S.P. Bharucha, J.
1. A construction of the provisions of section 155(6) of the Income-tax Act, 1961, is called for in this reference at the instance of the Revenue.
2. For the assessment year 1964-65, the assessee claimed a bad debt of Rs. 10,305. The Income-tax Officer disallowed the claim on the ground that the debt had become had not in the previous year relevant to the assessment year 1964-65 but in the preceding previous year. The Income-tax Officer's finding was upheld in appeal. At the stage, the assessee requested the Appellate Assistant Commissioner to direct the Income-tax Officer to rectify the assessment for the assessment year 1963-64 under the provision of section 155(6). The Appellate Assistant Commissioner declined to do so, but observed that the assessee was free to ask the Income-tax Officer to make such a rectification. The assessee so asked. The Income-tax Officer rejected the application. The assessee preferred an appeal to the Appellate Assistant Commissioner. The assessee preferred an appeal to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner analysed the provisions of section 155(6) and directed the Income-tax Officer to make the rectification.
3. The Revenue preferred an appeal against the Appellate Assistant Commissioner's order to the Income-tax Appellate Tribunal. The finding of the Appellate Assistant commissioner that the debt in question had been incurred in the course of carrying on the assessee's business was not disputed. What was disputed was the interpretation placed by the Appellate Assistant Commissioner upon section 155(6). The submission on behalf of the Revenue was that, as the assessee had not accepted the Income-tax Officer's finding in regard to the year in which the debt had become bad at the stage of the assessment proceedings for the assessment yea 1964-65, the provisions of section 155(6) were not applicable. Put differently, the submission was that where the Income-tax Officer rejected the claim for writing off a bad debt on the ground that it became bad in a year prior to the accounting year for which the claim was made, the assessee had two courses available : one was to file an appeal or prefer a revision and the other was to accept the Income-tax Officer's finding in regard to the year in which the debt had become bad and have the assessment for that year rectified under the provisions of section 155(6) to be clear, unambiguous and unqualified. It did not lend itself to the suggestion that the benefit which it sought to give tot he assessee was available only in the event of the assessee not filing an appeal or revision in regard to his claim in the matter of the year of write off. The Tribunal, accordingly, upheld the Appellate Assistant commissioner's order.
4. From out of the Tribunal's judgment this question arises :
'Whether the provisions of section 155(6) have been correctly construed by the Tribunal ?'
the relevant portion of section 155(6) of the Income-tax Act reads thus :
'Where any such debt or part of debt as is referred to in clause (vii) of sub-section (1) of section 36 is written of as irrecoverable in the accounts of the assessee for a previous year and the Income-tax Officer is satisfied that such debt or part thereof became a bad debt in an earlier previous year not falling beyond a period of four previews years immediately preceding the previous year in which the debt or part is written off, the Income-tax Officer may, notwithstanding anything contained in this Act, allow such debt or part as a deduction for such earlier previous year, if the assessee accepts such a finding of the Income-tax Officer, and recompute the total income of the assessee for such earlier previous year and make the necessary amendment.'
5. Dr. Balasubramanian, learned counsel for the Revenue, stressed the words '.... the Income-tax Office may.... allow such debt or part as a deduction for such earlier previous year, if the assessee accepts such a finding of the Income-tax Officer.... 'in section 155(6). In his submission, these words signified that the benefit of the provisions of section 155(6) was available to the assessee only if he accepted the Income-tax Officer's finding and did not carry the matter further.
6. We are unable to accept this construction of section 155(6). First, though it uses the word 'may, it casts upon the Income-tax Officer an obligation to recompute the total income of the assessee for the year in regard to which he is satisfied that a debt or part thereof became a bad debt and make the necessary amendment. the word 'may must clearly be read as 'shall'. Secondly, the words 'if the assessee accepts such a finding of the Income-tax Officer' are employed for the purpose of giving the assessee an opportunity of preferring an appeal or a revision against the Income-tax officer's finding. If the assessee does prefer an appeal or revision but loses, the obligation of the Income-tax Officer to allow such debt or a part thereof a s a deduction for the year in regard to which he is satisfied that the debt or part thereof became a bad debt remains. His finding has only been confirmed in appeal or in revision. There is no warrant for construing section 155(6) so as to hold that an assessee forfeits the right to have a bad debt written off in the year in which the Income-tax Officer finds it to have become bad if he has filed an appeal or revision against the finding.
7. We find that the Appellate Assistant Commissioner and the Tribunal were right in the construction they placed upon section 155(6) and answer the question in the affirmative and in favour of the assessee.
8. No order as to costs.