You forgot the quotes so we can see if there is any whitespace around those. I would suspect a typo somewhere -- I'm not getting any syntax error from a copy+paste of that script.

yeah...my mistake..it worked... i have one question... u suggested to use read.. can u please tell me how to use "read" command.

Is it hard to delete the last 3 three lines in file1.txt using script... i am not sure whether to use script to solve the problem or use c++ program.

This is not particularly elegant, but at least this demonstrates how to use read.

If you'd run head -n 3 inside the loop, with standard input for the loop redirected to come from file2.txt, I suppose that would work, too. The trick is to use redirection to open the file once and then keep on reading without closing the file descriptor. Redirection (with <, or with exec) achieves that for you.

Using a temporary file just seems like better hygiene than continuously butchering the input file, and saves you from having to keep track of how many lines exactly to remove again in case of a short read (what with the possibility of missing newlines at the end and other complications).