Rectification cannot cure a debatable tax issue; section 154 was unavailable and no referable question of law arose.

Rectification under section 154 is limited to mistakes apparent from the record and cannot be used where the tax position is debatable or reasonably capable of more than one view. The Karnataka High Court noted that the allowability of interest paid to a partner's Hindu undivided family under section 40(b) was not free from controversy and could support a legally sustainable view in favour of the assessee. On that basis, no apparent error existed in the assessment order, section 154 was unavailable, and no referable question of law arose for a reference under section 256(2).

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Issues: Whether the power of rectification under section 154 of the Income-tax Act, 1961 could be invoked where the allowability of interest paid to the partner's Hindu undivided family under section 40(b) admitted more than one possible view, and whether any referable question of law arose for a reference under section 256(2).

Analysis: The question depended on whether the assessment orders contained a mistake apparent from the record. The Tribunal had found that the interest was paid to the Hindu undivided family of which the partner was karta, and that the assessee's claim was capable of at least one legally sustainable view. Rectification under section 154 is confined to cases where the point is free from debate and does not permit correction of a matter on which two views are reasonably possible. In that situation, no referable question of law survived for compulsion of a statement of case under section 256(2).

Conclusion: Section 154 could not be invoked, because the issue was debatable and not a mistake apparent from the record. No referable question of law arose, and the petitions were liable to be dismissed.

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