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TMI Blog1996 (5) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... ,35,681 had shifted to the assessment year 1974-75, was justified not to have held that other ingredients of section 36(2)(iii) of the Act were automatically fulfilled and that the assessee was entitled to the allowance of the said bad debt for the assessment year 1974-75 ? 2. Whether, in the facts and circumstances of the case, the Tribunal was justified to dismiss the assessee's appeal on the new ground that credit for the dividend was taken by the assessee in the accounts for the assessment year 1975-76 and section 154 was not attracted ?" The brief facts of the case are that the assessee was due to receive a sum of Rs. 1,35,681 from Kaluram Nemichand of Beawar. For the assessment years 1962-63 to 1964-65, the debt was claimed as bad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed of. The claim could not be pressed at the time of the assessment for the year 1974-75, since the assessee was simultaneously pursuing the remedy on different lines by way of reference in respect of earlier assessment years. When his reference application was rejected, his claim to deduct the bad debts survived for the assessment year 1974-75. The claim for bad debts in the assessment years 1962-63, 1963-64 and 1964-65 was considered to be premature. There was no finding that the debt became bad in 1974-75 and as such all that was said was that the debt did not become bad in those years. It was for the assessee to place the facts before the Income-tax Officer at the time of assessment for 1974-75 and claim that the debt, became bad in 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the debt had become bad during the accounting period ending Diwali 2030 (October 26, 1973), relevant to the assessment year 1974-75. The provisions of section 36(2)(iii) on the basis of which the claim of the assessee rests are as under : "(2) In making any deduction for a bad debt or part thereof, the following provisions shall apply --- . . . . (iii) any such debt or part of debt may be deducted if it has already been written off as irrecoverable in the accounts of an earlier previous year, but the Assessing Officer had not allowed it to be deducted on the ground that it had not been established to have become a bad debt in that year." The assessee claimed the debts outstanding against Kaluram Nemichand as bad. This contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year 1974-75 till the assessment is complete. The Tribunal also found that the credit for the dividend was taken by the assessee in the account for the assessment year 1975-76 and, therefore, the application under section 154 was not maintainable. The moot question which arises is whether the claim for bad debt could be raised for the first time in the rectification proceedings, when no such claim was made in the assessment order, nor even a document in respect thereof was submitted before the Income-tax Officer so that it may be considered to constitute a mistake apparent from the record. The important thing to be seen over here is that the return for the assessment year 1974-75 was filed by the assessee on July 23, 1975, which was afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of account. The decision in the case of Addl. CIT v. S. RM. PL. Subramania Chettiar [1979] 119 ITR 925 (Mad) was based on the undisputed fact where the assessee had already written off the bad debt for the assessment year 1963-64 and the Income-tax Officer disallowed the claim on the ground that debt should not be considered as bad until the final declaration of the dividends by the official assignee takes place. It was held by the Madras High Court that since the debt has already been written off as irrecoverable in the accounts of the earlier previous year, there is no necessity for a further or fresh writing off of the debt by the assessee after he took over the business in view of the above provisions. Failure of the assessee to produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord on the basis of which the order could be rectified. In these circumstances, we are of the view that the Tribunal having held that on the final declaration of dividend in the insolvency of the debtor on October 19, 1973, as per cheque of date, the claim of bad debt of Rs. 1,35,681 had shifted to the assessment year 1974-75 was justified not to have held that other ingredients of section 36(2)(iii) of the Act were automatically fulfilled and that the assessee was entitled to the allowance of the said bad debt for the assessment year 1974-75. We are further of the view that the Tribunal was justified to dismiss the assessee's appeal on the new ground that credit for dividend was taken by the assessee in the accounts for the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X
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