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TMI Blog1967 (3) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions and whether in view of the true nature of the transactions, the debts could still be claimed as bad debts in working out the assessable income of the assessee ? (3) Whether there was any material on which the Tribunal could arrive at the finding that the debts had become bad prior to the year of account in question ?" The relevant facts out of which these questions arose were stated by the Tribunal in the statement of the case and are briefly as follows : The assessment year in question is 1942-43 and the relevant accounting year is Samvat year 1997-98, corresponding to October 1941. The appellant, R. B. Seth Champa Lal Ram Swarup (hereinafter referred to as the assessee), was a joint Hindu family headed by the karta, Moti Lal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or which was given to a new account styled " Amolakchand Mewaram pro-note account ". After these adjustments the current account was left with a debit balance of Rs. 25,626. Thereafter, there were only petty transactions and adjustments. At the commencement of the Samvat year 1994-95, there was a debit balance of Rs. 9,017. The assessee purchased Amolakchand Mewaram's card of the East India Cotton Association for a sum of Rs. 20,000 resulting in a credit balance in favour of M/s Amolakchand Mewaram of Rs. 11,253. Thereafter there was only one debit entry of Rs. 980 in Samvat year 1996-97, and in the relevant accounting year the balance was to the credit of Amolakchand Mewaram in the sum of Rs. 10,273. The two new accounts, Amolakchand Mew ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he answer to the question (3) is given against the assessee the appeal must fail. The High Court in rejecting the claim of the assessee observed : " 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 had 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material on which the Tribunal could arrive at the findings that the debts had become bad prior to the year of account in question. From a perusal of the findings of the Tribunal and the reasoning of the High Court it is quite clear that there was material for the Tribunal to have come to the conclusion that the two debts had become bad prior to the year of account. The material on which the Tribunal could well come to the conclusion that the debts had become bad earlier than the relevant accounting year is in brief as follows : " 1. Regarding debt of Rs. 3,25,000 (1) Shantilal was the younger brother of Motilal ; (2) On November 3, 1932, when the pro-note for Rs. 3,25,000 was executed the assessee had taken over major assets of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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