Section 154

What a section 154 notice is

Rectification. Correcting a mistake apparent from the record. It is a low-severity notice in the rectification family under the Income Tax Act 1961.

If you ignore it: The mistake stands.

Time to reply: this notice type carries no standard period. The date is printed on the notice itself and you must read it off the document. This is a window to APPLY, not to reply. Verify the period and whether the AO has a disposal time limit.

Under the Income Tax Act 2025: section 287. But read that as reference, not as the provision to cite. Under s.536(2) of the 2025 Act, a proceeding for any tax year beginning before 1 April 2026 stays under the Income Tax Act 1961 from the notice through to the appeal — so a notice arriving today for an earlier year is a 1961 Act matter, whatever today's date is.

Section 154 — the law in short

What the courts have decided on section 154, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Vatika Township P Ltd Supreme CourtHelps taxpayer
  An amendment adds a new levy. Does it reach back to earlier years?
  Not unless the statute says so. Legislation is presumed not to operate retrospectively, and that presumption applies with full force where the amendment imposes a new burden. Only clarificatory or beneficial amendments may be read back.
• Brij Lal v CIT Supreme CourtCuts both waysValidity unconfirmed
  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?
  No to both. A Constitution Bench of the Supreme Court held on 21 October 2010 that sections 234A, 234B and 234C do apply to Settlement Commission proceedings, but only up to the order admitting the case under section 245D(1). Parliament did not extend the liability beyond the date of the settlement application, so no interest runs between admission and the final order under section 245D(4). Hindustan Bulk Carrier, which had taken the section 245D(4) date as the terminus, does not survive on that point. And the Commission cannot reopen its concluded proceedings under section 154 to levy interest it did not levy at the time, section 245I making its order final.
• ACIT v Saurashtra Kutch Stock Exchange Ltd Supreme CourtHelps taxpayer
  A binding decision that covers my point was never considered when my order was passed. Is that a mistake apparent from the record?
  Yes. The Supreme Court held that non-consideration of a decision of the jurisdictional High Court or of the Supreme Court can be a mistake apparent from the record, and upheld the Tribunal recalling its own order on that ground. The section actually applied was s.254(2); the same test - patent, manifest and self-evident - is the one used under s.154.
• Honda Siel Power Products Ltd v CIT Supreme CourtHelps taxpayer
  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?
  It can. The Supreme Court held that where a coordinate bench decision was placed before the Tribunal and the Tribunal overlooked it, the resulting order carries a manifest error and section 254(2) permits the Tribunal to set it right. The purpose of the sub-section is that no party, assessee or Department, should suffer because of a mistake by the Tribunal. That is atonement for the Tribunal's own error, not the exercise of an inherent power of review, and the High Court was wrong to strike the rectification down as a disguised review.
• S.A. Builders Ltd v CIT (Appeals) Supreme CourtCuts both ways
  I passed borrowed money to my sister concern interest-free. Can the AO disallow the interest I paid?
  Only if the advance fails the commercial expediency test. Interest on borrowed funds advanced interest-free to a sister concern is deductible under s.36(1)(iii) where the advance was made on grounds of commercial expediency, an expression of wide import covering what a prudent businessman spends for the purposes of business, with no need for a legal obligation.
• Hind Wire Industries Ltd v CIT Supreme CourtHelps taxpayerValidity unconfirmed
  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?
  No. The Supreme Court held that the word order in section 154(7) is not qualified and does not necessarily mean the original order; it can be any order, including the amended or rectified order. So where an assessment of 21 September 1979 had been rectified on 12 July 1982, an application made on 4 July 1986 was in time, being within four years of the rectified order. The Calcutta High Court, which had counted from the original assessment, was set aside and the Tribunal restored. The Court followed its own sales tax decisions in International Cotton Corporation and H.R. Sri Ramulu.
• T. S. Balaram, ITO v Volkart Brothers Supreme CourtHelps taxpayer
  What actually counts as a 'mistake apparent from the record' under s.154?
