IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN WEDNESDAY, THE 17TH MARCH 2010 / 26TH PHALGUNA 1931 ITA.No. 270 of 2009() --------------------- ITA.564/COCH/2008 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT: ----------------------------- THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT: --------------- ISLAND SEAFOOD PVT. LTD., WILLINGDON ISLAND, COCHIN-682003. ADV. SRI.A.KUMAR FOR R1 THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 17/03/2010, ALONG WITH ITA NOS.995,1029,1100 & 1101 OF 2009,THE COURT ON 17/03/2010 DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & P.S.GOPINATHAN, JJ. .................................................................... I.T. Appeal Nos.270,995,1029,1100 & 1101 of 2009 .................................................................... Dated this the 17th day of March, 2010. JUDGMENT Ramachandran Nair, J. Appeals are filed by the Revenue against orders of the Tribunal cancelling rectification order issued under Section 154 upheld by the first appellate authority for the assessment years 1999-2000 to 2003- 2004. We have heard Standing Counsel appearing for the appellant and Adv. Sri.A.Kumar appearing for the respondent-assessee. 2. In the assessments completed for the above years, unabsorbed business loss carried forward was disallowed by rectifying original assessments under Section 154 holding that since assessee discontinued business, business loss from earlier years cannot be carried forward for the subsequent year. The assessee's case was that electricity supply was disconnected on assessee's request because business was dull. However, according to the assessee, industry remained only dormant for business to commence later. So much so, it cannot be said that assessee has closed down business, was the contention. During the ITA 270/09&conn.cases 2 assessment years 1999-2000 and subsequent years, the Assessing Officer noticed from Profit and Loss Account and the minutes of the meeting of the Board of Directors that the assessee had disconnected power supply and in fact, the freezing plant was notified for sale which means that business was closed once for all. If these are the facts, then certainly assessee is not entitled to carried forward benefit under Section 72 of the Income Tax Act which was disallowed in rectification proceedings under Section 154. However, counsel for the assessee contended that business could be dormant for a few years and thereafter if the assessee restarts business, then certainly during the period of dormancy disallowance could not be made. Even though there is no material to find that assessee has restarted business at any time in the near future, we still feel one more opportunity can be given for the Assessing Officer to verify whether assessee really did not sell machinery and after a period of lull, they restarted the business. In any case we do not find any justification for the Tribunal to hold that the issue is debatable because the records of the case itself prove that assessee had disconnected power supply and invited tenders for sale of ITA 270/09&conn.cases 3 the machinery which establish beyond doubt that business was closed. Therefore, we allow the appeals by vacating the orders of the Tribunal. However, since the counsel contended that assessee probably would have started business, we direct the Assessing Officer to verify the assessment records and find out whether assessee has atleast started business in the financial year 2003-2004 and if so, the order under Section 154 confirmed by the first appellate authority will stand cancelled and the Assessing Officer will allow the carried forward business loss. C.N.RAMACHANDRAN NAIR Judge P.S.GOPINATHAN Judge pms