Sabyasachi Mukharji J.
1. In order to appreciate the controversy in this case it would be relevant to refer to certain facts. It appears that on 30th November, 1954, there was half-yearly closing of account by Lothian jute Mills Co. Ltd. and the accounts for the half-year ended on 30th November, 1954, were drawn up by the Lothian Jute Mills Co. Ltd, The said accounts disclosed a surplus profit of Rs. 2,38.754-8-7. On the 9th February, 1955, the directors submitted their report to the shareholders in respect of the half-yearly account up to 30th November. 1954. The directors recommended distribution of dividend Out of the aforesaid profit of Rs. 2,38,754-8-7 as follows:
' Preference shares at Rs. 3-8-0 per share amounting to Rs. 35,000 and ordinary shares at Rs. 15 per share amounting to Rs. 1,50,000. Distribution of dividend has left a balance of Rs. 53,754-8-7 which was carried forward. The Lothian Jute Mills Co. Ltd. on the 24th March, 1955, distributed to the shareholders the aforesaid dividends of Rs. 35,000 on preference shares and Rs. 1,50,000 on ordinary shares.'
2. In August, 1955, proceedings were taken for amalgamation Of Lothian Jute Mills Co. Ltd. and Albion Jute Mills Co, Ltd. with the New Central Jute Mills Company Ltd., the assessee herein, OB the 30th November1955, Lothian Jute Mills Co. Ltd. and Albion Jute Mills Co. Ltd. distributed dividends in respect of the year ended on 30tb November, 1955. We are not concerned with this distribution and the question relating thereto. An order of this court was passed in Matter No. 337 of 1955 on 6th December,1955. approving the scheme of amalgamation by which the undertaking of Lothian Jute Mills Co. Ltd. and the Albion Jute Mills Co. Ltd. stood transferred to and vested in the New Central Jute Mills Co. Ltd. as and from 1st December, 1954. We are concerned in this reference with the order of the Income-tax Officer under Section 154 of the Income-tax Act, 1961. By the aforesaid order, the Income-tax Officer wanted to rectify the mistake in the original assessment order made on the 29th March, 1961, in respect of the assessment year 1956-57, Under the scheme of amalgamation referred to hereinbefore the Whole of the undertaking, property and all the assets and liabilities of the two other companies known as the Lothian Jute Mills Co, Ltd. and Albion Jute Mills Co. Ltd. were transferred to and vested in the assessee-company as indicated before. In completing the assessment on the assessee for the assessment year 1956-57, the Income-tax Officer had to compute the super-tax payable by the assessee and allow a rebate thereon and then reduce the rebate so allowed. In the present case, the matter related to reduction of the rebate pursuant to Sub-clause (i)(b) of the second proviso to Paragraph D of Part II of Finance Act,1956. The relevant portion of the same was to the following effect:
' Provided further that:
(i) the amount of the rebate.........shall fee reduced by the sum.........equal to the......aggregate of the amounts..................computed ashereunder:--....
(b) in addition, in the case of a company referred to in Clause (ii) of the preceding proviso which has distributed to, its shareholders during the year dividends in excess of six per cent, of its paid-up capital.'
3. While completing the assessment on 29th March, 1961, the Income-tax Officer computed reduction in rebate at Rs. 86,703-12-0. As a result of the amalgamation, the balance-sheet of the assessee-company incorporated in itself the balance-sheets of the other two companies as on the 1st December, 1954, The Income-tax Officer subsequently noticed that; in calculating the reduction in rebate on the super-tax the dividend of Rs. 1,50,000 distributed by Lothian Jute Mills Co. Ltd. with reference to the year ending on 30th November, 1954, has been left out of account. This will appear from the balance-sheets of 31st December, 1955, distributed to the shareholders as attached to the said balance-sheet; the company, namely, Lothian Jute Mills Co. Ltd,, was maintaining half-yearly accounts and the accounts for the half-year ending 30th November, 1954, had disclosed a surplus profit as indicated before.
