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TMI Blog1984 (9) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... y dues from them. Therefore, the assessee has written off the said amount as bad debt. The ITO did not agree with the claim of the assessee. According to him, the assessee has received the huge amount from Dwarkaprasad Bhojnagarwala of Calcutta in the year under consideration and merely on the information from General Cloth Stores of Calcutta, the debts cannot be said as bad and, therefore, when there are dealings and the assessee has received certain payments, no question of bad debt arises. 3. In appeal, the view taken by the ITO has been confirmed by the Commissioner (Appeals), saying that the writing off of the debts in this year would be premature. 4. Being aggrieved, the assessee came in appeal before us. The submission of the learned counsel for the assessee, Shri J.P. Shah, was that the assessee has inquired from its known firm and it is said that the assessee has closed down its business and Dwarkaprasad Bhojnagarwala Sons have gone into insolvency. There is no hope of recovery of the amount and till today the assessee has not recovered any further amount. He filed the copy of accounts of Dwarkaprasad Bhojnagarwala also. The same is placed at page 1 of the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id party in the books of the assessee of the Samvat years 2032-2035, it appears that the assessee used to sell goods to the said party and remittances were received by the assessee from him. In the accounting period corresponding to the assessment year 1977-78, sales to the extent of Rs. 1,06,118 were made by the assessee to the said party and payments in respect of the entire sum were received by the assessee-firm during the accounting period itself. 3. In the accounting period corresponding to the assessment year 1978-79, the value of the goods sold came to Rs. 1,65,987 as against which the said party (the Calcutta party) paid to the assessee Rs. 1,55,218. Rs. 10,701 remained by way of balance, which were carried over by the assessee to the next year. In the accounting period corresponding to the assessment year 1979-80, the sales made by the assessee to the Calcutta party aggregated to Rs. 3,00,670 as against which receipts from the said party were to the extent of Rs. 2,61,451. Rs. 49,920 remained recoverable from the said party at the end of the accounting period in question. In the accounting period under consideration, the sales made amounted to Rs. 85,012 only. The openin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spend its good money in order to recover something which has already, in its opinion, become bad, has to be left to the judgment of the businessman, who is carrying on his business and the bona fides of his decision should not normally be challenged unless there is material to show some collusive action. In the present case, it is not the department's stand that the assessee was in any way or in some way related with the Calcutta party and that the write off is the result of collusive action on the part of the two. Their Lordships of the Gujarat High Court considered the principles, which should be applied while evaluating the claim of bad debt in the case of Sarangpur Cotton Mfg. Co. Ltd. v. CIT [1983] 143 ITR 166. According to their Lordships, " when a businessman writes off an amount, there is prima facie evidence that the amount is irrecoverable ". The department can, of course, rebut the prima facie inference by drawing attention to circumstances or by leading some evidence to suggest that the position taken up by the assessee was not correct. Such rebuttal has not been done by the revenue in the present case. Taking into account the facts and circumstances of the present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal action. On the strength of the above communications, the assessee wrote off the sum of Rs. 28,077 as irrecoverable debt. The ITO rejected the claim of bad debt on the ground that the assessee had not initiated any legal steps against the debtor. The Commissioner (Appeals) confirmed the order of the ITO. 2. When the matter came on appeal to the Tribunal, the two members having differed on the question of the allowability of the bad debt, the following point of difference has been referred to me as the Third Member for resolution : " Whether, on the facts and in the circumstances of the case, the claim of the assessee for bad debts amounting to Rs. 28,077 due from Dwarkaprasad Bhojnagarwala of Calcutta in Samvat Year 2035 relevant to the assessment year 1980-81 is allowable ?" 3. The learned counsel for the assessee has pointed out that every possible step was taken to realise the amount. It was written off only when the recovery was impossible. The bills payable were dishonoured. That the debtor has gone into insolvency is also known. The outstandings related to an earlier year. Till today nothing has been recovered. It is on the basis of these facts that the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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