TMI Blog2017 (2) TMI 1348X X X X Extracts X X X X X X X X Extracts X X X X ..... ted:- 15-2-2017 - Shri Bhagchand, Accountant Member Assessee by : Shri Manish Agarwal , CA Revenue by : Smt. Poonam Rai, DCIT- DR ORDER Per Bhagchand, AM The assessee has filed an appeal against the order of the ld. CIT(A), Jaipur dated 27-06-2016 for the assessment year 2011-12 raising therein grounds of appeal as under:- 1. That the ld. CIT(A) has erred in law as well as on facts in confirming the addition without considering the facts and circumstances of the case. 2 That the ld. CIT(A) has erred in making an addition of ₹ 4,77,500/- for disallowance of loss of goods by theft ignoring the facts and circumstances of the case. The same deserves to be deleted. 2.1 Apropos Ground No. 1 and 2 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 4,77,500/- for which the ld. AR of the assessee filed the following written submission. Under all these grounds of appeal, the assessee has collectively challenged the action of Ld. CIT(A) in sustaining the addition of ₹ 4,77,500/- made by Ld. AO by disallowing the loss claimed by assessee on account of loss of goods by theft. Brief facts pertaining to these grounds of appeal are that, during the year under appeal, upon investigation, the assessee company s internal control department detected a fraud which was committed by some of its employees. Therein, it was found that a fraud of ₹ 4,77,500/- of Tata Sky Vouchers / Coupon (transferable through mobile) has been committed on the basis of records available fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and more particularly when the fact of loss on account of fraud is an admitted position, the genuineness thereof automatically gets established. The judgment of Hon ble Supreme Court in the case of Associated Banking Corporation of India Ltd. Vs. CIT (SC) [56 ITR 1] which has been relied upon by the Ld. AO has been rendered in different set of circumstances and is clearly distinguishable on facts of the case. In that case, embezzlement of huge amount had taken place in a banking company which had been wound up and was under liquidation. In that case it was found that there were reasonable chances of recovery by Liquidator, of the embezzled amount and therefore, it was held that so long as there was a reasonable prospect of recovering the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... volved was necessarily kept for the purpose of the business in the place from which it was lost. Since the above circulars were issued, the Supreme Court has further considered the matter and laid down the law in this regard in the following two cases :- (1) Badri Das Daga vs. CIT (1958) 34 ITR 10 (SC) : TC 14R.202. (2) Associated Banking Corporation of India Ltd. vs. CIT (1965) 56 ITR 1 (SC) In the first case, the Supreme Court has affirmed the view that the loss resulting from embezzlement by an employee or agent of a business is admissible as a deduction under s. 10(1) of the IT Act, 1922 (corresponding to s. 28 of the IT Act, 1961) if it arises out of the carrying on of the business and is incidental to it. In the seco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot justified in holding that the assessee s claim of loss was premature. [page 516] Further, in the case of Bombay Forgings Pvt. Ltd. Vs. CIT reported in (1994) 206 ITR 562, the Hon ble Gujarat High Court held that: it was an admitted position that the embezzlement had taken place during the relevant previous year and the same was duly reflected in the books of account by omission of the value of such goods from the sales as well as closing stock of the assessee in preparation of the final accounts. In a situation like this, so far as loss was concerned, detection was not relevant. The loss caused to the assessee by embezzlement during the relevant previous year was allowable as deduction in the computation of the income in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tata Sky Vouchers / Coupon of the supplier company) by theft. However, in the assessment proceedings, the AO required the justification in this regard or also to produce the copy of the FIR for the legal action taken by the assessee which the assessee could not produced before the AO. The AO for want of the evidence or justification as to the theft of the goods disallowed the claim of ₹ 4,77,500/- made by the assessee which has been confirmed by the ld. CIT(A) in first appeal. In the appellate proceedings, the ld. AR of the prayed that it is an admitted position that theft/ fraud had indeed taken place in the assessee company and the AO had nowhere doubted the fact of fraud but he disallowed the claim of the assessee for the reason th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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