Rectification under section 154 is limited to patent errors; debatable interest deduction issues need notice and cannot be rectified.

Rectification under section 154 requires prior notice and a reasonable opportunity to object under section 154(3); absent that safeguard, the rectification order is not legally sustainable. A correction under section 154 is confined to an obvious, patent error apparent from the record. Where disallowance of interest deduction depends on competing factual views about the purpose and use of borrowed funds, the issue is debatable and falls outside rectification jurisdiction. The material states that such interest disallowance could not be reopened under section 154 and that the rectification orders were unsustainable in law.

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Issues: (i) Whether the rectification order under section 154 was invalid for want of notice and opportunity under section 154(3); (ii) Whether disallowance of interest deduction was a mistake apparent from record amenable to rectification under section 154.

Issue (i): Whether the rectification order under section 154 was invalid for want of notice and opportunity under section 154(3).

Analysis: Before invoking rectification jurisdiction, the assessee must be informed of the proposed rectification and given a reasonable opportunity to object. The notice requirement is a foundational procedural safeguard and not a mere formality.

Conclusion: The rectification order was not legally sustainable because the mandatory notice requirement under section 154(3) was not complied with.

Issue (ii): Whether disallowance of interest deduction was a mistake apparent from record amenable to rectification under section 154.

Analysis: A mistake apparent from record must be obvious, patent, and self-evident. Where the controversy depends on competing views of the facts and the purpose for which funds were borrowed and used, the matter becomes debatable and cannot be corrected in rectification proceedings.

Conclusion: The disallowance of interest deduction did not involve a mistake apparent from record and could not be rectified under section 154.

Final Conclusion: The rectification orders were unsustainable in law and the appeals succeeded.

Ratio Decidendi: Rectification under section 154 is permissible only for an obvious and patent error; a debatable issue cannot be treated as a mistake apparent from record, and the assessee must be given notice and opportunity under section 154(3) before rectification is made.

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