Arijit Pasayat, C.J:— This is an appeal under section 260A of the Income-Tax Act, 1961 (in short, “the Act”), filed by the Revenue questioning the correctness of the conclusion recorded by the Income-Tax Appellate Tribunal (in short, “the Tribunal”) to the effect that the action taken under section 154 of the Act was not legal after issuance of notice under section 143(2) of the Act.

2. The factual position in a nutshell is as follows:

For the assessment year 1989–90, the due date of filing a return was December 31, 1989. The assessee filed the return on December 28, 1989. An intimation in terms of section 143(1)(a) of the Act was given to the assessee on March 31, 1990, on the basis of the return filed. A notice under section 143(2) was issued in the month of December, 1990. Subsequently, a notice for taking action under section 154 of the Act was issued on February 28, 1991. The assessee submitted its reply on March 21, 1991, taking the stand that there was no scope for taking any action under section 154. On March 27, 1991, a revised return was filed by the assessee. Rejecting the assessee's plea that after issuance of notice under section 143(2) of the Act, as well as on the facts, there was no case for resorting to section 154, an order under section 154 was passed. In the order under section 154, the Income-Tax Officer decided the question as to how profits under section 115J of the Act was to be undertaken and passed an order determining the taxable book profit of Rs. 8,58,21,204. It was held that there was a mistake which was apparent from the record and rectifiable under section 154. The assessee filed an appeal before the Commissioner of Income-Tax (Appeals) (in short, the CIT(A)). The said authority held that the matter was not one which involved any interpretation of law but one of inclusion or noninclusion of certain items for calculating the book profit under section 115J. As the language of section 115J is very clear, regarding the items to be included and not to be included for working out the book profit, when a particular item was left out or included by mistake it could be considered as an arithmetical error and a matter of law which required long drawn process of deliberations. The fact that the assessee had filed a revised return, according to the Commissioner of Income-Tax (Appeals), was indicative of the fact that there was a mistake with regard to adding back book profits. The action of the Assessing Officer in carrying out rectification was found to be in order. The assessee carried the matter in appeal before the Tribunal. Its stand that the action under section 154 was not in order, was accepted by the Tribunal. It was held that after the commencement of the proceedings for making assessment under section 143(3) by issuance of notice under section 143(2), the assessing authority cannot rectify any intimation under section 143(1)(a), because once notice for scrutiny of accounts is issued and the matter is in progress under subsection (2), then to again rely on the intimation under section 143(1)(a) of the Act would be improper. Reading section 143(1) and (2) together, it was observed that even when intimation under section 143(1)(a) has been issued, yet power under sub-section (2) of section 143 can be exercised. In fact, there was no scope for rectifying an intimation after resort to section 143(2).

3. In this appeal under section 260A of the Act, the following questions have been raised for adjudication:

(a) Whether the Income-Tax Appellate Tribunal is correct in law in holding that after commencing proceedings for making assessment under section 143(3) the Assessing Officer cannot rectify any intimation under section 143(1)(a)?

(b) Whether the Income-Tax Appellate Tribunal has correctly interpreted the provisions of a statute, namely, sections 115J, 143(1)(a), 143(1A), 143(2), 143(3) and 154?

(c) Whether the Income-Tax Appellate Tribunal is correct in holding that if the Assessing Officer has already issued a notice under section 143(2), then he cannot send any intimation on the basis of a return filed?

(d) Whether the order of the Assessing Officer passed under section 154 after issue of notice under section 143(2) making adjustment and charging additional tax is proper in law?

(e) Whether the order passed by the Income-Tax Appellate Tribunal is perverse and contrary to law?

(f) Whether the Assessing Officer was justified in recomputing the book profit under section 154/143(1)(a) for the purpose of section 115J in the light of the fact that notice under section 143(2) had already been issued?

(g) Whether the Income-Tax Appellate Tribunal is correct in law in holding that once notice under section 143(2) has been issued, recourse to section 154 is not warranted?

(h) Whether sections 154 and 143(2) are mutually exclusive or not?

(i) Whether the interpretation put forward by the Assessing Officer with reference to computation of book profits under section 115J is correct?

(j) Whether principles of natural justice are violated if recourse to section 154 is taken and to rectify intimation under section 143(1)(a) when proceedings under section 143(2) are going on?

4. According to learned counsel for the Revenue, the Tribunal fell into grave error in holding that after notice under section 143(2) has been issued, there was no scope for rectifying the intimation under section 143(1) of the Act.

