P.B. Mukharji, C.J.
1. This is an appeal from the order of K.L. Roy J. It was an application under article 226 of the Constitution of India. K.L. Roy J, India Foils Ltd. v. Income-tax Officer : [1973]87ITR333(Cal) .made the rule absolute and issued a writ of prohibition, commanding the respondent to forbear from proceeding any further with the impugned notice and with any other proceedings connected therewith.
2. A notice dated 11th March, 1969, relating to the assessment year 1962-63, purported to have been issued under Section 154/155 of the Income-tax Act, 1961, is the subject-matter of this application. The notice dated 11th March, 1969, reads as follows :
'C/1/1-27/G Ward
Dated 11th March, 1969
Notice under Section 154/155 of the Income-tax Act, 1961.
To,
The Principal Officer,
Name : Messrs, India Foils Ltd.,
11, Sooterkin Street,
Calcutta.
The assessment under Section 143(3) for the assessment year 1962-63 made on 18th March, 1965, requires to be amended as there is a mistake apparent from the record within the meaning of Section 154/155 of the Income-tax Act, 1961. The rectification of the mistake, as per details given below, have the effect of enhancing the assessment or reducing the refund or increasing your liability and if you wish to be heard, you are requested to appear in person or by an authorised representative in my office on 14th March, 1969, at 11-30 a.m. If, however, you intend sending a written reply to this notice and do not wish to be heard in person, you are requested to ensure that your reply reaches me on or before the date mentioned above.
Sd/-IIIegiblc
Income Tax Officer,
' C ' Ward, Comp. Dist, I.
Seal.
Nature of mistake proposed to be rectified. Mistakes in the calculation of allowance of depreciation.'
3. The sole ground alleged in the notice was that the mistake was apparent from the record within the meaning of Section 154/155 of the Income-tax Act, 1961. The main question in this appeal is whether, in the facts and circumstances of this case, it may be called a mistake apparent on the face of the record within the meaning of these sections.
4. The facts are not in dispute. Venesta Foils Ltd., a company incorporated in the United Kingdom, manufactures and markets aluminium foils and allied products exclusively in the U.K. and in the other countries throughout the world. On the 17th March, 1939, another company called the Foils Centre Ltd. was incorporated under the English Companies Act with an authorised capital of 100, divided into 100 shares of 1 each of which only 2 shares were issued as fully paid up and held by Venesta Foils Ltd. On the 28th April, 1961, at an extraordinary general meeting of Foils Centre Ltd. resolutions were passed, changing the name of that company to India Foils Ltd. and also increasing the authorised capital by a further sum of 900, divided into 900 shares of 1 each. By an agreement dated 30th November, 1961, Venesta Foils Ltd. agreed to transfer all its immovable properties, factories, plants, machineries and other movable and immovable assets in India to India Foils Ltd., the present respondent at the value shown in the books of Venesta Foils Ltd., while the respondent undertook to meet all the liabilities of Venesta Foils Ltd., incurred on account of its Indian business, including a loan of 204,328, due by Venesta to M/s. Reynolds T.I. Aluminium Ltd. It was further agreed that after setting off all the liabilities from the aforesaid book value of the assets, the residue of the consideration for the said sale would be paid and satisfied by the issue to Venesta or its nominees of 998 shares of 1 each credited as fully paid up in the petitioner-company. As a result Venesta Foils Ltd. held all the thousand shares, constituting the authorised capital of the petitioner-company and the petitioner-company became a hundred per cent. subsidiary of Venesta Foils Ltd.
5. The petitioner-respondent closed the accounts for the first time on the 30th November, 1961. It filed its return for the assessment year 1962-63, accounting period being from 1st January, 1961, to 30th November, 1961. In the said return the petitioner-respondent claimed depreciation on the basis of written down value of the fixed assets as determined in the previous assessment of Venesta Foils Ltd. On the 3rd December, 1962, M/s. Price Waterhouse Peat & Co., the petitioner-respondent's auditors, furnished an amended statement of depreciation and development rebate on the basis of actual cost of the fixed assets to the assessee, viz., the value of these assets as shown in the books, of Venesta on the date of the sale. Forthe assessment year 1962-63, the Income-tax Officer making the assessment, accepted the respondent's contention after considering the terms of the aforesaid agreement dated 30th November, 1961, and determined the depreciation as per the assessee's computation at Rs. 10,96,630.
6. For the subsequent assessment years 1963-64, 1964-65 and 1965-66, the different Income-tax Officers also accepted the assessee's contention as to the actual cost of these fixed assets in determining the depreciation allowance in each of these three years.
