Rectification notice under section 154 upheld where assessment record showed prima facie apparent mistake

A rectification notice under section 154 is sustainable where the assessment record itself contains prima facie material showing an apparent mistake. The Income-tax Officer may issue such notice on that basis and require the assessee to explain the alleged error; the notice is not invalid merely because the issue is debatable or the assessee disputes the inference. At the notice stage, no adverse order is made, and the availability of contest on merits does not by itself justify quashing the notice in writ proceedings.

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Issues: Whether the Income-tax Officer had jurisdiction to issue a notice under section 154 of the Income-tax Act, 1961, on the basis of the shareholding materials on record, and whether such notice could be interfered with in writ proceedings.

Analysis: Section 154 confers power to rectify only a mistake apparent from the record, but if the record itself discloses prima facie material showing such an error, the Income-tax Officer is competent to issue a notice and require the assessee to show cause. At the notice stage no adverse order is made; the assessee may contest the alleged error before the authority. The materials relied upon were part of the assessment record, and the case was not one of inherent lack of jurisdiction. The existence of a debatable question or the possibility of contest on the merits did not by itself invalidate the notice.

Conclusion: The notice under section 154 was validly issued and the challenge to it failed.

Final Conclusion: The writ petition stood dismissed and the appellate court set aside that result, upholding the rectification notice as within jurisdiction.

Ratio Decidendi: Where the assessment record itself contains prima facie material disclosing an apparent mistake, the Income-tax Officer may invoke section 154 and issue notice to rectify it, and such notice is not liable to be quashed merely because the assessee disputes the inference or the issue may require further contest.

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