CBDT Introduces Simplified Rule for Rectification and Refund
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CBDT Notifies New Rules for Simplified ITR Rectification & Refunds
The Central Board of Direct Taxes has issued new rules aimed at improving efficiency in correcting income tax return errors and expediting refunds. The CBDT has rolled out a new framework to streamline the rectification of income tax return (ITR) errors and expedite refund processing under the Income Tax Act, 1961. following ae the Key Highlights New Rules for Simplified ITR Rectification & Refunds along with Collection Trends & Supreme Court Ruling Update
Empowering Centralised Processing Centre Bengaluru
The Commissioner of Income Tax, Bengaluru, has been empowered U/s 154 of the Income Tax Act to rectify apparent errors in tax computation, prepaid tax credits, and refund calculations. If your refund has been delayed or incorrectly calculated due to an apparent record-based error, the CPC Bengaluru now has the authority to directly rectify and release the corrected refund: making the process simpler, faster, and more efficient.
The Commissioner of Income Tax (Centralised Processing Centre – CPC), Bengaluru has been empowered to directly rectify mistakes apparent from records under Section 154, including:
- Errors in tax computation or refund determination,
- Non-consideration of prepaid tax credits (Advance Tax, TDS, Self-Assessment Tax),
- Omission of eligible reliefs, or
- Incorrect computation of interest under Section 244A.
This allows faster correction of refund errors without requiring separate Assessing Officer intervention.
Empowerment of Centralised Processing Centre:
The Centralised Processing Centre now enjoys concurrent jurisdiction with Assessing Officers (AOs) for rectification cases, minimizing administrative delays and ensuring timely resolution. With CPC Bengaluru as the central processing hub for all ITRs, this move is expected to significantly cut response times in addressing refund discrepancies and improve taxpayer satisfaction.
Scope of Rectification: The Commissioner of Income Tax (Centralised Processing Centre), Bengaluru can now correct computational or accounting errors such as:
- Non-consideration of prepaid tax credits or reliefs
- Incorrect interest computation U/s 244A
- Discrepancies in refund or demand determination
Demand Notices: The Commissioner of Income Tax (CPC), Bengaluru can also issue notices of tax demand U/s 156, where rectification results in additional tax liability.
Benefits to Taxpayers on New Rules for Simplified ITR Rectification & Refunds
This change is a part of CBDT’s ongoing push for automation and taxpayer convenience.
- Faster Refunds: Quicker rectification enables prompt refund processing.
- Reduced Compliance Burden: Centralized corrections minimize inter-office delays.
- Improved Transparency: Automated systems ensure accuracy and a clear audit trail.
Concurrent Jurisdiction and Delegation of Powers
The CBDT has granted concurrent jurisdiction to the Centralised Processing Centre along with Assessing Officers to handle such rectifications. The Commissioner of Income Tax (Centralised Processing Centre) may further delegate powers to Additional Commissioners, Joint Commissioners, and Assessing Officers ensuring quicker case handling and smoother processing. So following can Rectify Errors:
- Commissioner of Income Tax (CPC), Bengaluru
- Additional/Joint Commissioners (as delegated)
- Assessing Officers (when authorized for specific cases)
Direct Tax Collection Trends (As of November 10, 2025 – FY 2025–26)
| Metric | Amount (INR lakh crore) | Change vs. Previous Year |
| Gross Direct Tax Collections | 15.35 | +2.15% |
| Refunds Issued | 2.42 | –17.72% |
| Net Direct Tax Collections | 12.92 | +7.0% |
The decline in refunds (INR 52,200 crore less than last year) may be due to Smaller refund claims filed by taxpayers, reflecting improved advance tax alignment. Slower refund processing, possibly linked to the extended ITR due dates (Sept 15, 2025, for non-audit cases and Dec 10, 2025, for corporates).
Growth in collections is driven by +5.7% rise in corporate tax. & +8.7% increase in non-corporate tax.
Supreme Court Ruling on Works Contract Tax Deduction (Karnataka VAT Act, 2003)
In the case Authority for Clarification and Advance Rulings, Gandhinagar, Karnataka & Anr. v. M/s Skyline Construction and Housing Pvt. Ltd. (Civil Appeal No. 8318 of 2011, order dated October 9, 2025), the Supreme Court held that
U/s 15 of the KVAT Act (even prior to 1.3.2006), a principal contractor is entitled to deduct payments made to registered subcontractors (who have paid VAT) while computing tax on composition basis. Inclusion of such amounts would result in double taxation, contrary to the constitutional principle under Article 366(29A)(b).
| Issue | Court’s View |
|---|---|
| Tax on subcontractor’s turnover | Subcontractor liable directly; main contractor not taxed again. |
| Requirement for deduction | Subcontractor must be registered and have paid tax on that turnover. |
| Interpretation of “executed by him” | Limits taxable turnover to actual execution by the main contractor. |
| Double taxation | Not permissible under VAT law or Article 366(29A)(b). |
| Applicability of L&T precedent | Fully applicable; governs works contract tax principles. |
Reinforces Larsen & Toubro doctrine that property transfer in a works contract occurs through accretion directly from subcontractor to contractee. Clarifies that deduction for subcontractor payments is implicit even before explicit statutory amendment to prevent double taxation. Important precedent for interpretation of composition schemes and turnover computation under State VAT laws.
U/s 15 of the Karnataka VAT Act, 2003, for the period prior to March 1, 2006, principal contractors operating under the composition scheme are entitled to deduct amounts paid to registered subcontractors from their total works contract consideration ; provided those subcontractors have duly accounted for and paid tax on such receipts.
This ruling clarifies the treatment of subcontractor payments under the pre-amendment composition scheme, potentially impacting past and ongoing Value added Tax disputes for contractors in Karnataka. It aims to Reduce refund delays and administrative bottlenecks, Enable faster correction of record-based errors, Improve accuracy in tax and interest computations, & Enhance transparency in refund processing
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