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TMI Blog1931 (3) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... they became bad in the year of account. He has held upon the evidence that the assessees have failed to do this and he has disallowed the deduction claimed. He has referred to us the question whether the income-tax officer was right in disallowing set off. ( 2. ) As under the Income-tax Act, ( Section 66) this Court has to decide questions of law only, the form of the question is open to exception. I propose to inquire whether the Income-tax Commissioner was upon the evidence obliged in law to allow the deduction and whether if not he has in arriving at his decision departed from or misapplied the principles which in law govern the matter. ( 3. ) The debts alleged to be due from Tarachand are described in a mortgage-bond dated 28th June ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e losses which were met by the assessees and that the sum of ₹ 81,685 was due from him to the assessees accordingly. ( 4. ) The mortgage bond states that the amounts therein mentioned, viz., ₹ 6,909-2-6 + ₹ 2,431-0-3 + ₹ 81,658-14-3 =Rs. 90,999-1-0, were settled and adjusted with Tarachand in 1924 (R. 1981) who gave handnotes for each debt. It describes the sum of ₹ 90,999-1-0 as being due for principal and interest. It then goes on to effect a "settlement" as follows: The assessee firm gives up all save ₹ 30,000; it is to receive this sum of ₹ 30,000 from Mohanlal one of the two partners in the assessee firm; Mohanlal takes a mortgage for ₹ 30,000 at six per cent upon Tarachand' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tarachand since 1920 has owed them money on capital account this debt can be deducted from the profit of the assessee firm in 1927 assuming that in 1927 it became a bad debt. To put the matter in another way suppose that in 1924 Tarachand had paid up his share of losses in the old jute firm with interest at six per cent could the income-tax authorities merely on the materials now disclosed have insisted on reckoning this as part of the profits of this registered firm s-money lending business ? I do not think they could. Of course if the assessee firm had got out annual balance sheets of their money lending business and it appeared that in previous years the sum spent on Tarachand's account had been brought into the account so that inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es a mortgage of a certain property from Tarachand. The mortgage sum is ₹ 30,000. This sum is credited against the debt. Cross-entries are made in Mohanlal's account. As proof that the debt became bad in 1927 this seems to me poor and the income tax authorities did well to be suspicious of it. ( 9. ) I cannot discern any error of law in the view taken by the Commissioner. When as in this case an assessee produces his books for the year of account and complies with any other requirements as to specific documents so that he is assessed in the ordinary way under Section 23 (3) and not as being in default, the income-tax authorities cannot assess him upon any figure of profits not warranted by evidence which they have before them. Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal with the case. ( 11. ) The assessees have suggested before us that they have had insufficient opportunity to produce or insufficient warning as to the need to produce evidence as to the origin of these debts their nature and character and the fact that they become bad in 1927. The Commissioner has referred no such question to us, and I find from the assessees, petition before the Commissioner, which they have asked us to look at, that they raised no such question before him. Further the Commissioner has at the request of the assessees annexed to the case stated a copy of the assessment note and the order sheet of the Income-tax Officer. These show that the assessees have had repeated warning of the necessity for giving proof of the ori ..... X X X X Extracts X X X X X X X X Extracts X X X X
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