2021 (3) TMI 831

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....come Tax (Appeals) is contrary to law, facts of the facts and material on record. 2. The commissioner of Income Tax (Appeals) grossly erred in dismissing the assessee's appeal challenging the disallowance of expenses on the ground that there was no commercial activity during the relevant previous year. The commissioner of Income Tax (Appeals) failed to appreciate that the assessee company was set up in the year 2005 and that substantial sum of revenue was realised from commercial activity during the years ended 31/03/2012, 31/03/2013 and 31/03/2014 as is evident from the financial for the respective years. The Commissioner of Income Tax(Appeals) is not justified in holding that the expenses incurred during the....

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.... and needs to continue its operations for which necessary expenditure needs to be incurred. Therefore, merely for the reason that there is no revenue from operations, genuine expenditure incurred wholly and exclusively for the purpose of business cannot be disallowed. The AO however was not convinced with the explanation furnished by the assessee and according to him there is no justification for claiming huge expenditure, when there is no business operation for the year under consideration. Therefore, he was of the opinion that there is no nexus between expenditure debited into profit & loss account and business operation of the assessee and therefore, following the decision of ITAT, Bangalore in the case of Kingfisher Training & Aviati....

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.... the profit & loss account and hence, confirmed addition made towards disallowance of expenditure and dismissed the appeal filed by the assessee. Aggrieved by the CIT(A) order, the assessee is in appeal before us. 5. The ld.AR for the assessee submitted that the ld.CIT(A) has erred in confirming additions made by the AO towards disallowance of expenses without appreciating the fact that when there is temporary null in the business, genuine expenditure incurred for the purpose of business cannot be disallowed merely for the reason that there is no revenue from operations. He, further submitted that there is no finding of fact from the AO that expenditure debited into profit & loss account are not genuine. There is no observation from t....

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....urred for continuity of business operations cannot be disallowed simply for the reason that there is no revenue from operations for the impugned assessment year. In this legal background, if we examine the case of the assessee, it is not the case of the AO that the assessee has not commenced its business operations during the year under consideration. It is also not a case of the AO that the assessee has not earned any revenue from operations in the past. In fact, the evidences filed by the assessee clearly prove that the assessee has revenue from operations right from AY 2011-12 to AY 2014-15. But, there is no revenue from operations for the impugned assessment year. The assessee has explained the reasons for no revenue from operations as ....