TaxTMI 
TaxTMI 
1933 (10) TMI 15
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.... state of affairs as properly shown by his books. The period under assessment is the Sambat year 1985-86 and the petitioner claimed as a deduction from his income the sum of Rs. 30,580 as a debt which he said had become bad in that year. A considerable time ago the assessee had advanced a sum of money to one Janki Das and by the Sambat year 1985-86 this had accumulated to the said sum of Rs. 30,580. From the year 1979-80 until the year 1982-83 there were acknowledgements by the debtor Janki Das in the books of the assessee and in each of those four successive years the total amount of the debt up to that date was stated together with interest for that year. The interest was compound interest and therefore there was a....
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....ome-tax Officer and by the Assistant Commissioner. He said moreover in paragraph 8 of his order in the revision case that the proper way to deal with the question of whether the debt had become bad was to see whether it was incapable of realization, and when it became incapable of realziation, and that he came to the conclusion, in agreement with the Income-tax Officer and the Assistant Commissioner that the debt had become barred by limitation in the year 1982-83 and not 1985-86. The assessee then came to this Court with a petition praying for an order on the Commissioner to state a case. In the order of this Court the Commissioner was asked to state a case upon three points mentioned by the petitioner in his petition. The points wer....
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....came barred by limitation. As pointed out by their Lordships a debt on the one hand may be barred by limitation, but owing to the honesty of the debtor and possibly his means, hope need not have been abandoned of recovering the debt. On the other hand notwithstanding the debt may not have been barred by limitation, the circumstances of the debtor may have made the debt quite irrecoverable. He therefore proceeded upon what he has described as a further inquiry by himself and the results of that inquiry are set forth in the last paragraph of his statement of the case. Now it is clear that it has been the practice of the Incometax officer, and one cannot say that it is an unreasonable practice, to regard a debt as bad prima facie when....
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.... proper finding at all. Moreover, the assessee has been able to point out, and indeed it is admitted by the Department, that for the years during which the acknowledgment by the debtor was given and interest accordingly charged in the books of the assessee, the Department actually taxed the assessee in respect of such interest and they therefore themselves treated the debt as being still alive and the income as having been notionally received. The present decision with which we are dealing that the debt became irrecoverable and had ceased to exist as notional liability before the period 1985-86 cannot be justified on any ground of consistency. The procedure adopted ....