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Issues: Whether the Tribunal could invoke section 254(2) of the Income-tax Act, 1961 to revise its earlier order by entering into the reasonableness of expenditure claimed under section 48(1)(a)(i), and whether such exercise amounted to rectification of a mistake apparent from the record.
Analysis: The Tribunal's earlier view had proceeded on a hypothetical basis while restricting the deductible amount. In the rectification proceedings, it treated the question of reasonableness as outside the scope of section 48(1)(a)(i) and allowed the full deduction. The Court held that section 254(2) is confined to rectifying a mistake apparent from the record and cannot be used to revisit a debatable issue or to review an earlier decision. The reliance placed on the cited Supreme Court decision did not authorise such a conclusion on the present statutory provision, and the issue whether reasonableness could be examined under section 48(1)(a)(i) was itself not free from debate.
Conclusion: The Tribunal was not justified in exercising power under section 254(2); its order amounted to an impermissible review rather than rectification, and the question was answered against the assessee and in favour of the Revenue.
Final Conclusion: The reference was answered in favour of the Revenue on the limited ground that rectification under section 254(2) cannot be used to re-open a debatable matter or reassess the reasonableness of the claimed expenditure.
Ratio Decidendi: Section 254(2) of the Income-tax Act, 1961 permits only correction of a mistake apparent from the record and does not authorise review or reappreciation of a debatable issue.
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