High Court Of Bombay
Chudgar & Co. (P) Ltd. vs. Assistant Commissioner Of Income Tax
Sections 28(i), 260A
Asst. Year 1993-94
S.H. Kapadia & J.P. Devadhar, JJ.
IT Appeal No. 230 of 2001
9th April, 2003
Counsel Appeared
V.B. Joshi with Ms. Jyoti Dialani, for the Appellant : R.V. Desai with P.S. Jetly, for the Respondent
JUDGMENT
S.H. Kapadia, J. :
This appeal is filed by the assessee against the order of the Tribunal dt. 20th Oct., 2000, in ITA No. 7541 of 1996 in respect of asst. yr. 1993-94.
2. In this appeal, our opinion is sought on the following questions : (i) Whether, on the facts and circumstances of this case, the Tribunal erred in holding that an amount of Rs. 2,63,816 claimed by the assessee by way of deduction on account of business loss was not allowable ? (ii) Whether, on facts, the Tribunal erred in holding that the assessee had not proved the factum of embezzlement ?
Facts
3. Assessee-company is a dealer in chemicals. For the year under consideration being accounting year ending 31st March, 1993, corresponding to asst. yr. 1993-94, the assessee had declared a total loss of Rs. 1,829 after claiming deduction of Rs. 2,63,816 on account of embezzlement of cash. On or about 21st April, 1993, there was a search under s. 132 of the Act. A file–Exhibit A-17 was seized. The file had, a caption “Inflated expenses”. It also contained certain vouchers showing freight charges for all the group concerns totalling Rs. 6,13,095 out of which Rs. 2,90,236 pertained to the assessee-company for the year under consideration. On inquiry, it was stated that this cash amount had been embezzled by one of the employees of the assessee-company. His name was Paresh Vadia who had inflated the freight charges in the vouchers. In support, the assessee has relied upon affidavit dt. 21st Dec., 1994. Further, reliance was also placed by the assessee on the legal opinion of an advocate, dt. 15th June, 1993. According to the assessee, Mr Paresh Vadia had admitted the commission of offence of embezzlement and pursuant to such admission the assessee had managed to recover Rs. 26,420 from the total amount of embezzlement, amounting to Rs. 2,90,236 leaving a balance of Rs. 2,63,816 in respect of which the assessee has claimed deduction. The AO disallowed the claim. Being aggrieved, the matter was carried in appeal to CIT(A) who allowed the assessee’s appeal. Being aggrieved, the Department carried the matter in appeal to the Tribunal which took the view that the factum of embezzlement has not been proved and consequently the Tribunal allowed the appeal of the Department. Accordingly, the assessee has filed this appeal under s. 260A of the IT Act.
Arguments
4. Mr. Vipul Joshi, learned advocate for appellant-assessee, vehemently urged that, in this case, Tribunal had lost sight of a draft report prepared by the chartered accountant of the assessee which came to be seized by the Department on 21st April, 1993, when search operations were carried out. He submitted that this report was in the stage of preparation when the Department carried out the search. He stated that this report has not been obtained after the search. That, this report was made by the chartered accountant after the assessee had detected the embezzlement some time in March, 1993, when the assessee had undertaken steps to prepare the accounts for the year ending 31st March, 1993. That, when this report was under preparation, the search was carried out and the draft report was seized. He, therefore, submitted that the bona fides of the assessee in support of the claim for deduction cannot be doubted. He also relied upon the affidavit of Paresh Vadia in which the employee has admitted misappropriation of Rs. 6 lacs. He, therefore, submitted that the Department should have allowed assessee’s claim for deduction on account of business loss.
Findings
5. We do not find any merit in this appeal. Firstly, no evidence has been led before the ITO by the assessee as to the date on which the assessee detected inflated expenses vouchers. No evidence has been led to show the circumstances under which the assessee detected embezzlement. No affidavit has been filed by the assessee before the ITO indicating circumstances under which the matter was referred to the chartered accountant for preparing a report on embezzlement/inflated expenses. No letter of termination was produced. No police complaint was filed. No notice of termination has been filed on record. The affidavit dt. 21st Dec., 1994, of Paresh Vadia shows that Paresh Vadia did not know English. The figure of embezzlement is borrowed from the report. No purpose has been shown to us for obtaining this affidavit from the delinquent. No domestic inquiry has been held against Paresh Vadia. The burden was on the assessee to produce relevant documents as the assessee was claiming deduction. In the circumstances, the Tribunal was right in coming to the conclusion that the factum of embezzlement has not been proved by the assessee. Lastly, we may mention that no substantial ground of appeal arises in this case under s. 260A of the IT Act. Therefore, we do not see any reason to interfere with the factual finding recorded by the Tribunal.
Conclusion
6. Accordingly, we answer both the above questions in the negative i.e., in favour of the Department and against the assessee.
7. In the circumstance, appeal stands dismissed with no order as to costs. In view of our findings to the above two questions, it is not necessary for us to answer question No. (iii).
[Citation : 263 ITR 324]
