Step by Step Preparation of Section 154 Application – For Section 143(1)- Clause 16(d) Of Tax Audit Report

This Article Explains Step by Step Preparation of Application U/S. 154 of the Income Tax Act, 1961 For Rectification of Intimation U/S. 143(1) Issued with Adjustment for Income Reported in Clause 16(d) Of Tax Audit Report.

INTRODUCTION :   Recently, large no. of Intimations U/s. 143(1) (mainly for AY 2021-22) have been issued by CPC (Income Tax Department) wherein an adjustment / addition has been made regarding income reported by the auditor in clause 16(d) of Form No. 3CD of Tax Audit Report. Consequently, an additional demand for tax, interest etc. has been raised on the assessee. The above adjustment has been made by mentioning that that there are some mismatches between the income reported in tax audit report and in the Income Tax Return. In other words, it can be said that the above addition has been made under impression that the income reported in above clause 16(d) has not been included in the Income Tax Return.

In most of the cases, the general grievance is that the above clause 16(d) income has already been included in the respective schedules of the Income Tax Return. Despite that above duplicate adjustment / addition has been made.

One of the probable remedy (besides other remedies) to get rid of the above problem is to file an application U/s. 154. In this article, an attempt has been made to discuss every step and every aspect of preparation and submission of application U/s. 154 in such cases.

APPLICATION U/S. 154 : The application U/s. 154 is to be filed online on e filing portal of the Income Tax Department. The application containing mere description of problem etc. is not sufficient in the present case. In the present case, some rectifications will have to be made in the last filed return (i.e., original / revised return) of the relevant assessment year. The rectification will have to be made through the return preparation utilities / softwares through which the normal ITRs are prepared. Thereafter, new rectified JSON file will have to be generated. This JSON file of the rectified return will have to be attached with the rectification application U/s. 154. This rectified JSON file will be again processed by the departmental computer system and it is hopeful that on reprocessing, the above mismatches may not occur again and return may be processed at returned income.

It is experienced that return preparation utility available on Income Tax Department e filing portal is simple and much effective. Therefore, in this article the steps have been mentioned regarding preparation of rectified return JSON file for S.154 application, through above utility only. There may be other utilities / softwares etc. also for preparation of above rectified return, but to remain precise, the preparation of rectified return through ITD utility only has been discussed in this article.

STEP 1 – DOWNLOADING OF ITR PREPARATION UTILITY :

(1) For this firstly, home page (Screenshot given below) of the ITD e filing portal is to be accessed (without login) through URL – www.incometax.gov.in.

(2) Thereafter, the “Download” tab available at the top of the above home page (displayed in blue coloured ribbon) is to be clicked. On clicking, download page (Screenshot given below) will get opened. Here the default assessment year mentioned as AY 2022-23 has to be changed to AY 2021-22.

(3) Then according to the ITR form applicable to the concerned assessee, the “Common Offline Utility (ITR 1 To ITR 4)” or individual separate utility for ITR 5, ITR 6 or ITR 7 is to be downloaded. In most of the cases, instead of “Utility for MAC”, the utility available under head “Utility” may be appropriate.

STEP 2 – INSTALLATION OF ITR UTILITY :

(4) Then, downloaded utility (in WinRAR Zip format) (laying at download section of the computer) is to be selected and right mouse is to be clicked on it. Then on selecting “Extract Here” option, a normal folder containing four different files will get generated (Screenshot given below).

(5) Thereafter, the top most file in the folder, containing ITD Logo and having name “ITDe-Filing Setup 1.0.34” is to be run. Then utility will automatically get installed on our computer system and opening window will appear (Screenshot given below). The utility once installed can be used for different clients.

(6) Simultaneously, a shortcut icon for utility will also get generated on desktop of the computer system. If the utility is closed due to any reason, it will not be required to be downloaded and installed again. It can simply be reopened by clicking on desktop shortcut icon.

(7) Thereafter,  blue coloured “Continue” button is to be pressed. Then home page of the utility named as “Income Tax Returns” will get opened.

 STEP 3 – PREPARATION OF RECTIFIED RETURN FOR APPLICATION U/S. 154 :

(8) On above home page (Screenshot given below), three options will be available i.e., “Returns”, “Draft Version of Returns” and “Pre-filled Data”. First time “Returns” option is to be selected (Next time when utility will be opened, the saved file can be opened in “Draft Version of Returns” option). Then blue coloured “File Returns” button is to be pressed, on which a new window will get opened.

(9) In the new window (Screenshot given below), again three options will be available, out of which the third option i.e., “Import draft ITR filled in Online mode or import JSON generated from Excel/HTML utility” is to be selected and then blue coloured “continue” button is to be pressed.

