Rectification under section 154 cannot reopen a debatable interest levy, and adverse amendment needs fair hearing.

Rectification under section 154 is confined to patent mistakes apparent from the record and cannot be used to reopen a debatable question on the levy of interest under sections 234A, 234B and 234C. Where the levy had been deleted and was later sought to be restored by rectification, the issue was not an obvious error but a matter on which two views were possible, so section 154 was not available. An adverse rectification order also requires a reasonable opportunity of hearing; absence of such opportunity renders the amendment unsustainable on natural justice grounds.

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Issues: (i) Whether the rectification orders enhancing the assessees' interest liability were invalid for want of reasonable opportunity of hearing; and (ii) whether the subject matter was a debatable issue outside the scope of rectification under section 154.

Issue (i): Whether the rectification orders enhancing the assessees' interest liability were invalid for want of reasonable opportunity of hearing.

Analysis: The rectification orders were passed so as to restore the levy of interest under sections 234A, 234B and 234C after the earlier deletion of such interest. The record showed that no reasonable opportunity of hearing had been afforded before passing those rectification orders. In proceedings under section 154, where the proposed amendment adversely affects an assessee, observance of fair hearing is essential. The absence of such opportunity rendered the rectification unsustainable.

Conclusion: The rectification orders were invalid and liable to be quashed for breach of natural justice, in favour of the assessees.

Issue (ii): Whether the subject matter was a debatable issue outside the scope of rectification under section 154.

Analysis: The levy of interest had first been made, then deleted suo motu, and thereafter sought to be reimposed by rectification. This sequence itself showed that the question whether interest was chargeable in the facts of the case was not a patent or obvious error. A matter on which two views were possible could not be treated as a mistake apparent from the record. Rectification under section 154 was therefore not available to reopen such an issue.

Conclusion: The matter was a debatable one and could not be corrected under section 154, in favour of the assessees.

Final Conclusion: The Tribunal set aside the appellate and rectification orders and restored relief to the assessees, with consequential refund and costs.

Ratio Decidendi: Rectification under section 154 is confined to patent and obvious mistakes and cannot be used to decide a debatable issue, and an adverse rectification order passed without reasonable opportunity of hearing is unsustainable.

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