Commissioner of Income Tax vs Hanuman Tubewells Co.

V.K. Singhal, J.—The Revenue has prayed u/s 256(2) of the Income Tax Act, 1961, that the following question of law arises out of the order of the Tribunal dated May 26, 1982, in respect of the assessment year 1975-76.

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing the bad debts amounting to Rs. 18,662 in the following names :

Rs.

8,964 R. K. Hotel

3,750 Mr. P. K. Gupta

1,346 Shri V. V. Sood

2,072 Shri K. L. Jain

1,035 Shri Narain Das Sindhi

2,495 Sainik Vishram Grah ?"

Normally, the question as to whether a particular debt was a bad debt or not is a question of fact, but in the present case, we find that the Income Tax Appellate Tribunal has proceeded on the basis that a few of the persons named above were holding powerful posts and, therefore, it was not possible for the assessee to take legal action against them as his business would have adversely been affected. We need not go into the merits of the case at this stage with regard to bad debts as it has to be decided objectively on the actual facts and not on hopes or fears or position of the creditors. A person having a high position or status in the society must pay any sum which is due and payable by him. It is also to be seen that while submitting the original returns, these debts were not considered as bad debts. The burden is on the assessee and whether it has been discharged by him has to be interpreted on the basis of law as it was in existence during the relevant assessment year.

Consequently, the application is allowed and the Income Tax Appellate Tribunal is directed to refer the above question.