2023 (3) TMI 927 - HC - Income Tax

Claim of bad debts - substantial question of facts or law - claim found unacceptable by the Tribunal, inasmuch as explanation given by the appellant/assessee was vague and general in nature in respect of five entries, in respect of the remaining entries there was lack of clarity as to the nature of the transaction - HELD THAT - Whether a debt is a bad debt is a question of fact, which would clear from the Judgment of Travancore Tea Estates Co. Ltd. v. CIT 1997 (12) TMI 10 - SC ORDER wherein it is held that whether a debt has become bad or the point of time when it became bad are pure questions of fact. Also see case of Bank of Bihar Ltd. 1962 (3) TMI 8 - SUPREME COURT Thus we find no reason to interfere with the concurrent findings of the Authorities below inasmuch as whether a debt is bad, being essentially a question of fact. As the appellant has not made out any question of law much less substantial question of law, this tax case appeal stands dismissed.

Summary

Issues:
The issues involved in this case are whether the Tribunal correctly considered the details filed in the paper book relating to the amounts advanced and whether the advance made to suppliers during earlier years can be claimed as business loss or bad debt.

Details of the Judgement:

Issue 1: Consideration of Details in Paper Book
The appellant challenged the Tribunal's decision of not considering the details filed in the paper book containing the amounts advanced to 14 defaulters. The Commissioner of Income Tax (Appeal) found that the claim of bad debts was not sustainable due to lack of evidence showing the nature of the business transactions and trading loss incurred. The Tribunal also confirmed this decision, stating that there was a lack of clarity regarding the nature of the transactions in the accounts. The Tribunal concluded that there was no evidence to show that the balances represented trading losses for the relevant assessment year.

Issue 2: Treatment of Advances as Business Loss or Bad Debt
The appellant had advanced sums to suppliers of raw materials/service providers during earlier years, which were later considered irrevocable advances. The appellant claimed these advances as business loss or bad debt. However, the Tribunal rejected this claim, emphasizing the need for an objective decision on the impossibility of debt collection. The Tribunal found the appellant's explanation vague and lacking clarity on the nature of the transactions. The court cited legal precedents stating that whether a debt is bad is a question of fact, and in this case, the appellant failed to establish a substantial question of law. Therefore, the tax case appeal was dismissed.

This judgment addresses the issues related to the consideration of details in the paper book and the treatment of advances as business loss or bad debt. The court upheld the decisions of the lower authorities, emphasizing the importance of providing clear evidence and establishing the impossibility of debt collection to claim bad debts. The legal precedents cited highlight that the determination of bad debt is a factual question that must be objectively assessed.