Law:

Section:

Section 28(i) of the Income-tax Act, 1961 - Business loss/deduction - Allowable as - Assessment year 1986-87 - Assessee entered into a contract for importing dates with certain concern of Dubai - A letter of credit was opened with bank for said purpose - Said concern presented false shipping documents and collected money without loading and dispatching corresponding quantity of dates - Assessee traced said concern through an intermediary who forwarded two post-dated cheques to assessee - However, said cheques were not honoured and assessee could not recover any money from said concern - Assessee, therefore, claimed a sum of Rs. 3,45,000 as a business loss - Assessing Officer disallowed claim of assessee - On appeal, Tribunal had found evidence that assessee had made attempt through Consulate General of India to recover money but failed, and that two post-dated cheques received from intermediary were also not honoured - In view of said finding, Tribunal held that assessee had prima facie established incurring of loss and, therefore, it allowed claim of assessee - Whether Tribunal was justified in allowing claim of assessee - Held, yes FACTS The assessee entered into a contract for importing dates from certain concern of Dubai. For the said purpose, a letter of credit with the bank was opened. The said concern presented the false documents and collected money without loading and dispatching the corresponding quantity of the dates. The assessee, therefore, initiated efforts to recover money from the said concern. Thereafter, the said firm was traced through an intermediary who forwarded two post-dated cheques to the assessee, but the said cheques were not honoured. Therefore, the assessee claimed a sum of Rs. 3,45,000 as a business loss. The Assessing Officer, disallowed the claim of the assessee on the ground that the bank official through whom the transactions were effected should have been careful to check before releasing the relevant amount in favour of the said concern. On appeal, the Deputy Commissioner (Appeals) allowed the appeal, holding that the loss had been incurred in the course of the business. On further appeal, the Tribunal upheld the order of the…

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