Rectification under Section 154 cannot sustain a cash payment disallowance where Rule 6DD(j) depends on factual inquiry.

Section 154 permits only correction of mistakes apparent from the record, not issues requiring factual enquiry or inferential assessment. Whether the assessee's cash payments fell within Rule 6DD(j) depended on facts such as whether the payments were made on holidays and whether the explanation furnished in assessment was acceptable. That question was not a patent error visible from the record, so rectification under Section 154 could not be used to sustain the Section 40A(3) disallowance. The rectification order on this point was therefore annulled and the assessee succeeded.

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Issues: Whether the rectification made under Section 154 of the Income-tax Act, 1961 to sustain the disallowance under Section 40A(3) of the Income-tax Act, 1961 could stand when the assessee's cash payments were claimed to fall within the exception in Rule 6DD(j) of the Income-tax Rules, 1962.

Analysis: Section 154 confers only a narrow power to correct mistakes apparent from the record. The question whether the cash payments were made on holidays and whether the explanation offered by the assessee was acceptable required examination of the surrounding facts and the explanation furnished in the assessment proceedings. Such a matter could not be treated as an obvious or patent mistake capable of rectification under Section 154, because it involved an inferential assessment and not a self-evident error from the record.

Conclusion: The rectification was unsustainable and the disallowance could not be upheld in rectification proceedings. The issue is decided in favour of the assessee.

Final Conclusion: The assessee succeeded in appeal and the rectification order on this point was annulled.

Ratio Decidendi: A debatable issue requiring factual evaluation or inferential reasoning cannot be corrected under Section 154, which is confined to mistakes apparent from the record.

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