Query on section 154

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CA. Mohit chaturvedi (Querist)
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29 March 2015 If the department has not corrected or rectified your demand and as per section 154, rectification can be made within 5 years, and the time has elapsed then i want to know whether may such demand rectified or not after completion of 5 years....?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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29 March 2015 Within 4 years from end of relevant AY, if AO comes to know that there is mistake Or Within 6 monts from end of month in which assessee has made application for rectification. So,if assessee comes to know that there is mistake in return which is not debatable then he can make application to AO on his own and AO have to rectify it within 6 months. But Assessee can make application within 4 years fron end of relevant AY. For Ex. for AY 2009-10, timelimit is 31-3-2014. i.e.4 years from 31-3-2010.

CA. Mohit chaturvedi

CA. Mohit chaturvedi (Querist)
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14 April 2015 No sir, because department sent me notice u/s 245 as on 19th august 2014, i.e. later than 31st march 2014, then how can it possible to make an application to department to rectify the mistake after completing 4 years....?

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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10 August 2024 Section 154 of the Income Tax Act deals with the rectification of mistakes in the orders passed by the income tax authorities. Here’s a detailed explanation relevant to your query:

### **Understanding Section 154: Rectification of Mistakes**

**1. **Time Limit for Rectification:**
- **Section 154(7)** provides that a rectification application can be made within **four years** from the end of the financial year in which the order sought to be rectified was passed.
- This means if an order was passed on or before March 31, 2019, you have until March 31, 2023, to file an application for rectification under Section 154.

**2. **Application of Section 154:**
- **Rectification of Mistakes**: Section 154 allows rectification of mistakes that are apparent from the record. This includes mistakes of arithmetic nature, errors in computing income or tax, or incorrect application of law.
- **Scope**: It does not cover changes in the order based on new facts or evidence that were not available at the time of the original order.

**3. **Situations Beyond the Four-Year Limit:**
- **Order Beyond the Rectification Period**: If the time limit for rectification (four years) has elapsed, the department generally cannot entertain applications for rectification under Section 154. This is based on the principle that rectification must occur within a prescribed time limit to ensure administrative efficiency and finality of assessments.
- **Other Remedies**: If a rectification application is beyond the four-year period, alternative remedies should be considered:
- **Appeal**: If there’s a mistake in the demand or assessment, and it’s outside the rectification period, you might have to file an appeal or review with the relevant authority. Appeals typically need to be filed within a specific period from the date of the order.
- **Revision**: Under Section 264, a revision application can be filed to the Commissioner of Income Tax within one year of the order, if the order is prejudicial to the assessee.

**4. **Notice Under Section 245:**
- **Relevance**: Notice under Section 245 deals with adjustment of refund against demand, not with rectification. The notice under Section 245 is related to recovery of demand rather than rectification of the mistake in demand.
- **Rectification After Notice**: If a notice under Section 245 is received, and if it pertains to a demand where you believe a mistake has been made, you should address the rectification request within the four-year limit from the date of the original order.

### **Addressing Your Specific Case**

Given that the demand in question was communicated after the expiration of the rectification period (assuming the original order was passed more than four years ago), you may not be able to use Section 154 to correct the mistake directly.

However, you should consider the following steps:

- **Review the Original Order**: Check if the original order was passed within the four-year period, and whether any action can be taken under Section 154 within that time frame.
- **Appeal or Review**: If the rectification period has elapsed, filing an appeal or requesting a revision might be necessary. Consult with a tax professional to determine the appropriate course of action.
- **Consult with Authorities**: For any complex scenarios or specific guidance, it’s advisable to consult with a tax advisor or legal expert who can provide guidance based on the exact nature of the demand and rectification issues.

In summary, while Section 154 has a strict four-year limit for filing rectification applications, there are other avenues such as appeals or revisions that may still be available depending on the specifics of your case.