TMI Blog2002 (11) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee shows that the Government would not have given consent for recovery of the amount by way of winding up proceedings. One has to look at the problem from the point of view of a prudent businessman. In this case, there is ample material on record to show that there was no possibility of recovering the amounts from the said two mills. There was also no possibility of the Government consenting to the liquidation of the two mills. - For the above reasons, the assessee succeeds - - - - - Dated:- 21-11-2002 - Judge(s) : S. H. KAPADIA., J. P. DEVADHAR. JUDGMENT The judgment of the court was delivered by S.H. KAPADIA J.-The appellant is engaged in the business of dealing in cotton. The appellant filed its return of income for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recovery of the debts for the mills whose management was taken over by the Central Government. Accordingly, the Assessing Officer disallowed the claim for bad debt in respect of the above two mills as premature. Being aggrieved by the assessment order, the assessee carried the matter in appeal to the Commissioner of Income-tax (Appeals) who confirmed the order of the Assessing Officer. The matter was carried in appeal to the Tribunal. The Tribunal has confirmed the order of the Commissioner of Income-tax (Appeals). Consequently, the assessee has come before us under section 260A of the Income-tax Act. Arguments: Mr. Jasani, learned counsel appearing on behalf of the appellant-assessee, invited our attention to various provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sister concern of the assessee, on identical facts, the Tribunal had allowed the claim of bad debt aggregating to Rs. 12,13,235 for the same assessment year. He, therefore, submitted that, in this case also, the Tribunal should not have disallowed the claim for bad debt made by the assessee. Mr. R.V. Desai, learned senior counsel for the Department, on the other hand, contended that, in this case, no demand was ever raised by the assessee on the textile companies. That no suit was ever filed against the two textile mills whose management was taken over by the Central Government under the Ordinance. Mr. Desai submitted that under the Ordinance, various amounts were payable by the Central Government on month to month basis to the textile m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he material available it could be shown that there was a possibility of recovering the same. In our view, the ratio of the said judgment in Jethabhai's case [1979] 120 ITR 792 (Bom), squarely applies to the facts of the present case. A prudent businessman, has to act on the basis of the material before him and, if from that material available, he could show that there was no possibility of recovering the amount then the assessee was certainly entitled to write off the debt as bad and irrecoverable. In the present case, the accounts annexed at exhibits B and C show that right from the assessment year 1984-85, the assessee could not recover a single penny from the two mills. The record further shows that the assessee had called upon the Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court, the amount in question was Rs. 32.57 lakhs relating to the assessment year 1985-86. The Ordinance, as stated above, came into force from October, 1983. For the assessment year 1985-86, Rallis India Ltd. (assessee) had claimed write off under section 36(1)(vii). It was the case of the assessee that because of the take over of the aforestated mills by the Central Government, the amount of bad debt which was written off as irrecoverable in the accounts of the assessee was to be deducted in respect of the assessment year 1985-86. The Assessing Officer rejected the contention of the assessee but the Commissioner of Income-tax (Appeals) set aside that finding and came to the conclusion that the amount in question was a bad debt. The Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e accounts further show the amount receivable by the assessee from Podar Mills Ltd. (Bombay) and Podar Spinning Mills Ltd. (Jaipur). These accounts further show that not a penny had been paid by the said two units during the assessment years 1984-85, 1985-86, 1986-87 and 1987-88. Further, in our case, the assessee as a member of the association, wrote letters to the Central Government seeking redressal. The Central Government has rejected their application. Further, in our case, for the same assessment year, the Tribunal has allowed the claim of the sister concern of the assessee under section 36(1)(vii). Lastly, section 8(1)(c) of the Ordinance indicates that no proceedings for winding-up/appointment of the liquidator or the receiver could ..... X X X X Extracts X X X X X X X X Extracts X X X X
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