1980 (6) TMI 1 - HC - Income Tax

Summary

Issues involved: Challenge to the legality of notice issued u/s 148 of the Income Tax Act, 1961 for assessment year 1968-69.

Summary:
The High Court of Karnataka, in the case presented by an income-tax assessee, addressed the legality of a notice issued u/s 148 of the Income Tax Act, 1961, for the assessment year 1968-69. The notice was issued on the grounds that certain income had escaped assessment. The respondent argued that the notice was based on the allowance of certain expenditure incurred before the commencement of the business. However, the petitioner contended that the initiation of action u/s 147(a) was not valid as the business commenced only on January 26, 1968, and the expenditure was allowed even prior to that date. The petitioner relied on the decision of the Supreme Court in Gemini Leather Stores v. ITO [1975] 100 ITR 1 to support their argument. Additionally, referencing the case of C. T. Desai v. CIT [1979] 120 ITR 240, it was highlighted that business expenditure incurred before the commencement of the business, but attributable to the business, was considered allowable. Consequently, the High Court ruled in favor of the petitioner, quashing the impugned notice dated July 24, 1975, as it was not valid even on merits. The court made the order that the rule be made absolute, the notice be quashed, and no costs be awarded.