TMI Blog1993 (9) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... in upholding an addition to the total income of a sum of Rs. 6,54,777 representing the loss of stock-in-trade due to embezzlement by the employee discovered long after the end of the previous year, i.e., some time in the year 1976, notwithstanding that such loss already stood reflected in the books of account for the previous year ended December 31, 1974 ?" At the instance of the Revenue : "2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the provisions of section 40(c) of the Income-tax Act, 1961, and not the provisions of section 40A(5) of the said Act, apply in the case of an employee-director ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on account of such embezzlement was duly taken care of in the accounts of the relevant year itself. Thus, though the assessee-company had no knowledge as such of the loss by embezzlement in the previous year, the loss has been suffered inasmuch as goods had been surreptitiously taken out of the assessee's stock without crediting the sales account and, consequently, the loss was reflected in the books of account. The assessee-company having come to know of the embezzlement some time in the year 1976, referred the matter to a detective agency which submitted its report in February, 1977, which confirmed the fact of embezzlement in the previous year and determined the total loss by embezzlement at Rs. 9,07,230 out of which Rs. 6,54,777 rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o dispute in the instant case about the fact that the embezzlement of goods worth Rs. 6,54,777 took place during the previous year under consideration and the loss caused as a result thereof was reflected in the books of account of that year. It is also not in dispute that the loss was incidental to the business of the assessee and deductible in the computation of its income from business. There is also no controversy about the fact that no deduction was claimed by the assessee in the year when the embezzlement was suspected or was confirmed by the detective agency. The only question for consideration is whether the Tribunal was justified in holding that this loss was allowable as a deduction not in the year in which it took place but in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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