7. Then followed the notice dated 11th March, 1969, which I have already set out above, by which the Income-tax Officer wanted to amend the income-tax for the assessment year 1962-63 on the ground of mistake apparent from the records within the meaning of Section 154/155 of the Income-tax Act, 1961. Immediately, on the 13th March, 1969, there was a protest on behalf of the respondent's auditors, M/s. Price Waterhouse Peat & Co. In that reply, M/s. Price Waterhouse Peat & Co. made the following points:
8. The notice does not throw any light as to why it was considered that there has been any mistake in allowing the depreciation which all the previous Income-tax Officers had allowed. The contention on behalf of the income-tax department was that the mistake was in allowing the depreciation which resulted from such depreciation having been allowed on the basis of the value of the assets as shown in the vendor-company's balance-sheet on the date of the transfer. Further, it was contended by the income-tax department that such depreciation should have been allowed not on the value of the shares as per the said balance-sheet but by reference to the nominal value of the shares issued to the vendor-company, that is, Venesta Foils Ltd. That was the main controversy. But the reply of Price Waterhouse Peat & Co. made it clear that the consideration for taking over the assets and liabilities of the business was the issue of shares and as such the fair value and not the nominal value of the shares, should be taken into consideration. Therefore, there was no mistake whatsoever in allowing the depreciation which the income-tax department did and which was allowed by the predecessors of the present Income-tax Officer. It was pointed out that when the three Income-tax Officers have accepted that basis, there could not be any mistake apparent from the records. This does not mean a mistake which has been arrived at by a process of reasoning or on which two opinions are possible or which is a debatable point Reference was made to the decision of the Supreme Court in the case of National Rayon Corporation v. Bahmani, [1965] 56 I.T.R. 114 (Bom.)..
9. Lastly, it was contended on behalf of the respondent-petitioner that at the time the assessment was completed, the Income-tax Officer consideredthe claim for depreciation on the basis of all materials available to him and allowed the full depreciation claimed by the assessee after having applied his mind. The fact that the depreciation has been claimed on the basis of the book value of the assets taken over by India Foils Ltd. was brought to the predecessors' notice by the previous letter of Price Waterhouse Peat Co., dated 3rd December, 1962. In these circumstances it was contended that what the present Income-tax Officer is doing was merely a change of opinion.Section 154(1) of the Income-tax Act, 1961, uses the opening words : ' With a view to rectifying any mistake apparent from the record...' Therefore, the mistake has to be apparent on the face of the record. When the valuation was accepted not only by one Income-tax Officer but by three Income-tax Officers, it cannot be said that it was a mistake apparent from the face of the records. A mistake must be apparent on the face of the records. It must be an obvious, clear and patent mistake. One which is not so apparent and which requires a long and elaborate reasoning and arguments on points on which there may be conceivably two or more opinions (sic). Clearly, a decision on a debatable point of law is not a mistake apparent on the face of the records. I think the point is concluded now by the Supreme Court decision in the case of T.S. Balaram, Income-tax Officer v. Volkart Brothers, : [1971]82ITR50(SC) ., That decision of the Supreme Court cited the decisions in Satyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Thirumale, : [1960]1SCR890 ., and Sidhramappa Andannappa Manvi v. Commissioner of Income-tax, [1952] 21 I.T.R. 333 (Bom.).. The words used in Section 154 are a mistake apparent from the record and it is clear that unless it is apparent from the record the notice can be validly challenged. The decision of the Madras High Court in T.S. Rajam v. Controller of Estate Duty, [1968] 69 I.T.R. 342 (Mad.)., therefore, has to be understood in the light of the latest decisions of the Supreme Court of India.
10. On behalf of the appellant, the income-tax department, an argument was raised that this was merely a notice why assessment should not be amended and, therefore, there was no finality in that notice and the respondent could have waited till the assessment was made and if the assessment is finally made against the assessee, the assessee then could have made an application for a writ. In support of this argument, the appellant relied on a judgment of my learned brother, B.C. Mitra J. in Pilani Investment Corporation Ltd. v. Income-tax Officer, 'A' Ward, Companies District II, [1968] 69 I.T.R. 847 (Cal.).. That was, however, a case of a notice issued to show cause why an order under Section 23A of the Income-tax Act, 1922, should not be passedagainst an assessee and the assessee applied to the High Court for a writ. It was on that basis held that since the Income-tax Officer had merely issued a notice why an assessment should not be made under Section 23A, no writ lay. That case, however, has little application to the facts and circumstances of the instant appeal before us. Here, section 154 is quite clear that it must have to be a mistake apparent from the record and in the instant case a notice under Section 154 was issued. If the notice was not in fact justified by the circumstances of the case then the notice itself is bad and I do not see why the respondent should wait till the assessments are made pursuant to the notice before coming up to this court for a writ. The case for a writ is there if the Income-tax Officer is proceeding under the statute and the statutory provisions do not apply. It is not a case where the question of jurisdictional fact is involved. It is a case where obviously and plainly the issue of the notice under Section 154/155 of the Income-tax Act was initially bad and, therefore, all proceedings thereafter are bound to be bad. In such circumstances one does not have to wait till the proceedings are completed. The doctrine of lost opportunity in constitutional law and that the Constitution should be resorted to when other remedies have failed docs not in my judgment apply to the facts and circumstances of the case.
