TMI Blog1980 (2) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1969, the assessee claimed a loss of Rs. 60,000 on the ground that the books were maintained by the previous secretary against whom a case is pending in the court of law ; on checking, it was found that there was no deposit with M/s. Tata Iron and Steel Company and Hindustan Steel, Ltd., whereas there was a deposit (security) of Rs. 10,000 with M/s. Indian Iron and Steel Company as against Rs. 20,000 shown in the balance-sheet. It may be pointed out that in the balance sheet a sum of Rs. 30,000 was shown as deposit with Tata Iron and Steel Company and a sum of Rs. 20,000 was shown as deposit with Indian Iron and Steel Company. The assessee also produced copies of the printed balance-sheet as on 30th June, 1964, and 30th June, 1967, along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id amounts be allowed as expenditure. The AAC rejected the claim of the assessee. The assessee filed I.T.A. No. 535/1970-71, pertaining to the assessment year 1965-66, and I.T.A. No. 3121/1971-72, pertaining to the assessment year 1969-70. Both the appeals were dismissed by the Tribunal by its consolidated order of the 26th November, 1979. On a reference application having been made by the assessee, the Tribunal has referred the following two questions of law to this court for its opinion : " 1. Whether the Tribunal has rightly held that, on the material on record, the assessee has failed to prove the embezzlement of Rs. 60,000 and Rs. 2,61,000 in the assessment years 1965-66 and 1969-70, respectively? 2. Whether, on the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the auditors merely points out the discrepancies in the accounts of the assessee. It does not fix the responsibility for embezzlement, if any, on Shri D. D. Mehta, or any other employee. Thus, on the material on record, it is difficult to hold that any losses had, in fact, arisen to the assessee on account of embezzlement by any of its employees. Again, there is no material on record to hold that the alleged embezzlement of the relevant amounts occurred in the respective assessment years or that the amounts became irrecoverable in these years. The losses claimed by the assessee cannot, therefore, be allowed in the assessment year in question. The authority cited by the assessee, i.e., [1966] 61 ITR 23 (Mad) (Kothari and Sons v. CIT) is di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial before the authorities for proving the loss irrespective of the fact whether the accused charged of embezzlement has been convicted or not the authorities cannot refuse to consider the material by observing that the conviction of the person accused of embezzlement, has not been recorded. In the present case, the assessee produced its balance-sheets, audit report, copy of the first information report, copy of the letter dated 10th September, 1969, of the assessee along with its enclosure. The Tribunal observed that there was only suspicion against Shri D. D. Mehta and that there was only a charge of embezzlement against him. It was further observed that till the criminal case pending against Shri Mehta is decided against him, it could no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med in the assessment year when it came to be known. The material produced by the assessee before the Tribunal was not at all considered by the Tribunal from a true perspective. It is, therefore, obvious that irrelevant considerations got in and the Tribunal without considering the material rejected the claim of the assessee. In the circumstances of the case, we feel that it is not possible for us to answer question No. 1. Since the decision of question No. 2 is directly linked with question No. 1, therefore, it is also not possible for us to answer the same. For the reasons recorded above, we direct that the case be sent back to the Tribunal which shall decide the appeals of the assessee afresh keeping in view the propositions which find ..... X X X X Extracts X X X X X X X X Extracts X X X X
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