Rectification under section 154 cannot survive once the original assessment is set aside and de novo assessment is directed.

Rectification under section 154 could not be used to keep a demand in abeyance and recompute outstanding tax after the Tribunal had set aside the original assessment and directed a de novo assessment by a competent officer. The administrative instruction relied on for giving effect to appellate orders did not apply where, after the amendment to section 251, the first appellate authority had no power to set aside assessments. Once the original assessment had ceased to operate and a subsequent assessment was made, the earlier tax computation and demand no longer survived, so the rectification proceedings were unsustainable and academic. The rectification orders were quashed.

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Issues: Whether the rectification orders passed under section 154 of the Income-tax Act, 1961, by keeping the demand in abeyance and recomputing the outstanding demand after the Tribunal had set aside the original assessment and directed a de novo assessment by a competent officer, were valid.

Analysis: The rectification was founded on an administrative instruction dealing with giving effect to appellate orders partially setting aside assessments. That instruction had no application where the first appellate authority no longer had power to set aside assessments after the amendment to section 251 of the Income-tax Act, 1961. More importantly, once the Tribunal had held that the original assessment framed by the Income-tax Officer was invalid and had directed assessment de novo by a competent officer, the assessment order sought to be rectified was no longer operative. The subsequent assessment passed by the competent officer also meant that the earlier computation of tax and demand did not survive, rendering the rectification proceedings unsustainable and academic.

Conclusion: The rectification orders under section 154 were invalid and were quashed; the appeals were allowed.

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