Temporary business suspension does not bar revenue expense deduction; appellate loan evidence was admitted and remanded for verification.

Temporary suspension of manufacturing during rehabilitation does not amount to cessation of business, so revenue expenses incurred in that period remain deductible; the disallowance was deleted. On the cash credit issue, loan confirmation and bank evidence produced at the appellate stage were treated as prima facie relevant to the identity and genuineness of the transaction, so the additional evidence was admitted and the matter remanded to the Assessing Officer for verification. The assessee obtained partial relief on both issues.

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Issues: (i) Whether the assessee was entitled to deduction of business expenses incurred during a period of temporary suspension of manufacturing activity; (ii) Whether the addition made under section 68 for want of loan confirmation could be sustained when confirmation and bank evidence were produced at the appellate stage.

Issue (i): Whether the assessee was entitled to deduction of business expenses incurred during a period of temporary suspension of manufacturing activity.

Analysis: The expenses were found to be revenue in nature. The business had not been permanently closed; it had only remained under a temporary lockout while the assessee was pursuing rehabilitation and revival. The record showed steps taken to restart production, including renewal of the factory licence and efforts made in connection with the rehabilitation scheme. Temporary suspension of operations due to financial difficulty does not amount to cessation of business.

Conclusion: The disallowance of business expenses was deleted and the issue was decided in favour of the assessee.

Issue (ii): Whether the addition made under section 68 for want of loan confirmation could be sustained when confirmation and bank evidence were produced at the appellate stage.

Analysis: The loan transaction was stated to have been routed through banking channels, and the confirmation from the creditor, together with the bank statement, constituted material evidence relevant to the identity and genuineness of the transaction. Since the evidence appeared prima facie relevant, it was admitted and the matter was directed to be verified by the Assessing Officer in accordance with law.

Conclusion: The additional evidence was admitted and the issue was remanded for verification, in favour of the assessee.

Final Conclusion: The appeal succeeded on the deduction issue and was sent back for fresh verification on the cash credit issue, resulting in partial relief to the assessee.

Ratio Decidendi: A temporary suspension of business during rehabilitation does not amount to cessation of business so as to deny revenue expenditure, and relevant additional evidence proving a cash credit may be admitted at the appellate stage and verified on remand.

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