Asst. CIT, Circle-6, Pune V. Suzlon Infrastructure Services Limited, Pune

ITA 1039/PUN/2013

• Counselvise Citation: 103924514 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 08-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Assessee Lawyers: SANJAY N KAP ADIA
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1039/PN/2013 (A.Y: 2010-11) ACIT, CIRCLE-6, PUNE APPELLANT VS. SUZLON INFRASTRUCTURE SERVICES LIMITED ONE EARTH, HADAPSAR, PUNE 411028 PAN: AADCS0451M RESPONDENT ITA NO.784/PN/2013 (A.Y: 2008-09) SUZLON INFRASTRUCTURE SERVICES LIMITED ONE EARTH, HADAPSAR, PUNE 411028 PAN: AADCS0451M APPELLANT VS. ADDL.CIT, RANGE-6, PUNE RESPONDENT ITA NO.785/PN/2013 (A.Y: 2010-11) SUZLON INFRASTRUCTURE SERVICES LIMITED ONE EARTH, HADAPSAR, PUNE 411028 PAN: AADCS0451M APPELLANT VS. ACIT, CIRCLE-6, PUNE RESPONDENT ASSESSEE BY : SHRI SANJAY N . KAPADIA DEPARTMENT BY : B.C. MALA KAR DATE OF HEARING: 11.08.2014 DATE OF ORDER : 28.08.2014 2 ITA NOS.1039, 784 & 785 OF 13 SUZLON INFRASTRUCTURE SERVICES LTD ORDER PER SHAILENDRA KUMAR YADAV, J.M: ONE APPEAL FILED BY THE REVENUE AND TWO APPEALS FI LED BY THE ASSESSEE PERTAIN TO THE SAME ASSESSEE ON COMMON ISSUES AGAINST THE RESPECTIVE ORDERS OF COMMISSIONER OF IN COME TAX (APPEAL)-III, PUNE. 2. IN ITA NO.1039/PN/2013, THE REVENUE HAS FILED TH E APPEAL ON THE FOLLOWING GROUNDS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LEARNED CIT (APPEALS) IS CONTRARY TO L AW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT IN CASE WHERE ASSESSEE EXERCISES TH E OPTION OF INITIAL ASSESSMENT YEAR, SET OFF OF LOSSES OF YE ARS EARLIER THAN INITIAL YEARS WILL NOT BE CONSIDERED FOR CALCU LATING DEDUCTION UNDER SECTION 80IA OF THE INCOME-TAX ACT, 1961. 3. THE LEARNED CIT (APPEALS) HAS ERRED IN NOT FOLLOWIN G THE DECISION OF THE APEX COURT AND THE JURISDICTIONAL H IGH COURT WHILE DECIDING THE ISSUE OF DEDUCTION U/S.80IA OF T HE INCOME-TAX ACT, 1961. 4. FOR THIS AND SUCH OTHER REASONS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE ID. CIT (A) MAY B E VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURS E OF THE APPELLATE PROCEEDINGS BEFORE THE HON'BLE ITAT. 2.1 THE ASSESSEE COMPANY IS CLAIMED TO BE ENGAGED I N THE BUSINESS OF PROJECT EXECUTION FOR INSTALLATION OF W INDMILLS, ITS OPERATION AND MAINTENANCE AND MANUFACTURING OF TRAN SFORMERS. RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W AS FILED ON 05.10.2010 WHICH WAS SUBSEQUENTLY REVISED ON 13.02. 2012 DECLARING TOTAL INCOME OF RS.56,48,21,980/-. IN SC RUTINY ASSESSMENT, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS 3 ITA NOS.1039, 784 & 785 OF 13 SUZLON INFRASTRUCTURE SERVICES LTD CLAIMED DEDUCTION U/S.80IA(4)(IV) OF THE I.T. ACT I N RESPECT OF THE FOLLOWING INDEPENDENT POWER GENERATION UNITS. UNDERTAKING AMOUNT OF DEDUCTION CLAIMED MAHARASHTRA RS. 13,58,389/ - RAJASTHAN RS. 46,38,201/ - TAMILNADU RS. 18,11,204/ - TOTAL RS. 78,07,793/ - 2.2 THE ASSESSEE WAS CALLED UPON BY THE ASSESSING O FFICER TO CLARIFY AS TO WHETHER THE DEDUCTION CLAIMED WAS COM PUTED IN TERMS OF SEC.80IA(1) R.W.S. 80IA(5). IN RESPONSE T O THE SAME, THE ASSESSEE CONTENDED THAT FOR CLAIMING THE DEDUCTION U/S.80IA(1), THE OPTION GIVEN BY THE PROVISIONS OF SEC.80IA(2) O F SELECTING THE PERIOD OF TEN CONSECUTIVE ASSESSMENT YEARS OUT OF T HE BLOCK OF FIFTEEN YEARS WAS VESTED WITH THE ASSESSEE, WHICH W AS CLAIMED TO HAVE BEEN EXERCISED FOR ITS VARIOUS UNDERTAKINGS AS UNDER:- LOCATION OF UNDERTAKING INITIAL ASSESSMENT YEAR CHOSEN AS PER OPTION AVAILABLE U/S.80IA(2) MAHARASHTRA A.Y. 2007 - 08 RAJASTHAN A.Y. 2009 - 08 TAMILNADU A.Y. 2010 - 11 2.3 IN THIS BACKGROUND, IT WAS ARGUED ON BEHALF OF THE ASSESSEE THAT SINCE THE OPTION OF CHOOSING THE INITIAL ASSES SMENT YEAR FOR VARIOUS UNDERTAKINGS WERE EXERCISED AS ABOVE, THE P ROVISIONS OF SECTION 80IA WERE APPLICABLE TO UNDERTAKINGS FROM T HOSE ASSESSMENT YEARS ONLY AND THEREFORE, THE EXPENSES I NCURRED PRIOR TO THOSE ASSESSMENT YEARS IN THE CASE OF RESPECTIVE UNDERTAKINGS WERE NOT TO BE CONSIDERED WHILE COMPUTING DEDUCTION U/S.80IA. IN SUPPORT OF THIS