Ramaswami, J.

(1) In this case, the income-tax Appellate Tribunal has submitted the following, questions of law for being determined by the High. Court: (1) Whether there was any material to justify the assessment of Rs. 89,000 being the cash reintroduced into business and (2) Whether the bad debt of Rs. 14,518 could in law be disallowed

(2) The questions in this case relate to the assessment made upon a Hindu undivided family for the year 1946-

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7. The previous year for the assessment year 1946-47 was the sainvat year 2001-2002 ending with Phagun Sudi. The assessee derives income from interest on securities, house property, money-lending, trade in gold and silver, dividends, and other sources. For the assessment year in. question, the essessee filed a return showing an income of Rs. 20,176. Upon an examination of the accounts of the assessee, the Income-tax Officer discovered that there were cash credits in the personal account of Rai Bahadur Balmiki Frasad Singh, father of the assessee, Sri Deoniti Frasad Singh, who is the karta of the undivided family. The Income-tax Officer required the Essessee to furuish explanation as to the sources of these cash credits. The explanation given was that during the Samvat year 1997-1999 the assessee had withdrawn, cash from the business on several occasions and that he had also introduced cash business. In proof of this explanation the assessee furnished the personal account of Balmiki Frasad Singh for the Sarnvat years 1997 to 2000:

YearCash withdrawnCash Credits

1997Rs. 1,03,500Rs. 32,350

1998Rs. 90,000Nil

1999NilRs. 45,000

2000NilRs. 30,000

The Income-tax Officer refused to accept the ex planation of the assessee on the ground that there was material to suggest that the amounts with drawn by the assessee were converted into gold. and later on sold in the market when the price of gold had risen due to war conditions. The In come-tax Officer therefore held that the amount of Rs. 86,000 should be added to the income of the assessee and should be assessed to income-tax. There was another point taken by the assessee before the Income-tax Officer. This related to the amount of Rs. 14,518 which according to the assessee was a Bad debt and an allowance had to be made on that account under Section 10(2) (xi), income-tax Act. It appears that the assessee had lent the amount on handnotes to Harihar Prassd Singh. As the money was not paid the assessee instituted a money suit in the court of the first Subordinate Judge of Monghyr and obtained a decree. The assessee filed execution petitions on 6-9-1935, 15-11-1935, 13-2-1939, 16-6-1942 and 7-9-194

4. All these execution cases were dismissed by the executing court for non-prosecution. In this connection, the Income-tax Officer observed that the assessee had lent other sums of money on mortgage to Harihar Frasad Singh and the mortgage bonds were transferred by the assessee to one Tuka Singh of Barhiya seven or eight years back. Tuka Singh instituted a suit against Harihar Prcsad Singh for realising the amount due on the mortgage bonds and having obtained a mortgage decree caused all the mortgaged properties of the debtor to be sold in execution. The sale took place about four years previous to the order of assessment. The Income-tax Officer thought that the debt due on the hand- note became irrecoverable on account of the debtors properties having been sold in execution of the mortgage decree four years before the year of assessment. For these reasons, the Income-tax Officer refused to allow the deduction of Rs. 14,518 which the assessee claimed to be a bad and irrecoverable loan. An appeal was taken by the assessee to the Appellate Assistant Commissioner against the order of the Income-tax Officer. But the appellate Assistant Commissioner affirmed the findings of the Income-tax Officer and dismissed the appeal with respect to the two items with which we are concerned in this case. The matter was taken up in further appeal to the Income-tax Appellate Tribunal. On the question of addition of cash credit to extent of Rs, 86,000, the Appellate Tribunal accepted the argument advanced on behalf of the assessee that the asseasee was not carrying on any trade in gold and silver. But the Tribunal was of opinion that the assessees account as regards the home chest of Balmiki Prasad Singh even if it be accepted as correct, did not show that a sum of Rs. 86000 could have been introduced into the business. This was the main ground given by the Tribunal for not accepting the explanation of the assessee regarding the source of the cash credit of Rs. 83,000. The relevant passage from the order of the Appellate Tribunal is as follows:

