Rectification under section 154 cannot support a disputed disallowance requiring inquiry into expenditure allowability.

Section 154 rectification is confined to mistakes apparent from the record and cannot be used to make a disallowance that depends on detailed inquiry or contested examination of allowability. A proposed disallowance of interest and remuneration as revenue expenditure under section 37(1) fell outside this limited rectification jurisdiction, so the rectification order was not sustainable and the matter went in favour of the assessee.

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Issues: Whether section 154 of the Income-tax Act, 1961 could be invoked to disallow revenue expenditure claimed by the assessee where the disallowance required detailed inquiry.

Analysis: Rectification under section 154 is confined to mistakes apparent from the record and cannot be used for issues that require investigation or a contested evaluation of the allowability of expenditure. A disallowance of interest and remuneration expenditure under section 37(1) in such circumstances involves a matter beyond the limited rectification jurisdiction, and therefore cannot be sustained through section 154 proceedings.

Conclusion: The rectification order was not sustainable in law and the issue was decided in favour of the assessee.

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