Time Limit to Pass Section 154 Rectification Order – Judicial Precedents

Section 154 of the Income Tax Act, 1961 (Act) deals with provisions relating to rectification of mistakes apparent from the record an income-tax authority (income tax authority is defined under section 116 of the Act).

It is important to note that order cannot be rectified under this section after expiry of four years from the end of the financial year in which the order sought to be rectified was passed.

Is there any time limit to pass the rectification order under Section section?

Sub-section (8) of section 154 specifies that rectification application under this section need to be disposed off in a time bound manner (i.e. six months from the end of the month in which application is received).

There is number of judgements (discussed in later paragraph) which shows that department is not following the stipulated time limit to pass the rectified order and application remains undisposed for longer. In this regard, the Central Board of Direct Taxes (“CBDT”) has issued instruction (instruction no 1 dated 15.02.2016) wherein it is mentioned that the time limit stipulated in section 154(8) need to be strictly followed by the authority for disposing off the application for rectification.

Judicial Precedents

While talking about judicial precedents, there are number of rulings of Hon’ble Delhi High Court wherein Hon’ble High Court has directed the authority to pass order in a time bound manner. In most of the order, although, time limit to pass order was expired but on the writ petition, Hon’ble Delhi High Court directed the revenue to pass order within additional time granted by the Hon’ble Court.

Recently, in the case of Nokia India Private Limited vs. Assistant Commissioner of Income Tax (W.P.(C) 3145/2022 & CM APPL.9154/2022) Hon’ble Delhi High Court vide order dated 21.02.2022 directed the Revenue to dispose off the matter in six weeks albeit time limit to pass order was expired on 31.01.2022.

There are similar judgements of Hon’ble Delhi High Court in the case of:

• Nortel Networks India International Inc. Vs Asst. CIT, WPC 12236/2021
• Cheil India Private Limited Vs. Deputy CIT & Anr., WPC 11683/2021
• Hyosung Corporation Vs. Union of India & ors. W.P. (C) 4681/2020
• L S Cable and System Limited Vs. Union of India & ors. W.P. (C) 5154/2020

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Disclaimer: The views expressed in this article should not be construed as legal advice. Before filing of legal reply or submissions one should consult with their consultants/advisors.