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Interpretation of section 154 of the Income-tax Act, 1961 regarding rectification of mistakes apparent from the record. Analysis: The High Court of Calcutta was presented with a question of law under section 256(2) of the Income-tax Act, 1961, concerning the correctness of the Tribunal's decision on rectification of a mistake. The case involved the allowance of extra shift depreciation to a limited company for the assessment year 1963-64. The Income-tax Officer sought to rectify the order by reducing the extra shift depreciation allowance, contending that it was erroneously calculated. The Appellate Assistant Commissioner deemed the issue debatable and set aside the Income-tax Officer's order. The Tribunal, upon hearing both parties, observed that the interpretation of 'normal allowance' was pivotal in the controversy. It noted that the mistake was not apparent and the point was debatable, aligning with the Appellate Assistant Commissioner's decision. The Tribunal's decision was guided by the principle that in cases where two plausible views exist on a legal question, the one favoring the assessee should be adopted. Citing the Supreme Court's ruling in T. S. Balaram, ITO v. Volkart Bros., the High Court emphasized that rectification under section 154 cannot be pursued if the issue is debatable. Relying on established legal precedents, the Court upheld the view that in instances of legal interpretation where differing opinions are conceivable, rectification cannot be invoked to alter the original decision. Consequently, the Court answered the reference in the affirmative, favoring the assessee, and disposed of the matter without costs. The judgment, concurred by both judges, underscored the importance of adhering to legal principles in matters of rectification under the Income-tax Act, 1961. It elucidated that the presence of a debatable issue precludes rectification under section 154, reiterating the need to resolve legal ambiguities in favor of the assessee when multiple interpretations are plausible. The decision underscored the significance of established legal precedents in guiding judicial determinations on matters of tax law.
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