5. Section 143(1) as it stood before and after amendment with effect from June 1, 1999, read as follows:

After amendment:

“143. Assessment—(1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142,—

(i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid, any tax paid on self-assessment and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly; and

(ii) if any refund is due on the basis of such return, it shall be granted to the assessee and an intimation to this effect shall be sent to the assessee:

Provided that except as otherwise provided in this sub-section, the acknowledgment of the return shall be deemed to be an intimation under this sub-section where either no sum is payable by the assessee or no refund is due to him:

Provided further that no intimation under this sub-section shall be sent after the expiry of two years from the end of the assessment year in which the income was first assessable.

(2) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer shall, if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend: his office or to produce, or cause to be produced there, any evidence on which the assessee may rely in support of the return:

Provided that no notice under this sub-section shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished.

(3) On the day specified in the notice issued under sub-section (2), or as soon afterwards as may be, after hearing such evidence as the asses-, see may produce and such other evidence as the Assessing officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment.

(4) Where a regular assessment under sub-section (3) of this section or section 144 is made,—

(a) any tax or interest paid by the assessee under sub-section (1) shall be deemed to have been paid towards such regular assessment;

(b) if no refund is due on regular assessment or the amount refunded under sub-section (1) exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply accordingly.”

Before amendment:

6. Section 143(1) as it stood at the point of time when the intimation was given under the said provision, under section. 139, or in response to a notice under sub-section (1) so far as relevant, read as follows:

“143.(1)(a) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142,—

(i) if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-section (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly; and

(ii) if any refund is due on the basis of such return, it shall be granted to the assessee:

Provided that in computing the tax or interest payable by, or refundable to, the assessee, the following adjustments shall be made in the income or loss declared in the return, namely

(i) any arithmetical errors in the return, accounts or documents accompanying it shall be rectified;

(ii) any loss carried forward, deduction, allowance or relief, which, on the basis of the information available in such return, accounts or documents, is prima facie admissible but which is not claimed in the return, shall be allowed;

(iii) any loss carried forward, deduction, allowance or relief claimed in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed:

Provided further that where adjustments are made under the first proviso, an intimation shall be sent to the assessee, notwithstanding that no tax or interest is found due from him after making the said adjustments:

Provided also that an intimation for any tax or interest due under this clause shall not be sent after the expiry of two years from the end of the assessment year in which the income was first assessable.

(b) Where, as a result of an order made under sub-section (3) of this section or section 144 or section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264, or any order of settlement made under sub-section (4) of section 245d relating to any earlier assessment year and passed subsequent to the filing of the return referred to in clause (a), there is any variation in the carry forward loss, deduction, allowance or relief claimed in the return, and as a result of which

(i) if any tax or interest is found due, an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly, and

(ii) if any refund is due, it shall be granted to the assessee:

Provided that an intimation for any tax or interest due under this clause shall not be sent after the expiry of four years from the end of the financial year in which any such order was passed.

(c) Where the assessee is a partner of a firm or a member of an association of persons or body of individuals and as a result of the adjustments made under the first proviso to clause (a) of sub-section (1) in the income or loss declared in the return made by the firm, association or body, as the case may be, or as a result of an order made under sub-section (3) of this section or section 144 or section 147 or section 154 or section 155 or sub-section (1) or sub-section (2) or sub-section (3) or sub-section (5) of section 185 or sub-section (1) or sub-section (2) of section 186 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264, or any order of settlement made under sub-section (4) of section 254d, passed subsequent to the filing of the return referred to in clause (a), there is any variation in his share in the income or loss of the firm, association or body, as the case may be, or in the manner of inclusion of his share in the returned income, then,—

(i) if any tax or interest is found due, an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 156 and all the provisions of this Act shall apply accordingly, and

(ii) if any refund is due, it shall be granted to the assessee:

Provided that an intimation for any tax or interest due under this clause shall not be sent after the expiry of four years from the end of the financial year in which any such adjustments were made or any such order was passed.

(lA)(a) Where, in the case of any person, the total income, as a result of the adjustments made under the first proviso to clause (a) of sub-section (1), exceeds the total income declared in the return by any amount, the Assessing Officer shall

(i) further increase the amount of tax payable under sub-section (1) by an additional Income-Tax calculated at the rate of twenty per cent, of the tax payable on such excess amount and specify the additional Income-Tax in the intimation to be sent under sub-clause (i) of clause (a) of sub-section (1);

(ii) where any refund is due under sub-section (1), reduce the amount of such refund by an amount equivalent to the additional Income-Tax calculated under sub-clause (i).

