Judgment :- James, J. The income Tax Appellate Tribunal, Cochin Bench, in R.A.No. 305/Coch/97. at the instance of the Commissioner of income Tax, Cochin. Under Section 256(1) of the income Tax Act. 1961, for short ‘the Act’, has referred the following question of law: “whether, on the facts and in the circumstances of the case, the charging of tax at a flat rate of 40% on Rs.22.500/- under S.115BB of the I.T.Act. 1961, is valid and in accordance with law and making adjustment u/s 143(1)(a) is highly debatable?” 2. The facts of the case are that the only source of income for the assessee during the assessment year 1993-94 was winning an amount of Rs.25,000/- from Kerala State Lottery. He had filed a return of income showing the total income as Rs.22.500/- after deducting the agent’s commission and seller’s bonus, at the rate of 5% each. The assessing officer, at the first instance, accepted the returned income and made a total demand of Rs.10,472/-, together with interest under Sections 234B and 234C of the Act. He also gave credit for T.D.S. of Rs.7,000/-, and thereafter, fixed the amount at Rs.3472/-. But subsequently, the assessing officer, under Sec. 154 of the Act, passed a rectification order allowing exemption of Rs.5000/- under Sec.10(3) of the Act on 18.12.1995. Thus, the total income was fixed as per the rectification order at Rs.17,500/-, and deducted 40% of the tax of said Rs.17,500/- together with surcharge at the rate of 12%, amounting to Rs.840/-. The said rectification order was challenged before the Deputy Commissioner of income Tax (Appeals), who agreed with the findings of the assessing officer, and dismissed the appeal. The same was challenged before the income Tax Appellate Tribunal. Cochin Bench as ITA.No. 698 (Coch) 1996. As per the order dated 4.9.1997. the Tribunal allowed the appeal, and directed the assessing officer to accept the income returned by the assessee. It was thereafter, at the instance of the Department, this reference stated above, was made. 3. Heard Sri.P.K.R. Menon, the learned Senior Counsel (Government of India) Taxes, and Sr.K.R.Syam Kumar, the learned counsel appearing for the respondent. 4. the Tribunal allowed the appeal, and directed the assessing officer to accept the income returned by the assessee. It was thereafter, at the instance of the Department, this reference stated above, was made. 3. Heard Sri.P.K.R. Menon, the learned Senior Counsel (Government of India) Taxes, and Sr.K.R.Syam Kumar, the learned counsel appearing for the respondent. 4. The main contention of the Department is that Sec.115BB of the Act, being a special provision, the schedule and other income of the assessee should not be considered in assessing the income from winning the State Lotteries, and the exemption available to the assessee under Section 115 is only under Sec.10 (3) of the Act, which had been granted. Therefore, the assessing officer and the appellate authority were correct, and the Tribunal was wrong in allowing the appeal, and directing the assessing officer to accept the tax return. It is also contented that Circular No.31.1 of C.B.D.T. Circulars is inapplicable. As stated above, deduction under Sec.10(3) of the Act had been granted by the assessing officer through his rectification order under Section 154 of the Act, thereby, deducting an amount of Rs.5,000/-. After rectification, the assessing officer fixed the total income at Rs.17,500/- and under Sec.115BB. 40% of the tax together with surcharge at the rate of 12% was also deducted. After reducing the tax deducted at source. Rs.7000/-, the demand was refixed in the rectification order at Rs.840/-. It was this order, under challenge before the Deputy Commissioner of Income Tax, who took the same view as that of the assessing authority. The Tribunal stated that the matter being highly debatable, no adjustment could have been made by the assessing officer, and therefore, directed the assessing officer to accept the tax return originally filed by him. Sec.115BB of the Act is reproduced below: “115BB. Tax on winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or gambling or betting of any form or nature whatsoever. Sec.115BB of the Act is reproduced below: “115BB. Tax on winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or gambling or betting of any form or nature whatsoever. Where the total income of an assessee includes income by way of winnings from any lottery or crossword puzzle or race including horse race (not being income from the activity or owning and maintaining race horses) or card came and other game of any sort or from gambling or betting of any form or nature whatsoever, the income-tax payable shall be the aggregate of- (i) the amount of income-tax calculated on income by way of winnings from such lottery or crossword puzzle or race including horse race or card