Direct Tax Alert

BACKGROUND

With the growing volume of electronically processed returns, the need for a comprehensive centralised mechanism to correct processing errors and issue corresponding demands or refunds has become essential.
In view of the same, the Central Board of Direct Taxes (CBDT) has issued a Notification¹ authorising the Centralised Processing Centre (CPC), Bengaluru, to undertake rectification of mistakes apparent from the record and to issue demand notices arising from such rectifications. This notification becomes effective from the date of its publication in the official Gazette, i.e., 27 October 2025.

We, at BDO India, have summarised the key aspects of the Notification and provided our comments on its impact hereunder:

• Authorisation of CPC for rectification and demand functions
  • The CBDT has authorised the Commissioner of Income-tax (CIT), CPC, Bengaluru, to undertake rectification of mistakes apparent from the record under section 154² of the Income-tax Act, 1961 (IT Act).
  • This includes rectification of any errors in refunds issued earlier under the IT Act, non-consideration of any pre-paid tax credits or eligible reliefs or incorrect calculation of interest under section 244A³ of the IT Act, resulting in any error in the computation of tax, refund, or demand determination.
  • The CIT, CPC, has also been authorised to issue a notice of demand under section 156⁴ of the IT Act in cases arising from such rectifications.
  • These powers shall be exercised in respect of such territorial area or such cases/classes of cases or such persons/classes of persons, namely, all cases (specified cases) where the orders have been passed through the interface between the tax officer and the CPC and in respect of all income/ classes of income thereof.

• Delegation of Powers by CIT, CPC to Additional/Joint CIT and, in turn, to any subordinate tax officer
  • The CBDT has authorised the CIT, CPC, to issue orders in writing delegating the powers and performance of the specified functions to the Additional CIT (ACIT) or Joint CIT(JCIT) who are subordinate to him in respect of the above-mentioned specified cases.
  • Similarly, the CBDT has authorised the ACIT or JCIT to issue orders in writing delegating the powers and performance of the specified functions to the tax officers who are subordinate to them in respect of the same above-mentioned specified cases for which such ACIT or JCIT have been authorised by the CIT, CPC.

BDO INDIA COMMENTS

This notification indicates a significant step towards streamlining post-processing functions and greater clarity on administrative jurisdiction in respect of electronically processed cases. This move is expected to expedite the resolution of taxpayer grievances related to errors in refunds, interest mismatches, and credit omissions.

Further, the explicit delegation framework ensures operational efficiency and establishes a clear chain of authority within the CPC structure. From a compliance standpoint, this measure is expected to significantly enhance transparency and consistency in the handling of rectification requests and refund-related adjustments across jurisdictions.
Previously, as per the Frequently Asked Questions (FAQs) on the income-tax website, certain rectification powers were vested with the CPC by way of filing online rectification requests for reprocessing returns, data corrections and tax credit mismatch corrections. This notification formally expands and codifies this authority, thereby strengthening the legal and administrative basis for CPC-driven rectifications.