Income-tax regular assessment after s143(2) notice: s143(1) intimation can't be rectified under s154 to alter s115J book profit; appeal dismissed.

After issuance of notice under s.143(2), an intimation under s.143(1)(a) remains "without prejudice" to regular assessment, so assessment proceedings under s.143(3) can validly continue notwithstanding such intimation and even if a revised return is filed. During pendency of s.143(3) proceedings, the AO cannot use s.154 to recompute book profit for s.115J by purporting to rectify the earlier intimation; any permissible modification must be effected only in the s.143(3) assessment. The HC noted that the alleged error involved a debatable legal issue rather than an apparent mistake, further undermining s.154 recourse. The appeal was dismissed.

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Issues: (i) Whether the Assessing Officer can rectify an intimation under section 143(1)(a) by exercising power under section 154 after issuance of notice under section 143(2) and during pendency of proceedings under section 143(3); (ii) Whether intimation under section 143(1)(a) is ousted or rendered ineffective by issuance of notice under section 143(2) (i.e. whether sections 143(1)(a) and 143(2)/154 are mutually exclusive).

Issue (i): Whether the Assessing Officer can exercise section 154 to rectify an intimation under section 143(1)(a) after a notice under section 143(2) has been issued and while proceedings under section 143(3) are pending.

Analysis: The Court distinguished an intimation under section 143(1)(a) from an assessment under section 143(3). An intimation under section 143(1)(a) is given "without prejudice to the provisions of section 143(2)", preserving the Assessing Officer's right to initiate scrutiny under section 143(2) and proceed to assessment under section 143(3). Once proceedings under section 143(2)/143(3) are initiated, any change to the position based on the return should be effected in the assessment proceedings under section 143 and not by resort to section 154. The Court declined to decide whether the particular alteration in this case amounted to a "mistake apparent from the record" for purposes of section 154, noting that the Commissioner of Income-tax (Appeals) considered the issue to involve questions of law and deliberation rather than a mere arithmetic error.

Conclusion: The Assessing Officer cannot properly effect rectification under section 154 of an intimation under section 143(1)(a) after a notice under section 143(2) has been issued and while assessment proceedings under section 143(3) are pending. This conclusion operates in favour of the assessee.

Issue (ii): Whether intimation under section 143(1)(a) is ousted by issuance of notice under section 143(2) or whether the two provisions are mutually exclusive.

Analysis: The Court held that the intimation under section 143(1)(a) is expressly made "without prejudice to the provisions of section 143(2)", which means the right to proceed under section 143(2) is preserved. The statutory scheme and legislative history show that intimation and scrutiny/assessment serve different functions; an intimation does not preclude subsequent exercise of powers under section 143(2) and (3). Thus the provisions are not mutually exclusive in operation, but where assessment proceedings are on foot they are the appropriate forum for changes to the computation of income.

Conclusion: Sections 143(1)(a) and 143(2)/143(3) are not mutually exclusive; issuance of a notice under section 143(2) preserves the Assessing Officer's power to assess under section 143(3) and limits the appropriateness of using section 154 for substantive changes. This conclusion is in favour of the assessee.

Final Conclusion: The order under section 154, passed after issuance of notice under section 143(2) and during the pendency of assessment proceedings under section 143(3), was not the proper course; any permissible change should be made in the assessment proceedings rather than by rectification under section 154. The appeal under section 260A does not merit interference and is dismissed.

Ratio Decidendi: Where proceedings for regular assessment under section 143(3) have been initiated by issuance of notice under section 143(2), substantive alterations to the taxpayer's returned income cannot be effectuated by invoking section 154; such changes must be addressed in the assessment proceedings under section 143.

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