(b) Where as a result of an order under section 154 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264, the amount on which additional Income-Tax is payable under clause (a) has been increased or reduced, as the case may be, the additional Income-Tax shall be increased or reduced accordingly, and,—

(i) in a case where the additional Income-Tax is increased, the Assessing Officer shall serve on the assessee a notice of demand under section 156;

(ii) in a case where the additional Income-Tax is reduced, the excess amount paid, if any, shall be refunded.

Explanation— For the purposes of this sub-section, ‘tax payable on such excess amount’ means,—

(i) in any case where the amount of adjustments made under the first proviso to clause (a) of sub-section (1) exceed the total income, the tax that would have been chargeable had the amount of the adjustments been the total income;

(ii) in any other case, the difference between the tax on the total income and the tax that would have been chargeable had such total income been reduced by the amount of adjustments…

(2) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer shall, if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced there, any evidence on which the assessee may rely in support of the return:

Provided that no notice under this sub-section shall be served on the assessee after the expiry of the financial year in which the return is furnished or the expiry of six months from the end of the month in which the return is furnished, whichever is later.

(3) on the day specified in the notice issued under sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him on the basis of such assessment.

(4) Where a regular assessment under sub-section (3) of this section or section 144 is made

(a) any tax or interest paid by the assessee under sub-section (1) shall be deemed to have been paid towards such regular assessment;

(b) if no refund is due on regular assessment or the amount refunded under sub-section (1) exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply accordingly.”

7. It is to be noted that substantial changes have been made to section 143(1) with effect from June 1, 1999. Up to March 31, 1989, after a return of income was filed the Assessing Officer could make an assessment under section 143(1) without requiring the presence of the assessee or production by him of any evidence in support of the return. Where the assessee objected to such an assessment or where the officer was of the opinion that the return was incorrect or incomplete or the officer did not complete the assessment under section 143(1), but wanted to make an inquiry, a notice under section 143(2) was required to be issued to the assessee requiring him to produce evidence in support of his return. After considering the material and evidence produced and after making necessary inquiries, the officer had power to make assessment under section 143(3). With effect from April 1, 1989, the provisions underwent substantial and material changes. A new scheme was introduced and in the new substituted section 143(1) prior to the subsequent substitution with effect from June 1, 1999, in clause (a), a provision was made that where a return was filed under section 139 or in response to a notice under section 142(1), and any tax or refund was found due on the basis of such return after adjustment of tax deducted at source, any advance tax or any amount paid otherwise by way of tax or interest, an intimation was to be sent without prejudice to the provisions of section 143(2) to the assessee specifying the sum so payable and such intimation was deemed to be a notice of demand issued under section 156. The first proviso to section 143(1)(a) allowed the Department to make certain adjustments in the income or loss declared in the return. They were as follows:

(b) an arithmetical errors in the return, accounts and documents accompanying it were to be rectified;

(c) any loss carried forward, deduction, allowance or relief, which, on the basis of the information available in such return, accounts or documents, was prima facie admissible, but which was not claimed in the return, was to be allowed;

(d) any loss carried forward, relief claimed in the return, which, on the basis of the information as available in such return, accounts or documents were prima facie inadmissible, was to be disallowed.

8. One thing further to be noticed is that intimation under section 143(1)(a) is given without prejudice to the provisions of section 143(2). Though technically the intimation issued was deemed to be a demand notice issued under section 156, that did not per se preclude the right of the Assessing Officer to proceed under section 143(2).

