Law:

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Section 256, read with section 36(1)(vii), of the Income-tax Act, 1961 - Reference -Question of fact - Whether finding as to whether a debt is proved to be a bad debt or not is a finding of fact - Held, yes Facts In the relevant assessment year, the assessee claimed a deduction of a certain sum which was due from a firm as a bad debt. The ITO, the first appellate authority, and the Tribunal held that the assessee had failed to prove the said amount to be a bad debt. The assessee sought a reference under section 256(1) on the question whether the Tribunal was right in holding that the impugned debt had not become bad during the previous year under assessment. The Tribunal rejected the application. On application under section 256(2): Held The finding as to whether a debt is proved to be a bad debt or not is a finding of fact. In the instant case, as no legal error could be pointed out in arriving at that finding, the question as framed by the assessee did not arise from the order of the Tribunal. Therefore, the Tribunal was justified. Bhagirath Dass and Ramesh Kumar for the Applicant. Ashok Bhan and Ajay Mittal for the Respondent. JUDGMENT Goyal, J. -The assessee, a dealer in foodgrains, in the assessment year 1972-73, claimed a deduction of a sum of Rs. 87,878 on account of bad debt which was due from Dil Chand Shah Bedi Lal, Jahanabad. His claim was negatived by all the authorities up to the Tribunal holding that the assessee has failed to prove the said amount to be a bad debt. The assessee then moved an application under section 256(1) of the Income-tax Act, 1961 ('the Act') for referring the…

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