TMI Blog1989 (2) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... ngth. We proceed to dispose of the appeal as under: 5. The first dispute in this appeal relates to the addition on account of understatement of sale price in the bill. On going through the sales, the ITO found that the assessee had effected 42.66 candy cotton for Rs. 1,77,042 to Vijay Trading Co. on 21st July, 1981 when the market rate was Rs. 4,800 per candy. The purchase rate was Rs. 4,850 per candy on that date. When enquired of the reasons as to why the goods were sold at a lower rate vis-a-vis market rate, the representative of the assessee stated that the goods might have been promised for sale on an earlier date. No soda book, nor any other evidence was produced in support of such statement. The ITO concluded that the assessee had deliberately under stated the sale price in the bill. The difference in the market price was added back to the total income as understatement of sales. 6. On appeal, the Commissioner(A) noticed that there was no written agreement with M/s Vijay Trading Co. and in the absence of evidence to show that the assessee was under an obligation to supply cotton at a stipulated rate, the explanation offered by the assessee was rejected and the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a statement from the representative of the assessee that goods might have been promised for sale on an earlier date. Although the assessee did not produce the type of evidence required by the ITO but none-the-less before he actually passed the assessment order on 29th March, 1985, the assessee is said to have produced a letter dt. 30th June, 1981 before the ITO from the party reminding the assessee about the supply of goods. Therefore, it is not a case of complete failure of the assessee to establish the case as made out by the learned Departmental Representative. The statement of transactions furnished by the learned counsel for the assessee appearing at page 1 of the paper compilation shows that in respect of first four transactions made on 9th Dec., 1980 and 12th Dec., 1980 there were profits earned by the assessee. In respect of transactions effected on 21st July, 1981, both in respect of M/s Vijay Trading Co. (two transactions) and M/s Sailesh Trading Co. (one transaction), there were losses sustained by the assessee. Therefore, feature of sustaining loss by selling at price less than purchase price is not confined to the sale effected to M/s. Vijay Trading Co. only. On the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to pay Rs. 15,000 towards full and final payment of the outstanding dues was noticed by the Commissioner (A) none-the-less, he doubted the bona fides of the agreement. From the circumstances that the said party was in a bad financial condition and some of the debtors had already filed suits in the Courts for recovery of the dues as early as in 1974 and the debtor firm had been dissolved and failed to pay dues, the Commissioner(A) doubted the bona fides of the agreement. According to him, there was no evidence whatsoever to show that the debtor was in a position to return the loan earlier and, in fact, the debt became bad in the earlier year. Consequently, he confirmed the disallowance of bad debt made by the ITO. 12. At the time of hearing, the learned counsel for the assessee stressed that what was under consideration before the authorities was only a claim of business loss sustained and inasmuch as the claim was fully and finally settled as per agreement dt. 23rd Oct., 1981 the assessee has waived the right to claim the balance as per agreement. The loss was sustained in the previous year relevant for the asst. yr. 1982-83 and therefore the claim should have been allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and sale of cotton besides ginning of cotton. Consequently, it is not necessary to go into the question of when the debt became bad, when it should be claimed and when it should be allowed. All these exercises are in the nature of academic only. When once we come to the conclusion that there was a trading loss, it has to be dealt with and decided on that basis only. Therefore, we are not going into various case laws cited at the time of hearing. 15. The trading dues were carried forward to later years upto S.Y. 2036. In all these years, the copies of account of the party revealed acknowledgement and agreement from the said party that the said sum was owed by it to the assessee. It is stated that the party had confirmed and agreed that the sum of Rs. 1,75,000 was due by it to the assessee as per details mentioned in the copies of the account. Further, there was a separate agreement dt. 23rd Oct., 1981 between the assessee and the said party wherein, it has been stated that there were business dealings by the said party with the assessee and it approached the assessee with the request to accept a sum of Rs. 15,000 in full and final settlement of the same due and in total extingu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the confirmation and agreement the sum due to the assessee appended by the party below account copies for these years and the final settlement effected would clearly show that there was hope of recovery till it was finally settled on 23rd Oct., 1981. The observations of the Madras High Court which are relevant for the purpose of deciding bad debt, none-the-less are relevant for coming to the conclusion that there was no justification for insisting on infallible proof and coming to the conclusion that the debt had become bad earlier to the previous year relevant for the asst. yr. 1982-83. In this connection, we have to point out that the finding given by the ITO that the debt became bad in the year 1974 itself relevant for the asst. yr. 1975-76 is factually wrong because the account copy furnished by the assessee at page 14 of the paper book shows that there were transactions with the said party as late as 17th Sept., 1974, and only thereafter, the balance remained unpaid. Therefore, the amount due could not have become bad in the year 1974 as found by the ITO and Commissioner(A). 16. If the case of the assessee is treated as that of bad debt, even then it is only the ITO who h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er(A) confirmed the action of the ITO for want of evidence regarding details of dates of purchase of the machineries. 18. At the time of hearing, the learned counsel for the assessee submitted the details of purchase of certain machineries and stated that the ITO could have as well ascertained from the IT records the period for which the machineries were held and come to the conclusion whether the resultant gains were long term capital gains or not. However, he submitted that except one item of sale of control penal made on 1st Sept., 1978 which was less than three years old, the rest of the machineries were held for more than three years. However, he had no objection if the matter is restored to the ITO for fresh adjudication. The learned Departmental Representative has also no objection for reappraisal of the matter regarding capital gains. 19. In view of the situation in which the ITO could not decide the issue properly for want of particulars regarding dates of acquisition of machineries, we set aside the order of the Commissioner(A) on this point and restore the matter to the file of the ITO for fresh adjudication, after considering the evidence adduced by the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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