  An obvious and patent mistake. Not one that must be established by a long drawn process of reasoning on points where two opinions are conceivable. A decision on a debatable point of law cannot be rectified.
• Avana Global FZCO v DCIT High CourtHelps taxpayer
  My refund was simply taken against another year's demand and I was never told. Does the notice have to come first?
  Yes. Section 245(1) permits a set-off only after an intimation in writing of the proposed action. The Bombay High Court held that adjustments made without that intimation are contrary to the words of the statute and to its own settled decisions, made the rule absolute and ordered the refunds paid within four weeks. It also noted that no reasons had been recorded under s.245(2) either.
• Genpact India P Ltd v DCIT High CourtHelps taxpayer
  My refund came out of an appeal effect order and was paid years late. Can the department refuse the extra interest by blaming its own portal?
  No. Where the refund arises from giving effect to an appellate order, the additional interest is statutory. It can be refused only in the one situation the Act allows, namely delay attributable to the assessee. A broken departmental portal, an amalgamation the department was told about, and the pandemic are not delays attributable to the assessee.
• Pramod R Agrawal v PCIT High CourtHelps taxpayer
  I left a legitimate deduction out of my return and the assessment is over. Can the Commissioner allow it under s.264?
  Yes. The Bombay High Court held that s.264 confers wide jurisdiction, that it is not confined to correcting the errors of subordinate authorities, and that it covers a claim the assessee failed to make in the return and discovered only later. The rejection was quashed and the Commissioner was directed to decide the application afresh, by a reasoned order, after a hearing.
• Aafreen Fatima Fazal Abbas Sayed v ACIT High CourtHelps taxpayer
  I let the 30 days to appeal my 143(1) intimation lapse. Can I still go to the PCIT under s.264?
  Yes. Section 264(4) bars revision only in the situations it lists, essentially where an appeal is pending or has been decided; letting the appeal period run out without filing is not one of them. The revision application had to be decided on merits, and no formal waiver of the right of appeal could be demanded, because a right not exercised does not need to be waived.
• Vijay Gupta v CIT High CourtHelps taxpayer
  I made a mistake in my own return and paid tax I did not owe. The time to revise has gone. Can the Commissioner give me relief under section 264?
  Yes. The Delhi High Court held that the revisional power under section 264 is very wide and is not confined to correcting the officer's errors - it extends to errors made by the assessee, including a legitimate claim never made in the return and raised for the first time in the revision application. An intimation under section 143(1) is an "order" for section 264. Paying the Rs.500 fee late is a curable irregularity, not a bar. The Commissioner's rejection was set aside and the revision restored for fresh consideration on merits.
• CIT, Kolkata-I v Birla Corporation Ltd High CourtHelps taxpayerHigh Courts differ
  Part of my refund is self-assessment tax I paid under s.140A. The officer says no interest is payable on that. Is he right?
  No. The Calcutta High Court held that s.244A(1)(b) is a residuary clause that covers a refund of excess self-assessment tax paid under s.140A, and that interest runs from the date the tax was paid to the date the refund is granted — a starting point since narrowed by s.244A(1)(aa) for periods from 1 June 2016. The Explanation to clause (b) does not stand in the way, because it operates only where the tax was paid pursuant to a notice of demand under s.156.
• India Trade Promotion Organisation v DGIT (Exemptions) High CourtHelps taxpayerValidity unconfirmed
  My institution advances an object of general public utility but charges fees and ends up with a surplus — does the proviso to section 2(15) knock out my exemption?
  Not by itself. The Delhi High Court upheld the constitutional validity of the first proviso to section 2(15) but read it down: it bites only where the dominant and prime objective of the institution is profit making, whether directly through trade, commerce or business or indirectly through rendering services in relation to them. Charging a fee, or generating a surplus, does not by itself make an institution non-charitable. Because the India Trade Promotion Organisation's driving force was promoting the nation's trade rather than earning profit, its exemption under section 10(23C)(iv) was restored and a mandamus issued to grant approval within six weeks.
