9911796707
TMI Blog1987 (7) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; Rs. (1) Bill No. 133 of 18/6/81 100 bears 2,22,224 (2) Bill No. 138 of 14/7/81 100 bears 2,30,027 (3) Bill No. 139 of 14/7/81 100 bears 2,23,825 -------- 6,76,076 -------- Cheques for Rs. 2,20,002 was realised. Two cheques of Rs. 2,30,000 each of 28-8-1981 on State Bank of Indore were dishonoured as per bank's Memorendum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry in Civil Court at Morvi on 10-7-84 which is pending. From the above facts it is clear that assessee has claimed loss/bad debt though hope of recovery is not lost and efforts for recovery are continuing. The period of transactions and decision taking is very short. The claim is prematured. Such a claim can be allowed only when it is proved that debtor is not in a position to make payment and not when debtor is hesitant to pay or delaying. In the circumstances bad debt of Rs. 4,65,121 is disallowed. Even otherwise, a claim of bad debt can be allowed only when amount is written off in the books of account by debit to vatav account and credit to bad debt account." Consequently, the ITO also charged interest under section 217 of the Act. 5. Being aggrieved by the order of the ITO, the assessee preferred an appeal before the Commissioner (Appeals) wherein, it once again claimed deduction of Rs. 4,65,121 either as bad debts or in the alternative as trading loss. It further claimed that no interest under section 217 of the Act, could have been charged in its case. In support of its submissions, the assessee had relied on a number of decisions of the Hon'ble Gujarat High Court mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btor is not at all traceable and many parties have filed suits against the debtor and local enquiry have revealed that the person is not traceable and even issue of the summons issued by the Court have not been served on the debtor. As the claim has been made in the assessment year 1982-83 i.e., S. Y. 2037 and till to-day i.e., S. Y. 2041 the party is not traceable and there is no recovery from the said debtor. In view of these facts and in view of the decision of the Gujarat High Court that the subsequent events have also to be taken into consideration the claim made for writing off of the debt is justified. In this case, after the lapse of five years of the event the assessee is not in a position to recover a single paisa and the criminal case has been filed but the Court is not able to proceed further because the debtor is not traceable. Thus, taking into account all these facts into consideration and also following the decisions of the cases on which the reliance has been made, I find that the ITO is not justified in not allowing the claim of the assessee. The ITO is, therefore, directed to allow the claim of bad debt to the tune of Rs. 4,65,121. 5. The next objection is with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agar addressed to the ITO, Morvi, assessing the assessee giving certain particulars regarding transaction with M/s. Radhakishan & Co. by the firm of M/s. Karmali & Co., Dudhrej, assessed by the ITO Surendranagar. Pages 2 to 27 of his paper book contain Advocate's notice of M/s. Kunverji Mothibhai & Co. of Morvi to M/s. Radhakishan & Co., Ahmedabad, Indore and Bombay and the reply dated 30-11-1981 to the Advocate by M/s. Radhakishan & Co. According to this material, the learned representative for the department strongly argued that M/s. Radhakishan & Co. was not only traceable but could have been approached by the assessee for the recovery of the amount involved. He further submitted that since the assessee itself had filed a suit in Morvi Civil Court against M/s. Radhkishan & Co., Ahmedabad some time in 1984, it cannot be presumed that the assessee had lost last ray of hope of any recovery from the said party during the previous year relevant to the assessment year under appeal. According to him, in deciding the point at issue, we have to consider the age of the debt which in the instant case, was hardly less than a year. Further, we have to consider whether while claiming bad debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad filed suit in 1984 would not disentitle the assessee to claim deduction of Rs. 4,65,121 in the year under appeal. If, by any chance, the assessee would be.lucky to recover certain amount from M/s. Radhakishan & Co. in future, the same would be offered for taxation as per the provisions of section 41(1) of the Act. In other words, he wanted to impress upon the Tribunal that there would not be any loss to the revenue if the assessee's claim for deduction of Rs. 4,65,121 as allowed by the Commissioner (Appeals) is upheld by the Tribunal. He, therefore, urged that the action of the Commissioner (Appeals) should be upheld, even if the amount of Rs. 4,65,121 is treated as business/trading loss. Since the charging of interest u/s 217 of the Act is consequential in nature, the learned counsel for the assessee relied on the order of the Commissioner (Appelas) on this point. In support of his various submissions, he relied on the decision in the cases of Hindustan Trading Corpn. v. CIT [1986] 160 ITR 15 (Guj.), CIT v. Abdul Razak & Co. [1982] 136 ITR 825 (Guj.), CIT v. Srivinayaga Pictures [1986] 161 ITR 65 (Mad.), Ishwarchand Gupta 27 ITJ 302, Arvind Kanchanlal 18 BCAJ 90 and Ramnarayan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30,000 each dated 28-8-1981 issued by M/s. Radhakishan & Co. were dishonoured. In other words, out of Rs. 6,76,076, the assessee could recover only Rs. 2,20,002 and the balance amount could not be recovered from the said party. Since this loss had sprung out of business dealing with M/s. Radhakishan & Co., we fail to appreciate why the assessee cannot get deduction of the said sum u/s. 28 (i) of the Act, even if for the sake of argument, it can be held that the same could not be allowed u/s. 36(1)(vii) read with section 36(2) of the Act. The aforesaid observations of the Hon'ble Supreme Court clearly help the assessee's case in this regard. It is an undisputed fact that even till to-day, the assessee has not recovered a single pie out of Rs. 4,65,121. We entirely agree with the submissions made on behalf of the assessee that suppose by chance it could recover certain amounts from M/s. Radhakishan in future, the same could be brought to tax u/s 41(1) of the Act. In other words, the revenue would not suffer even if deduction of Rs. 4,65,121 is allowed u/s 28(i) of the Act. In our view, the various reported decisions relied on behalf of the assessee clearly support the stand taken on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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