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TMI Blog1985 (4) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... ebt of Rs. 1,27,500 consisting of two amounts as follows: 1. Rs. 67,500 Due from Bhupendra Manilal 2. Rs. 60,000 due from Pankaj Chimanlal It was contended on behalf of the assessee before the ITO that no recovery was forthcoming from the said parties due to their weak financial position. The assessee was also aware of the fact that some of the creditors of the said parties had filed suits for recovery against the said parities In this connection the assessee placed before the ITO certain evidence (which we shall discuss later on) to support the claim that the amounts in question had become bad and irrecoverable. The ITO was not satisfied with the evidence as produced by the assessee and he further ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties were financially incapable of meeting the dues of the creditors. It was next pointed out that the assessee had filed an affidavit before the ITO that he has joined as a party to the suit filed by Kantilal and Ambalal as stated above. Therefore the assessee was justified in making the claim for bad debt as stated above. Therefore the assessee was justified in making the claim for bad debt as stated above. These contentions found favour with the CIT (A) who upheld the claim of the assessee and directed the ITO to allow bad debt in respect of the said two items. 3. Being aggrieved the Revenue has come up in appeal before us. The ld. departmental representative submitted that the assessee had written off the impugned debts prematurel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it was not correct to say that the debts in question became bad only when Maskati Mahajan issued the said letter. The question of bad debt therefore had to be determined from overall facts which led to a firm conclusion that the amounts in question had already become bad and as such rightly written off during the relevant previous year. Shri Patel supported his submission by relying on the decision in case of Jathabhai Hiriji and Jehabhai Ram Das vs. CIT 1978 CTR (Bom) 415 : (1979) 140 ITR 792 (Bom) Sarangpur Cotton Mfg. Co. vs. CIT (1982) 31 CTR (Guj) 247 : (1983) 143 ITR 166 (Guj) Lords Dairy Farm Ltd. vs. CIT (1950) 27 ITR 700 (Bom) and Vithaldas H. Dhanjibhai Bardanwalla (1981) 21 CTR (Guj) 190 : (1981) 130 ITR 95 (Guj). 4. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory requirement for writing off as irrecoverable the concerned debt in the books of the assessee. When a businessmen writes off an amount, there is prima facie evidence that the amount is irrecoverable. Undoubtedly the Department can rebut the prime 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." Keeping in mind the above principles it is noticed in the first place that the transaction in question is in respect of the business carried on by the assessee in the relevant accounting period. Secondly, the debt was taken into consideration in the earlier accounting year in as much as interest on sarafi advances were duly taken into consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d parties and Maskati Cloth Market Association had certified that the matter was pending in insolvency and the said parties were not capable of meeting their dues. It is true the certificate of Maskati Mahajan is dt. 7th Oct., 1982 it cannot be said that the financial position of the said parties had become weak only on that date. In fact the other evidence like criminal complaints and insolvency proceedings as stated earlier would support the claim of the assessee that the amount, due had become bad during the relevant previous years. In a case like this ordinarily the assessee is the best judge of the situation. As pointed out by their Lordships in Sarangpur Cotton's case in absence of any overwhelming evidence to rebut the claim of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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