Rectification under Section 154 should be done in the assessment under Section 143 and not by exercising power under Section 154, as parallel proceedings would serve no purpose and result in waste of time.

Jawahar Lal Gupta, J.

1. Can proceedings under Section 154 of the Income-tax Act, 1961, for rectification of the intimation under Section 143(1)(a) be initiated after the Assessing Officer has given a notice under Section 143(2) to the assessee ? This is the short question that arises for consideration in this appeal under Section 260A of the Act.

2. The assessee is a public limited company. It filed its return for the assessment year 1990-91. It claimed a deduction of Rs. 1,27,98,515 on account of dividend paid to the various shareholders. On April 16, 1991, the Assessing Officer issued an intimation to the assessee. On February 9, 1992, the Assessing Officer gave a notice under Section 143(2) to the assessee. Almost a year later on January 28, 1993, a notice under Section 154(1)(b) was issued. Soon thereafter, an order dated February 25, 1993, was passed under Section 154(1)(b). Aggrieved by the order, the assessee filed an appeal. On September 7, 1994, the Commissioner of Income-tax (Appeals) accepted the assessees claim. The Revenue challenged the order passed by the appellate authority. Vide order dated February 26, 2001, the Tribunal dismissed the appeal. Hence, this appeal under Section 260A of the Act.

3. The solitary contention raised by Mr. Sawhney, learned counsel for the Revenue, is that the Act does not place any bar on the Assessing Officer to invoke his jurisdiction under Section 154 even after notice under Section 143(2) has been given to the assessee. Thus, the view taken by the Tribunal cannot be sustained.

Admittedly, the power under Section 154 can be invoked only to correct an error apparent on the record. The scope of proceedings under Section 143(2) is far wider. The competent authority had taken a view in the matter and issued a notice under Section 143(2) to the assessee. Such a notice is normally issued to ensure that the assessee has not understated the income or has not computed excessive loss or underpaid the tax. It is only on consideration of the matter and on being satisfied that it is necessary or expedient to do so that the Assessing Officer issues the notice under Section 143(2). Once that has been done, the Assessing Officer has to proceed under Sub-section (3) and make an assessment of the total income or loss of the assessee and determine the sum, if any, payable by it. The consequences follow under Sub-section (4).

It is no doubt correct that an error apparent on the record can be corrected under Section 154 of the Act. However, if parallel proceedings are permitted it would only result in waste of time. It would serve no purpose. Thus, it is not surprising that judicial opinion is consistently against the Revenue. A Division Bench of the Gujarat High Court in Gujarat Poly-Avx Electronics Ltd. v. Deputy CIT (Asst.) [1996] 222 ITR 140 has taken a simitar view. Later on even a Division Bench of the Delhi High Court has considered the matter in CIT v. Punjab National Sank [2001] 249 ITR 763. The Chief Justice Mr. Arijit Pasayat (as his Lordship then was) has been pleased to observe as under (page 773): "The question is whether after the issue of notice under Section 143(2) the intimation issued under Section 143(1) is of any consequence, more particularly when a revised return has been filed. Notice under Sub-section (2) of Section 143 is relatable to the first return. The intimation under Section 143(1) is given without prejudice to the provisions of Sub-section (2). That makes the position clear that even when intimation under Section 143(1) has been given yet proceedings for assessment under Section 143(3) can be initiated by issuance of notice under Section 143(2). The order under Section 154 of the Act was passed after issuance of notice under Section 143(2) and during the pendency of the proceedings for assessment under Section 143(3). The order under Section 154 was passed on March 9, 1992, while the order under Section 143(3) was passed on March 27, 1992. We have made distinc