An instruction issued by the Central Board of Direct Taxes, as Instruction No. 2/2016 (F.No. 225/305/2015-ITA.II), dated 15 February 2016.
An instruction of the Board to its officers on the manner of disposing of rectification applications under section 154 of the Income-tax Act, 1961. It records that in some cases Assessing Officers were passing the rectification order on the AST system without giving a copy of the order to the taxpayer, sets out what sub-section (4) of section 154 requires, and directs that every rectification application be disposed of by a written order duly served on the taxpayer. It is short, and it is entirely about procedure and service.
This is an instruction to the department's own officers. It tells them how to do something — which cases to take up, what to check, how to record it. It is an internal direction, and its whole force runs downwards inside the department.
The Board records the complaint that has reached it: rectification orders are being passed on the AST system alone, the taxpayer remains unaware of them, and he is therefore unable to take the matter further, whether in appeal or by a further rectification. It then reads sub-section (4) of section 154, which mandates that a rectification order shall be passed in writing by the income-tax authorities, and on that footing directs that all rectification applications must be disposed of after passing an order in writing, to be duly served on the taxpayer concerned, and not by merely making the necessary rectification on the AST system. The contents are to be brought to the notice of all for necessary compliance, and a Hindi version was to follow.
Making the correction on the system disposes of the application in the Department's records but leaves the taxpayer with nothing in hand. He does not know the application has been decided, he does not know on what reasoning, and the time to carry the matter further passes while he waits. The Board treats this as a grievance of its own making and closes it by insisting on the written order that section 154(4) already required.
It binds the Assessing Officers and those supervising them; that is the whole of its legal force. It does not bind the taxpayer, and it does not bind a court or the Tribunal. But a taxpayer who was never served may hold the Department to it, because an instruction that helps the assessee can be enforced against the Department even though it creates no obligation on him.
From 15 February 2016, the date of the Instruction. It carries no deadline and no cut-off date, and applies to rectification applications disposed of from that date onwards.
The Instruction says the order must be in writing and duly served, but prescribes neither the mode nor the time of service, and says nothing about orders already passed on the AST system before it. It speaks of rectification applications, while sub-section (4) as quoted speaks of rectification orders generally, so a suo motu rectification is not expressly dealt with. Where an appeal or a further rectification is said to be late, put the absence of a served written order on record at the earliest opportunity.
all rectification applications must be disposed of after passing an order in writing, to be duly served upon the taxpayer concerned and not by merely making necessary rectification on the AST System.
— the Central Board of Direct Taxes, instruction Instruction No. 2/2016 (F.No. 225/305/2015-ITA.II), 15 February 2016. Read it in the department’s own PDF.
| Under the Income-tax Act, 1961 | Now, in the Income-tax Act, 2025 |
|---|---|
| section 154 | section 287 |
A binding decision that covers my point was never considered when my order was passed. Is that a mistake apparent from the record?
My settlement application was admitted years before the Commission passed its final order — can it charge me section 234B interest for that whole period, and reopen the settled order later to add interest it forgot?
An amendment adds a new levy. Does it reach back to earlier years?
My assessment was rectified once already. I want a second rectification, and four years have gone since the original assessment but not since the rectified one. Am I out of time?
The Tribunal decided against me without dealing with a coordinate bench decision I had actually filed in the paper book. Can it recall that order under section 254(2), or is that a review it cannot do?
The Tribunal decided against me without dealing with a coordinate bench decision I had cited. Can it put that right under section 254(2), or is that a review?
What here is the Board’s and what is ours. The document is the Central Board of Direct Taxes’ own. Its number, its date and the words quoted above are reproduced from the Board’s own PDF, which is here. Everything else on this page is ours: the plain-English account of what the document is and what it does, the reading of which provision it turns on, the note on what to watch, and the choice of cases. Where our account and the document part, the document governs.
An order of the Board binds the department, not you and not a court. The Board writes to its own officers. An assessee may hold the department to an order or an instruction that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves. This is the most common mistake made with this material, and it is worth making twice: a direction of the Board is not a section of the Act.
What we could not settle. The Instruction number is garbled in the scan, printed as "Instruction No. 6Z,j2016"; it has been taken as Instruction No. 2/2016 from the Department's own file name for this scan, and the F. No. 225/305/2015-ITA.II is legible. The Instruction is not stated to be issued under any particular provision.