9. That right is preserved and is not taken away. Between the period from April 1, 1989, to March 31, 1998, the second proviso to section 143(1)(a), required that where adjustments were made under the first proviso to section 143(1)(a), an intimation had to be sent to the assessee, notwithstanding that no tax or interest was due from him after making such adjustments. With effect from April 1, 1998, the second proviso to section 143(1)(a) was substituted by the Finance Act, 1997, which was operative till June 1, 1999. The requirement was that an intimation was to be sent to the assessee whether or not any adjustment had been made under the first proviso to section 143(1)(a) and notwithstanding that no tax or interest was found due from the assessee concerned. Between April 1, 1998, to May 31, 1999, sending of an intimation under section 143(1)(a) was mandatory. Thus, the legislative intent is very clear from the use of the word “intimation” as substituted for “assessment” that two different concepts emerged. While making an assessment, the Assessing Officer is free to make any addition after grant of opportunity to the assessee. By making adjustments under the first proviso to section 143(1)(a), no addition which is impermissible by the information given in the return could be made by the Assessing Officer. The reason is that under section 143(1)(a) no opportunity is granted to the assessee and the Assessing Officer proceeds on his opinion on the basis of the return filed by the assessee. The very fact that no opportunity of being heard is given under section 143(1)(a) indicates that the Assessing Officer has to proceed accepting the return and making the permissible adjustments only. As a result of insertion of the Explanation to section 143 by the Finance (No. 2) Act of 1991, with effect from October 1, 1991, and subsequently, with effect from June 1, 1994, by the Finance Act, 1994, and ultimately with effect from June 1, 1999, by Explanation as introduced by the Finance Act, 1999, an intimation sent to the assessee under section 143(1)(a) was deemed to be an order for the purposes of section 246 between June 1, 1994, to March 31, 1999, and under section 264 between October 1, 1991, and May 31, 1999. It is to be noted that the expressions “intimation” and “assessment order” have been used at different places. The contextual difference between the two expressions has to be understood in the context the expressions are used. Assessment is used as meaning sometimes “the computation of income”, sometimes “the determination of the amount of tax payable” and sometimes “the whole procedure laid down in the Act for imposing liability upon the taxpayer”. In the scheme of things, as noted above, the intimation under section 143(1)(a) cannot be treated to be an order of assessment. The distinction is also well brought out by the statutory provisions as they stood at different points of time. Under section 143(1)(a) as it stood prior to April 1, 1989, the Assessing Officer had to pass an assessment order if he decided to accept the return, but under the amended provision, the requirement of passing of an assessment order has been dispensed with and instead an intimation is required to be sent. Various circulars sent by the Central Board of Direct Taxes spell out the intents of the Legislature, i.e, to minimize the Departmental work to scrutinize each and every return and to concentrate on selective scrutiny of returns. These aspects were highlighted by one of us (D.K Jain J.) in the case of Apogee International Ltd. v. Union of India, [1996] 220 ITR 248 by this court. It may be noted that under the first proviso to the newly substituted section 143(1), with effect from June 1, 1999, except as provided in the provision itself, the acknowledgment of the return shall be deemed to be intimation under section 143(1) where (a) either no sum is payable by the assessee or (b) no refund is due to him. It is significant that the acknowledgment is not done by any Assessing Officer, but mostly by ministerial staff. Can it be said that any “assessment” is done by them? The reply is an emphatic “no”. The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible and nothing more can be inferred from the deeming provision.

10. As the Tribunal has rightly observed, the intimation under section 143(1)(a) is without prejudice to the provisions of section 143(2). In this case notice for assessment under section 143(2) has been issued. The expression “without prejudice to the provisions of section 143(2)” is of great significance. It means that the right of the Assessing Officer to proceed under section 143(2) despite intimation to the assessee of the sum payable as tax or interest was preserved and not taken away. It was not curtailed and on the other hand it was saved. In Apogee International Ltd. 's case, [1996] 220 ITR 248 this court held that even if an intimation was given after issuance of notice under section 143(2) that did not preclude Assessing Officer from issuing a fresh notice under section 143(2) where he considered it necessary or expedient to ensure that the assessee had declared his income correctly. Under sub-section (4) of section 143, where a regular assessment is made under sub-section (3) thereof, or under section 144 any tax or interest paid by the assessee under sub-section (1) shall be deemed to have been paid towards such regular assessment. If no refund is due on regular assessment or the amount refunded under subsection (1) exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded is deemed to be tax payable by the assessee subject to provisions of the Act.

11. 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 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 distinction between an intimation under section 143(1) and an order issued under section 143(3)(supra). The above being the position, if any change is permissible to be effected, the same can be done in the assessment under section 143 of the act and not by exercising power under section 154 of the Act. We do not think it necessary to go into the question whether rectification that was done by the Assessing Officer could be termed to be a mistake apparent from the record. The scope and ambit of section 154 has been examined in several cases. We may just note that the Commissioner of Income-Tax (Appeals) himself was not very sure as to whether the so-called mistake was one which could be considered an arithmetic error because he himself had further observed that it was a matter of law which required a long drawn process of deliberations. If it is the latter, certainly section 154 has no application. Since the Tribunal has not considered this aspect, we do not think it necessary to examine that question. This is not a fit case which deserves to be considered under section 260A of the Act. The appeal is dismissed.