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TMI Blog1970 (7) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... etarial work carried out on behalf of the petitioner in London and the charge was for certain services rendered by the London company. The said Income-tax Officer by his letter dated the 19th December, 1952, required the petitioner to furnish a schedule in respect of the London charges and also to let him know if any reserve had been debited to this account. By its letter dated 9th December, 1953, the petitioner recorded the discussion held between the Commissioner of Income-tax, Central, Calcutta-cum Assam, and the petitioner-company relating to the London office charges amounting to pound 1,00,000 and explained that the said amount represented approximately 40% of the head office expenses of the London company and that it had been advised by its London office that the amount represented a reasonable allocation having regard to the amount of the work done on behalf of the petitioner. Apparently, the taxing authority was satisfied with this explanation and no further questions were raised regarding the allowances of the claim for deduction. Again, for the assessment year 1954-55, the said query was raised by the Income-tax. Officer, Dibrugarh, in regard to the claim of pound 1,10,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis, but in proprortion to the time which has been spent on the various companies affairs, etc. The last letter in this series is the letter by the respondent-Income-tax Officer to the petitioner in respect of the assessment years from 1954-55 onwards dated 26th December, 1958, asking the petitioner to obtain the relevant certificate from the head office auditors regarding the reasonableness of the expenses allocated by the Burmah Oil Co. Ltd. to the petitioner for supervision and control of expenses incurred in the U.K. Thereafter, some time in January, 1959, the assessments for the years 1953-54 to 1958-59 were completed by the respondent-Income-tax Officer. The assessments for the years 1957-58 and 1958-59 were made more or less on the basis of the profit and loss account of the petitioner for these years, in which the London officer charges had been debited. These assessments were, subsequently rectified in order to give effect to certain appellate orders under sections 31 and 33A in February, 1962, but the revised orders have no bearing so far as this application is concerned. It appears that some queries with regard to the London management charges were again raised for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 147 of the Act, he proposed to reassess the income for the said years and required the petitioner to deliver, within 30 days from the date of the service of the notice returns in the prescribed form. The notice also mentioned that it 'was being issued after obtaining the necessary satisfaction of the Commissioner of Income-tax, Central, Calcutta. The form of the notices shows that the notices were issued under section 147(1)(a) of the said Act. Before I deal with the cause shown to this rule, it would be interesting to notice the different Income-tax Officers who had made the assessments, issued. the impugned notices and showed cause to this rule. The assessments for the years 1957-58 and 1958-59 were made by Sri D. G. Pradhan and that for 1959-60 was by Sri G. P. Gupta while the notices under section 148 were issued by Sri P. S. Gopala Krishnan and the affidavit-in-opposition showing cause has been affirmed by Sri Panjwani, all successive incumbents of the office of the Income-tax Officer, Central Circle v. Calcutta. I have given the above list in order to stress again the fact as to how negligently and carelessly cause is shown by the department against a rule issued by thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s only a means of avoiding taxation by debiting excessive sums by way of management fees unrelated to the extent of the services rendered. By reason of the assessee's failure to disclose the correct facts its income had been found to have escaped assessment and sanction to reopen the same was, therefore, requested. The amount of London management fee debited in excess is shown at pound 1,13,000. As the petitioner was similarly informed by the respondent's letter dated 21st October, 1965, that he considered the assessee's claim for deduction of the London management expenses in the past years to be excessive in the light of the London auditor's report for the assessment year 1963-64, I must accept that the respondent-Income-tax Officer's reasons for believing that the assessee's income had been under-assessed for the aforesaid three years have been disclosed to the petitioner and that no complaint can be made for such non-disclosure. Mr. Banerjee, the learned counsel for the respondents, contended that the petitioner has no right to any relief and the petition is misconceived. It is submitted that, the petitioner is not entitled to be informed of the reasons for the belief that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncerned and the petitioner company culminating in a conference held between the Commissioner of Income-tax, Central, and the representative of the petitioner-company where the position had been discussed threadbare. The petitioner had explained again and again that it debited the amount which was allocated to it by the Burmah Oil Co. Ltd., London, as its share of the general management expenses of the London office of the latter company attributable to the services rendered to the petitioner-company. As it had no office or staff of its own in London, it accepted and paid the amount demanded by the Burmah Oil Co. Ltd. In some of these years a certificate of reasonableness from the London auditor was also demanded but the petitioner expressed its inability to procure such certificate within the time asked for and the assessments were completed without such certificate. If the Income-tax Officer was not satisfied with the explanation given by the petitioner, he could have either refused to allow the whole or a part of the claim for London management expenses. Having accepted the claim with full knowledge of the facts and in spite of the non-production of the auditor's certificate dema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court in the aforesaid case the Income-tax Officer must have reason to believe that the underassessment was also due to the failure of the assessee to disclose all the material facts. In the light of the correspondence disclosed in the petition, it cannot be said that there was any such failure on the part of the petitioner. All the facts in its possession were placed before the taxing authority. It was for the taxing authority either to accept the claim or to reject it wholly or partly. After having accepted the claim even in spite of the non-production of the relevant auditor's certificates, the department cannot now turn round and say that its income bad escaped assessment or been under-assessed due to he failure of the petitioner to disclose those very auditor's reports. As pointed out by Dr. Pal, the assessing officer could have very well refused to accept the claim or allow the total amount of such claim. Having allowed the claim he cannot now try to whittle it down on the ground of reasonableness based on the auditor's repor t for a subsequent year. Though I am satisfied that the assessee has in all possibility obtained a larger allowance than it should have reas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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