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TMI Blog1970 (3) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... money-lending. Its partners were Harjasmal (assessee), M/s. Yograj Dev Raj and Smt. Indira Vati. A Surat firm known as M/s. Harjas Rai and Co. were debtors of Messrs. Hukam Chand Raj Kumar, the Amritsar firm. Their debt liability to this firm was to the tune of Rs. 1,50,705. The firm was dissolved on 20th March, 1954. The assets and liabilities of the Amritsar firm were taken over by the assessee, Harjasrai Mehra, on Chet Bedi, 2010. In an award, as a result of arbitration proceedings, the liability of the Surat firm was liquidated on payment of Rs. 40,000. In the assessment year 1954-55, relating to the financial year 1953-54, the assessee claimed a sum of Rs. 1,10,705 as bad debt, in view of the award, whereby on payment of Rs. 40,000, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of Rs. 1, 10,704 was claimed as a business loss. The loss in question is definitely not a business loss. It is a capital loss. The amount claimed as a loss did not accrue or arise to the appellant during the course of his day to day business activities. It is not all kinds of losses that are to be considered for set-off. The Income-tax Officer rightly disallowed the claim of the appellant. " Against this decision the assessee took up the matter to the Income-tax Appellate Tribunal, Delhi Bench. The Appellate Tribunal came to the conclusion that a remand report was called for. The reasons for this remand are to be found in the following order of the Tribunal : " It was contended before us that the firm, M/s. Hukam Chand Rai Kumar, was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort of his contentions. The Appellate Assistant Commissioner after recording the evidence in this case should submit the remand report within three months from the date of receipt of this order. " The Appellate Assistant Commissioner in his report observed : " By the time the appellant took over the assets and liabilities of the money-lending business of the firm, it had already been closed and that the appellant thereafter did not carry on any money-lending business. He merely confined his activities to the realization of sundry debtors and payments to sundry creditors. Any loss resulting out of it purely was a capital gain or loss. It may be mentioned that the appellant himself was never a money-lender. " This remand report was conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf carried it on. The ratio laid down in the case of Commissioner of Income-tax v. R. S. A. Sankara Ayyar, therefore, applies, and the bad debt claimed is admissible. " The department was dissatisfied with this order and applied to the Tribunal under section 66(1) of the Act for a reference to this court for stating certain questions of law for the opinion of this court. This application was declined by the Tribunal on the ground that no questions of law arose out of its order dated 2nd November, 1960. This led the department to move this court by an application under section 66(2) of the Act. This court allowed the application and directed the Tribunal to refer the following two questions of law for its opinion along with the statement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me to the conclusion that, prima facie, the assessee was carrying on money-lending business and this fact was also accepted by the department when interest was assessed as business income in subsequent years. In the absence of any materials to the contrary they did not accept the contention of the revenue that the business of money-lending was closed." The learned counsel for the department has vehemently contended that the order of the Tribunal is merely based on conjectures and is not based on any evidence, whereas the contention of the learned counsel for the assessee is that the order of the Tribunal is based on evidence. The learned counsel for the assessee particularly lays stress on paragraph 6 of the statement of the case. Two fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Supreme Court in Esthuri Aswathiah v. Commissioner of Income-tax. In this case the explanation of the assessee in relation to an opening cash balance of Rs. 1,85,000 on July 1, 1949, was rejected by the Income-tax Officer. The Income-tax Officer brought to tax the sum of Rs. 1,35,000 as income from undisclosed sources for the assessment year 1950-51. The Income-tax Officer's order was confirmed by the Appellate Assistant Commissioner. On further appeal, the Appellate Tribunal, after holding that the assessee was unable to explain the source of the amount satisfactorily, came to the conclusion that it was not unlikely that the assessee had some cash in hand from profits in trade from jaggery and from assets received on parti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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