Step 1: Understanding the sentence.
The sentence says, “The teacher pointed ........... the mistake and Sheela corrected it.” Here, the teacher indicated or showed the mistake so that Sheela could correct it.
Step 2: Analyzing the options.
(A) upon: “Pointed upon” is not grammatically correct in this context. Incorrect.
(B) too: “Pointed too the mistake” makes no sense grammatically. Incorrect.
(C) off: “Pointed off” does not fit idiomatically here. Incorrect.
(D) out: The correct phrasal verb is “point out,” which means to indicate or show something. This fits perfectly: “The teacher pointed out the mistake.” Correct.
Step 3: Conclusion.
The correct answer is (D) out, because the correct phrasal verb is “point out.”