Law: Income Tax Act, 1961

Section: 36(1)(vii),(2)

(a) Income-tax---Bad debt---Year in which debt passed through accounts of assessee need not be immediately preceding accounting year---Debts taken over by third person--Not a factor which would disentitle assessee from claiming it as a bad debt---Indian Income Tax Act, 1961, S.36(1)(vii), (2). In construing section 36(1)(vii) of the Income Tax Act, 1961, there is no justification for holding that the previous year should be proximate to the earlier previous year when the debt had passed through the revenue accounts. When the statute provides that an earlier previous year will do, any earlier previous year will suffice, unless of course, there are other disentitling factors not connected with the remoteness of the earlier year from the previous year in question. (b) Income-tax--- ----Revision---Appeal to Appellate Tribunal---Appeal from order passed by CIT in revision---Tribunal cannot justify order on grounds other than those mentioned by CIT in his order---Indian Income Tax Act, 1961, Ss.254 & 263. The Income-tax Appellate Tribunal cannot seek to justify an order passed under section 263 on grounds other than those mentioned by the Commissioner in the revising order itself. Under section 263 of the Act it is only the Commissioner who has been authorised to proceed in the matter, and therefore, it is his satisfaction according to which he may pass necessary orders thereunder in accordance with law. If the grounds, which were available to him at the time of the passing of the order, do not find a mention in his order, appealed against, then it will be deemed that he rejected those grounds for the purpose of any action under section 263(1) of the Act. In this situation, the Tribunal, while hearing an appeal filed by the assessee cannot substitute the grounds, which the Commissioner of Income-tax himself did not think proper to form the basis of his order. The assessee claimed Rs.46 lakhs as a bad debt in the assessment year 1984-85. Excepting for a very small portion of this sum, which was only of the order of Rs.50,000 and about which there was not much dispute, the rest was a long-standing and old debt. The Income-tax Officer accepted the assessees claim.…

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