Bad debt deduction depends on proof of irrecoverability and timing of write-off; assessee failed to establish both.

In a bad debt deduction claim, the assessee bore the burden of proving both that the debt had become irrecoverable and that it became bad in the relevant accounting year. On the material before the income-tax authorities, there was no reliable evidence that the assessee knew before the close of the year that the balance was irrecoverable, and the timing of the write-off entry was not established; the entry also appeared suspicious. The court treated the year in which a debt becomes bad as ordinarily a question of fact and held that the assessee had failed to discharge that burden. The write-off was therefore premature and no referable question of law arose.

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Issues: Whether the assessee had proved that the alleged bad debt was written off and had become bad in the relevant accounting year so as to justify a reference under section 66(3).

Analysis: The onus of proving both that a debt had become bad and the year in which it became bad lay on the assessee. On the material before the income-tax authorities, there was no reliable evidence that the assessee knew before the close of the accounting year that the balance of the debt had become irrecoverable. The record also did not establish when the book entry of write-off was actually made, and the entry appeared suspicious. The question whether a debt becomes bad in a particular year was treated as one of fact, and the authorities were entitled to hold that the assessee had failed to discharge the burden.

Conclusion: The issue was decided against the assessee; the write-off was held to be premature and no referable question of law arose.

Ratio Decidendi: In a claim for deduction of a bad debt, the assessee must prove that the debt became bad in the relevant year, and the determination of that year is ordinarily a question of fact unless a clear legal issue arises.

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