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TMI Blog2024 (11) TMI 1097X X X X Extracts X X X X X X X X Extracts X X X X ..... opriation of funds amounting to Rs. 343 lakhs by Mr. Augustine Fernandes, one of the employees of the assessee. The assessee recovered only Rs. 229 lakhs and further estimated recovery of Rs. 60 lakhs and, therefore, balance amount of Rs. 54 lakhs remained unrecovered. Further, cash of Rs. 30,62,000/- was found deposited in assessment year 2011-12 in the bank account of the wife of the said employee. The assessee, vide letter dated 23/05/2017, APB pages 52-54 had accepted that Rs. 54 lakhs is pending for recovery and Rs 60 lakh is sub-judice for recovery. Therefore, the Ld.AO reopened the assessment order and accordingly Rs. 30,62,000/- was added back with the total income of the assessee by an order under section 143(3) / 147 of the Act. The aggrieved assessee filed an appeal before the Ld.CIT(A) by challenging the validity of reopening under section 148 and also on merit. But Ld.CIT(A) rejected the appeal of the assessee and upheld the impugned assessment order. Being aggrieved on the appeal order, the assessee filed an appeal before us. 3. The Ld.AR argued and filed a written submission which is kept in the record. The Ld.AR argued on merit of the case and stated that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount will be recovered the assessee would pay the tax on the recovery. 5. The Ld.AR relied on the order of the Hon'ble Bombay High Court in the case of Bombay Forgings Pvt Ltd vs CIT (1994) 206 ITR 562 (Bom) wherein it was held as under: - "2. The assessee is a private limited company and this reference relates to the assessment year 1975-76. The assessee submitted its return of income for this assessment year on 5-7-1975 declaring a total income of Rs. 4,43,123. A revised return was filed on 30-7-1975 declaring a total income of Rs. 2,30,583. In the year 1976, the assessee suspected the commission of a fraud by two of its principal officers, viz., M.V. Gokarn and H.H. Sanghani, Sales Manager and Chief Accountant & Secretary, respectively. The matter was referred to a detective agency who submitted its report in February 1977. It was found that during the relevant previous year these employees had embezzled or misappropriated goods worth Rs. 6,54,777. It was done by manipulating the accounts. As a result, the aforesaid goods did neither reflect in the closing stock nor as goods in transit, nor was their value credited to the sales. The result was that though the goods worth Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 the year when it was suspected. 5. We have carefully considered the facts of the case and the order of the Tribunal. We find it difficult to uphold the decision of the Tribunal, particularly in view of the 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 the closing stock of the assessee in preparation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 37(1), but it will come under section 28 of the Act considering the embezzlement. The assessee had never rectified the head during filing of return of Income in pursuance of notice U/s 148 of the Act. The Ld.AR relied on the judgement of the Hon'ble Supreme Court in the case of Kedarnath Jute Mfg Co Ltd vs CIT (1971) 82 ITR 363 (SC). The Hon'ble Apex Court allowed the appeal of the assessee with following observation. "The main contention of the learned Solicitor-General is that the assessee failed to debit the liability in its books of accounts and, therefore, it was debarred from claiming the same as deduction either under section 10(1) or under section 10(2)(xv) of the Act. We are wholly unable to appreciate the suggestion that if an assessee under some misapprehension or mistake fails to make an entry in the books of account and although, under the law, a deduction must be allowed by the Income-tax Officer, the assessee will lose the right of claiming or will be debarred from being allowed that deduction. Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take ..... X X X X Extracts X X X X X X X X Extracts X X X X
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