accordingly.
  • Where every change raises the penalty or decreases the rebate, it shall be considered as a note of application under section 156. And will be disposed of in full within 30 days, otherwise the assessee would be deemed the default assessee and be liable to pay interest under section 220 and penalty under section 221.
  • (7) With the exception of Section 155 or subparagraph (4) of Section 186, no amendment under this section shall be made after the expiry of four years (from the end of the financial year in which the order sought to be amended was passed).
  • Using small illustration can be better understood:
  • If section 143(3) passes the order on 10.01.2020
  • The order under section 154 can be passed until 31.03.2024.
  • (8)Without prejudice to the provisions of sub-section (7), where an assessee (or deductor) submits an application under this section to the income tax authority referred to in sub-section ( 1) on or after the first day of June 2001, the authority shall pass an order within a period of six months from the end of the month in which the application is received.
  • (A) Modification or
  • (B) 'refusing all claims
  • The order under this section shall be passed within 6 months from the end of the month in which it receives the request.
  • AND AND
  • As per CIRCULAR No. 14/2001 Dated 9-11-2001 CBDT clarified
  • In view of the absence of any specific time limits for the disposal of a request for rectification pursuant to section 154 and with a view to ensuring the time-limited disposal of rectification applications, the Act inserted a new subparagraph (8) in section 154 to provide that where an assessee applies for an amendment pursuant to this section on or after 1 June 2001 to an income-tax autho However, the overall four-year time limit in the section for passing any rectification order will continue to apply. In other terms, the six-month duration specified in the current sub-section (8) can not, in any conditions, stretch past the maximum four-year term from the end of the financial year in which the order sought to be amended.
  • These amendments take effect from 1 June 2001.
  • Means if 6 months lapse, the authority concerned may also pass order within four years from the end of the financial year in which the order sought to be amended.
  • RELEVANT JUDGEMENTS:
  • 1. When buying obvious mistake from record to the Evaluating Officer's note, he is obligated to send certain request. [Narain(L) V ITO(1970) 78 ITR 26(SC)]
  • 2. The power to correct the error must extend to eliminating the error, the error may be such as to go to the root of order, and its elimination may result in the entire order falling to [Blue Star Engineering Co. (Bombay) Pvt. Ltd (1969) 73 ITR 283]
  • 3. Subsequent Supreme Court interpretation of law would constitute Record's Mistake Apparent. [Seshvatram V CIT(1994) 210 ITR 633 AP
  • 4. ITAT may make rectification subject to Section 254(2)
  • 5. Where an assessment order is not in accordance with the law established by a binding precedent, it would amount to an apparent error in the record for rectification under section 154. [Hindustan Lever Limited Vs JCIT (Calcutta)]
  • 6. Section 154 rectification can not be subject to adding debatable nature. [Shri Punit J. Patel (ITAT Mumbai)]
  • 7. Notice Password Rectification Order U / s. 154 [Aparna Ashram vs. ADIT(E)]
  • 8. Section 154 AO can not refuse rectification of assessee [ACIT Vs Rupam Impex (ITAT Ahmedabad)]
  • "Now, after reading this provision in depth, a problem emerges in my view ... What are the implications if the income tax authority failed to pass order within four years from the end of the financial year in which the order was issued.
  • And You Will Be Shocked To Know That I Found No High Court Or Supreme Court Case And Judgment Thereon So That Whether Asses See Can Presumed That Is Deemed To Be Passed In Favour Of Assessee Or Not.

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