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ITR-U Rectification Rights Transferred to AOs: What Taxpayers Need to Know

16 July 2025Janvi
ITR-U Rectification Rights Transferred to AOs: What Taxpayers Need to Know

ITR-U Rectification Rights Transferred to AOs: What Taxpayers Need to Know

In a significant move, many taxpayers who filed an Updated Income Tax Return (ITR-U) in previous years woke up to emails from the Income Tax Department informing them about a change in the rectification process. The Centralized Processing Centre (CPC) has transferred rectification rights for ITR-U returns to the Jurisdictional Assessing Officer (JAO). This change has been made because the CPC lacks the authority to deal with factual or legal issues under Section 154 of the Income Tax Act for ITR-U filings. From now on, any rectification involving issues such as mismatches in TDS credit, incorrect reporting of income, or other factual mistakes must be handled by the taxpayer’s assigned AO.

The ITR-U was introduced to allow taxpayers to voluntarily update their returns by declaring additional income or correcting errors and omissions. It can be filed within two years from the end of the relevant assessment year and includes payment of an additional tax (25% to 50% of the tax and interest due). However, it cannot be filed to claim a higher refund or reduce tax liability. With the shift in rectification responsibility, affected taxpayers can approach their AO directly to address genuine mistakes, which may result in an opportunity that may result in a faster resolution. That said, it also increases the possibility of scrutiny, especially if the discrepancies are significant.

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Taxpayers should approach this new process with caution and adequate preparation. Since the AO has the power not only to allow or reject rectifications but also to initiate scrutiny, any request must be backed by proper documentation and transparent disclosure. It’s important to remember that while rectification under Section 154 is limited to “mistakes apparent from the record,” Updated Returns often involve complex assessments. Engaging a qualified tax professional before reaching out to the AO can help mitigate risks and ensure compliance with the legal framework.

A Chartered Accountant has also posted on platform X, which is formally known as Twitter. “Early morning action by @IncomeTaxIndia today. Many assessee who had filed ITR-U in previous years have today received emails informing them of the transfer of Rectification Rights to JAO! Why? Because CPC can’t handle legal/factual rectification under Sec 154 for ITR-U. But if a genuine mistake exists (like TDS credit mismatch), only JAO has the power to assess and rectify it. This move enables assesses to now approach their AO directly, but it also opens the door for scrutiny if errors are substantial. JAO has full powers to issue 154 orders, initiate scrutiny, or reject requests after due inquiry.”

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