Rectification under section 154 fails when the underlying addition is deleted and the higher tax rate has no basis.

Rectification under section 154 applying section 115BBE to alleged undisclosed income could not survive once the underlying addition had already been deleted in the assessee's appeal. The alleged mistake depended entirely on the existence of the addition treated as unaccounted on-money; after that substantive addition ceased to exist, the basis for enhancing the tax rate also disappeared. The first appellate authority was therefore justified in setting aside the rectification order, and the department's challenge failed.

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Issues: Whether the rectification order passed under section 154 of the Income-tax Act, 1961, applying section 115BBE to the amount treated as undisclosed income, was sustainable after the addition itself had been deleted in the assessee's appeal.

Analysis: The rectification was premised only on the premise that the income of Rs. 3,96,05,000 treated as unaccounted on-money was liable to be taxed at the higher rate under section 115BBE instead of the rate originally applied. However, the coordinate Bench had already deleted the very addition forming the basis of the rectification. Once the substantive addition ceased to survive, the alleged mistake in applying the higher rate on that amount also lost its foundation. In these circumstances, the first appellate authority was justified in holding that the rectification could not be sustained.

Conclusion: The rectification order was rightly set aside and the department's challenge failed.

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