Section 154 of Income Tax Act: Rectification of Mistake & Section 155: Other Amendments*******

Clipped from: https://taxguru.in/income-tax/section-154-rectification-mistake-section-155-amendments.html

Apeksha Gupta

Apeksha Gupta

Sometimes there may be a mistake in any order passed by the Assessing Officer. In such a situation, mistake which is “apparent from the record” can be rectified under Section 154 within 4 years from the end of the financial year in which the order sought to be amended was passed.

The word ‘mistake’, has a special significance here. It covers not merely clerical or arithmetical errors but also wrong application of the provisions of law. The expression “mistake apparent on record” is inherently indefinite in scope and subjective in the sense that what may be a mistake for one may not be a mistake for another.

In addition to the above, Section 155 also introduces some instances which deems certain circumstances to be “mistake apparent on record” in the several situation as a result of subsequent events, and then accordingly Section 154 can be applied by the Assessing Officer.

Object of Section 155-

Section 155 serves two purposes-

(i) It deems the amendments necessitated in the circumstances, mentioned therein, to be mistake apparent from the record warranting the application of Section 154(1).

(ii) It enlarges the period of limitation available for such action specified in Section 154(7) and provides in each of the cases, a separate time limit of 4 years commencing from different dates mentioned in sub-section (1) to (18) of Section 155.

Section 154: Rectification of Mistake

154(1)- With a view to rectifying any mistake apparent from the record an income- tax authority referred to in Section 116, such as AO, CIT(A), etc. may, –

(a)  amend any order passed by it under the provisions of this Act;

(b) amend any intimation or deemed intimation under Section 143(1);

(c) amend any intimation under Section 200A(1);

(d) amend any intimation under Section 206CB(1).

154(1A)- However, if the matter in the order is subject matter of appeal & revision, the concerned income tax authority cannot amend the order. 

154(2)- Rectification can be made:

√ On his own motion, or

√ On application by the assessee or where the authority concerned is Commissioner (Appeals), by the Assessing Officer also.

154(3)-Authority concerned should give Notice and reasonable opportunity of being heard where rectification has the effect of-

√ Enhancement of assessment;

√ Reduction of refund;

√ Increasing liability of the assesse.

154(4)- An order of rectification must be in writing. Refusal to make rectification shall also require an order under this section.

154(5)- Where any such amendment has the effect of reducing the assessment or otherwise reducing the liability of the assesse, the AO shall make any refund which may be due to such assesse.

154(6)- Where any such amendment has the effect of enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assesse, the AO shall serve on the assesse, a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be issued under Section 156 and the provisions of this Act shall apply accordingly.

154(7)- Time limit for Rectification:

Within 4 years from the end of the FY in which the order sought to be amended was passed. However, the time limit shall not apply to a case where amendment is made u/s 155.

154(8)- Time limit for Rectification:

where assesse has applied- Without prejudice to the provision of Section 154(7), the authority shall pass an order within 6 months from the end of the month in which the application has been filed, by-

(a) making the amendment; or

(b) refusing to allow the claim.

Section 155: Other Amendments

Section 155 provides some instances which deems certain circumstances to be mistake apparent on record, for the applicability of Section 154, in several  situations as a result of subsequent events, which are set out hereunder:-