• Court On Its Own Motion v CIT High CourtHelps taxpayer
  CPC has refused my TDS credit and adjusted the refund against an old demand. What did the Delhi High Court actually direct?
  Taking up the problem on its own motion, the Delhi High Court issued directions on both limbs. A TDS claim supported by the deductor's certificate is not to be rejected merely because the uploaded information does not tally, and unmatched challans are to be verified and corrected within a fixed time. And s.245 is a two-stage provision: prior intimation of the proposed adjustment, a reply from the assessee, consideration of that reply by the Assessing Officer, an order under s.245, and communication of the outcome. A computerised set-off without that sequence does not comply with the section.
• Tamil Nadu Magnesite Ltd v CIT High CourtHelps taxpayerValidity unconfirmed
  The Assessing Officer has rectified my old s.143(1)(a) intimation under s.154 after already completing a s.143(3) assessment. Can he do that?
  No. Once a notice under section 143(2) has gone out and a regular assessment has been made under section 143(3), the earlier intimation under section 143(1)(a) merges into that assessment and no longer stands as an order of its own. There is then nothing left for section 154 to rectify. The Madras High Court set aside a rectification made in December 1998 on an intimation of 7 March 1994, which had charged additional tax of Rs 4,70,346 more than three years after the scrutiny assessment of 22 November 1995 was over, and set aside the revisional order that had confirmed it. The rectification was held to be wholly without jurisdiction.
• CESC Ltd v DCIT High CourtHelps taxpayer
  The Assessing Officer has issued a section 154 notice to rectify my section 143(1)(a) intimation after a scrutiny notice under section 143(2) was already served. Can he do that?
  No. The Calcutta High Court quashed the section 154 notices. Once a notice under section 143(2) has been issued the department cannot fall back on the summary procedure of section 143(1)(a), and rectifying the intimation is only another way of activating that procedure, so it is equally impermissible. The Court added a second and independent reason: where a regular assessment under section 143(3) has been completed on the same item, the order under section 143(1)(a) ceases to be operative and merges in the final order, so there is nothing left to rectify. The notices for the four years before the Court were quashed.
• S.R.F. Charitable Trust v Union of India High CourtHelps taxpayer
  The department adjusted my return under section 143(1)(a) simply because I did not attach proof of my claims. Can it do that?
  No. The Delhi High Court held that an adjustment under the first proviso to section 143(1)(a) can be made only where the claim is prima facie inadmissible on the information available in the return, the accounts or the accompanying documents. The conclusion must flow from the return as filed. No power is given to disallow a claim merely because proof has not been furnished. If the officer wants proof he must ask for it, which means issuing a notice under section 143(2). The intimation was quashed.
• Vaishali Baban Bhosale v ITO ITATHelps taxpayerValidity unconfirmed
  My s.89 relief on salary arrears was disallowed in the intimation because Form 10E was not filed with the return. Is it lost?
  Not necessarily. The Pune Tribunal restored the claim to the Assessing Officer with a direction to verify it and allow the relief, where the assessee had filed Form 10E only years after the intimation. The Bench followed coordinate bench decisions holding that a delay in filing the form should not by itself defeat a relief the assessee is otherwise entitled to.
• Pudhureddiyur Raju Kalaimani v ITO ITATHelps taxpayerValidity unconfirmed
  CPC denied my leave encashment exemption under s.10(10AA) because Form 26AS shows the gross salary, and the Department says I resigned and joined another employer in the same year. Can I still get it?
  Yes on both points. Leave encashment received on resignation is exempt under s.10(10AA), and nothing in the statute disentitles an employee who takes up fresh employment in the same year; what matters is that the receipt was on cessation of employment. A Form 26AS mismatch thrown up in s.143(1) processing is not a sustainable ground to tax the amount where the claim is supported by the employer's Form 16.
• Orient Craft Ltd v DCIT ITATHelps department
  I withdrew my appeal against the section 143(1) intimation because the case went into scrutiny. Can the Assessing Officer now rectify under section 154 to bring back the intimation addition the scrutiny order left out?
