JUDGMENT : A. Pasayat, J. - The challenge in this writ application is to the order passed by the Income Tax Appellate Tribunal, Cuttack Bench (in short, " the Tribunal "), purportedly exercising power u/s 254(2) of the Income Tax Act, 1961 (in short, " the Act "). 2. The background facts are that, for the assessment year 1982-83, Messrs. Union Steel Products, a partnership firm (hereinafter referred to as " the assessee "), was assessed on an income of Rs. 24,69,530. The assessee had received a sum of Rs. 13,43,000 in respect of an award in arbitration proceedings, interest of Rs. 11,48,575 and Rs. 38,641, and costs of Rs. 1,054. These formed the subject-matter of assessment. While computing the income, the Assessing Officer deducted a sum of Rs. 66,808 claimed by the assessee to have been incurred for earning the award amount. The assessee challenged the assessment in appeal before the Commissioner of Income Tax (Appeals). By order dated January 30, 1987, the Commissioner of Income Tax (Appeals) modified the income as assessed on the following scores : (i) The amount received as refund of security deposit was to be excluded from the gross receipts. (ii) The amounts awarded towards wage escalation were to be taken out of the gross receipts and were to be taxed fully. (iii) The balance arrived at after deduction of the amount of refund of security deposit and the amount received towards wage escalation was to be treated as gross receipts for the purpose of computation and income therefrom was to be worked out at 12.5 per cent. 3. He further held that the expenses of Rs. 66,808 which were deducted from the gross receipts were to be added and the gross receipts were to be arrived at accordingly. Both the assessee and the Revenue assailed the correctness of the order before the Tribunal. The Tribunal upheld the order of the Commissioner of Income Tax (Appeals). It observed by its order dated March 9, 1990, that the arbitration expenses were not to be allowed as a separate item of expenditure because a fixed percentage of the award money was taken as profit of the contract business. 4. The Tribunal upheld the order of the Commissioner of Income Tax (Appeals). It observed by its order dated March 9, 1990, that the arbitration expenses were not to be allowed as a separate item of expenditure because a fixed percentage of the award money was taken as profit of the contract business. 4. On May 1, 1990, the assessee filed an application u/s 254(2) of the Act, inter alia, stating that the Tribunal had erroneously assumed that the expenses incurred in connection with the arbitration proceedings were part of the expenses incurred for execution of the contract work and were, therefore, not to be allowed separately. According to the assessee, the omission to note the fact that expenses incurred in connection with the arbitration proceedings were over and above the expenses relating to the execution of the contract, constituted an error apparent from the record which was rectifiable. The Tribunal, by its order dated December 18, 1990, which is annexed as annexure-1 to the writ application, held that the arbitration expenses were not expenses for construction work and constituted a separate item. This was held to be an obvious position and the Tribunal directed its order dated March 9, 1990, to be modified to the extent that the arbitration expenses of Rs. 66,808 were to be separately allowed as deduction, as done by the Assessing Officer and the rate of 12.5 per cent. was to be applied only on the balance. 5. The stand of the Revenue in this writ application is that the Tribunal considered that expenses incurred in connection with the arbitration proceedings were not to be allowed as a deduction. Even assuming that the conclusion was erroneous, the same could not have been rectified by exercise of powers u/s 254(2). Learned counsel for the assessee, however, submits that Section 254(2) was enacted with the object of ensuring that injustice is not done either to the assessee or to the Revenue. Since the Tribunal failed to make an obvious distinction between business expenses and the expenses in connection with arbitration proceedings, this was a patent mistake and, therefore, was rectifiable. It is also submitted that the tax involved being minimal, no interference should be made. 6. Since the Tribunal failed to make an obvious distinction between business expenses and the expenses in connection with arbitration proceedings, this was a patent mistake and, therefore, was rectifiable. It is also submitted that the tax involved being minimal, no interference should be made. 6. We find that the Tribunal, while dealing with the application u/s 254(2), proceeded on the basis that the expenses incurred in connection with the arbitration proceedings are to be separately allowed and they do not form part of the expenses which are taken into consideration while computing the income of the assessee from the contract business. While deciding the appeal, the Tribunal noticed the submission of the assessee in this regard and, at paragraph 7 of the order, had held categorically that once a flat rate was applied on the award money, there was no justification in going itemwise for allowance or disallowance. Even assuming that this conclusion was erroneous, it cannot be characterised as a mistake which is rectifiable u/s 254(2). The Tribunal, therefore, fell into a grave error in accepting the prayer of the assessee for rectification. The order is interdicted on that score. We, accordingly, quash annexure-1. 7. It is submitted by learned counsel for the assessee that, since the assesses had filed an application for rectification, it could not take steps for filing an application for reference. Considering the fact that the Tribunal was moved u/s 254(2), if a reference application is filed within ten days from today along with an application for condonation of delay, the Tribunal would do well to condone the delay and hear the reference application on merits. 8. The writ application is allowed. No costs. S.K. Mohanty, J. 9. I agree.