ARGUMENT, THE ASSESSEE PLACED RE LIANCE ON VARIOUS DECISIONS INCLUDING ITAT, PUNE IN THE CASE OF SERUM INTERNATIONAL LTD. VS. ADDL. CIT, PUNE (2012 TIOL 9 6, PUNE). THE ASSESSING OFFICER DID NOT ACCEPT THIS CONTENTION OF THE ASSESSEE. HE OBSERVED THAT THE SECTION 80IA(5) CLEARLY PROVID ED THAT THE 4 ITA NOS.1039, 784 & 785 OF 13 SUZLON INFRASTRUCTURE SERVICES LTD INCOME OF THE ELIGIBLE UNITS TO WHICH PROVISIONS OF SEC. 80IA(1) SHALL APPLY, IS TO BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING TH E PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO B E MADE. ACCORDING TO THE ASSESSING OFFICER, INITIAL ASSESSM ENT YEAR REFERRED TO IN SEC.80-IA IS THE ASSESSMENT YEAR IN WHICH THE BUSINESS OF POWER GENERATION WAS COMMENCED AND NOT THE ASSESSMENT YEAR CHOSEN BY THE ASSESSEE U/S.80IA(2) FOR CLAIMING THE DEDUCTION AS SOUGHT TO BE ARGUED BY THE ASSESSE E. THE ASSESSING OFFICER PLACED RELIANCE ON THE DECISION O F THE SPECIAL BENCH OF THE AHMEDABAD ITAT IN THE CASE OF GOLDMINE SHARES AND FINANCE (P) LTD. (116 TTJ (AHD.)(SB) 705). NOT ING THAT THE ASSESSEE HAS APPLIED THE PROVISIONS OF SEC.80IA(5) FROM THE ASSESSMENT YEAR CHOSEN BY IT U/S.80IA(2) AND THEREB Y DID NOT CARRY FORWARD THE DEPRECIATION ALLOWANCE PERTAINING TO ASSESSMENT YEARS PRIOR TO SUCH ASSESSMENT YEAR, THE ASSESSING OFFICER HELD THAT THE DEDUCTION COMPUTED BY THE ASS ESSEE U/S.80IA(1) R.W.S. 80IA(5) WAS INCORRECT. REGARDIN G THE ASSESSEES RELIANCE ON THE DECISION OF SERUM INTERN ATIONAL LTD. (SUPRA), THE ASSESSING OFFICER HELD THAT THE SAME W AS BEING CHALLENGED BEFORE THE JURISDICTIONAL HIGH COURT. A PPLYING THE ABOVE DECISION IN RESPECT OF TAMILNADU UNDERTAKING WAS HELD TO BE ALLOWABLE SINCE IT WAS FOUND BY THE ASSESSING OF FICER THAT THE UNABSORBED DEPRECIATION NOTIONALLY CARRIED FORWARD BY APPLYING THE PROVISIONS OF SECTION 80IA(5) DID NOT GET SET O FF FULLY DURING THE YEAR, PROMPTING THE ASSESSING OFFICER TO DISALL OW THE ENTIRE CLAIM OF DEDUCTION OF RS.18,11,204/- MADE IN RESPEC T OF THE SAID UNDERTAKING. 2.4 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE A UTHORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF THE 5 ITA NOS.1039, 784 & 785 OF 13 SUZLON INFRASTRUCTURE SERVICES LTD ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) HAS ALLOWED THE ASSESSEES CLAIM U/S.80IA OF RS.18,11204/- IN R ESPECT OF TAMILNADU UNDERTAKING. THE SAME HAS BEEN OPPOSED B EFORE US ON BEHALF OF THE REVENUE, INTER ALIA, SUBMITTED THA T THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT IN CA SE WHERE ASSESSEE EXERCISES THE OPTION OF INITIAL ASSESSMENT YEAR, SET OFF OF LOSSES OF YEARS EARLIER THAN INITIAL YEARS WILL NOT BE CONSIDERED FOR CALCULATING DEDUCTION UNDER SECTION 80IA OF THE INC OME-TAX ACT, 1961. ACCORDINGLY, THE ORDER OF CIT(A) BE SET ASID E AND THAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, THE LEARNED AUTHORIZED REPRESENTATIVE HAS SUPPORTED THE ORDER O F CIT(A) WHICH HAS BEEN RENDERED BY FOLLOWING THE DECISION O F SERUM INTERNATIONAL (SUPRA). 2.5 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT AS PER PROVISIONS OF SUB-SECTI ON 2 OF 80IA OF THE ACT WHICH PROVIDES THE COMPUTATION SPAN OF 15 Y EARS, THE DEDUCTION COULD BE CLAIMED FOR ANY TEN CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YEARS BEGINNING FROM THE YEAR IN WH ICH UNDERTAKING GENERATES POWER. THE INSTALLATIONS OF WINDMILLS INVOLVES HUGE CAPITAL AND RETURN ON CAPITAL MAY BE ACHIEVED OVER A LONG PERIOD OF TIME BEGINNING FROM FEW YEARS OF I NSTALLATION UP TO 15 YEARS. IT IS ONLY FOR THIS PURPOSE, THE LEGI SLATURE PROVIDED AN OPTION THAT THE ENTERPRISE INVOLVED IN GENERATIO N OF POWER WILL BE FREE TO CHOOSE A SPAN OF TEN SUCCESSIVE YEARS OU T OF 15 YEARS FROM THE YEAR OF GENERATION DURING WHICH IT MAY PRE FER TO CLAIM THE DEDUCTION U/S.80IA. THE OPTION AVAILABLE TO TH E ASSESSEE DOES NOT SHIFT THE INITIAL YEAR FROM FIRST YEAR OF GENERATION TO POWER TO THE FIRST YEAR OF CLAIMING THE DEDUCTION B Y THE ASSESSEE. THE EXPRESSION 15 YEARS BEGINNING FROM THE YEAR IN WHICH UNDERTAKING OR ENTERPRISE GENERATES POWER USED IN S UB-SECTION (2) CLEARLY SUGGESTS THAT THE INITIAL ASSESSMENT YE AR IS THE YEAR IN WHICH GENERATION OF POWER STARTED. THUS, THE HARMO NIOUS 6 ITA NOS.1039, 784 & 785 OF 13 SUZLON INFRASTRUCTURE SERVICES LTD CONSTRUCTION OF SECTION 80IA(5) R.W.S. 80IA(2) IS T HAT THE INITIAL ASSESSMENT YEAR IN WHICH GENERATION OF POWER FROM W INDMILL BEGINS I.E. A.Y. 2007-08 AND NOT THE YEAR OF CLAIMI NG THE DEDUCTION FOR THE FIRST TIME I.E. A.Y. 2010-11. 