Rectification under section 154 cannot correct a debatable computation view on average profits in capital employed.

In computing capital employed under Rule 3(6), the treatment of average profits was held to be capable of two reasonable interpretations: one including such profits in the capital base and another treating that inclusion as duplicative. Because the alleged mistake arose from an artificial computation rule and was not an obvious or patent error apparent from the record, section 154 could not be invoked to adopt one debatable view over another. Rectification was therefore not justified, and the assessee succeeded.

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Issues: Whether the inclusion or exclusion of average profits in computing capital employed under Rule 3(6) was so self-evidently erroneous in the original assessment orders as to justify rectification under section 154.

Analysis: The applicable rule for ascertaining the average amount of capital employed deemed profits or losses to accrue evenly during the computation period and to affect capital correspondingly. On that construction, two views were reasonably possible: one favouring inclusion of average profits in the capital base and the other treating such inclusion as duplicative. Because the issue depended on the proper interpretation of an artificial computation rule and was capable of more than one reasonable view, any error in the original computation could not be characterised as an obvious or patent mistake apparent from the record. Rectification jurisdiction under section 154 could not be used to adopt one of two debatable interpretations.

Conclusion: Rectification under section 154 was not justified, and the assessee succeeded.

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