Law:

Section:

Section 147 of the Income-tax Act, 1961 - Income escaping assessment - Ilustrations - Assessment years 1957-58 to 1959-60 - ITO found during assessment for assessment year 1963-64, that a certificate from London auditors revealed 10 percent as reasonable charge in relation to total administrative expenses incurred by London Company on behalf of assessee-company, and that such expenses debited actually in earlier assessment years were far in excess of this percentage - Accordingly, he required assessee to furnish similar certificates for each of assessment years in question - On assessee's failure to do so, ITO issued impugned notices under section 148 read with section 147(1)(a) to assessee-company purporting to make reassessments - Whether after having accepted assessee's claim even in spite of non-production of relevant auditor's certificates, department could not later turn round and say that assessee's income had escaped assessment or been under-assessed due to assessee's failure to disclose those very auditors' reports - Held, yes - Whether ITO having allowed claim, could not later try to whittle it down on ground of reasonableness based on auditor's report for a subsequent year - Held, yes - Whether under-assessment, if any, was due to laches of department itself, and not due to any act or omission on assessee's part, and, therefore, impugned notices had to be quashed - Held, yes FACTS The assessee-company, incorporated in U.K., having its principal place of business in India, carried on business, inter alia, in oils and lubricants. In its assessments, the assessee claimed deduction of certain expenses as administrative charges incurred by 'B' company of London as the London management fee payable by the assessee and debited in its account and explained that the said amount represented approximately 40 per cent 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 assessee. Apparently, the taxing authority was satisfied with this explanation and no further questions were raised regarding the…

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