11. For these reasons, the appeal is dismissed. There will be uo order as to costs.
B.C. Mitra, J.
12. I agree, but will like to add a tew words of my own. The short point involved in this appeal is the validity of a notice under Section 154/155 of the Income-tax Act, 1961 (hereafter referred to as ' the Act').
13. A British company, Venesta Foils Ltd., manufactures and markets aluminium foils and similar products extensively in the United Kingdom and in other countries. On March 17, 1939, a company under the name of Foil Centre Ltd. was incorporated under the English Companies Act, with an authorised capital of 100 divided into 100 shares of 1 each. Of these 100 shares, two only were issued and fully paid up by Venesta Foils Ltd. On April 20, 1961, at an extraordinary general meeting of Foil Centre Ltd. resolutions were passed changing the name of that company to India Foils Ltd., and also increasing the authorised capital by a further sum of 900 divided into 900 shares of 1 each.
14. By an agreement dated November 30, 1961, Venesta Foils Ltd. agreed to transfer all its properties, factories, plants, machinery and other movable and immovable assets in India to India Foils Ltd., at the value shown in the books of Venesta Foils Ltd, The transferee-company undertook to meet all the liabilities of the transferor-company, incurred onaccount of its Indian business including a loan of 204,328, due by the transferor-company to Messrs. Reynolds T. I. Aluminium Ltd. It was also agreed that after setting off the liabilities from the said book value of the assets, the balance of the consideration for the transfer would be paid and satisfied by the issue to the transferor-company or its nominees of 998 shares of 1 each, credited as fully paid up in the transferee-company.
15. The transferee-company, that is to say, India Foils Ltd., the respondent herein, closed its books of account for the first time on November 30, 1961, and filed its income-tax return for the assessment year 1962-63 (the accounting period being from January 1, 1961, to November 30, 1961). In this return the respondent claimed depreciation on the basis of the written down value of the fixed assets as determined in the previous assessment of the transferor-company. By a letter dated December 3, 1962, Price Water-house Peat & Co., the respondent's auditors furnished an amended statement of depreciation and development rebate, on the basis of the actual cost of the fixed assets of the respondent, namely, the value of these assets as shown in the books of the transferor-company on the date of the sale.
16. In the assessment year 1962-63, the Income-tax Officer, in making the assessment, accepted the respondent's contention after taking into consideration the terms of the agreement for sale and transfer, dated November 30, 1961, and determined the depreciation according to the respondent's computation at Rs. 10,96,630. For three subsequent assessment years, namely, 1963-64,1964-65 and 1965-66, different Income-tax Officers also accepted the respondent's contention as to the actual cost of these-fixed assets in determining the depreciation allowance claimed by the respondent.
17. By a notice under Section 154/155 of the Act, dated March 11, 1969, the first appellant notified the respondent that he intended to rectify a mistake apparent from the records for the assessment year 1962-63, as such rectification would have the effect of enhancing the respondent's assessment. The respondent was asked to appear either in person or by an authorised representative, if it wanted to be heard in the matter. In this notice, the nature of the mistake was stated to be the mistake in the calculation of allowances of depreciation. The respondent thereupon obtained a rule nisi under article 226 of the Constitution which was made absolute by a judgment and order dated May 15, 1970, against which this appeal has been preferred. The question in this appeal is whether the first appellant had the jurisdiction to issue the impugned notice, and assuming he had such jurisdiction, whether the impugned notice is valid.
