TaxTMI 
TaxTMI 
2019 (2) TMI 986
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....Act, 1961 (The Act) whereby and whereunder disallowance to the tune of Rs. 24,76,606/- was upheld by the Learned Commissioner of Income Tax (Appeals) on the ground that during the year under consideration assessee did not carry out any business activity. 2. Brief facts relating to the case is this that the assessee being a trader of cotton filed its return of income on 22.09.2012 declaring total income at Rs. 24,57,238/-. Upon scrutiny a notice u/s 143(2) was issued on 08.08.2013 followed by subsequent notice u/s 142(1) dated 22.04.2014 along with detailed questionnaire upon which the profit and loss including all other documents were duly submitted by the assessee. The interest income earned on FDR kept with Nationalized Bank at Rs. 48,....
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....,20,798/- and depreciation claimed u/s 32 of the Act to the tune of Rs. 55,808/- has been disallowed which was further uphold by the Learned CIT(A). Hence the instant appeal. 4. At the time of hearing of the instant appeal, Learned Counsel appearing for the assessee submitted before us that there was a temporary cessation of the business fact of which is clearly evident from the return of income filed by the assessee for Assessment Year 2013-14 onwards. The chart showing income from operation from A.Y. 2013-14, 2015-16 to 2017-18 has been handed over to us by the Learned Counsel appearing for the assessee. The Learned Counsel for the assessee further submitted before us that there was inadvertent error committed by the Revenue in not ....
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....uring the relevant period when the trading of cotton was very risky the assessee could not carry out the business. Neither the company got export quota license from the Government as a result whereof no sale was affected. However, it was contended by the assessee that all along and although the assessee was engaged in the business of cotton trade but due to the reason mentioned above there was temporary lull in the business. The assessee sought to justify the continuity of business by stating that during the financial year 2012-13 & 2013-14 Company has affected sales and paid Vat thereon. It was further contented by the assessee that there is no compulsion that in each Financial Year the company has to affect sale even if the market conditi....
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.... 3. Assessee is a Company assessee and a Company is incorporated with main object to carry on business. It has perpetual existence and therefore, no matter for what reason the actual trading activity was not earned on during a specific period, its existence to carry the business cannot be overlooked and any activity to explore a business, with or without success must be regarded as continuity of business. Assessee Company is not a Section 25 Company to take up nonprofit activity and hence Business must be treated as part of its very existence." In addition to the said reply reliance were made in the judgment passed by General Corporation Ltd.-vs-CIT, 3 ITR 350, CIT-Vs-Bharat Nidhi Ltd., 60 ITR 520 (PUNJ) & Inderchand Hariram-vs-CIT,....
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....income filed that no business activity has been carried on by the appellant in the two subsequent years i.e. Asst. Year 2013- 14 and 2015-16 as well. As such, the claim that the business is maintaining continuity cannot be accepted. Simply because the FDRs in banks have been made out of surplus available funds with it on account of discontinuation of business cannot imply that the interest earned on these deposits will be business income. !n fact, it has been admitted by the appellant that the FDRs were placed with banks in order to earn interest income. It is also seen from the submissions and financial statements that even in earlier year i.e. Asst. Year 2011-12, interest on FDRs was shown by the appellant as income from other sources. Co....