Rectification under Section 154 cannot resolve debatable prior period interest claims or sustain consequential interest levies.

Rectification under section 154 cannot be used to decide a debatable issue or to revisit whether prior period interest expenditure had crystallised as a liability. Because the disallowance depended on a matter requiring examination beyond an apparent record error, the rectification was not sustainable. As the levy of interest under section 234B was consequential to that rectification, it also did not survive. The additions made under the rectification order were therefore deleted in favour of the assessee.

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Issues: Whether rectification under section 154 of the Income-tax Act, 1961 could be invoked to disallow the assessee's prior period interest expenditure, and to sustain the consequential levy of interest under section 234B.

Analysis: Rectification under section 154 is confined to mistakes apparent from the record and cannot be used for debatable matters requiring examination beyond the record. The disputed interest pertained to an earlier year and involved the question of crystallization of liability, which was not an obvious error capable of rectification. On these facts, the invocation of section 154 to disallow the interest was not sustainable. The levy of interest under section 234B, being consequential to the rectification, also did not survive.

Conclusion: The rectification order was held to be unsustainable and the additions made thereunder were deleted in favour of the assessee.

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