JUDGMENT P. Govindan Nair, J. 1. This is a reference at the instance of the assessee under S.256(1) of the Income Tax Act, 1961. The questions referred are these: "(i) Whether, on the facts and in the circumstances of the case, the Income Tax Officer , had jurisdiction to invoke the provisions of S.154 of the Income Tax Act, 1961and to revise the assessment originally made? (ii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the provisions of S.54(ii) are attracted to the sale effected by the assessee on 1-7-1962? (iii) Whether the computation of capital gains assessable to tax is in accordance with law?" 2. The year of assessment is 1963-64 the corresponding accounting period being that which ended on 31-3-1963. The assessee, an individual sold his residential house on 25-7-60. He purchased a new house for Rs. 19,550/-. The capital gains in relation to those transactions computed in accordance with the provisions of the Indian Income Tax Act, 1922 was a sum of Rs. 15,029/-. No tax on the capital gains Was however imposed on the assessee under that Act in view of the provisions in sub-s.(4)(b)(ii) of S.12B of that Act. The assessee made considerable improvements to the new house that he purchased but did not keep it for long as he sold that house too on 1-7-62 for a consideration of Rs. 56,500. For the assessment year 1963-64 this sale was taken into account for determination of the capital gains. The capital gains then was determined at Rs. 7500/- by applying S.45 of the Income Tax Act, 1961 by the assessment order dated 25-3-64. The Income Tax Officer, according to him, discerned an apparent mistake on the record of this assessment and therefore issued a notice under S.154 of the Income Tax Act, 1961 to the assessee to show cause why the original assessment should not be rectified by including the sum of Rs. 15,029 the capital gains by the sale of the first house on 25-7-60. This was proposed on the basis of S.54(ii) of the Income Tax Act, 1961. Though the assessee demurred the proposed rectification was made. An appeal taken by the assessee before the Appellate Assistant Commissioner was dismissed and the Tribunal in further appeal came to the same conclusion holding that S.54(ii) applied and that therefore the sum of Rs. This was proposed on the basis of S.54(ii) of the Income Tax Act, 1961. Though the assessee demurred the proposed rectification was made. An appeal taken by the assessee before the Appellate Assistant Commissioner was dismissed and the Tribunal in further appeal came to the same conclusion holding that S.54(ii) applied and that therefore the sum of Rs. 15,029 must be added to the capital gains. 3. Counsel for the assessee contended that it is not at all clear that S.54(ii) of the Income Tax Act, 1961 warranted the inclusion of the sum of Rs. 15,029 to the difference between the purchase and sale price of the house that had been acquired by the assessee after the first sale and which had been considerably improved by him. According to counsel for the assessee, S.54(ii) of the Income Tax Act, 1961 will be applicable only when the first sale also had resulted in capital gains which could be assessed under the 1961, Act. He invited our attention to S.45 and also to S.54. The relevant part of S.45(1) of the Income Tax Act, 1961 enacts that "any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in S.53, 54 and 54B be chargeable to income tax under the head 'Capital gains' and shall be deemed to be the income of the previous year in which the transfer took place." 4. Counsel for the assessee contended that capital gains mentioned in S.45(1) can therefore only arise for the purpose of 1961, Act With reference to some sale transaction that took place in the earliest of the previous years relating to which an assessment could be made under the Income Tax Act, 1961 or in any years subsequent thereto. He submitted that since the first sale of the residential house then owned by the assessee was on 25-7-60 the profit or gains made by that sale could not have given rise to any capital gains under the Income Tax Act, 1961. S.53 referred to in S.45(1) of the said Act is not relevant for the purpose of our case. Counsel for the assessee contended that the very Wording of S.54 will indicate that the new asset" mentioned in S.54(ii) can only be an asset acquired after the sale as envisaged by the first paragraph of S.54. S.53 referred to in S.45(1) of the said Act is not relevant for the purpose of our case. Counsel for the assessee contended that the very Wording of S.54 will indicate that the new asset" mentioned in S.54(ii) can only be an asset acquired after the sale as envisaged by the first paragraph of S.54. That sale it is urged must necessarily be during an accounting period to which the Act applied. We shall read S.54. "54. Counsel for the assessee contended that the very Wording of S.54 will indicate that the new asset" mentioned in S.54(ii) can only be an asset acquired after the sale as envisaged by the first paragraph of S.54. That sale it is urged must necessarily be during an accounting period to which the Act applied. We shall read S.54. "54. Profit on sale of property for residences.- Where a capital gain arises from the transfer of a capital asset to which the provisions of S.53 are not applicable, being buildings or lands appurtenant thereto the income of which is chargeable under the head 'Income from house property', which in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or a parent of his mainly for the purposes of his own or the parent's own residence, and the assessee has within a period of one year before or after that date purchased, or has within a period of two years after that date constructed, a house property for the purposes of his own residence, then, instead of the capital gains being charged income tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,- (1) if the amount of the capital gain is greater than the cost of the new asset, the difference between the amount of the capital gain and the cost of the new asset shall be charged under S.45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or (ii) If the amount of the capital gain is equal or less than the cost of the new asset, the capital gain shall not be charged under S.45; and for the purpose of computing in respect of new asset any capital again arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain." 5. The words "new asset" occurring in S.54(1) as well as in S.54(ii) in the latter in more than one place, must refer to the asset Which is indicated in S.54, Para.1. This can only be an asset that had been acquired within a period of one year before or after the date of sale or constructed Within two years thereof. The sale must it is urged, refer to a sale during a previous year to which the Income Tax Act, 1961 will apply. If this is the view to be taken the expression "new asset" occurring in S.54(ii) cannot be applied to the property sold on 1-7-62. That was a house acquired in a previous year to which the Income Tax Act, 1961 did not apply and cannot be treated as a "new asset" for the purpose of S.54. We do not consider it necessary to express a final opinion about the ambit and scope of S.54, particularly S.54(ii) but we feel no doubt that the question is a debatable one and that in those circumstances, the Income Tax Officer had no jurisdiction to invoke S.154 of the Income Tax Act, 1961. Reference may be made to a recent decision of the Supreme Court in T. S. Balaram, Income Tax Officer, Company Circle IV, Bombay v. Volkart Brothers and others, AIR 1971 (82 ITR) 50. Their Lordships observed in that case as follows: "A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions." We are of the view that two opinions on the question is certainly possible. S.154 could not therefore have been invoked. We answer the question number (1) referred to us in the negative, that is in favour of the assessee and against the department. In view of the above answer, we do not consider it necessary to answer question number (2) as an answer to that question will be purely academic. The question number (3) also does not arise as the computation of the capital gains by the order dated 25-3-64 must stand in view of the answer to question number (1).We decline to answer this question as well. We make no order as to costs. 6. The question number (3) also does not arise as the computation of the capital gains by the order dated 25-3-64 must stand in view of the answer to question number (1).We decline to answer this question as well. We make no order as to costs. 6. A copy of this judgment under the seal of the High Court and the signature of the Registrar will be sent to the Appellate Tribunal as required by sub-s.(1) of S.260 of the Income Tax Act, 1961.