9911796707
TMI Blog1985 (12) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... firm engaged in business as "a film producer ". It would appear that the picture " Moondreluthu" produced by the assessee was screened in Maharaja Talkies, Madras, through a distributor and the assessee accounted for the collections only for about 20 days, from May 10, 1968, to May 31, 1968. However, when the folio of the said Maharaja Talkies in the books of the assessee was examined, it was found that some further collections and receipts from the said Maharaja Talkies were credited to the accounts and it was found that these entries had also been reversed with the narration that the relevant cheques were dishonoured. Rejecting the contention of the assessee that the fact that the cheques were dishonoured would show that no collections a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at, therefore, the said amount should be allowed as bad debt. The Appellate Assistant Commissioner was of the view that in the absence of adequate evidence to show that the amount had actually become bad and irrecoverable, it is not possible to hold that they had become bad or irrecoverable and that the same cannot be allowed as bad debts. On a further appeal, the Tribunal held that considering the fact that the assessee was maintaining the mercantile system of accounting, the monies due to the assessee from the exhibitor would definitely be income assessable in their hands. However, on the alternative plea, the Tribunal held that there was no chance of recovery of the amount from the exhibitor as the party in question had absconded and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d it imposes conditions precedent for such allowance, there could be no doubt that all the conditions would have to be satisfied. But on that ground, we cannot normally permit a party to argue a point which was not urged in the court below unless on the facts as found by the court below, the point could be argued and no fresh fact or finding is needed. No fresh fact or finding is needed in this case for consideration on the point raised by the learned counsel. Therefore, we had permitted the counsel to argue this new point. We would not have permitted the learned counsel to raise this contention but for the fact that no more facts are necessary. The facts as found are admitted and on the basis of such facts found, we will proceed to conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrecoverable in the accounts of the assessee for that previous year. In the light of the finding of the Tribunal deleting the addition, it may be taken that the second condition relating to taking into account in computing the income of the assessee for that previous year has been satisfied. On the first point, though the learned counsel for the Revenue contended that on the two grounds mentioned in the orders, it is not possible to hold that the debt had become a bad debt, we are unable to agree with the learned counsel. There is a specific finding that the party/debtor had absconded. There is also the finding that the cost of litigation involved is so expensive with no chance of recovery making it futile to spend more money for recovery o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f of the alleged bad debt is proper and permissible in the circumstances of the case is undoubtedly upon the assessee, the Department cannot insist on demonstrative proof which is quite infallible. " Thus, though the onus of proving that it had become a bad debt is on the assessee, the Department cannot insist on foolproof evidence. The Tribunal has believed the evidence of the assessee and we are satisfied that this view is not unreasonable. Therefore, we confirm the finding of the Tribunal that the debt had become a bad debt. On the question as to what is meant by writing off as irrecoverable debt in the accounts of the assessee, we have two instructive judgments, one rendered with reference to the old provision in section 10(2)(xi) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d loss account and he may make corresponding entry in another appropriate account." A similar view was taken by a Division Bench of the Gujarat High Court in the decision reported in Vithaldas H. Dhanjibhai Bardanwala v. CIT [1981] 130 ITR 95 (Guj). Therefore, there would be no doubt that debt may be either written off as irrecoverable in the individual accounts of the debtor in the assessee's books or by making appropriate entries in the profit and loss account. In either case, the condition relating to writing off in sub-section (2) of section 36 is satisfied. In this case, the facts stated above show that not only the assessee reversed the entries relating to the receipt of the bounced cheques but also the effect of it was reflected in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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