2.6 HAVING HELD THAT THE INITIAL ASSESSMENT YEAR IS THE A.Y. 2007-08, THE NEXT ISSUE FOR CONSIDERATION ARISES IS WHETHER BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION OF THE WINDMILL PROJECT PERTAINING TO THE EARLIER YEARS WH ICH WERE ALREADY SET OFF AGAINST OTHER INCOME OF THE ASSESSE E COULD BE NOTIONALLY BROUGHT FORWARD AND SET OFF AGAINST THE INCOME FROM THE WINDMILL UNITS IN THE CURRENT YEAR FOR THE PURP OSE OF COMPUTING THE DEDUCTION IN RESPECT OF INCOME FROM E LIGIBLE BUSINESS. THE STAND OF THE ASSESSEE HAS BEEN THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN SETTING OFF NOTIONAL B USINESS LOSS AND UNABSORBED DEPRECIATION RELATING TO EARLIER YEARS A GAINST THE INCOME OF THE CURRENT YEAR FROM THE WINDMILL PROJEC T. ACCORDING TO THE ASSESSEE, SUCH NOTIONAL BUSINESS LOSS, UNABS ORBED DEPRECIATION, WHICH WERE ALREADY SET OFF AGAINST OT HER INCOME OF THE ASSESSEE IN THE EARLIER YEARS, WAS NOT CALLED FOR AND NOT CONTEMPLATED UNDER THE PROVISIONS OF SECTION 80IA O F THE ACT. THE DISALLOWANCE BASED ON SUCH IMAGINARY AND NOTION AL BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION ON WINDM ILL PROJECTS PERTAINING TO EARLIER YEARS WHICH WERE ALREADY SET OFF AGAINST OTHER INCOME OF THE ASSESSEE WAS NOT CORRECT STATED ON BEHALF OF THE ASSESSEE. 2.7 WE FIND THAT ITAT, PUNE IN THE CASE OF SERUM IN TERNATIONAL LTD. IN ITA NOS.290 TO 292/PN/2010 DATED 28.09.2011 FOR A.YS. 2004-05 TO 2006-07 FOLLOWING THE DECISION OF THE HO NBLE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING M ILLS (P) LTD. 38 DTR 57 HELD THAT WHEN THE ASSESSEE EXERCISING TH E OPTION, ONLY LOSSES OF THE YEAR BEGINNING FROM INITIAL ASSE SSMENT YEARS 7 ITA NOS.1039, 784 & 785 OF 13 SUZLON INFRASTRUCTURE SERVICES LTD ARE TO BE BROUGHT FORWARD AND NOT LOSSES OF THE EAR LIER YEAR, WHICH HAVE ALREADY SET OFF AGAINST OTHER INCOME OF THE ASSESSEE. SINCE THE CIT(A) GRANTED RELIEF TO THE ASSESSEE BY FOLLOWING THE SERUM INTERNATIONAL (SUPRA), WE ARE NOT INCLINED TO INTERFERE WITH HIS FINDING, WHO GRANTED RELIEF TO THE ASSESSEE ON THE ISSUE OF DEDUCTION U/S.80IA AS DISCUSSED ABOVE. 2.8 AS A RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 3. IN ITA NO.784/PN/2013 FOR A.Y. 2008-09, THE ASSE SSEE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS. 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE MA DE BY AO IN RESPECT OF CLAIM OF LOSS OF RS. 4 CR. SUFFERE D BY THE APPELLANT ON ACCOUNT OF MISAPPROPRIATION OF GOODS ERRONEOUSLY CONCLUDING THAT THE APPELLANT HAS NOT B EEN ABLE TO SUBSTANTIATE THE LOSS WITH ANY EVIDENCE OTHER TH AN FIR AND THE SUBJECT LOSS CANNOT BE SAID TO HAVE CRYS TALLIZED DURING YEAR UNDER CONSIDERATION IN UTTER IGNORANCE OF CIRCULAR NO.35-D (XLVII-20) [F.NO.10/48/65-IT(A-I)] , DATED 24-11-1965 AS WELL AS JUDICIAL PRONOUNCEMENT OF VAR IOUS HIGH COURTS AND TRIBUNALS REFERRED TO DURING THE CO URSE OF HEARING WHICH IS ABSOLUTELY ILLEGAL AND BAD IN LAW. 2. THAT ID.CIT(A) HAS GROSSLY ERRED IN CONFIRMING DISALLOWANCE MADE BY AO IN RESPECT OF CLAIM O F LOSS OF RS. 4 CR. SUFFERED DURING THE YEAR UNDER CONSIDERAT ION IGNORING :- - FIRST INFORMATION REPORT FILED BY THE APPELLANT W ITH THE POLICE AND THE ADJUDICATION PROCEEDINGS OF THE ACCU SED BEFORE THE COURT - CERTIFICATE OF ADVOCATE ON THE SUBJECT MATTER - DISCLOSURE AND THE ACCOUNTING OF THE MATTER IN TH E AUDITED BALANCE SHEET AND BOOKS OF ACCOUNTS OF THE APPELLANT - WRITTEN SUBMISSIONS MADE BY THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS 8 ITA NOS.1039, 784 & 785 OF 13 SUZLON INFRASTRUCTURE SERVICES LTD 3. THE LEARNED CIT(A) HAS ALSO ERRED IN DISALLOWING CLAIM OF LOSS