Incomes in infancy but now losses

Friends

A company is in its 6th year. It was having good times in the first 3 years. There was robust turnover, taxable incomes. Gradually the order book position deteriorated. In march 11, the turnover and PBT compared with march 10 figures were pathetic. The situation has worsened in current year.

But the expenses have not declined proportionately as the costs are almost fixed in nature -- employee cost, administrative and selling expenses.

What would be the view of assessing officer in such situation ? Now, if an aseesee company keeps on incurring losses, no body can finger anything legally as the expenses are duly authenticated, i mean, TDS have been made where applicable and backed by approppriate evidences.

Is there any law under income tax whereby AO can ask why you are not making incomes ? What utmost action AC can initiate ?

Regards,