BANSIDAR PODDA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This is the Statement of a case under Section 66, Sub-section (3), Income Tax Act, by the Commissioner regarding the assessment upon the assessee. The facts which have given rise to the assessment and the history of the procedure may be stated thus. The assessee who appears to carry on a considerable business, keeps his account in the mercantile system and therefore his income in the year and the allowable deductions from that income are of a notional character and depend upon the 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 continuance of the transactions during those years, the amount of interest continually increasing and inasmuch as the interest, was of a compound character, the amount of the principal debt continued to increase. After the year 1982-83 no further interest was charged but a special demand charge was entered up in the books. Now/inasmuch as the last acknowledgement by the debtor was in 1982-83, the period of limitation for the recovery of the debt expired in 1985-86. The Income-tax Officer, before whom the matter first came, in his report to the Assistant Commissioner, stated this fact and made the following statement:

(2.) The matter then came before the Assistant Commissioner and he took the same point of view as that adopted by the -Income-tax Officer. There was then a petition under Sections 33 and 66, Sub-section (2), to the Commissioner and the Commissioner refused to state a case before the High Court, but dealt with the matter upon the same basis as that adopted by the Income-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 realization, 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 were:

(3.) After the receipt of that order the Commissioner proceeded to. the statement of the case and he stated-that he was of opinion that the date by which the debt became irrecoverable by means of, limitation was three years from the date of the last acknowledgement, that is to say, in the year 1985-86; but he correctly appreciated the law which had since the date of the order of this Court, become manifest in the decision of the Privy-Council in ,the case of Commissioner of Income-tax,. Central Provinces v. Chitnavis. He saw that the question for determination as a matter of fact would have been on what-date the debt became bad and not the date on which it became 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.