TaxTMI 
TaxTMI 
1970 (3) TMI 19
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....a, on Chet Bedi, 2010. In an award, as a result of arbitration proceedings, the liability of the Surat firm was liquidated on payment of Rs. 40,000. In the assessment year 1954-55, relating to the financial year 1953-54, the assessee claimed a sum of Rs. 1,10,705 as bad debt, in view of the award, whereby on payment of Rs. 40,000, the debt liability of the Surat firm amounting to Rs. 1,50,705 had come to an end. The Income-tax Officer rejected this claim on three grounds : 1. This is a debt of the dissolved firm of M/s. Hukam Chand Raj Kumar and is, therefore, a capital loss. The assessee was in the know of this loss when he took over the firm. 2. The assessee has not done any business in the name of M/s. Hukam Chand Raj Kumar and is not a trade debt at all. It cannot, therefore, be considered here. 3. The assessee has surrendered the amount himself for considerations best known to him. It is a case of voluntary surrender and not of bad debt. Against the order of the income-tax Officer an appeal was taken to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner confirmed the order of the Income-tax Officer in the following terms : " I find that t....
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....ot claim it as a bad debt. It appears that the respective contentions ought to be examined more closely by the Appellate Assistant Commissioner. This the Appellate Assistant Commissioner will now do. The Appellate Assistant Commissioner will examine the books of the firm, M/s. Hukam Chand Raj Kumar, and ascertain whether the debt due from the debtor pertained to the money-lending business. The Appellate Assistant Commissioner will permit the assessee to lead whatever evidence he likes in support of his contentions. The Appellate Assistant Commissioner after recording the evidence in this case should submit the remand report within three months from the date of receipt of this order. " The Appellate Assistant Commissioner in his report observed : " By the time the appellant took over the assets and liabilities of the money-lending business of the firm, it had already been closed and that the appellant thereafter did not carry on any money-lending business. He merely confined his activities to the realization of sundry debtors and payments to sundry creditors. Any loss resulting out of it purely was a capital gain or loss. It may be mentioned that the appellant himself was neve....
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....any material on the record to hold that the assessee carried on moneylending business during the year of account ? and 2. Whether, on the facts and circumstances of the case, the amount of Rs. 1,10,705 was not rightly allowed as bad debt in computing the income of the assessee ? " So far as the statement of the case is concerned, reference need only be made to paragraph 6 which is reproduced below : " The Tribunal decided the case finally on 2nd November, 1960. The Tribunal came to the conclusion that the assessee, viz., Harjasmal Mehra, the individual, was carrying on money-lending business because : 1. M/s. Hukam Chand Raj Kumar was carrying on money-lending business. 2. Interest from money-lending business was earned by the assessee in the assessment years 1955-56, 1956-57 and 1957-58 as under Assessment year Interest Rs. 1955-56 6,354 1956-57 5,0....
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....f the assessee. In this situation it appears to us that the case strictly falls within the decision of the Supreme Court in Esthuri Aswathiah v. Commissioner of Income-tax. In this case the explanation of the assessee in relation to an opening cash balance of Rs. 1,85,000 on July 1, 1949, was rejected by the Income-tax Officer. The Income-tax Officer brought to tax the sum of Rs. 1,35,000 as income from undisclosed sources for the assessment year 1950-51. The Income-tax Officer's order was confirmed by the Appellate Assistant Commissioner. On further appeal, the Appellate Tribunal, after holding that the assessee was unable to explain the source of the amount satisfactorily, came to the conclusion that it was not unlikely that the assessee had some cash in hand from profits in trade from jaggery and from assets received on partition of the joint family of which the assessee was a member, thereby estimating the income from undisclosed sources at Rs. 50,000 relying merely upon the offer made by the counsel for the assessee. On a reference, the High Court held that the judgment of the Tribunal was based on no reasoning and was on that account speculative. On appeal to the Supreme Cour....