18. Mr. Sen, appearing for the appellant, submitted that there was a mistake apparent on the face of the records in allowing depreciation claimed by the respondent, inasmuch as the value of the assets transferred wasmuch in excess of the consideration paid for the transfer. He further argued that the question of ascertaining the actual cost was always a question of fact and that the Income-tax Officer was entitled to determine such actual cost according to his own valuation. The next contention of the counsel for the appellant was that under Section 154(3) of the Act, the Income-tax Officer was only required to give a notice to the assessee of his intention to rectify or amend an order which would have the effect of enhancing an assessment or reducing a refund. This notice, it was argued, was not a statutory notice, and the. whole object of the notice was to give the assessee an opportunity of being heard before any order was passed to his detriment. He next argued that as the Income-tax Officer's jurisdiction did not depend on such a notice, no writ could be issued for quashing a notice under Section 154 of the Act, and, therefore, no relief could be obtained in the writ proceedings. In support of his contentions, Mr. Sen, firstly, relied on a decision of this court in Pilani Investment Corporation Ltd. v. Income-tax Officer. That was, however, a case where a notice under Section 23A of the Indian Income-tax Act, 1922, was issued calling upon the assessee to show cause why an order should not be passed under Section 23A of the 1922 Act. Thereupon, the assessee applied under article 226 of the Constitution and obtained a rule nisi. The contention of the assessee was that an order under Section 23A of the 1922 Act was an order of assessment, and as such it was governed by the four-year period of limitation fixed by Section 34(3) of the same Act, and since the four years had elapsed, the Income-tax Officer had no jurisdiction to make an order under Section 23A. It was on these facts that it was held that since the Income-tax Officer had merely issued a notice why an assessment should not be made under Section 23A, the Contention that an order under that section would be barred by limitation, could be raised before the Income-tax Officer who had jurisdiction to decide the question himself, and in issuing the notice he had not acted in excess of the jurisdiction vested in him. Reliance was also placed by Mr. Sen on a judgment of this court in Barendra Prosad Roy v. Income-tax Officer, ' A ' Ward (unreported--Matter No. 163 of 1970). In that case a counsel from abroad was engaged in a case in this court and the Income-tax Officer drew the attention of a Calcutta firm of solicitors to Section 195(2) of the Act, which required that tax should be deducted at source in respect of payment made to a non-resident. This was done on the assumption that the Calcutta solicitors were paying the fees to the counsel from abroad. The Calcutta solicitor was also sought to be treated as an agent of the counsel under Section 163(1) of the Act and was requested to place before the Income-tax Officer any objection that the solicitors might have in the matter. It was held that the contentions of the solicitors might be raised before theIncome-tax Officer who was competent to deal with the same, and,accordingly, the rule was discharged. Reliance was also placed by Mr. Senon a decision of the Madras High Court in T.S. Rajam v. Controller of EstateDuty. In that case the question was of rectification of records in an estateduty assessment case. The deceased had sold within two years before hisdeath certain shares in a private company to his sons and grandsons forrupees one lakh. The Assistant Controller of Estate Duty being of the viewthat the sale was a disposition in favour of relatives within the meaning of Section 27 of the Estate Duty Act, 1953, rectified the order which did notoriginally take this aspect into consideration and fixed a higher value forthe shares sold. It was held that the rectification was validly made. I donot think either of the three decisions mentioned above is of any assistanceto the appellant in this case, because the question in this appeal is whetherthere was an error apparent on the record to enable the appellant to issuethe impugned notice. It cannot be overlooked that the view the Income-taxOfficer took on the question of depreciation in the assessment for theyear 1962-63 was adhered to in the subsequent assessments by differentIncome-tax Officers for the assessment years 1963-64, 1964-65 and1965-66. As to what is meant by a mistake apparent from the record, ourattention was drawn by Dr. Pal, counsel for the respondent, to a decision ofthe Supreme Court in T.S. Balaram, Income-tax Officer v. Volkart Brothers. Inthat case it was held that a mistake apparent from the record must be anobvious and patent mistake and not something which could be establishedby a long drawn process of reasoning on points on which there mightconceivably be two opinions. It was also held that the power of theIncome-tax Officer under Section 154 of the Act to correct a mistakeapparent from the record was not more than that of the High Court toentertain a writ petition on the basis of an error apparent on the face ofthe record. In this case it is to be borne in mind that the auditors by theirletter dated December 3, 1962, furnished a statement of depreciation anddevelopment rebate on the basis of the actual cost of the fixed assets to theassessee, namely, the value of these assets as shown in the books of thetransferor-company on the date of the sale. Therefore, the attention of theIncome-tax Officer was drawn to the value of the assets pointedly and itwas on the basis of this valuation that the claim for depreciation was dealtwith by the Income-tax Officers, after taking into consideration theexplanation furnished by the auditors in their letter of December 3, 1962.The claim for depreciation on the basis of written down value of the fixedassets was made not only in the return filed by the assessee, but this claimwas reiterated in the auditor's letter of December 3, 1962. On these factsit cannot, in my view, be said that there was an error apparent on therecord, so as to justify the issue of the impugned notice. Quite plainly, two views are possible on the basis on which depreciation is to be allowed on the fixed assets of the respondent and the first appellant had taken a view different from that which found favour with the Income-tax Officers who made the assessment orders for the years 1962-63, 1963-64, 1964-65 and 1965-66.
19. On these facts and on the law as it stands now, I concur in the order made by my Lord.