The Judgment of the Court was delivered by

Sabyasachi Mukharji, J.:— I am concerned in this application with the validity of the notice under section 154 of the Income-tax Act, 1961, issued on 15th November, 1971. The notice relates to the assessment year 1963-64, the relevant accounting year for which ended on 31st March, 1963. The petitioner was assessed under section 143(3) of the Income-tax Act, 1961, in which the petitioner's total income was computed at Rs. 96,03,460. The petitioner is a public limited company and carries on business, inter alia, of manufacturing textile goods and chemical products. During the period relevant for the assessment year 1960-61, the petitioner had set up a new unit for manufacturing, inter alia, soda ash, caustic soda and other chemicals at Porbandar in Saurashtra. In the order of assessment for the assessment year 1963-64, the Income-tax Officer had allowed to the petitioner relief under section 84 of the Income-tax Act, 1961, as it stood in the relevant year in respect of the said chemical unit set up at Porbandar. The relief was allowed under section 84 of the Act by the said order and was to the extent of Rs. 8,72,753. Being aggrieved by certain disallowances, the assessee preferred an appeal from the said order of the Income-tax Officer. In the meantime, there was an order of rectification under section 154 on 2nd February, 1968. The point on which the said order was rectified is not relevant for the present purpose. The Appellate Assistant Commissioner passed the appellate order on 31st October, 1969. In the meantime it appears that pursuant to a notice under section 148 of the Income-tax Act, 1961, there was an order of reassessment for the said year on 25th March, 1969. The impugned notice which is the subject-matter of challenge in the instant case before me was issued, as mentioned before, on the 15th November, 1971. The said notice indicated the nature of the mistake which was proposed to be rectified as follows:

“Nature of mistake proposed to be rectified.—The relief under section 84 of the Income-tax Act, 1961, was allowed without taking into account the past losses, unabsorbed depreciation, etc., incurred by the new industrial undertaking. This mistake is apparent from the records and rectification in the computation of tax is called for.”

2. The first ground of challenge to the notice is that the impugned notice has been issued beyond the period of limitation. It was contended that the order of reassessment dated 25th March, 1969, did not affect or alter the ground on which rectification was proposed, and in the instant case the period of limitation should be computed from the order dated 29th April, 1967, and on that basis the impugned notice was issued beyond the period of limitation. I am unable to accept this contention. It appears to me that the reassessment order dated 25th March, 1969, was the effective order of assessment which is sought to be rectified, and the same is within the period of limitation prescribed. The impugned notice, therefore, cannot be challenged on this ground. On behalf of the revenue, however, reliance was placed on the decisions in the case of Lalji Haridas v. Income Tax Officer & Anothers [1961] 43 ITR 387 (SC) and in the case of Lalji Haridas v. R.H Bhatt [1965] 55 ITR 415 (SC), in aid of the submission that the question of limitation should be raised before the authorities concerned and was not a matter to be adjudged in a writ application under article 226 of the Constitution. Where the question, whether any particular proceeding has become barred by lapse of time, depends upon investigation of certain facts or determination of certain facts, then it is proper that such a question should be agitated before the forum created under the particular statute. But, where the action of an officer is barred on admitted facts or on the face of it, then as the jurisdiction of the officer to act depends on initiation of the proceeding within the time, in such a case resort to article 226 for obtaining relief is not inappropriate provided the other conditions for seeking relief under article 226 are fulfilled. In the view I have taken on the question of limitation, it is not necessary for me to examine this question any-further.

3. The main contention urged in support of this application was that the mistake proposed was not a mistake which could come within the purview of section 154 of the Income-tax Act, 1961. Section 154 permits rectification only if there is a mistake apparent from the record. The scope and occasions for such rectification have been examined by the Supreme Court and several High Courts. A mistake to be corrected under section 154 must be obvious, patent and self-evident. A mistake on which conceivably there can be two views cannot be rectified by virtue of section 154 of the Act. Reliance in this connection may be placed on the observations in the cases of T.S Balaram v. Volkart Brothers [1971] 82 ITR 50 (SC), India Foils Ltd. v. Income-tax Officer [1973] 87 ITR 333 (Cal), Harbans Lal Malhotra & Sons P. Ltd. v. Income-tax Officer [1972] 83 ITR 848 (Cal) and Income-tax Officer v. Raleigh Investment Co. Ltd. [1976] 102 ITR 616 (Cal). Whether, however, a mistake is one which is patent or obvious or self-evident or one on which two views are conceivably possible depends upon the facts and the circumstances of each case.

