Section 119 of the Income-tax Act, 1961 - Income-tax authorities - Instructions to subordinate authorities - Authorization of AOs in certain cases to rectify/reconcile disputed arrear demand
Circular No. 04/2012 was issued by the Central Board of Direct Taxes on 20 June 2012. Its subject is Section 119 of the Income-tax Act, 1961 - Income-tax authorities - Instructions to subordinate authorities - Authorization of AOs in certain cases to rectify/reconcile disputed arrear demand.
This is an order under section 119 of the 1961 Act — section 239 of the 2025 Act. Section 119 lets the Board give directions to its own officers and, in defined cases, relax a requirement. It is an administrative power, not a power to rewrite the charge.
Lets Assessing Officers correct disputed arrear demand even after the four-year limitation in section 154(7) has run out. Acting under section 119(2)(b), the Board authorises the Assessing Officer to make appropriate corrections in the figures of disputed arrear demand after due verification and reconciliation and on merits, whether by rectification or otherwise, regardless of that limitation. Where CPC has already adjusted a refund against a figure the assessee disputes, the jurisdictional Assessing Officer must verify the claim on merits, refund the excess adjusted because of the inaccurate figure uploaded, and upload the amended figure on the Financial Accounting System portal where a balance still stands. Where the assessee disputes a figure that has not caused an adjustment, whether uploaded to CPC or still only in the Assessing Officer's records, the officer must verify on merits, correct his records and upload the correct figure.
The Board was told that assessees were disputing arrear demand figures on the ground that the demand was already paid or had been reduced or wiped out in appeal, and that Assessing Officers said they could not correct them because the four-year period under section 154(7) had expired, while those uncorrected figures were being used by CPC to adjust refunds.
Section 119 of the Income-tax Act, 1961 - Income-tax authorities - Instructions to subordinate authorities - Authorization of AOs in certain cases to rectify/reconcile disputed arrear demand
Circular No. 4 of 2012, dated 20-6-2012
The Board has been apprised that in certain cases the assessees have disputed the figures of arrear demands shown as outstanding against them in the records of the Assessing Officer. The Assessing Officers have expressed their inability to correct/reconcile such disputed arrear demand on the ground that the period of limitation of four years as provided under sub-section (7) of section 154 of the Act has expired.
Further, in some cases, the Assessing Officers have uploaded such disputed arrear demand on the Financial Accounting System (FAS) portal of Centralized Processing Center (CPC), Bengaluru which has resulted in adjustment of refund arising out of processing of Returns against such arrear demand which has been disputed by such assessees on the grounds that either such demand has already been paid or has been reduced/ eliminated in the appeals, etc. The arrear demands, in these cases also were not corrected / reconciled for the reason that the period of limitation of four years has elapsed.
2. The Board, in consideration of genuine hardship faced by the abovementioned class of cases, in exercise of powers vested under section 119(2)(b) of the Act, hereby authorize the Assessing Officers to make appropriate corrections in the figures of such disputed arrear demands after due verification/reconciliation and after examining the same on merits, whether by way of rectification or otherwise, irrespective of the fact that the period of limitation of four years as provided under section 154(7) of the Act has elapsed.
3. In view of the above the following has been decided:—
(a) In the category of cases where based on the figure of arrear demand uploaded by the Assessing Officer but disputed by the assessee, the Centralized Processing Center (CPC), Bengaluru has already adjusted any refund arising out of processing of return, the jurisdictional Assessing Officer shall verify the claim of the assessee on merits. After due verification of any such claim on merits, the Assessing Officer shall issue refund of the excess amount, if any, so adjusted by CPC due to inaccurate figures of arrear demand uploaded by the Assessing Officer. The Assessing Officer, in appropriate cases, will also upload amended figure of arrear demand on the Financial Accounting System (FAS) portal of Centralized Processing Center (CPC), Bengaluru wherever there is balance outstanding arrear demand still remaining after aforesaid correction/ reconciliation.
(b) In other cases, where the assessee disputes and requests for correction of the figures of arrear demand, whether uploaded on CPC or not uploaded and still lying in the records of the Assessing Officer, the jurisdictional Assessing Officer shall verify the claim of the assessee on merits and after due verification of such claim, will make suitable correction in the figure of arrear demand in his records and upload the correct figure of arrear demand on CPC portal.
4. It is specifically clarified that these instructions would apply only to the cases where the figures of arrear demand is to be reconciled/ corrected - whether such arrear demand has been uploaded by the Assessing Officer on to Financial Accounting System (FAS) of CPC or it is still in the records of the Assessing Officer.
This may be brought to the notice of all the officers of your CCA region.
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You meet it when a refund has been adjusted under section 245 against an old demand that was paid or deleted in appeal, and the Assessing Officer pleads limitation under section 154(7) as a reason for not correcting his records.
An assessee's refund is adjusted against an arrear demand of an assessment year that the Commissioner (Appeals) had reduced to nil six years earlier. Limitation under section 154(7) has expired. Under this circular the Assessing Officer verifies the appellate order, refunds the amount CPC adjusted, and uploads the corrected nil figure to the portal.
It mentions. Circular No. 4/2012
← Circular No. 225/124/2012/ITA.II], dated 20-6-2012 · Press Release [F.NO.RC/TRP-1(1)/2011-12], dated 19-6-2012 →
Source: the Income Tax Department’s own published text — its page for this instrument.