CHAMPALAL RAMSARUP R B Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a case stated under section 66(2) of the Income-tax (hereinafter referred to as the Act) by the Income-tax Appellate Tribunal, Allahabad Bench (hereinafter referred to as the Tribunal).

(2.) THE assessee was a Hindu undivided family whose karta was Motilal. THE assessee had been carrying on business as shroffs, bankers, merchants and commission agents. THE relevant year of assessment is the assessment year 1942-43, the accounting year ending Kartik, Maru Samvat year 1998 corresponding to October, 1941. THE first alleged bad debt was an amount of Rs. 3,25,000 due from Shantilal, a younger brother of Motilal, the karta of the assessee family, who had been adopted by a cousin. THE debtor, Shantilal, was the proprietor of Messrs. Amolakchand Mewaram. THE second bad debt of Rs. 16,005 was due from Mansukhlal Panthulal. THE asssessee claimed that these were all debts which related to his money-lending business and the debts had become bad and irrecoverable in the relevant year of account.

(3.) MR. Pathak, learned counsel for the assessee, has contended that there is no material for the Tribunals finding that the advances were not made by the assessee in the course of its money-lending business. No security whatsoever was taken by the assessee for the advances made from time to time, and considering the close relationship which once existed between the debtor and the creditor and looking at the nature of the accounts, it cannot be said that the department had no material for coming to the conclusion that the advances were not made in the course of its money-lending business. In any event, it does not make any substantial difference whether the advances were in the course of money-lending business or in the course of trading between the parties, as the main question which really arises in this case is as to whether even if the debts were trading or money-lending transactions did they become bad in the relevant year of account and not on some date anterior to the year of account. In order to succeed in claiming that a debt has become bad it is incumbent upon the assessee to establish that the debt was good immediately at the commencement of the relevant year of account and that it had become bad during the year of account. In the present case the pronote for Rs. 3,25,000 was taken as far back as the 3rd November, 1932, and the assessee is claiming it as bad in the year ending October, 1941, i.e., almost after a decade. During this decade the assessee did not charge any interest, nor did it take any legal steps to recover the amounts due. The evidence of the assessee and of the debtor, apart from its being only self-serving statements, is extremely vague and it does not at all show that there could possibly have been any ray of hope still lingering in the assessees mind that any part of this debt of Rs. 3,25,000 could be recovered. No doubt the debtor has given a long list of suits in which he was expecting that decrees would be passed in his favour but most of those expectations were shattered long èbefore the relevant year of account. At best, he could only have had hope of realising something from a decree against Baij Nath Gauri Datt but even that suit was decided by the civil judge of Mathura on the 29th March, 1940, against him. Even if this could be said to have been a flicker of hope it was completely snuffed in the assessment year 1941-42, and no possible hope could have survived justifying the assessee in claiming the debt as bad in the relevant assessment year 1942-43. On a consideration of the evidence on the record it cannot be said that there was no material for the Tribunal to have come to the conclusion that the two debts had become bad prior to the year of account.