JUST ON THE BASIS OF SOME CONTRADICTION IN QUESTION AND ANSWER OBSERVED BY THE ASSESSING OFFICER WHILE RECORDING THE STATEMENT U/S 131 OF TH E I.T ACT WITHOUT; - REJECTING THE BOOKS OF ACCOUNTS OF THE APPELLANT, WHICH IS THE PRIME REQUIREMENT FOR MAKING ANY ADDITION/DISALLOWANCE AS HELD IN THE CASE OF SARGAM CINEMA VS. CIT (2011) 241 CTR (SC) 179 - THERE BEING ANY OTHER JUSTIFIABLE REASONS FOR DISALLOWING THE LOSS - CALLING FOR ANY DOCUMENTS AND GIVING FAIR AND REASONABLE OPPORTUNITY TO THE APPELLANT FOR PERSONAL HEARING 4. THE APPELLANT CRAVES TO ADD, AMEND, ALTER, SUBST ITUTE, MODIFY ANY OR ALL THE ABOVE GROUNDS OF APPEAL, IF NECESSARY, ON THE BASIS OF SUBMISSIONS TO BE MADE A T THE TIME OF PERSONAL HEARING. 3.1 THE ASSESSING OFFICER NOTED IN THE NOTES TO THE ACCOUNTS ATTACHED WITH AUDIT REPORT FILED WITH THE RETURN OF INCOME, FOLLOWING STATEMENT WAS MADE. DURING THE YEAR, THE COMPANY HAS SUSPECTED A MISAPPROPRIATION OF SOME OF THE PROJECT RELATED MAT ERIALS AMOUNTING TO RS.40 MILLION INVOLVING THEREIN FEW OF THE EMPLOYEES OF THE COMPANY AT THE PROJECT SITES IN TH E STATE OF GUJARAT AND THE SAME HAS BEEN CHARGED OFF TO PROFIT AND LOSS ACCOUNT. MANAGEMENT HAS INITIATED ACTION AGAI NST THE CONCERNED EMPLOYEES AND THE MATTER IS CURRENTLY UND ER INVESTIGATION. 3.2 THE ASSESSEE WAS CALLED UPON BY THE ASSESSING O FFICER TO FURNISH THE RELEVANT DETAILS OF THE ALLEGED INCIDEN T, COPY OF FIR FILED ETC. BY ITS LETTER DATED 21.12.2010 FILED BE FORE THE ASSESSING OFFICER, THE DETAILS OF GOODS ALLEGEDLY STOLEN WERE FURNISHED TO BE AS UNDER:- A) 13 SETS OF COPPER CABLE HAVING ESTIMATED VALUE OF R S.3.51 CRORES 9 ITA NOS.1039, 784 & 785 OF 13 SUZLON INFRASTRUCTURE SERVICES LTD B) 8 PIECES OF ALUMINUM DRUM HAVING ESTIMATED VALUE OF 0.19 CRORES C) 764 PIECES OF STEEL ANCHOR BELT HAVING ESTIMATED VA LUE OF RS.0.09 CRORES D) 4 SETS OF STEEL ANCHOR PLATE HAVING ESTIMATED VALUE OF RS.0.12 CRORES 3.3 IT WAS FURTHER CLARIFIED THAT THE ACCUMULATED V ALUE OF THE ABOVE ITEMS STOOD AT RS.3.91 CRORES AS AGAINST RS.3 .81 CRORES MENTIONED IN THE FIR WHICH WAS ATTRIBUTED TO TOTALI NG MISTAKE. THE REMAINING AMOUNT OF RS.9 LAKHS WAS CLAIMED TO B E ON ACCOUNT OF VAT AND OTHER TAXES. THE BACKGROUND OF THE CASE AS PER THE ASSESSEE IS THAT THE ALLEGED THEFT HAD BEEN COMMITTED BY THE EMPLOYEE OF THE ASSESSEE COMPANY NAMELY SHAILES H GUPTA, WORKING AS STORES IN-CHARGE FOR CENTRAL STORES AT M OTI SINDHORI KUTCH, GUJARAT AND RADHAKRISHNA YADAV WORKING AS AS SISTANT STORE. EXPLAINING THE MODUS OPERANDI, IT WAS CONTE NDED THAT SHAILESH GUPTA WAS RESPONSIBLE FOR BOTH THE RECEIPT OF MATERIAL FROM VENDOR / SUPPLIER AND MAKING ENTRY OF INWARDS OF MATERIAL IN SAP. ACCORDING TO THE ASSESSEE, SHAILESH GUPTA ALONG WITH RADHAKRISHNA YADAV DIVERTED SOME OF THE TRUCKS CARR YING CABLES AND OTHER MATERIAL RECEIVED FOR PROJECT EXECUTION P URPOSES TO THE STORE OF THE SCRAP DEALER, RAMPAL CHAUDHARY INSTEAD OF UNLOADING THEM AT THE STORE PREMISES OF THE ASSESSE E, WHO IN TURN, SOLD THE SAME TO THIRD PARTIES BY IMPERSONATI ON THAT THE SAID MATERIALS WERE PURCHASED BY HIM FROM THE ASSES SEE. IN COMPLIANCE WITH THE CALL OF THE ASSESSING OFFICER T O PRODUCE THE SUPERVISOR/MANAGER OF THE SITE WHERE THE MISAPPROPR IATION OF THE GOODS CLAIMED TO HAVE TAKEN PLACE, SHRI HITESH PARM AR, DGM (PROJECTS) OF THE ASSESSEE COMPANY ATTENDED BEFORE THE ASSESSING OFFICER WHOSE STATEMENT WAS RECORDED BY THE ASSESSI NG OFFICER U/S.131 OF THE I.T. THE SAID STATEMENT IS REPRODUC ED BY THE ASSESSING OFFICER AT PAGE NO.5 TO 11 OF THE ASSESSM ENT ORDER. SIMILARLY, A TRANSLATED VERSION OF THE FIR FILED BY THE ASSESSEE 10 ITA NOS.1039, 784 & 785 OF 13 SUZLON INFRASTRUCTURE SERVICES LTD COMPANY WITH THE POLICE STATION WAS ALSO REPRODUCED AT PAGE NO.12 OF THE ASSESSMENT ORDER. HOWEVER, ACCORDING TO THE ASSESSING OFFICER, THERE WAS SOME GROSS INCONSISTEN CIES WITH THE FACTS MENTIONED IN THE FIR AND THE STATEMENT OF MR. SHRI HITESH PARMAR, DGM (PROJECTS) WHICH WERE HIGHLIGHTED BY TH E ASSESSING OFFICER AS UNDER: I) WHILE THERE WERE THREE EMPLOYEES OF THE ASSESSE