TMI Blog1982 (4) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... na, submitted that there are only two main issues---one regarding loss of Rs. 1,80,356 disallowed by the ITO having been confirmed by the Commissioner (Appeals), and the second about the disallowance of interest made by the ITO in a sum of Rs. 39,722, which came to be reduced by the Commissioner (Appeals) to Rs. 35,240, when the issue came before him. 3. The assessee is a registered partnership firm with seven partners and its accounting year ended 31-3-1977. Facts pertaining to the first issue, regarding disallowance of loss of Rs. 1,80,356, made by the ITO, confirmed by the Commissioner (Appeals) and disputed by the assessee before us, are more than detailed, if the orders of the two lower authorities are perused. But, for the sake of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jewellery, stereo, fridge, scooter, silver utensils, bank balance, in his name and in the name of his wife, and in the same form the assessee was finally able to recover the assets, worth Rs. 1,90,659, leaving a final balance of Rs. 66,863 in the form of net embezzlement loss. 4. In the course of the assessment proceedings, the assessee attempted to claim this loss of Rs. 1,80,356 during the year under consideration and relied on several judgments and came forward with many contentions discussed by the ITO in his detailed order, which came to be rejected. 5. When the assessee carried the issue before the Commissioner (Appeals), there too its contentions came to be rejected and the order of the ITO was confirmed. 6. It is this action o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipts and disbursing payments and entries, in respect of amounts recovered through him, were passed in the account books. Even, for the sake of argument, if be is considered to be an agent, receipt by him is as good as that by the assessee. He submitted that in case the judgment, in the case of Associated Banking Corporation is read thoroughly and as a whole, the order of the Commissioner (Appeals) would not call for any interference. He submitted that it is a clear case of embezzlement and in case of embezzlement, it is only when it comes to the knowledge and chances of recovery are exhausted, that it can be claimed. Regarding the contention mainly highlighted before us by the learned counsel, it is not due to embezzlement but it is a los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by any employee, it is nothing but embezzlement. 9. Once we have held it to be a case of embezzlement, law is trite as held by the Supreme Court in the case of Associated Banking Corporation in which the facts were that : "The Secretary of a bank misused the powers conferred on him under a power of attorney and withdrew Rs. 18 lakhs by posting false entries in the books of the bank in the accounting year ending June 30, 1947. The withdrawals for the first time came to the knowledge of the liquidator of the bank after the end of the accounting year, and the liquidator had to pay to the constituents of the bank, Rs. 10,15,000, pursuant to an order of the Court made in 1949 and a settlement in 1951 : Held , on the facts, that the los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders of the two lower authorities on this issue and for the reasons given therein and in the light of the discussion above and on the basis of facts, we confirm the order of the Commissioner (Appeals) on this issue. 11. The second issue is regarding disallowance of interest of an amount of Rs. 39,722. Four of the seven partners had debit balances and in addition one Mr. Sehgal was advanced a loan of Rs. 20,000. Neither any interest was charged on the debit balances of the four partners, nor from Mr. Sehgal. On the other hand, Vardhman Spinning General Mills. Ltd. was paid an interest of Rs. 1,49,178. The ITO considered the debit balances with the four partners and outstanding with Mr. Sehgal, as for 'non-business' considerations and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be only on the basis of the debit balances of four partners but on the net debit balances of all the partners. The learned departmental representative in this regard placed his reliance on the order of the Commissioner (Appeals). 14. After taking into consideration the rival submissions, we are of the view that while making the disallowance on account of interest not only the debit balance of the four partners but the net debit balances of all the partners should have been taken into consideration, because there is no dispute about the fact that the other partners have not been paid any interest, on their credit balances. Since the figures placed before us show that there were debit balances in some partners' cases and were credit balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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