  Yes, on these facts. The Delhi Bench of the Tribunal held that there was no merger of the section 143(1) intimation into the section 143(3) assessment, because the two orders proceeded on different issues, and that the intimation stood final once the assessee withdrew its appeal against it. The scrutiny order had started from the returned income instead of the income determined by the intimation, leaving the intimation's addition of Rs 12,82,64,760 out of the assessed figure. That, the Tribunal held, was a mistake apparent from the record, and the Assessing Officer was entitled to correct it under section 154.
• Brinda Ramakrishna v ITO ITATHelps taxpayerValidity unconfirmed
  I filed Form 67 late and my foreign tax credit was disallowed. Does missing the deadline kill the claim?
  No, on this decision. The Bangalore Tribunal held that Rule 128(9) does not provide for disallowance of foreign tax credit where Form 67 is filed late; filing Form 67 is directory, not mandatory; and the treaty overrides the Act, with the Rules unable to run contrary to the Act. The assessee had claimed credit of Rs 4,73,779 for Australian tax under section 90 read with Article 24 of the India-Australia treaty, filed Form 67 only on 18 April 2020, and had the credit refused. The Tribunal allowed the appeal, and also held the point could be taken in rectification proceedings under section 154.
• Subodh Gupta (HUF) v Pr CIT ITATCuts both waysValidity unconfirmed
  My mother gifted shares to my HUF. Is she a 'relative' of the HUF?
  No. For a Hindu undivided family the Explanation makes only a member of that family a 'relative'. The karta's mother was not a member - the gift deed itself recited that the gift was to the family of her son - so 75,000 shares gifted by her were chargeable under s.56(2)(vii), and the list of relatives that applies to an individual does not travel across to a receipt in the family's hands. The decision has a second limb: the Principal Commissioner's valuation by reference to a later sale price was rejected, fair market value has to be computed under Rule 11UA, and the computation was restored to the Assessing Officer, so the amount was never determined. The appeal was partly allowed.
• Smt. Vandana Manoj Shah v ITO, Ahmedabad ITATHelps taxpayerValidity unconfirmed
  The Assessing Officer has withdrawn my s.80E deduction by a s.154 rectification, saying the education loan was taken by my major married son and not by me. Can he do that under s.154?
  No, on this order. The Ahmedabad Tribunal held that deciding the nature of the loan and who took it would require a long drawn process of hearing, that the question is debatable, and that it therefore cannot be the subject matter of s.154 proceedings — and deleted the disallowance. The Tribunal did not decide the underlying question whether the deduction was in fact available.
• Dixit Rice Mill v DCIT (CPC) ITATCuts both ways
  Must an assessee first apply for rectification to CPC before appealing against a s.143(1) intimation?
  CPC made adjustments in a s.143(1) intimation without giving the assessee an opportunity, and the CIT(A) dismissed the appeal on the footing that the assessee should have applied online for rectification first. The Tribunal held that an appeal lies to the CIT(A) against a s.143(1) intimation and that there is no requirement in law to approach CPC for rectification before appealing.
• CBDT Instruction No. 01/2016 - the six months in s.154(8) CBDT Circulars & InstructionsHelps taxpayer
  My rectification application has been sitting with the officer for more than six months. Has it lapsed?
  No. The Board issued this instruction precisely because officers were taking the view that an application not decided inside the six months in s.154(8) had lapsed and needed no action. The instruction records that view, rejects it, and directs that the six-month limit be strictly followed and monitored by supervisory officers.
• CBDT Instruction No. 02/2016 - rectification orders must be in writing CBDT Circulars & InstructionsHelps taxpayerValidity unconfirmed
  The officer says my rectification has been 'done in the system' but I have received no order. Is that enough?
  No. The Board found that rectification orders under s.154 were being passed by officers on the AST system without a copy of the order being given to the taxpayer, who was then unaware of the decision and unable to pursue it in appeal or by a further rectification. Pointing to s.154(4), which requires the order to be passed in writing, it directed that all rectification applications 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.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.