Per Pradeep Parikh, AM - The department is in appeal before us against the order of the ld. CIT(A) dated 17-10-1994 for assessment year 1991-92. The only ground raised in the appeal is against the deletion or disallowance of Rs. 1,83,500 made on account of bad debts.

2. The assessee individual, besides trading in optical frames and lenses, is also a money lender. For the year under appeal it had declared loss of Rs. 1,83,500 from money-lending business. The assessee had advanced a sum of Rs. 1,83,500 to one Shri Shankarlal of Ichalkaranji and it was written off in the books of account by the assessee on 31-3-1991 as irrecoverable debt. According to the Assessing Officer the assessee had written off the debt within a very short time, namely within 2 months only and this according to him was highly improbable for a money lender to do. He rejected the explanation of the assessee that the same was written off on humanitarian grounds. The claim for deduction of bad debts was, therefore, rejected. The CIT(A) deleted the addition on the ground that after the amendment in section 36(1)(vii) there was no need for the assessee to show as to what steps had been taken for recovery, and writing it off as irrecoverable was sufficient.

3. The contention of the ld. D.R. was that a bad debt can be written off only when it has become bad and that it has become bad has to be shown to the taxing authorities. Hence according to him simply writing off the debt would not entitle the assessee to claim deduction under section 36(1)(vii). The ld. counsel for the assessee, at the outset, clarified that the debt was not written off within two or three months of giving the advance, but it was written off two years after the date of advance. Further, the debt was written off because according to the assessee it had become irrecoverable and hence the deduction be allowed.

4. On due consideration of the rival contentions and the material on record, we are inclined to accept the contention of the ld. counsel. Before clause (vii) of sub-section (1) of section 36 was amended with effect from 1-4-1989, the wordings of the said clause were "any debt, or part thereof, which is established to have become a bad debt in the previous year". In place of these words, now the wordings are "any bad debt or part thereof which is written off as irrecoverable.....". The difference in the wordings show that earlier the assessee was required to satisfy the taxing authority that debt which he is writing off is established to have become bad. Hence much depended on the satisfaction of the Assessing Officer about the debt having become bad. This entailed considerable litigation because satisfaction in such matters was quite subjective. Hence in order to reduce the scope of litigation, the amendment was brought to the effect that it would be sufficient if in the opinion of the assessee a debt has become bad and is written off in the books of account. Hence if the contentions of the ld. D.R. are to be accepted, we are afraid, we may be

going back to the pre-amended position which is not warranted after the amendment.

5. Let us examine the issue in a little greater detail. It is no doubt, true that the debt which is written-off as irrecoverable by the assessee must be a bad debt. The onus is, of course, on the assessee to show that the write-off of the alleged bad debt is proper and permissible, but certainly the department cannot insist on a demonstrative proof. This was the observation of the Bombay High Court in the case of Jethabhai Hirji & Jethabhai Ramdas v. CIT [1979] 120 ITR 792 at page 805, the court observed as follows :

"While the onus of establishing that the write-off of the alleged bad debt is proper and permissible in the circumstances of the case is undoubtedly upon the assessee, the department cannot insist on the demonstrative proof which is quite infallible."

The above observations make it quite clear that there can be no infallible evidence to show that the writ