E COMPANY NAMED AS ACCUSED IN THE STATEMENT I.E. VIMA L SHAH FROM VADODRA, SHAILESH SATYAPRAKASH GUPTA RESIDENT OF MANDVI ORIGINAL RESIDENT OF VIRAMGAON A ND RADHAKRISHNA R, YADAV, RESIDENT OF NALIA ORIGINAL RESIDENT OF VADODRA, MR. HITESH PARMAR DID NOT MENTION THE NAME OF MR. VIMAL SHAH WHILE GIVING REP LY TO Q.NO.5. SUBSEQUENTLY, IT WAS REVEALED TO HIM TH AT DEPARTMENT HAS A TRANSLATED COPY OF THE FIR IN ENGLISH AND THE NAME OF MR. VIMAL SHAH FIGURES IN I TS. ON BEING CONFRONTED IN Q.NO.15 HE TRIED TO COVER UP BY STATING THAT NO EVIDENCE WAS FOUND AGAINST MR. VIMA L SHAH. II) IN THE FIR IT WAS CLEARLY MENTIONED THAT THE GO ODS WITH THE ASSESSEE COMPANY CLAIMED AS MISAPPROPRIATED WERE RECEIVED FROM THE PRODUCTION SITE OF THE COMPA NY, HOWEVER, IN THE STATEMENT. MR. HITESH PARMAR, IN REPLY TO QUESTION NO.5 STATED THAT THE RAW MATERIAL WAS RECEIVED FROM VARIOUS VENDORS. WHEN SUBSEQUENTLY, IT WAS REVEALED TO HIM THAT THE DEPARTMENT HAS A TRANSLATED COPY OF THE FIR IN ENGLISH IN WHICH IT I S CLEARLY STATED THAT THE RAW MATERIAL IS RECEIVED FR OM THE PRODUCTION CENTRE OF THE ASSESSEE COMPANY, THEN IN REPLY TO Q.NO.19 HE AGREED THAT RAW MATERIAL WAS RECEIVED FROM THE PRODUCTION CENTRE OF COMPANY AT PONDICHERRY. III) FURTHER, IN THE FIR IT WAS ALSO MENTIONED THAT HUGE AMOUNTS WERE FOUND DEPOSITED IN THE THREE BANKS I.E . SBI VEERANGOAM, HDFC BANK AHMEDABAD AND BANK OF BARODA HELD IN THE NAME OF MR. SHAILESH GUPTA. HOWEVER, THESE DETAILS WERE NOT REVEALED BY MR. HIT ESH PARMAR UNTIL HE WAS CONFRONTED IN Q.NO.20. 3.4 ACCORDING TO THE ASSESSING OFFICER, THE CLAIM O F THE ASSESSEE OF HAVING LOST GOODS DUE TO MISAPPROPRIATION LACKED CREDENCE IN THE LIGHT OF THE ABOVE DISCREPANCIES AND INCONSISTE NCIES IN THE 11 ITA NOS.1039, 784 & 785 OF 13 SUZLON INFRASTRUCTURE SERVICES LTD STATEMENT OF THE DGM (PROJECTS) WHO WAS PURPORTEDLY CLOSELY ASSOCIATED WITH THE ENTIRE EPISODE AND WHO, ACCORDI NG TO THE ASSESSING OFFICER, WAS HIDING CRUCIAL FACTS. THE A SSESSING OFFICER WAS SURPRISED AS TO WHY THE ASSESSEE WAS NOT ABLE T O QUANTIFY THE LOSS AS ON THE DATE OF LODGING FIR AND THEREAFT ER ALSO, EVEN TILL THE DATE OF ASSESSMENT AND ALSO AS TO WHY THE ASSES SEE ATTEMPTED TO CONCEAL THE FACT THAT THE RAW MATERIAL WAS RECEIVED FROM ITS PRODUCTION HOUSE. AS PER THE ASSESSING OF FICER, THE ENTIRE DOCUMENTATION CREATED BY THE ASSESSEE WAS IN TENDED TO FABRICATE EVIDENCE TO FILE AN FIR. FURTHER, THE AS SESSING OFFICER ALSO NOTED THAT BOTH THE MAIN ACCUSED, VIZ. MR. SAT YAPRAKASH GUPTA AND RAMPAL BASTIRAM CHAUDHARY WERE OUT ON BAI L GRANTED BY THE HIGH COURT OF GUJARAT ON THE GROUND THAT THE RE WERE NO DEFINITE ALLEGATIONS MADE AGAINST THE APPLICANTS. IT WAS ALSO NOTED BY THE ASSESSING OFFICER THAT NO CHARGES HAVE BEEN PROVED AGAINST THE ACCUSED EVEN AFTER TWO YEARS OF FILING OF THE FIR. ACCORDING TO THE ASSESSING OFFICER, THE ENTIRE EPIS ODE OF MISAPPROPRIATION OF RAW MATERIAL HAS BEEN FABRICATE D. HE ALSO NOTED THAT DISCREPANCY IN THE FIR COULD ALSO NOT BE EXPLAINED PROPERLY AS ACCORDING TO THE ASSESSING OFFICER THE REASON GIVEN BY THE ASSESSEE THAT THE DIFFERENTIAL VALUE REPRESENTE D VAT AND OTHER FACTS WAS NOT TENABLE SINCE SUCH TAXES ALREAD Y FORM PART OF THE VALUE OF THE GOODS. THUS, THE ASSESSING OFFICE R CONCLUDED THAT THE ABOVE ASPECTS PROVED THAT THE CLAIM WAS NO T GENUINE AND ACCORDINGLY, THE LOSS CLAIMED OF RS.4 CRORES DE BITED TOWARDS MISAPPROPRIATION OF RAW MATERIAL WAS DISALLOWED, WH ICH WAS CONFIRMED BY THE CIT(A). 