4. On the ground that dividends of Rs. 1,50,000 distributed by the Lothian Jute Mills Co. Ltd. had been left out of account, the Income-tax Officer proceeded under Section 154 of the Income-tax Act, 1961, overruling the assessee's objections. He enhanced the reduction in rebate by 3 annas of Rs. 1,50,000 to Rs. 1,14,828-12-0. The assessee preferred an appeal before the Appellate Assistant Commissioner who dismissed the appeal. The assessee went on further appeal to the Tribunal. Before the Tribunal there were several contentions urged. It was urged that there was really no mistake and that the reduction of the rebate with reference to the sum of Rs. 1,50,000 was not correct; that, even assuming that the original order was not and the present order was correct in law, the remedy open to the department was not by way of rectification ; and thirdly, even if it was a case of rectification, the Income-tax Officer should have taken action under Section 35 of the Indian Income-tax Act, 1922, and not under Section 154 of the Income-tax Act, 1961.
5. The Tribunal rejected the last contention. As regards the first contention the Tribunal did not consider it necessary to express any final opinion as to whether the Income-tax Officer's order reducing the rebate with reference to the dividend distribution of Rs. 1,50,000 was justified on merits, since the Tribunal agreed with the second contention of the assessee, namely, that the subject-matter was not one that was capable of rectification under Section 154. The Tribunal was of the view that there was a debatable question to be considered in deciding this controversy and, therefore, Section 154 could not be resorted to. In the premises, the assessee's appeal was allowed. In the premises, as directed by the High Court under Section 256(2) of the Income-tax Act, 1961, the following question has been referred to this court:
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the order of the Income-tax Officer under Section 154 of the Income-tax Act, 1961, was not justified in law ?'
6. The principle governing this question has been laid down in the decision of the Supreme Court in the case of T. S. Balaram, Income-tax Officer v. Volkart Brothers, : 82ITR50(SC) . The Supreme Court observed that a mistake apparent on the record must be an obvious and patent mistake and not something which had to be established by a long-drawn process of reasoning on points on which there might be conceivably two opinions. A decision on a debatable point of law was not a mistake apparent from the record. We may also incidentally refer to the decision of this court in the case of Harbans Lal Malhotra & Sons Private Ltd. v. Income-tax Officer, : 83ITR848(Cal) where it was held that a question which involved interpretation of law and determination of controversial facts could not be rectified under Section 154 of the Income-tax Act, 1961. The question in this case is, whether the view taken bythe Income-tax Officer previously and the present view are two conceivable different possible views or whether the previous view of the Income-tax Officer was a view which was not possible but was only a mistake. That depends on the interpretation as to what effect is to be given to the distribution of the dividend of Rs. 1,50,000 by Lothian Jute Mills Co. Ltd. to its shareholders. The time when the distribution took place they were admittedly shareholders of Lothian Jute Mills Co. Ltd. but the scheme of amalgamation provided for relating back to a particular date. The question is whether this relating back would also have the effect of making the shareholders of Lothian Jute Mills Co. Ltd. the shareholders of the assessee-company and the payments to such shareholders would be payments to the shareholders of the assessee-company in terms of the section which has been referred to hereinbefore. Counsel for the revenue contended that the only effect of the scheme of amalgamation as mentioned by the High Court was to have the said effect. Counsel further contended that that was how the assessments had been made. It is true, from one point of view, from the order of amalgamation as sanctioned by the High Court it could be argued that it would have this effect but we have to bear in mind that this is not a case of fiction created by the statute. It is a question of relating back certain events by the amalgamation by agreement between the parties. What effect on the relation this would have by the sanction of court is a question which is not free from the mischief of two possible views. In this connection, we may refer to the decision of the Supreme Court in the case of Keshav Mills Ltd. v. Commissioner of Income-tax, : 23ITR230(SC) . It is not necessary for us to decide which of the two views is the correct view but we are of the opinion that the issue is debatable. On this ground Section 154 cannot be resorted to.
7. In the premises, we are of the opinion that the Tribunal was correct in its conclusion. Accordingly, the question referred to this court is answered in the affirmative and in favour of the assfissee. Each party will pay and bear its own costs.
R.N. Pyne, J.
8. I agree.