Sub- Section of Section No. 155Initial Event-  Order passed by AOSubsequent Event for Section 154 ApplicationAs a result of subsequent events, Section 154, applied by the AO, within the 4 years from the end of prescribed Financial  Year (“FY”)
(1A)(a) On the assessment or reassessment of the firm/AOP/BOI(b) On any reduction or enhancement made in the income of firm/AOP/BOI(c) On any Order passed under Section 245D(4)Remuneration to any partner is not deductible under Section 40(b)AO may amend the order of the assessment of the partner/Member , from the end of the FY, in which the final order was passed in the case of firm/AOP/BOI.
(2)Share of the Member in the income of the AOP or BOI has not been included, or, if included, is not correct
(4)Where, loss or depreciation has been recomputed, as a result of proceedings initiated u/s 147.In consequence thereof, it is necessary to recomputed the total income of the assesse, for the succeeding year or years to which the loss or depreciation allowance has been carried forward and set off.AO may proceed to recomputed the total income in respect of  such year or years, from the end of the FY, in which the Order was passed u/s 147
(7B)Where, capital gain arising from the transfer of a capital asset is not charged u/s 45 by virtue of the provisions of Section 47(iv) and 47(v).Subsequently, such transfer is deemed u/s 47A to be income chargeable under the ‘Capital Gain’ head at any time but within the 8 years from the date of transfer, by reason of-(a) Such capital asset being converted by the transferee company into, or being treated by it, as stock-in-trade of business.(b) When the holding company ceasing to hold the whole of the share capital of the subsidiary company.AO may recompute the  total income of the transferor company , from the end of the FY, in which the capital asset was so converted or treated or in which the holding company ceased to hold the whole of the share capital of the subsidiary company
(10A)Where, Capital gain arising from the transfer of a long – term capital asset, is charged to tax.Subsequently, within a period of 6 months after the date of such transfer, the assesse had made any investment or deposit in any specified asset within the meaning of Section 54E.AO shall amend the order of assessment so as to exclude the amount of capital gain , from the end of the FY, in which the assessment was made
(11A)Where deduction u/s 10A or 10B or 10BA has not been allowed  on the ground that such income has not been received in convertible foreign exchange in India,/ not been brought into India , with the approval of the RBI, or such authority mentioned in the law.Subsequently, such income or part thereof has been received in or brought into India.AO shall amend the order of assessment, so as to allow deduction u/s 10A, 10B, 10BA, as the case may be, from the end of the financial year, In which such income is so received in, or brought into India
(14)Where in any intimation or deemed intimation u/s 143(1), credit for TDS or TCS has not been allowed on the ground that Certificate as required u/s 203 or 206C was not filed with the returnSubsequently, such certificate is produced before the AO within the 2 years from the end of the AY in which income is assessable.Proviso to this sub-section:If assessee does not disclose, income from which tax at source(“TAS”) has been deducted or on which TAS has been collected, in the return of income.AO shall amend the order of assessment or any intimation or deemed intimation u/s 143(1), from the end of the FY, in which such credit was liable to be allowed
(14A)Where in any intimation or deemed intimation u/s 143(1), credit for Income Tax paid in any country outside India or a specified territory outside India referred to in Section 90, 90A, 91 has not been given on the ground that the payment of such tax was under disputeSubsequently, such dispute is settled; and the assessee within 6 months from the end of the month in which dispute is settled, furnishes to the AO evidence of settlement of dispute and evidence of payment of such tax along with an undertaking that no credit in respect of such amount has been claimed.Proviso to this sub-section:Credit of tax which was under dispute shall be allowed for the year in which such income is offered to tax or assessed to tax in IndiaAO shall amend the order of assessment or any intimation or deemed intimation u/s 143(1), from the end of the FY, in which such credit was liable to be allowed
(15)Where capital gain arising from the transfer of a capital asset, being land or building or both, is computed by taking the full value of the consideration is taken as adopted or assessed by any authority of SG for the purpose of payment of stamp duty.Subsequently, such value is revised in any appeal or revision or reference referred to in Section 2(b).AO shall amend the order of assessment so as to compute the Capital Gain by taking the revised value, from the end of the FY, in which the order revising the value was passed in that appeal or revision or reference
(16)Where capital gain arising from the transfer of a capital asset, being transfer by way of compulsory acquisition under any law and the compensation is enhanced or further enhanced as referred in Section 45(5), to be the full value of consideration for the purpose of computing capital gainSubsequently, such compensation or consideration is reduced by any Court, Tribunal or any other AuthorityAO shall recompute the total income of the assessee for such  previous year, from the  end of the FY, In which the order reducing the  compensation was  passed by the Court, Tribunal or any other Authority
(18)Where any deduction in respect of any surcharge or cess, which is not allowable as deduction u/s 40, has been claimed and allowed in the case of an assessee in any previous year.Such claim shall be deemed to be under-reported income of the assessee for such previous year for the purposes of section 270A(3), notwithstanding anything contained in section 270sA(6).Proviso to this sub-section:Where the assessee makes an application to the AO in the form (Form 69) and within the time(up to 31 03 2023), requesting for recomputation of the total income of the previous year without allowing the claim for deduction of surcharge or cess and pays the amount due thereon within the specified time.[As per Rule 132]AO shall recompute the total income of the assessee for such previous year, from the end of the FY commencing on the 01 04 2021

[Note : Only those sub-sections have been discussed in the table above, which in the opinion of the Author of this article may be of use to most of the assesses]

CONCLUSION

As can be seen from the table above, there are numerous circumstances, which have been covered under Section 155, which deems such circumstances to be “mistake apparent on record” giving power to the Assessing Officer to rectify the same.

The newest addition in the list, is Sub-Section (18) of Section 155. The said subsection was inserted vide Finance Act, 2022. It is in relation to those assessees, who had claimed Education Cess/ Surcharge as part of their expenses u/s 37. This was based on decisions of certain High Courts including the High Court of Rajasthan and High Court of Bombay.

Subsequently, amendment was made, with retrospective effect, not to allow deduction of the claim for Education Cess and Surcharge, paid by the assessee on their income. In order to recover the tax amount on the deductions claimed by the assessee earlier, for which the time limit for initiating assessment proceedings, had already been expired, sub-section (18) was inserted in Section 155.  As a result of the said subsection, the Assessing Officer directly got the power to add the deductions already claimed earlier to the income of the assessee company without selecting the case of the assessee for scrutiny or reopening the case of the assessee for the particular assessment year.

Section 155 is an important tool which helps the Assessing Officer to make additions to the income of the assessee without taking recourse to assessment or reassessment proceedings.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s