COMMISSIONER OF INCOME-TAX Vs. VALLABHDAS MURLIDHAR

JUDGEMENT

(1.) The short point in this reference which we have to decide is whether the assessee was entitled to deduct an alleged bad debt of Rs. 67,612 in his assessment to income-tax and euper-tax for the year 1927-28, for the purpose of which assessment he would be assessed under Section 3, Income-tax Act on his income for "the previous year," viz., the Hindu year beginning with 18 October 1925. It is common ground that the debt in question was due from one Abhechand Premchand, and that it arose at the end of Sam vat year 1969 (1912-13) on account of transactions in cotton, gold, silver and hundis. It is further common ground that Abhechand Premchand became insolvent in 1920 and that he was discharged in 1924. Further, nothing has been recovered from the insolvent, and in the proceedings before the Assistant Commissioner, no answer was given by the assessee to the question why this amount of Rs. 67,612 was not written off in or about the year when it was known to have become irrecoverable. The only explanation given by the assessee appears in his revision petition to the Commissioner, Ex. E, of 19 January 1928, where he submits: that this amount was not written off as the insolvency proceedings were going on, say, from 1920 to 1923 or 1924.

(2.) Now, it may be taken that the accounts of the assessee are kept on what is known as the mercantile system of accounting, and not on a cash basis. It may also be taken for the purposes of this present reference that a regular method of accounting was employed by the assessee within the meaning of Section 13, Income-tax Act, dsspite certain observations to the contrary as to the earlier years which were made by the Incometax Officer in the original proceedings before him, Ex. A.

(3.) The main contentions put before us on behalf of the assessee are that it is for him to determine when a debt becomes a bad debt; that he can choose any year he likes for that purpose; and that although in. law insolvency may bar the remedy for a debt, yet, it often happens-particularly amongst Hindus-that debts are paid notwithstanding the law of insolvency and notwithstanding the law of limitation. In connexion with the last point, two authorities in Bam Kishan Rai v. Ghhedi Rai A.I.R 1922 All. 402 and Gajadhar V/s. Jagannath A.I.R. 1924 All. 551 were referred to. Speaking for myself, I think that those authorities are remote from the question which we have to decide, namely, whether in assessing the income, profits or gains of the assessee for the year in question under Secs.3, 4 and 10, it was fair and reasonable to deduct this particular bad debt for the year in question. The Assistant Commissioner found that it was not proper to do so, and in revision this finding has been confirmed by the Commissioner. Certain criticisms were passed by counsel for the assessee to the effect that there has not been a sufficient finding of fact by the Commissioner. But in the result this objection was, I think, withdrawn, and it was expressly stated that it was not desired to refer this case back. In our opinion, the findings in the case are sufficient to show that the Commissioner agreed with the findings by the Assistant Commissioner, and refused to exercise his powers of revision under Section 33.