3.5 BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIV E HAS SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN CONF IRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IN RESPE CT OF CLAIM OF LOSS OF RS.4 CRORES SUFFERED BY THE ASSESSEE ON ACC OUNT OF MISAPPROPRIATION OF GOODS ERRONEOUSLY CONCLUDING TH AT THE 12 ITA NOS.1039, 784 & 785 OF 13 SUZLON INFRASTRUCTURE SERVICES LTD ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THE LOSS WITH ANY EVIDENCE OTHER THAN FIR AND THE LOSS IN QUESTION CO ULD NOT BE SAID TO HAVE BEEN CRYSTALLIZED DURING THE YEAR UNDE R CONSIDERATION IN UTTER IGNORANCE OF CIRCULAR NO.35- D (XLVII-20) (F.NO.10/48/65-IT(A-I), DATED 24.11.1965 AS WELL AS JUDICIAL PRONOUNCEMENT OF VARIOUS HIGH COURTS AND TRIBUNALS RELIED ON BY HIM BEFORE THE AUTHORITIES BELOW. THE REVENUE A UTHORITIES HAVE ALSO IGNORED THE FACT THAT CIVIL PROCEEDINGS B Y VIRTUE OF WHICH THE ASSESSEE HAD FILED CLAIM AGAINST THE RESP ONDENT IN CIVIL PROCEEDINGS PENDING BEFORE THE CONCERNED CIVI L COURTS WHICH IS ANNEXED ON PAGES 28 TO 36 OF THE PAPER BOOK FILE D BY THE ASSESSEE. HE HAS ALSO IGNORED THE CERTIFICATE GIVE N BY ADVOCATE WITH REGARD TO PENDENCY OF CIVIL AND CRIMINAL PROCE EDINGS WHICH IS PLACED ON PAGES 71 TO 127 OF THE PAPER BOOK FILE D BY THE ASSESSEE. THE CIT(A) HAS ALSO ERRED IN IGNORING TH E FACT THAT THE CIVIL AND CRIMINAL PROCEEDINGS AS CERTIFIED BY ADVO CATE OF THE ASSESSEE, WHICH IS PLACED ON PAGES 137 TO 139 OF TH E PAPER BOOK FILED BY THE ASSESSEE, WHICH ESTABLISHED THE FACT O F PENDENCY OF CIVIL AND CRIMINAL CASE AGAINST THE RESPONDENT. TH E ASSESSEE HAS ALSO RELIED ON CASE LAWS AND REQUESTED THAT THE DIS ALLOWANCE IN QUESTION HAS TO BE DELETED BECAUSE THE LOSS WAS CRY STALLIZED IN A.Y. 2010-11. ON THE OTHER HAND, THE LEARNED DEPAR TMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF CIT(A) FO R A.YS. 2008- 09 AND 2010-11 WITH REGARD TO THE DISALLOWANCE OF L OSS OF RS.4 CRORES AS DISCUSSED ABOVE AND SET OFF OF THE SAME I N A.Y. 2010- 11. 3.6 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROJECT EXECUTION FOR INSTALLATION OF WINDMILLS, IT S OPERATION AND MAINTENANCE AND MANUFACTURING OF TRANSFORMERS. THE ASSESSEE HAS CLAIMED MISAPPROPRIATION OF SOME PROJECT RELATE D MATERIAL AMOUNTING TO RS.4 CRORES INVOLVED BY FEW EMPLOYEES OF THE 13 ITA NOS.1039, 784 & 785 OF 13 SUZLON INFRASTRUCTURE SERVICES LTD COMPANY AT PROJECT SITE IN THE STATE OF GUJARAT AND THE SAME HAS BEEN CHARGED TO PROFIT AND LOSS ACCOUNT. THE DETAI LS OF THE GOODS ALLEGED TO HAVE BEEN STOLEN ARE AS UNDER: A) 13 SETS OF COPPER CABLE HAVING ESTIMATED VALUE OF R S.3.51 CRORES B) 8 PIECES OF ALUMINUM DRUM HAVING ESTIMATED VALUE OF 0.19 CRORES C) 764 PIECES OF STEEL ANCHOR BELT HAVING ESTIMATED VA LUE OF RS.0.09 CRORES D) 4 SETS OF STEEL ANCHOR PLATE HAVING ESTIMATED VALUE OF RS.0.12 CRORES AN FIR TO THAT EFFECT FILED BY THE ASSESSEE VIDE NO .03/08 DATED 08.04.2008 WITH THE JAKHAU POLICE STATION, KU TCH AND THE CHARGE SHEET HAS BEEN FILED BY THE CONCERNED POLICE IN THE COURT OF HONBLE JUDICIAL MAGISTRATE FIRST CLASS, NALIYA IN WHICH CASE HAS BEEN REGISTERED AGAINST THE ACCUSED SHAILESH SA TYA PRAKASH GUPTA, RADHAKRISHNA R. YADAV, RAMPAL CHAUDHARY, BIM AL BHAILALBHAI AND OTHERS UNDER THE PROVISIONS OF SECT ION 408, 409, 411, 420, 465, 467, 468, 471 AND 120B OF INDIAN PEN AL CODE. IT WAS ALSO FOUND FROM THE DETAILS THAT RADHAKRISHNA Y ADAV IS ABSCONDING AND BECAUSE OF THIS, FURTHER PROCEEDINGS COULD NOT TAKE PLACE. IT WAS FOUND FROM THE ORDER SHEET OF S AID CASE THAT THE ACCUSED HAVE BEEN RELEASED ON BAIL AND THE PROC EEDINGS ON CRIMINAL CASE ARE PENDING AGAINST THEM UNDER THE AB OVE SECTIONS OF IPC. BESIDES, IT WAS FOUND THAT CIVIL PROCEEDIN GS HAVE ALSO BEEN FILED BY THE ASSESSEE AGAINST SHAILESH SATYA P RAKASH, RADHAKRISHNA BEFORE THE HONBLE PRINCIPAL CIVIL JUD GE, BHUJ- KACHCHH AND THE MATTER IS SUB JUDICE FOR RECOVERY O F LOSS. 3.7 ACCORDING TO THE ASSESSEE, SHAILESH GUPTA WAS R ESPONSIBLE FOR BOTH THE RECEIPT OF MATERIAL FROM VENDOR / SUPP LIER AND MAKING ENTRY OF INWARDS OF MATERIAL IN SAP. ACCORD ING TO THE 14 ITA NOS.1039, 784 & 785 OF 13 SUZLON INFRASTRUCTURE SERVICES LTD ASSESSEE, SHAILESH GUPTA ALONG WITH RADHAKRISHNA YA DAV DIVERTED SOME OF THE TRUCKS CARRYING CABLES AND OTH ER MATERIAL RECEIVED FOR PROJECT EXECUTION PURPOSES TO THE STOR E OF THE SCRAP DEALER, RAMPAL CHAUDHARY INSTEAD OF UNLOADING THEM AT THE STORE PREMISES OF THE ASSESSEE, WHO IN TURN, SOLD T HE SAME TO THIRD PARTIES BY IMPERSONATION THAT THE SAID MATERI ALS WERE PURCHASED BY HIM FROM THE ASSESSEE. IN COMPLIANCE WITH THE CALL OF THE ASSESSING OFFICER TO PRODUCE THE SUPERVISOR/ MANAGER