game and other game of any sort or from gambling or betting of any form or nature whatsoever, at the rate of forty per cent; and (ii) the amount of income-tax with which the assessee would have been chargeable had his total income been chargeable had his total income been reduced by the amount of income referred t in clause (i)” 5. The question which arose before the authorities and the Tribunal was as to whether in view of the provisions of Section 115BB of the Act the basic exemption available under Sec.2 and the First Schedule to the Finance Act applicable to the assessment year in question is attracted or not? To put it differently for the assessment year 1993-94 under the Schedule to the concerned Finance Act, no tax was exigible in a case where the total income did not exceed Rs.28,000/-. In the present case by way of winnings in the lottery was only Rs.22.500/- even without applying the exemption of Rs.5,000/- provided under Sec.10(3) of the Act. So the question was as to whether in view of the basic exemption from the levy of tax under the Act provided in the Schedule to the Finance Act concerned, the assessee is liable to pay tax under the Act. The assessing authority and the first appellate authority have taken the view that in view of the special provision contained in Sec.115BB of the Act, the basic exemption is not available in respect of income by way of winnings from lottery. The Lottery department had deducted a sum of Rs.7,000/- at source and paid only the balance amount of Rs.17,500/- to the assessee. The Lottery department had deducted a sum of Rs.7,000/- at source and paid only the balance amount of Rs.17,500/- to the assessee. The assessee had filed a return showing a total income of Rs.22.500/- and claimed exemption. The assessing authority issued an intimation by applying the provisions of Sec.115BB of the Act and demanded a sum of Rs.3,472/- after adjusting the sum of Rs.7,000/- deducted at source. The assessee did not seek for rectification. The assessing officer, by invoking the provisions of Sec.154, rectified the intimation by deducting a sum of Rs.5,000/- under Sec.10(3) of the Act from the lottery income. It is against this, the assessee filed the appeal. Thus the main question which arose was as to whether the invocation of Sec.154 of the Act was justified. Of course the omission to deduct a sum of Rs.5,000/- under Section 10(3) of the Act is an error apparent from the record and therefore the rectification of the assessment in that regard was justified. The Tribunal, we find, had considered the rival contentions with regard to the exigibility to tax on the income from lotteries being below the non-taxable limit and held that this is a debatable question and observed that no adjustment could have been made by the assessing officer. However, it was observed that, in view of this the assessee has to succeed and the assessee’s appeal was allowed. We are afraid, the Tribunal has seriously erred in its conclusion that the assessee has to succeed, for, if the rectification order is found to be illegal the result is that the original intimation stands. 6. As already noted, in the original intimation the assessing officer had applied the provisions of Sec.115BB of the Act and applied a flat rate of 40% on the entire lottery income. The effect of the finding of the Tribunal that the legal issue is a debatable one and the assessment cannot be rectified is that the original intimation which is against the assessee stands. We also find that for arriving at the conclusion that the legal issue is a debatable one the Tribunal has not cared to consider the provisions of Sec.115BB and C.B.D.T. Circular No. 461 dated 9th July, 1986, (1986) 161 1TR (Statutes) at page 36 relied on by the assessee. Because there were rival contentions on this legal issue the Tribunal has held that it is a debatable issue. Because there were rival contentions on this legal issue the Tribunal has held that it is a debatable issue. The question whether the issue is a debatable one or not will depend on an understanding of Sec.2, the provisions of Sec.115BB and the provisions of the Schedule to the respective Finance Acts, certainly with reference to the circular also. Since the Tribunal has not considered the above. We are of the view that the Tribunal committed a serious error in holding that the assessee is entitled to succeed. We accordingly set aside the order of the Tribunal and remit the matter to the Tribunal for consideration of the matter afresh in accordance with law and in the light of the observations made herein above. In the circumstances, we decline to answer the questions referred to this court for decision. A copy of this judgment under the seal of this Court and the signature of the Registrar shall be forwarded to the Income tax Appellate Tribunal, Cochin Bench.