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2009 (8) TMI 777

..... er consideration, the assessee had claimed deduction of Rs. 3,92,15,559 by way of notes to the computation of income - As the discovery of the embezzlement was made during the year, the claim of the assessee is that it is entitled to the deduction on account of loss on account of embezzlement - the assessee was handling units worth of Rs. 7.5 crores belonging to M/s. TIFPL - There is no merit in the claim of the assessee as the said liability is a contingent one - Accordingly, ground of appeal raised by the assessee is thus dismissed - 4990 (Mum.) of 2007 - 11-8-2009 - Ms. SUSHMA CHOWLA, B. RAMAKOTAIAH, JJ. J.D. Mistry for the Appellant. Ajit Sinha for the Respondent. Order Per Ms. Sushma Chowla, Judicial Member. - This appeal filed by the assessee is against the order of CIT(A)- Central I, Mumbai dated 28-5-2007 relating to the assessment year 2004-05 against the order under section 143(3) of the Income-tax Act, 1961. 2. The only ground of appeal raised by the assessee is as under:- On the facts and in the circumstances of the case and in law, the CIT(A) Central-I erred in upholding the action of the Assessing Officer by rejecting the appellant s claim of business loss on account .....

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..... ent done by any of the employees and hence ratios were not applicable. The CIT(A) admitted it to be a fraud committed on assessee by an outsider by making forged claims but the same was held to be not done in the normal course of business carried on by the assessee and as such the claim was disallowed. 4. The assessee is in appeal before us in respect of the claim of deduction of Rs. 3.92 crores. The learned A.R. for the assessee after taking us through the facts of the case pointed out that the assessee in its computation of income had added back the provision for loss claimed totalling Rs. 3.92 crores to the profits and gains of business. However, by way of note I annexed to the computation of income, it was submitted that the claim of the assessee be allowed at the assessment stage based on the principle of prudence enshrined in accounting standards issued by the ICAI. Copy of the computation of income is annexed at pages 1 to 4 of the paper book. The learned A.R. pointed out that vide letter dated 31-10-2006, a request was made to the Assessing Officer to allow the claim in the current assessment proceedings relying on the ratio laid down by the Bombay High Court in Bombay Forg .....

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..... that the fraudulent redemption request with the forged signature was submitted to the assessee and the same was processed. The Citi Bank, the R & T agent could not detect the forged signature. The redemption cheque for Rs. 3.65 crores sent by Citi Bank to the assessee was delivered to a person, who came to collect the same on 3-3-2003. Thereafter, a fraudulent bank account was opened in the name of M/s. TIFPL with IDBI bank on 7-3-2003. The redemption cheque was deposited and the money was withdrawn subsequently. The assessee-company on receiving the information of embezzlement lodged an FIR on 7-4-2003. The documents were sent for forensic report to verify the signature and it was revealed that signature of Shri Sushil Agarwal, Managing Director of M/s. TIFPL was forged. The assessee also filed a complaint with Banking Ombudsman against the IDBI bank for recovery of loss due to fraud committed on the assessee-company. However, the Banking Ombudsman negatived the claim of the assessee and asked the assessee to pursue the matter with appropriate forum. Pursuant to the police complaint, the matter was investigated and the people involved were identified and were arrested. In the .....

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..... of the paper book. Enquiries made in the case reveal and confirm that forged signatures were used on the redemption request letter dated 28-2-2003. Forensic report dated 10-5-2003 affirmed the same, copy of which is enclosed at pages 37 to 44 of the paper book. 8. The claim of the assessee is that while carrying out its duty as portfolio management services, a fraud has occurred in the account of one of its clients i.e., M/s. TIFPL. The said M/s. TIFPL was a holder of units of mutual funds for Rs. 7.50 crores. By forgery a sum of Rs. 3.65 crores was encashed on 10-3-2003, though M/s. TIFPL made a request for redemption of Rs. 7.50 crores on 28-3-2003. The assessee on discovery of the forgery, i.e., when M/s. TIFPL informed the assessee-company that it had never made a request for redemption of Rs. 3.65 crores on 28-2-2003, lodged a police complaint on 7-4-2003. Efforts were also made by assessee-company by way of lodging a compliant with Banking Ombudsman and SEBI vide letter dated 5-1-2003, copy of which are enclosed at pages 46 to 48 of the paper book. A communication has been received from Banking Ombudsman stating that complaint in this case has been closed. However, pursuant t .....

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