4. I have noticed the mistake proposed to be rectified by the impugned notice. In this case leave was given to the revenue to file supplementary affidavit. Pursuant to the leave an affidavit has been filed wherein Anil Kumar Majumdar, the Income-tax Officer concerned, has stated, inter alia, as follows:

“It has been contended by the petitioner that there are no past losses or unabsorbed depreciation which require to be set off against the profit of the new industrial unit of the petitioner, namely, Saurashtra Chemicals, for the assessment year 1963-64. I say that from the records the following facts appear:

(a) For the assessment year 1962-63, as per separate profit and loss account produced in the course of the assessments, the profits derived from the new unit (Saurashtra Chemicals) before deduction of depreciation and development rebate amounted to Rs. 22,03,417. For the said assessment year depreciation of Rs. 53,71,326 and development rebate of Rs. 3,68,105 amounting to Rs. 57,39,431 in the aggregate in respect of Saurashtra Chemicals division was allowed, but the same was set off not against the profit of the said new unit but against the profit of the whole undertaking of the assessee-company. In order to determine the net profit of the new unit, Saurashtra Chemicals, the said amount of Rs. 57,39,431 being the amount of development rebate and depreciation in respect of the said Saurashtra Chemicals should have been set off against the profit of the said unit. Had the said amount been so set off, the trading result of the said Saurashtra Chemicals for the assessment year 1962-63 would have been a loss of Rs. 35,36,014 (Rs. 57,39,431 minus Rs. 22,03,417), that is to say, the difference between the net profit and the aggregate of development rebate and depreciation as aforesaid.

(b) For the said assessment year 1962-63, the assessee did not claim any relief under section 84 of the Income-tax Act, 1961, in view of the fact that the said unit, Saurashtra Chemicals, yielded no profit but the working resulted in a trading loss of Rs. 35,36,014 after setting off the development rebate and depreciation against the net profit of the said unit.

(c) In the premises aforesaid for the assessment year 1962-63, there was past unabsorbed depreciation and development rebate amounting to Rs. 35,36,014.

(d) For the assessment year 1963-64, rebate under section 84 was allowed at 21.64 per cent. on a profit of Rs. 8,72,573 which was computed as the profit earned from the said new industrial undertaking for the said assessment year without considering the said past unabsorbed depreciation and development rebate for the assessment year 1962-63, amounting to Rs. 35,36,014. Had it been set off as required by law there would have been a trading loss of the said unit even for the assessment year 1963-64, and the assessee-company would not have been entitled to any rebate under section 84 of the said Act for the assessment year 1963-64 in respect of the said unit.”