(10) Thereafter next window containing words on the top as “Import draft ITR filled in online mode” (Screen shot given below) will get opened where JSON file of earlier last filed ITR is to be attached. This JSON file is to be downloaded from ITD e filing portal through path “efile – Income Tax Returns – View Filed Returns – AY 2021-22 – Download JSON”. (Much description and screen shots for downloading JSON file are not given as tax professionals usually visits this path for downloading ITR receipts, ITR full forms etc.).

(11)  The screenshot of window after attaching JSON file is as under –

(12)  After attaching the JSON file, blue coloured “Proceed” button is to be pressed. Then “Select Schedule” window will get opened (Screenshot given below). Now, without doing anything in this window, only blue coloured “Continue” button  is to be pressed.

(13)  Thereafter, a new pop up window “Disclaimer” will get opened. Here blue coloured “Continue” button is to be pressed.

(14) After that, a “Proceed to schedule questions” window will get opened (Screenshot given below). Here “Skip The Questions” option is to be clicked. The blue coloured “Continue” button is not to be pressed. Then a new pop up window will get opened where “Ok” button is to be pressed.

(15) Thereafter, “Schedule Summary” window will get opened (Screenshot given below), wherein link for filling / amending various ITR schedules will be available. Here we have to open Schedule PART A-OI. All the applicable schedules will be already prefilled as per the last ITR filed for AY 2021-22.

(16) In PART A – OI Schedule, we have to mark tick in checkbox against point no. 5 and then have to click on edit button (Screenshot given below).

(17) Thereafter, “Edit details to OI” window will get opened, wherein clause 16(d) income is to be mentioned against point 5(d) (Screenshot given below). Then “Save” button is to be pressed. Then second “Save” button is to be pressed. Then “Confirm” button is to be pressed.

(18) Now Schedule BP is to be opened and “Edit” button against “A. Business or profession other than speculative business and specified business” is to be pressed. Then it is to be verified that whether clause 16(d) income is automatically carried to point no. 23 therein (Screenshot given below).

(19) Then as per the case, “Edit” button is to be pressed against Point No. 3 (for income chargeable under other heads) or against Point no. 5 (for exempt incomes) and respective clause 16(d) income is to be entered there and “Save” button is to be pressed. Similarly, in case point no. 32 is applicable, corresponding amount may be entered there. Then “Save” button and thereafter “Confirm” button is to be pressed.

(20) After that, information filled in all other applicable schedules may be checked for ensuring correctness (optional). It may be ensured that a tick mark and “confirmed” word appear against each schedule (optional) (Screenshot given below).

(21) Then blue coloured “Preview Return” button is to be pressed. Then “Proceed To Preview” button is to be pressed. Then “Proceed to Validation” button is to be pressed. Then rectified JSON file is to be downloaded. “Proceed to Verification” button is not to be pressed. Now, ITR utility is to be closed. The rectified JSON file will be available in download section of our computer system.

STEP 4 – FILING OF APPLICATION U/S. 154 (ALONGWITH RECTIFIED RETURN) ON ITD PORTAL :

(22) Now, we have to login to the e filing portal with client id and password. Then in “Services” tab in blue coloured ribbon, “Rectification” option is to be selected (Screenshot given below).

(23) Then in rectification window, “+New Request” button is to be pressed (Screenshot given below).

(24) Then in “New Request” window, “Income Tax” is to be selected and Assessment Year 2021-22 is to be selected and then “Continue” button is to be pressed (Screenshot given below).

(25) Then in a new window, “Select the Request Type”, the option “Return Data Correction (Offline)” is to be clicked (Screenshot given below).

(26) Then in this final window (Screenshot given below), the “Rectification Reason” is to be mentioned in maximum 4000 characters in the given box and rectified JSON file is to be attached. Then “Submit” button is to be pressed. The suggested reason for rectification may be “the clause 16(d) income was included in Schedule OI etc. of original / revised return earlier. But since the same has not been recognised by departmental computer system, the same has been reported in descriptive manner”.

(27)  Thereafter, the status of the rectification application can be checked from time to time from the e fililng portal.

CONCLUSION : Thus, a rectification application can be prepared in the above manner alongwith rectified return through departmental ITR utility. The same can be submitted directly by login to the e filing portal. Hope, the problem caused due to issuance of intimation U/s. 143(1) after addition of amount reported in clause 16(d) of tax audit report may got resolved by filing of rectification application in the manner discussed as above.

DISCLAIMER : The information contained in the above article are solely for informational purpose after exercising due care. However, it does not constitute professional advice or a formal recommendation. The author do not owns any responsibility for any loss or damage caused to any person, directly or indirectly, for any action taken on the basis of the above article. Before taking any action relevant to the above topic, it is advised that the user may please refer relevant Act, Rules etc.