Rectification cannot perpetuate an original assessment error where mandatory procedure under section 23A was not followed.

Rectification under section 154 of the Income-tax Act could not be used to sustain an order that merely perpetuated an original error under section 23A of the 1922 Act. The High Court stated that rectification is limited to correcting obvious mistakes and cannot make a substantive readjustment that preserves or worsens an illegality in the original order. Where the original section 23A order was vulnerable for non-compliance with mandatory statutory procedure, an enhanced demand through rectification would be invalid. The reference was left conditional on the Tribunal deciding whether the assessee was entitled to notice under section 23A(2), and the validity of the rectification depended on that finding.

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Issues: Whether an order under section 154 of the Income-tax Act, 1961 could be used to rectify an order passed under section 23A of the Indian Income-tax Act, 1922 where the rectification would merely perpetuate the original error.

Analysis: The power of rectification is confined to correcting obvious mistakes and cannot be used to make a substantive readjustment that preserves or aggravates an existing illegality in the original order. Where the original order under section 23A was itself vulnerable for non-compliance with the statutory procedure, a rectification enhancing the demand would amount to perpetuating the error rather than correcting it.

Conclusion: The rectification under section 154 could not be sustained on that basis and the assessee succeeded on this issue.

Final Conclusion: The reference was answered conditionally, leaving it open to the Tribunal to determine whether the assessee was entitled to the statutory notice under section 23A(2), and the validity of the rectification depended on that finding.

Ratio Decidendi: The rectification jurisdiction cannot be invoked to continue or intensify an error in the original assessment order, particularly where the original order is itself affected by non-compliance with mandatory statutory procedure.

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