5. The question, therefore, seems to be that for the assessment year 1962-63, the assessee had been allowed set-off on depreciation from its total income computed from the new industrial undertaking as well as from the income from other heads. But, according to the Income-tax Officer, the assessee's profits and gains from the new industrial undertaking for the assessment year 1962-63 was not sufficient to set off the entire depreciation allowable to the new industrial undertaking. Therefore, it was contended that such depreciation and development rebate which the new industrial undertaking was entitled to for the assessment year 1962-63 and which though in fact had been set off against the total income of the assessee for that year, could not have been set-off against the profits and gains of the new industrial undertaking. If the profits and gains of the new industrial undertaking were taken only as the income of the assessee, the said unabsorbed depreciation and development rebate should be considered to be available for set-off in the instant year and to that extent the relief granted on the profits of the new industrial undertaking should be recomputed. In order to appreciate this question it would be relevant to refer to certain relevant provisions of the Act. section 84 of the Income-tax Act, 1961, as it stood at the relevant time, provided for income of a newly established industrial undertaking or hotel. It provided that, save as otherwise provided, income-tax shall not be payable by an assessee on so much of the profits and gains derived from any industrial undertaking or hotel to which the section applied as did not exceed 6 per cent. per annum on the capital employed in the undertaking or hotel computed in the prescribed manner. Sub-section (2) of the section was made applicable only on fulfilment of certain conditions. As it is not in dispute that the conditions were fulfilled, I need not refer to the provisions of sub-section (2). Sub-section (4) of section 84 provided that profits and gains of an industrial undertaking or hotel to which section 84 applied should be computed in accordance with the provisions contained in Chapter IV-D. Chapter IV deals with computation of the total income and Chapter IV-D deals with profits and gains of business or profession. Section 32 of the Act deals with depreciation and how it should be computed. Sub-section (2) of section 32 provides that where in the assessment of the assessee full effect cannot be given to any allowance under clause (i) or clause (ii) or clause (iv) of sub-section (1) (providing for depreciation) in any previous year owing to there being no profits or gains chargeable for that previous year or owing to the profits or gains chargeable being less than the allowance, then subject to the provisions of sub-section (2) of section 72 and sub-section (3) of section 73, with which I am not concerned, the allowance or part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation in the following previous year and deemed to be part of that allowance and if there is no such allowance for that previous year, be deemed to be the allowance for that previous year and so on for the succeeding previous years. Similarly, there is a provision for development rebate. Sub-section (2) of section 33 deals with the manner the development rebate, which remains unabsorbed, should be carried forward. In the instant case it is indisputable that the depreciation as computed for the previous year has been given full effect against the total income of the assessee for the said previous year as computed in accordance with the provisions of the Act. Counsel for the revenue contended that under the scheme of the Act for the purpose of granting relief to the new industrial undertaking such units were treated as separate units and computation of income, profits or gains as well as reliefs were treated separately from the assessee's other incomes and, therefore, if in a particular case depreciation had not been given full effect to as against the profits or gains computed in respect of a new industrial undertaking, the said depreciation should be carried forward and should be set off again against the profits or gains of the new industrial undertaking of the succeeding year. On behalf of the petitioner it was, on the other hand, contended that in the instant case full effect having been given given to the depreciation against the profits or gains of the business of the assessee as such there was nothing else and unless the depreciation was notionally taken to be not to have been given effect to which had in fact been given effect to, it was not possible under the scheme of section 84 to carry the said unabsorbed depreciation forward to be set off against the profits or gains of a new industrial undertaking in the succeeding year. Similar was the argument on the question of development rebate. It was urged that the legislature had not provided specially that in granting such development rebate the new industrial undertaking should be deemed to be a separate head and the income of the new industrial undertaking should be computed separately and the depreciation contemplated under sub-section (1) should only be limited to be set off against the profits or gains of the new industrial undertaking. It was submitted that where the legislature wanted to do so, for instance, in a case of speculative transaction under section 28 by Explanation therein, the legislature had expressly provided that they should be treated as separate business. If the said depreciation which has not been fully given effect to because of the profits or gains of the new industrial undertaking should be treated as unabsorbed depreciation to be carried forward to be set off against the profits or gains of the new industrial undertaking, the legislature has not made that deeming provision and without that deeming provision it was not possible to construe the provisions of Sub-section (2) of section 32 or Sub-section (2) of section 33 in the same light. Reliance in this connection was placed on the observations in the case of Commissioner Of Income Tax, Madras v. The Ajax Products Limited [1965] 55 ITR 741 (SC), though the Supreme Court was concerned with a different question. The Madras High Court in the case of Rajapalayam Mills Ltd. v. Commissioner Of Income-Tax, Madras [1970] 78 ITR 677 (Mad) held that the exemption granted in a fiscal enactment had a special signification of its own and had to work on the hypothesis set to gain such an exemption. The prescriptions laid down to claim such an entitlement should be strictly complied with and such an exemption should not be granted or availed of on an a priori consideration. The intendment of the statutory concession contained in section 15C of the Indian Income-tax Act, 1922, was because the legislature had intended to provide an incentive for expansion of trade and setting up of new industries, apparently to vitalise the industrial progress. Its scope was explicit because it was centrifuged in and linked to the new industrial undertaking and the profits or gains which that undertaking would obtain during the period of its working. Such profits of the new undertaking computed in accordance with the provisions of section 10 did not have any impact or relation in such profits which the assessee who formed it might obtain under the Act. No telescoping of the income, profits or gains of the assessee obtained by the new industrial undertaking was envisaged in section 15C. The assessee and the undertaking independently operated in their respective fields of taxation in so far as section 15C was concerned. The Madras High Court expressed its opinion on the construction of section 15C of the Indian Income-tax Act, 1922, which was in pari materia with section 84 of the present Act. In a reference under section 66(1) of the Act the question had been referred to the High Court for its answer. Reliance was placed on behalf of the revenue on the aforesaid observations of the Madras High Court in aid of the contention for the purpose of giving relief under section 84 of the Act; profits or gains of the new industrial undertaking should be separately computed and the depreciation allowable in respect of the previous year should be notionally taken against the profits or gains of the previous year and if, as in this case, such profits were not such as to give full effect to such depreciation allowable to a new industrial undertaking, the said profits should be deemed to have been notionally carried forward for the subsequent year. I am not concerned at this stage with the validity of either of the contentions. But the contentions as set out hereinbefore certainly indicate that two views are reasonably possible. If that is the position, then the jurisdiction under section 154 of the Act cannot be attracted. There was another aspect of the matter to which my attention was drawn by counsel for the petitioner, namely, if the depreciation which had been actually allowed was treated as not to have been given full effect to and was carried forward, then the same should be set off against the total income of the assessee and as such the total income of the assessee should be reduced and the assessee in that event would get greater relief than what the assessee got under section 84 of the Act. This is also a contention on which I need not at this stage decide but this may be possible by construing the section in the manner contended for on behalf of the revenue and the assessee would get greater relief. In the aforesaid view of the matter, I am of the opinion that in this case inasmuch as the proposed mistake was not self-evident and the rectification of the mistake would entail construction of the section on which there are conceivably two views, section 154 of the Act cannot be attracted in this case.