"The two sums of Rs.40,000 and Rs.46,000 referred to items (0) and (c) of the first contention above are found credited on 3-4-45 and 24-5-45 to the capital account of the proprietor. A statement has been filed by counsel setting out the transactions in the capital account from 24-3-40 to 17-3-46 according to which it is found that Rs. 1,90,000 has been withdrawn from the business as against the total introduction (including this amount of Rs. 86,000) of Rs. 1,95,2

50. According to counsel, as part of the business routine, the business Manager is entrusted only with cash normally required by him for purposes of the day-to-day transactions; while the remaining cash balance of the day will either be withdrawn through Amanat Khata and kept under the custody of the more reliable hands of the business separately or, if the amount is very considerable, will be withdrawn by the proprietor himself for safe keeping. It is under these circumstances that the withdrawal of Rs. 1,90,000 in the above statement it is argued, has been made. These were according to counsel always available to the proprietor to be reintroduced into the business whenever there was a business need. It is clear from the assessees own statement of figures filed that he has introduced Rs. 1,95,250 as against Rs. 1,90,000 only withdrawn during the period so that it is evident that these withdrawals are not always kept intact for subsequent introductions. We do not therefore believe the assessees explanation regarding the manner of his disposal of his cash balances and hold that the whole of this sum of Rs. 86,000 should be (treated as) unexplained."

(3) As regards the sum of Rs. 14,518 the Tribunal took note of the fact that the last execution proceeding was instituted on 7-9-1944 accompanied by a prayer for the arrest of the judgment debtor. But the Tribunal also found that the execution petition was dismissed on 8-12-1945 within the accounting year. The claim of the assessee for allowance on account of this debt as bad and irrecoverable was rejected by the Tribunal on the ground that

"it has not been shown to us that the debt was good and recoverable at the commencement of the period which is necessary to show." The judgment of the Tribunal states; "Regarding the second contention of Bad Debts it is stated that the decree is dated 16-9-32 and that the last execution proceedings are on 7-9-44 accompanied by a prayer for arrest of the debtor. This petition for review of the order of dismissal for non-prosecution of the execution proceedings has been however, finally dismissed on 8-12-45 It is urged that in view of the fact thai rejection of the petition was only 8-12-45, that is within the accounting year, the claim is properly allowable as deduction in respect of the accounting period, under appeal. In our opinion, as it has. not been shown to us that the debt was good and recoverable at the commencement of the period which is necessary to show, we are unable to concede tae claim."

(4) On the question relating to the cash credit of Rs. 86,000, the argument of Dr. Dutt on behalf of the assessee is that there was 110 material upon which the Appellate Tribunal could base its finding that the amount of Rs. 86,000 shown as cash credit in the account books was secreted profits of the business and therefore liable to be assessed to income-tax. Learned counsel pointed out in this connection that the Income-tax Officer held that this amount of Rs. 83,000 should be taken as profit of the assessee from business in gold and silver. This finding was accepted by the Appellate Assistant Commissioner. But when the matter came up in further appeal the Appellate Tribunal held that there was no material to suggest that the assessee had carried on any trade in gold and Silver. Mr. Dutt also raised another important point. Counsel laid stress on the fact that the Appellate Tribunal accepted the account of home chest produced by the assessee as genuine account. This statement of the account of home chest for the year 1997 to 2000 Samvat has been reproduced in an earlier part of this judgment. The argument on behalf of the assessee is that the Appellate Tribunal has committed an arithmetical mistake which has materially prejudiced the finding of the Tribunal on this important question. On this point the Tribunal states that

"It is clear from the assessees own statement of figures filed that he has introduced Rs. 1,95,250 as against Rs. 1,90,000 only withdrawn during the period so that it is evident that these withdrawals are not always kept intact for subsequent introduction".

