Order passed u/s. 154 is erroneous with/without considering response
This query is : Resolved
22 September 2025
Dear Experts,
The assessee has filed return of income for AY 2023-24 in time. While filing the return, he claimed setoff of business loss of earlier year (where the return was filed in time as he is a partner in a firm and accounts of the firm were subject to audit u/s. 44AB). The return was processed. Later on, the department has sent notice to rectify the order as setoff allowed while processing the return was wrongly allowed as the department is of the view that return of that year was filed beyond time limit. In fact, which is not the case. The assessee has responded online giving details of return filed in time and hence to drop the penalty proceedings. In fact, this has happened twice. Earlier also such notice was there which was replied by the assessee and nothing was done. This time, the assesse has received order 2 days back under section 154 directly disallowing set off claimed, without mentioning whether the the response submitted by the assessee is considered or not.
How to rectify this order? What is the time limit? Should he apply for rectification u/s. 154 ? If yes, proof of partnership firm return for that year filed with audit report u/s. 44AB is to be submitted as proof in the year in which the assessee has carried forward loss in his personal capacity in his proprietary business ?
Please guide.
The assessee has filed return of income for AY 2023-24 in time. While filing the return, he claimed setoff of business loss of earlier year (where the return was filed in time as he is a partner in a firm and accounts of the firm were subject to audit u/s. 44AB). The return was processed. Later on, the department has sent notice to rectify the order as setoff allowed while processing the return was wrongly allowed as the department is of the view that return of that year was filed beyond time limit. In fact, which is not the case. The assessee has responded online giving details of return filed in time and hence to drop the penalty proceedings. In fact, this has happened twice. Earlier also such notice was there which was replied by the assessee and nothing was done. This time, the assesse has received order 2 days back under section 154 directly disallowing set off claimed, without mentioning whether the the response submitted by the assessee is considered or not.
How to rectify this order? What is the time limit? Should he apply for rectification u/s. 154 ? If yes, proof of partnership firm return for that year filed with audit report u/s. 44AB is to be submitted as proof in the year in which the assessee has carried forward loss in his personal capacity in his proprietary business ?
Please guide.
22 September 2025
Rectification Process and Time Limit
A rectification application under section 154 should be filed online via the Income Tax Department’s e-filing portal, using the “Rectification” service corresponding to the relevant assessment year.
The application must be made within four years from the end of the financial year in which the rectification order (the one you want to challenge) was passed. For example, if the order was passed in September 2025, the four-year period will count from 31 March 2026.
On receipt of a rectification application, the department must dispose of it within six months from the end of the month in which the application is received.
A rectification application under section 154 should be filed online via the Income Tax Department’s e-filing portal, using the “Rectification” service corresponding to the relevant assessment year.
The application must be made within four years from the end of the financial year in which the rectification order (the one you want to challenge) was passed. For example, if the order was passed in September 2025, the four-year period will count from 31 March 2026.
On receipt of a rectification application, the department must dispose of it within six months from the end of the month in which the application is received.
22 September 2025
Submitting Supporting Documents
Yes, when seeking rectification, it is essential to submit all relevant supporting documents. In your scenario, you should submit:
Proof of timely filing of the partnership firm's return for the year in question (copy of ITR-V, acknowledgment, audit report under section 44AB).
Proof of timely filing of the individual return for the concerned year.
Specify in the rectification request the specific error (wrongly treated as belated filing) and reference past correspondence (including online submissions already made) to strengthen the case.
Clearly indicate that response to prior notices was not considered and request a speaking order.
Yes, when seeking rectification, it is essential to submit all relevant supporting documents. In your scenario, you should submit:
Proof of timely filing of the partnership firm's return for the year in question (copy of ITR-V, acknowledgment, audit report under section 44AB).
Proof of timely filing of the individual return for the concerned year.
Specify in the rectification request the specific error (wrongly treated as belated filing) and reference past correspondence (including online submissions already made) to strengthen the case.
Clearly indicate that response to prior notices was not considered and request a speaking order.
22 September 2025
If the department ignores factual submissions and issues a non-speaking order, rectification under section 154 is the best first recourse; if still not remedied, an appeal can be filed against the 154 order within the prescribed appeal period, or a revision application under section 264 can be considered.
Since the issue involves a factual dispute (timeliness of filing), and all necessary evidence can be furnished, uploading the proof of return filings and audit report is not only advisable but also materially necessary.
Since the issue involves a factual dispute (timeliness of filing), and all necessary evidence can be furnished, uploading the proof of return filings and audit report is not only advisable but also materially necessary.
22 September 2025
If rectification under section 154 is rejected by the department, the assessee has legal remedies available. The next step is generally to file an appeal against the order or consider revision proceedings, depending on the specific facts.
Appeal against Rectification Order
An appeal can be made to the CIT(A) (Commissioner of Income Tax (Appeals)) against the rejection of the rectification application or against the rectification order itself if it adversely affects the assessee’s interests or refuses to allow the claim.
The appeal should be filed within the time frame prescribed for appeals under the Income Tax Act—typically within 30 days from the receipt of the order.
The appellate authority will adjudicate the dispute, and the assessee can present full factual and legal grounds supporting the original claim for setoff/carry forward.
Appeal against Rectification Order
An appeal can be made to the CIT(A) (Commissioner of Income Tax (Appeals)) against the rejection of the rectification application or against the rectification order itself if it adversely affects the assessee’s interests or refuses to allow the claim.
The appeal should be filed within the time frame prescribed for appeals under the Income Tax Act—typically within 30 days from the receipt of the order.
The appellate authority will adjudicate the dispute, and the assessee can present full factual and legal grounds supporting the original claim for setoff/carry forward.
22 September 2025
The rejection should contain valid reasons. If it does not, courts have consistently ruled in favor of the assessee where non-speaking orders have been issued.
If the mistake is apparent and was overlooked by the department, the appellate authority will generally provide relief on clear factual grounds.
By promptly initiating appeal or revision proceedings, the assessee can seek formal correction of the error and ensure rightful claim processing under the law.
If the mistake is apparent and was overlooked by the department, the appellate authority will generally provide relief on clear factual grounds.
By promptly initiating appeal or revision proceedings, the assessee can seek formal correction of the error and ensure rightful claim processing under the law.
22 September 2025
Thank you so much Sir for your detailed reply. First will move rectification application. If denied justice, will explore other remedies.
22 September 2025
Good Luck...
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