RAM NATH MEHROTRA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee, a registered firm, carried on the business of purchase and sale of cotton. It was also supplying cotton to M/s. Seksaria Cotton Mills Ltd., Bombay. On 7th April, 1967, it advanced a sum of rupees three lakhs to M/s. Seksaria Cotton Mills Ltd. at 12% per annum interest. For the assessment year 1969-70 (the relevant accounting period ending on 30th September, 1968), the assessee claimed a deduction of Rs. 1,50,000 on the ground that the debt given to M/s. Seksaria Cotton Mills had become irrecoverable. For the next assessment year 1970-71, it claimed a sum of Rs. 1,50,000 again on the same ground. THEse deductions were disallowed by the ITO. On appeal, the AAC found :

(2.) ON the same reasoning the deduction of Rs. 1,50,000 for the subsequent assessment year was also allowed.

(3.) MR. Raja Ram Agarwal, appearing for the assessee, emphasised that the Tribunal has no jurisdiction to record a finding of fact after completely ignoring the facts on which the AAC has given his findings. It is no doubt true that the Tribunal has not discussed the facts mentioned by the AAC, namely, the state of affairs of the company as evidenced by the balance-sheet of the company as on 12th March, 1969, as also the fact that nothing had been recovered even from the liquidators 9f the company. In the letter dated 22nd December, 1971, sent by the assessee to the ITO, it has been mentioned that the scheme was ultimately not adopted, as there was little chance of making any recovery under it. This letter was annexed to the statement of the case, but the Tribunal did not advert to it. If the scheme had not been adopted, as is apparent from the material on the record, it could not be a material relevant for considering that the debt was recoverable. The scheme never having been approved and adopted was a valueless document. But the Tribunal, without giving a finding that the scheme was in operation, has relied upon its contents in order to come to the conclusion that there was a ray of hope of recovery.