It is manifest that the arithmetical calculation is wrong, for, the account of the home chest really shows, that from the year 1997 to 2000 cash withdrawn was Rs. 1,93,500 while the cash credit was Rs. 1,07,3

50. The account of the home chest is a very important piece of evidence and it supports the case of the assessee that the amount of Rs. 86,000 was the amount introduced by the assessee from the home chest account. If the amount of Rs. 86,000 is added to the cash credit of Rs. 1.07,350, the total would be Rs. 1,93,350 which roughly tallies with the total figure of the cash withdrawn according to home chest account. The appellate Tribunal has proceeded on a wrong arithmetical calculation and upon the basis of this arithmetical error, it has disbelieved the explanation of the assessee as regards the source of the cash credit of Rs. 86,000. Mr. Gopal Prasad who presented the case of the Income-tax Department contended that the finding of the Appellate Tribunal is a finding on a question of fact and ought not to be interfered with on a reference to the High Court. It is true that normally the finding whether an item of cash credit is an item of capital receipt or an item of income nature is a fmaing on a question of fact. But the question becomes a question of law it there is no evidence to support the finding of the Appellate Tribunal or if in reaching the finding the Appellate Tribunal applies a wrong principle of law or completely misreads a material portion of evidence. For the reasons already set iorth, I am I of opinion that the explanation furnished by the assessee should have been accepted by the Income- tax Appellate Tribunal and the onus of proving the nature of the source of the cash credit has been sufficiently discharged by the assessee in this case. In a recent case -- Nilkantha Narayan v. Commr of Income Tax, B. and O. AIR 1951 Pat 165 [LQ/PatHC/1951/60] (A), a Division Bench of this Court has dealt with the question as to the extent of the burden of proof lying upon the assesses in a case of this description. In truth, the present case falls within the principle enunciated in Nilkantha Narayan Singns case, (A), where the material facts are ol similar character.

(5) Upon the first question, therefore I hold that there is no material to justify the assessment of" the amount of Rs. 86,000 and the question on this point must be answered in favour of the assessee. ("6) The second question relates to the amount of Rs. 14,518 which was claimed by the assessee as a bad debt within the meanmg of Section 10(2) (xi), income-tax Act. The contention of the assessee on this point is that the decree was passed on 16-9-1932 and it became time-barred only on 16-9-1945 which date fell, within the accounting year 1945-

46. it was argued that the Income-tax authorities ought to have held that this item was a bad debt .and that the assessee was entitled to an allowance on this account under S- 10(2)(xi), Income-tax Act. In this connection Mr. Gopal Prasad drew our attention to the facts that in the execution, of the mortgage decree the debtors properties had been sold about four years previous to the accounting year. Mr. Gopal Prassd said that the Income-tax Officer as well as the Appellate Assist- Commr. proceeded upon the view that the decree for Rs. 14,518 became irrecoverable on the date when the debtors properties were sold in execution of the mortgage decree. But the difficulty in accepting the argument is that this ground is not taken by the Appellate Tribunal who refused to accept the claim for allowance for the reason that it was not shown that the debt was recoverable at the commencement of the accounting year. The question whether a debt has become bad debt during the assessment year is undoubtedly a question of fact which must be determined by the Income-tax authorities upon proper material. But where is the evidence or material to show that in the present case the debt was not a bad debt or I that the claim of the assessec in this respect is not entertainable The contention of Mr. Dutt is that in reaching the finding that the debt was not a bad debt the Income-tax Appollate Tribunal has misdirected itself in law. Learned counsel pointed out that the Appellate Tribunal threw the onus upon the assessee to show "whether the debt was good and recoverable at the commencement of the accounting year" and not that the debt was bad at any point during the accounting year. There is a great force in the argument of Mr. Dutt on this point. The further contenton of the learned counsel is that there is no material to support the finding of the Appellate Tribunal that the assessee was not entitled to claim allowance for the amount of Rs. 14,518. In this connection, it is important to [notice that the decree was passed on 16-9-1932 and that it became time-barred only on 16-9-1945 which date fell duing the period of the accounting year. It is difficult therefore to accept the finding of the Tribunal that the debt became bad and irrecoverable before 18-9-194