OF THE SITE WHERE THE MISAPPROPRIATION OF THE GOODS CLAIME D TO HAVE TAKEN PLACE, SHRI HITESH PARMAR, DGM (PROJECTS) OF THE ASSESSEE COMPANY ATTENDED BEFORE THE ASSESSING OFFICER WHOSE STATEMENT WAS RECORDED BY THE ASSESSING OFFICER U/S.131 OF TH E I.T. THE SAID STATEMENT HAS BEEN REPRODUCED BY THE ASSESSING OFFICER AT PAGE NO.5 TO 11 OF THE ASSESSMENT ORDER. SIMILARLY , A TRANSLATED VERSION OF THE FIR FILED BY THE ASSESSEE COMPANY WI TH THE POLICE STATION WAS ALSO REPRODUCED AT PAGE NO.12 OF THE AS SESSMENT ORDER. HOWEVER, ACCORDING TO THE ASSESSING OFFICER , THERE WAS SOME GROSS INCONSISTENCIES WITH THE FACTS MENTIONED IN THE FIR AND THE STATEMENT OF MR. SHRI HITESH PARMAR, DGM (P ROJECTS) WHICH WERE HIGHLIGHTED BY THE ASSESSING OFFICER AS DISCUSSED ABOVE. BUT THE FACT REMAINS THAT CIVIL AND CRIMINA L PROCEEDINGS ARE PENDING AGAINST THE ABOVE SAID PERSONS WHICH HA S NOT BEEN DISPUTED. THE ASSESSING OFFICER HAS DOUBTED THE MISAPPROPRIATION OF MATERIAL ON THE GROUND THAT THE EVIDENCE COULD NOT BE SUBSTANTIATED BY THE ASSESSEE. IT IS NOT THE ASSESSING OFFICER BEFORE WHOM, THE ASSESSEE SHOULD SUBSTANTIATE THE CLAIM OF MISAPPROPRIATION, HE CAN ONLY GIVE BAS IC EVIDENCE FOR THE SAME. IT IS THE CIVIL AND CRIMINAL CASES WHERE THE ASSESSEE HAS TO PRODUCE EVIDENCE WITH REGARD TO MISAPPROPRIA TION IN QUESTION AND THE CONCERNED HONBLE CIVIL AND CRIMIN AL COURTS WILL REACH TO CERTAIN CONCLUSION WHICH ARE SUB JUDI CE. SO, IT IS NOT JUSTIFIED ON THE PART OF ASSESSING OFFICER AND CIT(A) TO OBSERVE THAT THE ASSESSEE HAS FAILED TO SUBSTANTIAT E THE 15 ITA NOS.1039, 784 & 785 OF 13 SUZLON INFRASTRUCTURE SERVICES LTD MISAPPROPRIATION WITH CREDIBLE AND COGNIZANT EVIDEN CE WHILE THE MATTER IS SUB JUDICE. THEY WERE ALSO NOT JUSTIFIED IN OBSERVING THAT THE LOSS IF ANY IS YET TO BE CRYSTALLIZED BECA USE THERE IS NOTHING ON RECORD TO SUGGEST THAT ANY RECOVERY HAS BEEN MADE FROM THE ACCUSED OR THE RESPONDENT IN CIVIL AND CRI MINAL PROCEEDINGS OR OTHERWISE. IN THE CASE, THERE IS A NY RECOVERY FROM THE ACCUSED PERSONS IN THE CRIMINAL PROCEEDINGS, TH E SAME IS NORMALLY RELEASED ON SUPERDARI BY THE CONCERNED COU RT ON THE TERMS AND CONDITIONS LAID DOWN IN SUPERDARI ORDER A ND THE COMPLAINANT ASSESSEE IS PROTECTED TO THAT EXTENT. WE FIND THAT ACCORDING TO BOARD CIRCULAR NO. 35-D (XLVII-20) [F. NO.10/48/65- IT(A-I)], DATED 24-11-1965, WHEREIN JUDGMENT RELIED ON BY THE CIT(A) HAS BEEN CONSIDERED AND REVIEWED. THE RELEV ANT EXTRACT FROM THE SAME IS AS UNDER: 2. IN THE LIGHT OF THE ABOVE DECISIONS OF THE SUPR EME COURT, THE LEGAL POSITION NOW IS THAT LOSS BY EMBEZZLEMENT BY EMPLOYEES SHOULD BE TREATED AS INCIDENTAL TO A BUSI NESS AND THIS LOSS SHOULD BE ALLOWED AS DEDUCTION IN THE YEA R WHICH IT IS DISCOVERED. THE LOSS HAS BEEN ACCOUNTED FOR AS PER ACCOUNTING STANDARDS APPLICABLE IN THIS REGARD. 3.8 WE FIND THAT THE ITAT, CUTTACK BENCH IN THE CAS E OF VENKATESWARA INDUSTRIES VS. ITO (1978) 5 TTJ (CTK) 177 HAS HELD THAT LOSS BY THEFT BY EMPLOYEE OF THE ASSESSEE FIRM IS ALLOWABLE EXPENDITURE. IN THE SAID CASE, LOSS ESTIMATED AT R S.50,926/- ON STOCK TAKING. ADMISSION WAS MADE BY THE EMPLOYEE F OR COMPOUNDING OF OFFENCE ENTERED ON PAYMENT OF RS.10, 000/-. THE BALANCE OF RS.50,926/- WAS ALLOWED AS BUSINESS EXPE NDITURE. IT IS PERTINENT TO MENTION HERE THAT IN THE CASE OF VE NKATESWARA INDUSTRIES (SUPRA) AFTER DROPPING THE CASE IN ABSEN CE OF SUFFICIENT EVIDENCE AGAINST THE ACCUSED EMPLOYEES, EVEN THEN T HE ASSESSEE WAS HELD ENTITLED TO DEDUCTION OF RS.50,926/-. IN THE CASE BEFORE 16 ITA NOS.1039, 784 & 785 OF 13 SUZLON INFRASTRUCTURE SERVICES LTD US, THE MATTER IS SUB JUDICE AND THE ACCUSED HAVE B EEN CHARGE SHEETED AND EVEN CIVIL CASES ARE PENDING. AS STATE D ABOVE, THERE IS NOTHING ON RECORD TO SUGGEST THAT ANY RECOVERY H AS BEEN MADE FROM THE ACCUSED PERSONS. SIMILAR OBSERVATIONS MAD E BY THE HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF DHEER AJ ASSOCIATES (P.) LTD. VS. CIT (2011) 11 TAXMANN.COM 213 (CAL.), WHEREIN THE POLICE COULD NOT RECOVER THE GOODS OR THAT GUILTY P ERSONS WERE NOT PUNISHED AND IT WAS HELD THAT IT COULD NOT GO AGAIN ST THE CLAIM OF THE ASSESSEE AND THE ASSESSEE WAS ENTITLED FOR DEDU CTION OF THE AFORESAID AMOUNT FOR LOSS SUFFERED BY THE ASSESSEE. 