Rectification & Revision of Income-Tax Returns (Sec 139/154)
Even after carefully filing your Income-Tax Return (ITR), you might discover errors or omissions. The Income Tax Act, 1961, provides mechanisms for correcting such mistakes through Rectification (under Section 154) and Revision (under Section 263/264).
Rectification of Mistake (Section 154)
Section 154 of the Income Tax Act allows for the rectification of any mistake apparent from the record. This means an error that is obvious and does not require any deep investigation or debate to ascertain. Common examples include:
- Clerical or arithmetical errors.
- Mistakes due to oversight or accidental errors.
- Incorrect application of a provision of law, where the error is self-evident.
Who Can Initiate Rectification?
- Assessing Officer (AO): The AO can rectify any order passed by them.
- Taxpayer: You can apply for rectification if you discover an apparent mistake in any order passed by the tax authorities (e.g., intimation under Section 143(1)).
Procedure for Rectification
If you wish to apply for rectification:
- Log in to the e-filing portal.
- Navigate to the 'e-File' > 'Income Tax Returns' > 'Rectification' option.
- Select the relevant assessment year and the order to be rectified (e.g., Section 154 order, Section 143(1) Intimation).
- Specify the reason for rectification (e.g., "Taxpayer is agreeing for the rectification of mistake").
- Submit the application.
Time Limit: An order under Section 154 can be rectified within 4 years from the end of the financial year in which the order sought to be rectified was passed.
Revision of Orders (Sections 263 & 264)
Revision provisions are broader than rectification and deal with errors that are not necessarily apparent from the record but indicate that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue (Section 263) or erroneous and not prejudicial to the interest of the revenue (Section 264).
Revision by Commissioner (Section 263)
This section empowers the Principal Commissioner or Commissioner of Income Tax (PCIT/CIT) to call for and examine the record of any proceeding under the Income Tax Act if they consider that any order passed by the AO is:
- Erroneous: Due to incorrect application of law, non-application of mind, or failure to conduct proper inquiries.
- Prejudicial to the interest of the revenue: This usually means the order resulted in a loss of legitimate tax revenue for the government.
Consequences: If an order is revised under Section 263, it can lead to an increased tax demand or reduced refund for the taxpayer.
Revision by Commissioner on Application of Assessee (Section 264)
Section 264 allows a taxpayer to apply to the PCIT/CIT for revision of an order passed by an authority subordinate to them. This typically applies when the order is erroneous, but not prejudicial to the interest of the revenue (e.g., an order that causes genuine hardship to the taxpayer).
Unlike Section 263, which is initiated by the department, Section 264 is taxpayer-initiated and aims to provide relief where the AO's order might be technically correct but causes an unfair outcome for the assessee.
Key Differences: Rectification vs. Revision
- Nature of Mistake: Rectification is for mistakes apparent from the record; Revision is for orders that are erroneous and (for Section 263) prejudicial to the revenue or (for Section 264) erroneous but not prejudicial.
- Authority: Rectification can be done by the authority who passed the order (AO). Revision is generally done by the PCIT/CIT.
- Initiation: Rectification can be initiated by AO or taxpayer. Section 263 revision is department-initiated; Section 264 revision is taxpayer-initiated.
- Scope: Rectification has a narrower scope (obvious errors); Revision has a broader scope (examining legality/propriety of order).
Understanding these provisions is crucial for taxpayers to ensure their tax affairs are in order and to address any discrepancies or errors that may arise in their Income Tax Returns or assessment orders. Always seek professional advice if you are unsure about the applicability of these sections to your specific situation.