5. It is true that the Income-tax Officer and the Appellate Commissioner both found that the properties of the debtor had been sold in execution of the mortgage decree four years prior to the commencement of the accounting year. But the fact ought not to be overlooked that the assessee had filed execution petitions for recovering the amount due under the decree on 6-9-1935, 15-11-1935, 13-2-1939, 16-8-1942 and 7-9-194

4. In the last execution petition filed on 7-9-1944 the assessee made a prayer for recovering the amount by arrest of the judgment -debtor. This petition was finally dismissed on 8-12-194

5. This circumstance also would show that the debt became bad and irrecoverable on 8-12-1945 when the last execution case was finally dismissed. The question whether a debt has become time-barred is a material question for coming to the finding whether the debt is bad and irrecoverable within the meaning of Section 10(2)(xi), Income-tax Act. But it is not a decisive circumstance and as pointed out by the Judicial Committee in -- Income-tax Commr. C. P. and Berar v. Section M Chitna-vis, AIR 1932 PC 178 [LQ/PC/1932/37] (B), a statute-barred debt is not necessarily bad, neither is a debt which is not statute-barred necessarily good, but the age of a debt is a relevant matter to be taken into consideration with the other circumstances. In the present case, there is the additional factor that there is no material to indicate that the debtor Harihar Prasad Singh had no other source of income or had acquired no other properties after the mortgage execution case in which the mortgaged properties were sold. The fact that in the last execution case filed on 7-9-1944 the assessee made a prayer for arrest of the judgment-debtor shows that there was some hope or ray of hope for realising the amount of the decree by the process of arrest and that the judgment-debtor had other sources of income with which he might have discharged the decretal debt. In a matter of this description, it is a relevant consideration that the assessee in prosecuting the execution proceedings has a reasonable expectation of recovering the decretal amount from the debtor concerned. In -- Mukundlal Bansilal v. Commr. of Income-tax, AIR 1952 Bom 491 (C), there is an observation of Chagla, C J. that a loan becomes irrecoverable or a debt becomes a bad debt when the creditor had no reasonable expectation of recovering it from the debtor. In the present case, it is impossible to support the finding of the Appellate Tribunal and it must be held that the assessee is entitled to the allowance of Rs. 14,518 which must be held to be a bad debt within the meaning of Section 10(2)(xi), Income-tax Act.

(6) For the reasons expressed I think that the answer to both the questions must be answered in favour of the assessee. The Income-tax Department must pay the cost of the reference: hearing fee Rs. 250/-. Rai, J.

(7) I agree that the answers to both the questions should be given in favour of the assessee. It is admitted by the learned counsel for the Department that the last execution case came to an end on 8-12-194

5. The money decree having been passed on 16-9-1932 no further execution could have been levied as the claim had become barred by that date. It has been argued by Mr. Gopal Prasad that as all the properties of the judgment-debtor had been sold several years before, the decree had become unrealisable during years prior to the year of assessment. In my opinion there is no force in this contention. The money decree could have been realised from the person as well as from the properties which might have come subsequently in the hands of the judgment-debtor. There is no wonder that the assessee expected to realise the decretal amount in future and with that hope he went on filing successive execution petitions to keep the decree alive. In my opinion the assessee was entitled to treat the amount of Rs. 14,518 as a bad debt within the meaning of Section 10(2)(xi), Income-tax Act, in the year of assessment when all hopes for its realisation were lost.

(8) I also agree with Mr. Dutt that the finding of the Appellate Tribunal is vitiated on account of its having misread and misconstrued exhibit P. From exhibit P, it is clear that the amount of cash intro duced is not more than the amount withdrawn by Rai Bahadur Balmiki Prasad Singh. The finding of the Appellate Tribunal that the introduction was more, than the withdrawal was thus based on misreading of the account. In my opinion such an error on the part of the Appellate Tribunal can be taken into consideration by us. In my opinion the cash introduced can be referable to the amounts withdrawn previously.