1939 (5) TMI 20 - HC - Income Tax

Court rules against taxpayer's bad debt deduction claim, emphasizing factual nature of issue. No legal question found.

Indarchand Kagriwal Versus Commissioner of Income Tax, Bihar & Orissa.

The High Court held that the Commissioner of Income Tax's order rejecting the deduction claim for bad debts was not prejudicial to the assessee. The Court ... - Issues:- Whether the Commissioner of Income Tax's order was prejudicial to the assessee within the meaning of the proviso to Section 33 or sub-section (2) of Section 66 of the Indian Income Tax Act.Analysis:The case involved a dispute regarding the deduction of bad debts claimed by the assessee in their income tax assessment. The Income Tax Officer initially disallowed the deduction, which was upheld by the Assistant Commissioner of Income Tax. Subsequently, the assessee filed an application under Section 33 and Section 66(2) of the Act, seeking a reference to the High Court on certain legal questions. The Commissioner of Income Tax, in his order, referred to the case law and concluded that the determination of bad debts is primarily a question of fact, not a legal issue. The Commissioner rejected the deduction claim for bad debts without hearing the assessee again, which led to the contention that the assessee was prejudiced due to lack of opportunity to present their case.The learned Counsel for the assessee argued that the Commissioner's failure to hear the assessee again while passing the order was prejudicial. However, the Judge disagreed, stating that even if there was an error in procedure, the assessee needed to demonstrate a legal point arising from the order under Section 33. It was clarified that the order of September 20, 1937, could not be considered an order under Section 66(2) as the original order under this subclause had already been passed. The Judge emphasized that the order under Section 66(2) provided no grounds for a legal question to be raised before the High Court, as the findings of fact by the Assistant Commissioner were clear and unaltered to the prejudice of the assessee.The Judge concluded that there was no legal question arising from the order that could be referred to the High Court. The answer to the formulated question was in the negative, and the assessee was directed to pay costs to the Commissioner of Income Tax. The Chief Justice concurred with this decision, and the reference was answered in the negative, dismissing the assessee's claim for deduction of bad debts.