Anil K.Sen, J. - (1.) The appellant in this appeal under Clause 15 of the Letters Patent is a banking company within the meaning of the Banking Regulation Act, 1949, and was incorporated under the laws of the United Kingdom having its head office and registered office at London. The appellant carries on banking business in several countries of the world including India and is assessed in the status of a company by the income-tax authorities in India. The principal office of the appellant in India is at Calcutta. The appellant causes a separate profit and loss account and balance-sheet to be drawn up for its own business in India and for the said purpose the head office at London has been allocating those expenses incurred there which are specifically attributable to India and a portion of the balance determined on a particular formula claimed to have been consistently followed since 1948 and not disputed by the tax authorities for years. That formula is as follows : Head Office General Charges X Indian Management Expenses -------------------------------------------------------------------------------- Management Expenses of all Territories.
(2.) In deciding the dispute now before us we are, however, not concerned directly with the formula as aforesaid.
(3.) The appellant filed its return for the assessment year 1972-73, which corresponds to the accounting year of 1971. In such returns as in previous years, the appellant claimed deduction in respect of its expenses including head office expenses. Dealing with the said return the ITO sought for information to meet his own doubts and apprehensions for the purpose of making the assessment. There is no dispute that on September 18, 1974, the ITO sought for such information on various points including some in respect of head office expenses. The appellant gave reply on November 27, 1974. The reply did not satisfy the ITO who on February 12, 1975, requested the appellant " to produce the cash book, ledger and journal for the year 1971 relating to the head office relevant to the assessment year 1972-73 ". The appellant expressed its inability to produce such books of account from the head office as according to the appellant it was not practicable. On February 18, 1975, the ITO called upon the appellant to furnish .certain clarifications with reference to the appellant's earlier letter written in reply to the ITO's requisition, A few days thereafter, the ITO addressed a letter to the appellant enclosing therein a notice under Section 142(1) of the I.T. Act, 1961, calling upon the appellant to produce or cause to be produced " all financial books of accounts including the cash book, ledger and journal of the head office of the National and Grindlays Bank Ltd. and evidence in support of the entries therein relating to the accounting year ended on December 31, 1971 ". In the covering letter, the ITO refers to previous correspondence and further states that he has to satisfy himself " as to the reasonableness of the head office expenses claimed to arrive at the taxable income of the bank under the I.T. Act, 1961 ", for which the appellant has to produce the evidence called for.;