9911796707
|
Home
Issues Involved:
1. Whether the CIT(A) erred in holding that the company was carrying out normal functions during the dormant period relevant to the assessment year 1977-78. 2. Whether the CIT(A) erred in directing the ITO to entertain the assessee's claim and compute the business loss despite no business activity during the accounting year. 3. Whether the CIT(A) erred in directing the ITO to allow the carry forward of business loss when the business was closed prior to the accounting year relevant to the assessment year 1977-78. 4. Additional ground: Whether the assessee could agitate the disallowances in an appeal filed under Section 246 of the IT Act when no objections were raised to the draft assessments forwarded under Section 144B(1). Issue-wise Detailed Analysis: 1. Dormant Existence and Normal Functions: The CIT(A) concluded that the company was not discontinued but temporarily suspended its normal functions. The company incurred administrative expenses but had no manufacturing activities due to financial acuteness and unsold finished goods. The CIT(A) relied on evidence, arguments, and legal precedents to support this view, including the Commentary of Kanga and Palkhiwala. The Tribunal agreed with CIT(A), noting that the company held regular meetings, maintained power connections, and made efforts to revive business, indicating only a temporary suspension, not a discontinuance. 2. Computation of Business Loss: The CIT(A) directed the ITO to entertain the assessee's claim and compute the business loss, arguing that the company was still incurring administrative expenses and making efforts to revive business. The Tribunal supported this, noting that the company's financial difficulties and unsold stock did not equate to business discontinuance. Legal precedents, such as CIT vs. Bharat Nidhi Ltd. and Karsondas Ranchhoddas vs. CIT, were cited to argue that temporary inactivity does not mean cessation of business. 3. Carry Forward of Business Loss: The CIT(A) allowed the carry forward of business loss, reasoning that the business was temporarily suspended, not closed. The Tribunal upheld this view, referencing cases like Mandsaur Starch and Chemicals vs. CIT and Hiralal Jerandas vs. CIT, which support the continuation of business despite periods of inactivity. The Tribunal concluded that the company's efforts to revive its business and the ongoing administrative activities justified the carry forward of losses. 4. Additional Ground - Appeal under Section 246: The Tribunal dismissed the department's additional ground, citing the Bombay 'C' Special Bench decision in Sippy Films, which held that the assessee could agitate disallowances in an appeal under Section 246 even if no objections were raised to the draft assessments under Section 144B(1). The Tribunal followed this precedent and ruled against the department. Conclusion: The Tribunal upheld the CIT(A)'s decisions on all grounds, affirming that the company was in a state of temporary suspension rather than discontinuance, allowing the computation and carry forward of business losses, and permitting the appeal under Section 246. The Tribunal found no need to interfere with the CIT(A)'s orders, dismissing the departmental appeals.
|
