The main legal point established in the judgment is that business expenditure incurred prior to the commencement of the business, which is clearly attributable to the business, is allowable based on relevant legal provisions and court decisions.

Rama Jois, J.—This writ petition is presented by an Income Tax assessee questioning the legality of the notice issued under s. 148 of the I.T. Act, 1961, proposing to take action under s. 147 of the Act in respect of the assessment year 1968-69.

2. For the assessment year 1968-69. Assessment was completed on March 22, 1972, (Ex. A) on July 24, 1975, notice was issued under s. 148 of the Act on the ground that the ITO had reason to believe that certain income exigible to tax during the assessment year 1968-69, had escaped assessment within the meaning of s. 147 of the Act.

3. On behalf of the respondent. It was submitted that the action was initiated as the ITO noticed that he had allowed certain expenditure incurred during the previous years, but prior to the actual date of commencement of business.

4. Learned Counsel for the petitioner submitted that in respect of the above matter, no action could be initiated under s. 147(a) on the Act as the ITO was fully aware of the fact that the business of the assessee, namely, exhibition of films, commenced only on January 26, 1968. He pointed out that there was a reference to this fact in the order of assessment itself. Even after noticing that the business of the assessee commenced on January 26, 1968, the ITO allowed the expenditure incurred towards the commencement of the business in his favour by the decision of the Supreme Court in Gemini Leather Stores Vs. The Income Tax Officer, 'B' Ward, Agra and Others, AIR 1975 SC 1268.

5. Further in the case of C.T. Desai Vs. Commissioner of Income Tax, Karnataka, (1979) 120 ITR 240 KAR, this court has held that business expenditure incurred prior to the commencement of the business, which was clearly attributable to the business was an allowable expenditure, in view of the said decision. It is clear that even on merits, it cannot be said that deduction in question was wrongly allowed.

6. For the reasons stated above, the impugned notice is liable to be quashed. Accordingly. I make the following order :

(i) Rule made absolute.

(ii) the impugned notice dated July 24, 1975, (Ex. D) is quashed.

(iii) No costs.