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2011 (2) TMI 936 - HC - Income TaxDeleting the disallowance - Expenditure relating to the closed business - The assessee filed return on the net loss which included brought forward losses - The Assessing Officer did not accept the return and disallowed the expenses and brought forward loss on the ground that no business was being carried on by the assessee - Its electricity supply had been cut off and there was no transaction of business - The factory was lying closed. Operation of bank account also showed that no business was being run - No workers were employed - On appeal, the CIT(A) set aside the additions on the ground that the assessee had operated the bank accounts, its books of account were duly audited and thus, its business was continuing. It has not been disputed that the electricity supply of the assessee had been cut off and the business had stopped - The expenses claimed also do not show any claim towards wages or electricity charges - Irrespective of meaning of the term ‘business’, entirety of facts and circumstances are required to be seen. No doubt, if business is being run, its volume may not be conclusive - However, where numerous circumstances indicate closure, insignificant turnover can be taken into account to determine whether such entry is only being used as device - The CIT(A) in the circumstances was required to go into the question whether plea of the assessee that it was carrying on business was merely a device to avoid tax by claiming carry forward of losses and business expenses which could be allowed only if the business was still continuing which has not been done. In the circumstances of the case, the finding of the CIT(A) as affirmed by the Tribunal cannot be sustained - Hence, answer the question in favour of the revenue
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