TMI Blog1978 (9) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... it was noticed by the assessee that a sum of Rs. 30,000 had been wrongly debited. On an enquiry it was found that the amount had been drawn against a cheque made payable self or bearer. On investigation it was found further that an unknown person had forged the signature of Shri P. K. Khaitan, one of the partners of the assessee, and had withdrawn. the money from the bank. By its letter dated the 8th January, 1968, the assessee called upon the bank to credit the said sum back to the account and advised the bank to report the matter to the police. This was done and also the services of handwriting experts were requisitioned. It was ultimately found that the signature on the forged cheque was not that of the authorised person whose signatu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al to the assessee's business. The AAC found that money was kept in current account in the bank in the course of the assessee's business and that such money stood on the same footing as money kept in the till of a business. If the bank made a payment by mistake or negligence it would be as much a loss to the assessee as a theft of cash from its business premises. He concluded that the loss claimed was admissible for the purpose of the assessee's business and hence allowable as a deduction. He also found that a suit for the amount lost was pending which was of no relevance and if the assessee succeeded in recovering the amount it would be treated as its income in the relevant subsequent year. The revenue preferred an appeal from the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal. The cash system of accounts maintained by the assessee would have no effect on the position. The Tribunal allowed the appeal of the revenue. On an application of the assessee under s. 256(1) of the I.T. Act, 1961, the Tribunal has drawn up a statement of case and has referred the following question of law arising out of its order for the opinion of this court : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sums of Rs. 30,000 and Rs. 1,280 were not allowable deduction for the assessment year 1969-70 ? " Mr. R. N. Bajoria, learned counsel for the assessee, contended at the hearing that both the AAC and the Tribunal found as a fact that the assessee had incurred a loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not." Mr. Bajoria also cited a decision of the Rangoon High Court in CIT v. Hajee Abdul Gany Ayoob [1941] 9 ITR 339. The facts in that case were that the assessee maintained a banking account for the purpose of its business with a Chettiar firm who carried on the business as bankers. In 1932, the bankers were adjudged insolvent, when the assessee's account with the bankers stood credited at Rs. 34,367. In 1939-40, such credit was Rs. 24,213-12-6 and in that year the assessee claimed the unrealised credit to be a bad debt and allowable deduction. On these facts, the High Court held that the loss suffered by the assessee was one connected with and arising out of its business and was a bad debt allowable as a deduction. Mr. B. K. Bag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the ordinary and normal relation between a customer and a banker is that of creditor and debtor." Mr. Bagchi also cited a decision of the Supreme Court in Associated Banking Corporation of India Ltd. v. CIT [1965] 56 ITR 1. The facts in that case were that the assessee carried on the business of banking. The secretary of the assessee, having extensive powers of management, embezzled large sums from the funds of the assessee in the year of accounting ending the 30th June, 1947. At the material time, the fact of such embezzlement was unknown to the assessee. By an order of the Bombay High Court dated the 21st April, 1947, the assessee was directed to be wound up. On the 23rd August, 1949, the liquidators submitted a return for the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considerations, as soon as the embezzlement takes place of the employer's funds, whether the employer is aware or not of the embezzlement, there results a trading loss. So long as there was a reasonable prospect of recovering the amounts embezzled by the bank, trading loss in a commercial sense may not be deemed to have resulted." The above principles laid down by the Supreme Court cannot be applied to the facts of the instant case. Here, the loss had been caused to the assessee by person or persons unknown and unidentified and the possibility of restitution by the wrongdoers is nil. The Tribunal has found as a fact that the assessee had suffered loss and this finding has not been challenged by any one. The only question which remains t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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