1. The short point in this reference which we have to decide is whether the assessee was entitled to deduct an alleged bad debt of Rs. 67,612 in his assessment to income-tax and euper-tax for the year 1927-28, for the purpose of which assessment he would be assessed under Section 3, Income-tax Act on his income for 'the previous year,' viz., the Hindu year beginning with 18th October 1925. It is common ground that the debt in question was due from one Abhechand Premchand, and that it arose at the end of Sam vat year 1969 (1912-13) on account of transactions in cotton, gold, silver and hundis. It is further common ground that Abhechand Premchand became insolvent in 1920 and that he was discharged in 1924. Further, nothing has been recovered from the insolvent, and in the proceedings before the Assistant Commissioner, no answer was given by the assessee to the question why this amount of Rs. 67,612 was not written off in or about the year when it was known to have become irrecoverable. The only explanation given by the assessee appears in his revision petition to the Commissioner, Ex. E, of 19th January 1928, where he submits:
that this amount was not written off as the insolvency proceedings were going on, say, from 1920 to 1923 or 1924.
2. Now, it may be taken that the accounts of the assessee are kept on what is known as the mercantile system of accounting, and not on a cash basis. It may also be taken for the purposes of this present reference that a regular method of accounting was employed by the assessee within the meaning of Section 13, Income-tax Act, dsspite certain observations to the contrary as to the earlier years which were made by the Incometax Officer in the original proceedings before him, Ex. A.
3. The main contentions put before us on behalf of the assessee are that it is for him to determine when a debt becomes a bad debt; that he can choose any year he likes for that purpose; and that although in. law insolvency may bar the remedy for a debt, yet, it often happens-particularly amongst Hindus-that debts are paid notwithstanding the law of insolvency and notwithstanding the law of limitation. In connexion with the last point, two authorities in Bam Kishan Rai v. Ghhedi Rai A.I.R 1922 All. 402 and Gajadhar v. Jagannath A.I.R. 1924 All. 551 were referred to. Speaking for myself, I think that those authorities are remote from the question which we have to decide, namely, whether in assessing the income, profits or gains of the assessee for the year in question under Sections 3, 4 and 10, it was fair and reasonable to deduct this particular bad debt for the year in question. The Assistant Commissioner found that it was not proper to do so, and in revision this finding has been confirmed by the Commissioner. Certain criticisms were passed by counsel for the assessee to the effect that there has not been a sufficient finding of fact by the Commissioner. But in the result this objection was, I think, withdrawn, and it was expressly stated that it was not desired to refer this case back. In our opinion, the findings in the case are sufficient to show that the Commissioner agreed with the findings by the Assistant Commissioner, and refused to exercise his powers of revision under Section 33.
4. That leaves us with the main point, and here it must be borne in mind that under Section 22, it is for the assessee to make a return, but under Section 23 (2) the Income-tax Officer can require the assessee to produce evidence, and then under Sub-section (3) the officer assesses the income of the assessee and determines the sum payable by him. Section 23 provides for a set-off for loss. Then Sections 30 and 31 provide for an appeal to the Assistant Commissioner who may make such further enquiries as he thinks fit, and may confirm, reduce or enhance the assessment or set it aside. Then Section 32 provides for a limited class of appeals against the order of the Assistant Commissioner. That section does not apply in the present case. Then Section 33 gives the Commissioner a power of revision-wrongly called a 'power of review' in the marginal note, because, as pointed out by the learned Advocate General, the corresponding words in Section 66 (2) have been amended, so as to read power of revision under Section 33.' Then, under Section 66, where a question of law arises, the Commissioner may draw up a statement of the case and refer it with his own opinion to us.
5. In my judgment, the assessee has put his case too high in saying that it rested with him to say when he could write off a bad debt. Speaking for myself, I think that for the purpose of the present case, it is sufficient to say that in law the bad debt in question ought to have been written off within a fair and reasonable time. Adopting that test here, were there grounds in fact on which in law the Commissioner could properly come to the conclusion that it would not be fair and reasonable to write off that bad debt for the year of of assessment in question In my judgment, such grounds clearly existed. The debt in question, as I have already pointed out, had been incurred some twelve years before the year under assessment, the debtor had become insolvent some five years previously, and had obtained his discharge over a year before. Under those circumstances, in the absence of any reasonable explanation as to why the debt was not written off before, I would hold that prima facie it was unfair and unreasonable in assessing the income for the year in question to write off this old debt, which on any reasonable basis should have been regarded as irrevocable years before.
6. On the other hand, I must not be taken to hold that the Commissioner has an arbitrary discretion to say that a bad debt should be written off in any particular year. He or the Assistant Commissioner has to hear the evidence in each particular case and to decide on the facts of that particular case. That, I think, is one answer to the argument of hardship and so on which was urged before us by counsel for the assessee.
7. Then, we were referred to the decision of the Lahore High Court in Puran Mal v. Commissioner of Income-tax, Punjab  2 I C 236 (Part. 4.). But as the two learned Judges, before whom the case originally came, differed, and the judgment of the third Judge proceeds on lines differing somewhat from each of the previous judgments, I do not propose, with all respect, to refer to the details. I would rather decide the present case on its own facts, and doing that it seems to me that the answer we should give is reasonably clear.
8. Accordingly, I would answer Question 2, namely:
whether it was not for the assessee to determine when he should write off the above bad debt.
by saying, 'no, not on the facts of this particular case.' But as regards Question 1 namely:
whether in the matter of the assessment of the assessee for the year 1927-1928, the Incoma-tax Officer has under the law any discretion to disallow the bad debt of Rs. 67,612 duly written off in, the accounts, on the ground that it became bad, not in the Samvat year 1982 on the basis of which the above assessment was levied, but four years back?
9. I would propose to answer as follows:
In the matter of this assessment the Income-tax Officer had grounds in fact on which in law he could rightly disallow, as he in fact did, the bad debt of Rs. 67,612 written off in these accounts,
10. In the result, therefore, as we agree with the decision arrived at by the Commissioner, we will direet that the assessee should pay the costs of this reference, to be taxed on the original side scale by the Taxing Master.
11. I agree. In my opinion it is for the assessee in each case to establish by evidence that a debt became irrecoverable during the year in which the income, profits and gains are to be ascertained, this being a question of fact.
12. On the facts stated in the present case, I think it clear that the assessee did not establish this by evidence. On the contrary, as appears from Ex. D to the case, the assessee had no answer to the question why the debt was not written off in the year when it became known to him by reason of the debtor's insolvency that this amount had become irrecoverable. The assessee might, no doubt, have sought to establish by evidence, if such were the case, that, notwithstanding the insolvency of the debtor, the amount did not in fact become irrecoverable until the year in which he wrote it off as a bad debt. But he offered no evidence with a view to establishing this. Accordingly, the Assistant Commissioner on the evidence before him found that the debt became irrecoverable some years before it was written off. The Commissioner agreed in this respect with the Assistant Commissioner. In the absence of any evidence by the assessee with a view to establishing that the debt became irrecoverable during the year in question, speaking for myself, I find it difficult to see how the Assistant Commissioner or the Commissioner could have come to any other finding of fact.
13. I agree that the questions submitted to us should be answered in the manner indicated by the learned Chief Justice.