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May 9, 2013

Rectification under Income Tax

Order Passed under
Summary Assessment u/s 143(1)
u/s 143(1)
Scrutiny (Regular) Assessment u/s 143(2)
u/s 143(2)

As per Sec 154, the income tax authorities (ITO/AO/CIT/CCIT) can rectify a mistake in an assessment order or intimation u/s 143(1) if such mistake is “apparent” from the record.
“apparent from record” *only when it is obvious or self-evident mistake and not something which can be established by a long-drawn process of reasoning on points in respect of which there may be two opinions.
No rectification shall be made by AO after the expiry of four years from the end of the financial year in which the order subject to rectification was passed.  The same is the time limit for assessee to apply for rectification. .[Sec 154(7)].

2. Rectification request made by assessee within the time limit as above to be accepted or rejected within 6months from  the end of the  month in which application was made. The acceptance or rejection of rectification request is to be communicated to assessee by sending him the rectified order passed u/s 154.

3. A rectification, which has the effect of enhancing an assessment (raising tax demand) or reducing a refund or otherwise increasing the liability of the assessee, shall not be made unless the AO has given notice to the assessee of its intention so to do and has allowed the assessee a reasonable opportunity of being heard.

4. The power to rectify the assessment order   conferred upon AO  is to ensure that injustice to the assessee or to the revenue may be avoided. Therefore, it is mandatory for AO  to exercise his such power and rectify apparent mistakes. Therefore, power to rectify is mandatory and not discretionary.

5. AO can further rectify the order which he has rectified once, but within time limit only.

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