Rectification of Mistake [Section 169]

Section 169 of the Finance Act, 2016 (Chapter VIII) governs the rectification of mistakes in the context of the Equalisation Levy in India. This section provides a mechanism to correct errors or omissions in the statements furnished under Section 167 or in the intimations issued after processing under Section 168 for both the 6% levy on specified services (Section 165) and the 2% levy on e-commerce supply or services (Section 165A). Below is a concise and comprehensive explanation of the provisions under Section 169.

Section 169: Rectification of Mistake

1.  Objective:

• Section 169 allows for the correction of apparent mistakes in the Equalisation Levy statement (Form 1) or in the intimation issued after processing, ensuring accuracy in the computation and compliance of the levy.

2.  Scope of Rectification:

• The provision applies to:
  • Statements filed under Section 167 by:
    • Payers deducting the 6% Equalisation Levy on specified services (e.g., online advertising).
    • Non-resident e-commerce operators paying the 2% Equalisation Levy on e-commerce supply or services.
  • Intimations issued under Section 168 after processing the statement, which may include errors in levy computation, interest, or refund calculations.
• Mistakes that can be rectified include:
  • Arithmetical errors (e.g., incorrect calculation of the levy).
  • Errors apparent from the record (e.g., incorrect reporting of consideration or levy deducted/paid).
  • Clerical errors or omissions in the statement or intimation.

3.  Who Can Initiate Rectification:

• By the Assessing Officer:
  • The Assessing Officer may rectify a mistake on their own motion if it is apparent from the record during or after processing the statement.
  • This could involve correcting errors in the intimation, such as wrong levy calculations or interest demands.
• By the Assessee:
  • The person who filed the statement (payer or e-commerce operator) can apply for rectification if they identify an error in the statement or intimation.
  • The application must be made to the Assessing Officer in the prescribed manner, as per the Equalisation Levy Rules, 2016.

4.  Time Limit for Rectification:

• Rectification can be carried out within four years from the end of the financial year in which the statement was furnished or the intimation was issued.
• For example, for a statement filed by June 30, 2025, for FY 2024–25, rectification can be made until March 31, 2029.

5.  Process of Rectification:

• Assessing Officer’s Action:
  • If the mistake is identified by the Assessing Officer, they will issue a rectified intimation or order correcting the error.
  • If the rectification results in additional levy or interest, a demand notice is issued.
  • If it results in a refund (e.g., due to overpayment of the levy), the refund is processed subject to verification.
• Assessee’s Application:
  • The assessee must submit an application for rectification, specifying the error and providing supporting evidence.
  • The Assessing Officer will review the application and issue an order either accepting or rejecting the rectification request.
• The rectification process is typically handled electronically through the Income Tax Department’s e-filing portal.

6.  Impact of Rectification:

• Increase in Levy: If rectification reveals an underpayment of the Equalisation Levy, the assessee (payer or e-commerce operator) is liable to pay the additional amount, along with interest under Section 170 (1% per month or part thereof for delayed payment).
• Refund: If rectification shows an overpayment, the excess levy is refunded to the assessee, subject to adjustments for any outstanding liabilities.
• No Adverse Impact Without Notice: The Assessing Officer cannot make a rectification that increases the levy or reduces a refund without giving the assessee an opportunity to be heard.

7.  Consequences of Non-Compliance:

• If the assessee fails to rectify errors (e.g., by not filing a revised statement or not applying for rectification), it may lead to:
  • Penalties under Section 171:
    • ₹100 per day for failure to furnish the statement, up to the amount of levy deductible/payable.
    • ₹25,000 for furnishing inaccurate particulars.
  • Disallowance of expenditure (for the 6% levy) under the Income Tax Act, 1961, if the payer fails to deduct or deposit the levy.
• Persistent errors may trigger further scrutiny or recovery proceedings under Section 166 or Section 166A.

8.  Key Considerations:

• Apparent Mistakes Only: Rectification is limited to errors that are evident from the record and does not allow for re-examination of the entire case or new claims.
• Revised Statement: If the error is in the original Form 1, the assessee may file a revised statement under Section 167 before or during the rectification process, subject to the Assessing Officer’s approval.
• Electronic Process: Rectification requests and orders are generally processed through the Income Tax Department’s e-filing system for efficiency.

Practical Implications:

• For Payers (6% Levy): A business paying for online advertising (e.g., to Google or Facebook) may need to rectify errors in Form 1 if they incorrectly reported payments exceeding ₹1 lakh or miscalculated the 6% levy deducted.
• For E-commerce Operators (2% Levy): A non-resident e-commerce operator (e.g., Amazon) may seek rectification for errors in reporting transactions exceeding ₹2 crore or the 2% levy paid.
• Timely rectification prevents penalties, interest, or disallowance of expenses (for the 6% levy) and ensures compliance with Equalisation Levy obligations.