Rectification under Section 154 requires factual verification before a demand is confirmed; AO must verify refund records.

Rectification under Section 154 was contested where a CPC-issued rectification altered refund/credit and raised a demand; the Tribunal found conflicting intimation and rectification entries and refused to sustain a demand without factual verification. The legal principle applied requires inquiry into whether an excess refund was actually issued before permitting a rectification demand to stand; accordingly the matter was restored to the assessing officer for de novo verification of refund records. Outcome: if verification shows no excess refund, the demand must be withdrawn; the appeal is partly allowed to that extent.

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Issues: (i) Whether the rectification order altering refund/credit and raising a demand could be validly passed by the CPC without issuance of a prior show cause notice under Section 154(3) of the Income-tax Act, 1961; (ii) Whether the discrepancy in amounts shown as refunded in various intimation/rectification orders requires verification and whether the demand should stand if no excess refund was actually issued.

Issue (i): Validity of rectification order passed by CPC without prior show cause notice under Section 154(3) of the Income-tax Act, 1961.

Analysis: The Tribunal reviewed the sequence of intimation under Section 143(1) and subsequent rectification orders under Section 154 as recorded in the proceedings and noted conflicting entries regarding amounts of refund/credit allowed and amounts indicated as previously issued. The bench observed that the record shows multiple rectification orders and that the parties had not brought one such earlier rectification order to the attention of the Tribunal. The Tribunal did not decide the jurisdictional question finally on the abstract point alone but examined the factual matrix to determine whether the demand genuinely arose from an excess refund actually issued.

Conclusion: The Tribunal did not uphold the demand without factual verification and directed de novo verification by the assessing officer; the rectification demand cannot stand if no excess refund was actually issued. This disposes the issue in favour of the assessee to the extent that the demand must be verified and unnecessary demand withdrawn.

Issue (ii): Whether the discrepancy in refund figures requires verification and the consequential effect on the demand.

Analysis: The Tribunal identified inconsistent figures between the intimation under Section 143(1) and entries in the later rectification order indicating a higher amount as previously refunded. Noting an intervening rectification order dated 01/11/2022 which had not been adverted to by the parties, the Tribunal found that the factual question whether an amount of Rs. 64,21,690/- was actually refunded needed to be verified by the assessing officer. The Tribunal therefore restored the issue to the file of the assessing officer for verification and fresh decision in accordance with law.

Conclusion: The Tribunal directed the assessing officer to verify the refund records and, if no excess refund was issued, to reduce the demand to nil. This conclusion is in favour of the assessee subject to verification.

Final Conclusion: The appeal is partly allowed for statistical purposes by restoring the disputed issue to the assessing officer for factual verification of refund payments and fresh decision; the demand raised shall be withdrawn if verification shows no excess refund was issued.

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