1. - The Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (hereinafter referred to as "the Tribunal"), by its order dated February 19, 1972, passed under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), has referred the following questions arising out of the order of the Tribunal dated June 1, 1970, in Income-tax Appeals Nos. 666 and 667 of 1968-69, for the opinion of this court :

"1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the shares of the assessee corporation were not preference shares ?

2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the mistakes in the original assessments in not reducing the rebates on super-tax for the assessment year 1964-65 and income-tax for the assessment year 1965-66, with reference to the dividends declared by the assessee, were mistakes apparent from the records within the meaning of section 154 of the Income-tax Act ?

2. These questions relate to the assessment years 1964-65 and 1965-66.

3. In the Finance Act, 1964, provision was made with regard to imposition of super-tax at the rate of 55% on every company other than the Life Insurance Corporation of India in Paragraph D of Part 11 of the First Schedule to the said Act. Under the proviso appended to Paragraph D aforesaid, a rebate at the rate of 37.5% was to be allowed in the case of any company, as referred to in section 108 of the Income-tax Act, to the total income exceeding Rs. 25,000. There was, however, a further proviso where under it was provided that in the case of a company referred to in section 108 of the Act, which has declared or distributed to its shareholders during the previous year any dividends other than dividends on preference shares, the amount of rebate would be reduced by 7.5% on the whole amount of the dividends other than dividends on preference shares. In other words, the rebate that was allowed was to be reduced by 7.5% on the dividend other than dividend on preference shares. In the Finance Act, 1965, First Schedule, Part 1. Paragraph F, income-tax at the rate of 80% was prescribed on the whole of the total income of every company other than Life Insurance Corporation of India. Under the proviso in the said paragraph, rebate was given in respect of income of the company as is referred to in section 108 of the Income-tax Act. There was, however, a further proviso for the reduction of the amount of rebate by 7.5% in case of a company, as is referred to in section 108 of the Act, which has declared or distributed to shareholders during the previous year any dividend other than dividend on preference shares and the said reduction in the rebate at the rate of 7.5% was to be made on the whole amount of the dividend other than dividend on preference shares.

4. The Rajasthan Financial Corporation (hereinafter referred to as "the assessee") is a State Financial Corporation established by the Government of Rajasthan under the provisions of the State Financial Corporations Act, 1951, (hereinafter referred to as "the Financial Corporations Act"). It was established in the year 1955, by a notification issued by the State Government under section 3 of the Financial Corporations Act, with an authorised capital of Rs. 2,00,00,000 divided in 2,00,000 shares of Rs. 100 each. The subscribed and paid up capital of the assessee is Rs. 1,00,00,000 divided into 1,00,000 shares of Rs. 100 each. The assessee has been established for advancing and granting loans to industries in the State of Rajasthan. In the previous years relating to the assessment years 1964-65 and 1965-66, the assessee had declared dividend of Rs. 3,50,000 at the rate of 31/2 % on its shares. For the assessment year 1964- 65, the assessee had submitted a return declaring a total income of Rs. 5,39,757. The Income-tax Officer assessed the income of the assessee at Rs. 5,58,237 for t