6. Counsel for the petitioner further drew my attention to the fact that in the reasons for rectification the Income-tax Officer has stated that for the assessment year 1962-63 as per separate profit and loss account produced in the course of assessment, the profit derived from the new unit before deduction of depreciation and development rebate amounted to Rs. 22,03,417. It was contended that this was not so. This had included the interest which was notionally calculated on account of blocking of the capital investment in the new industrial undertaking. In this connection my attention was drawn to the profit and loss account for the year ended 31st March, 1962, for the Chemicals division, Saurashtra Chemicals, Porbandar. This is at page 23 of the affidavit of Jagdish Prasad Sharma affirmed on 23rd August, 1974, wherein in arriving at the balance of profit, interest due to head office, this amount from Porbandar branch was stated to be Rs. 27,43,564. It was pointed out that said interest was debited in the account of Saurashtra Chemicals as interest due to the head office. The said sum was for internal accounting purpose credited in the books of account of the head office as interest from the said unit of Saurashtra Chemicals inasmuch as the Saurashtra Chemicals was the proprietary concern of the petitioner-company there was and could not be any question of or occasion for payment of any interest by the said unit of Saurashtra Chemicals. In the assessment orders made for the assessment years 1962-63 and 1963-64 such internal book adjustment of interest had not been taken into consideration and rightly so. Therefore, it was urged that the Income-tax Officer was in error in proceeding on the basis that the profit derived from the new industrial undertaking amounted to Rs. 22,03,417. The profit would be augmented by the interest which was debited. Therefore, if the sum of Rs. 22,03,417 is added to Rs. 27,43,564, the unabsorbed depreciation and development rebate amounting to Rs. 57,39,431 would be considerably reduced. On this account it was contended that there was no mistake apparent from the record. This, however, is a contention which in my opinion is possible to be raised before the Income-tax Officer concerned.

7. As I have held that on the construction of the section upon which the Income-tax Officer is seeking to proceed there-are conceivably two views, the impugned notice must be held to be without jurisdiction. In the premises, the notice in question is hereby quashed and set aside. The respondents are restrained from giving effect to the same.

8. The rule is, therefore, made absolute to the extent indicated above. There will be no order as to costs. Operation of this order is stayed for six weeks.