3.9 WE FIND THAT IN THE CASE OF BADRIDAS DAGA VS. C IT (1958) 34 ITR 10 (SC) THE HONBLE SUPREME COURT HAS HELD THAT LOSS SUSTAINED BY THE ASSESSEE AS A RESULT OF MISAPPROPR IATION BY THE EMPLOYEE, AGENT WAS ONE WHICH WAS INCIDENTAL TO THE CARRYING ON OF HIS BUSINESS AND THAT IT SHOULD THEREFORE BE DED UCTED IN COMPUTING THE PROFITS U/S.10(1) OF THE ACT. WE ALS O FIND THAT WHERE THERE IS A SCOPE OF REASONABLE PROSPECTS OF R ECOVERY OF EMBEZZLED AMOUNT, THE SAME IS NOT ALLOWABLE, HELD B Y THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CANA RA SALES CORPORATION LTD. VS. CIT (1989) 176 ITR 340 (KAR). BUT IN THE CASE BEFORE US, THERE IS NO REASONABLE PROSPECT OF RECOVERY OF MONEY BECAUSE IN SPITE OF ARREST OF THE ACCUSED PER SONS, NO RECOVERY HAS BEEN MADE AS ON DATE. THE LOSS ON ACC OUNT OF THEFT IS ALLOWABLE DEDUCTION AS BUSINESS LOSS WHERE FINDI NG IS THAT THE LOSS IS GENUINE AND REAL AND THERE IS NO POSSIBILIT Y OF RECOVERY DESPITE ISSUE OF NOTICE AS HELD BY THE HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF HARIJAN EVAM NIRBAL VARG A VAS NIGAM LTD. VS. CIT (1998) 229 ITR 776 (ALL). WE FIND THA T IN THE CASE OF SITAL PRASAD VS. CIT (1991) 187 ITR 135 (ALL), THE HONBLE HIGH COURT OF ALLAHABAD HAS HELD THAT A CLAIM OF BUSINES S LOSS DUE TO MISAPPROPRIATION BY THE ASSESSEE EMPLOYEES COULD NO T BE HELD TO BE PREMATURE SIMPLY BECAUSE CRIMINAL CASE WAS PENDI NG OR CIVIL 17 ITA NOS.1039, 784 & 785 OF 13 SUZLON INFRASTRUCTURE SERVICES LTD SUIT HAD NOT BEEN FILED. IN THE CASE BEFORE US, TH E CRIMINAL CASE IS ALSO PENDING AFTER ARREST OF THE ACCUSED PERSONS AND CIVIL CASE HAS BEEN FILED WHICH IS ALSO SUB JUDICE BEFORE THE CONCERNED COURTS AS DISCUSSED ABOVE. IT IS NOT IN DISPUTE TH AT THE MATERIAL EMBEZZLED WAS ENTRUSTED TO THE EMPLOYEES AS DISCUSS ED ABOVE AND THE SAME HAS BEEN MISAPPROPRIATED BY THE SAME P ERSONS AND THE CRIMINAL AND CIVIL CASES ARE PENDING AGAINS T THEM. SO, IT COULD NOT BE SAID THAT THE CLAIM OF MISAPPROPRIATIO N IS PREMATURE. THE RATIO OF BADRIDAS DAGA (SUPRA) HAS BEEN FOLLOWED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SAS OON J. DAVID AND CO. (P.) LTD. VS. CIT (1975) 98 ITR 50 (BOM). THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SMT. PUKHRAJ WATI BUBBER (2008) 296 ITR 290 (P&H) FOLLOW ING THE RATIO OF BADRIDAS DAGA (SUPRA) HAS HELD THAT LOSS D UE TO THE EMBEZZLEMENT BY EMPLOYEES IS DEDUCTABLE AS BUSINESS LOSS. IN VIEW OF ABOVE, WE HOLD THAT THE ASSESSEE IS ENTITLE D TO CLAIM THE LOSS OF RS.4 CRORES SUFFERED BY HIM ON ACCOUNT OF MISAPPROPRIATION OF GOODS AS DISCUSSED ABOVE. 4. COMING TO THE YEAR OF ALLOWABILITY AS RAISED IN A.Y. 2010-11, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS C LAIMED SET OFF OF UNABSORBED DEPRECIATION AND BUSINESS LOSSES PERT AINING TO THE A.Y. 2008-09 AGAINST THE INCOME OF A.Y. 2010-11. H OWEVER, THE ASSESSING OFFICER FOUND THAT WHILE FINALIZING THE A SSESSMENT FOR A.Y. 2008-09, THE ASSESSING OFFICER HAS MADE DISALL OWANCE OF RS.4,01,33,146/-. NOTING THAT THE CIT(A) WAS YET T O DECIDE THE APPEAL FILED BY THE ASSESSEE CHALLENGING THE SAID A DDITION, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF BROUGHT F ORWARD LOSS BY THAT AMOUNT. THE MATTER WAS CARRIED BEFORE FIRST A PPELLATE AUTHORITY CHALLENGING THE DENIAL OF BROUGHT FORWARD LOSSES BY THE ASSESSING OFFICER. IT WAS POINTED OUT ON BEHALF OF THE ASSESSEE THAT THE ASSESSEE HAS ALREADY FILED AN APPEAL BEFOR E CIT(A) AGAINST THE DISALLOWANCE OF RS.4,01,33,146/- MADE B Y THE AO IN 18 ITA NOS.1039, 784 & 785 OF 13 SUZLON INFRASTRUCTURE SERVICES LTD A.Y. 2008-09, AND THEREFORE, FOR THE YEAR UNDER CON SIDERATION, THE ASSESSING OFFICER OUGHT NOT TO HAVE DENIED THE BENE FIT OF SET-OFF OF UNABSORBED BROUGHT FORWARD BUSINESS LOSS AMOUNTING TO RS. 4,01,33,146/- AGAINST THE CURRENT YEAR'S INCOME. I T WAS THE STAND OF THE ASSESSEE THAT THE ASSESSING OFFICER MA Y ACCORDINGLY BE DIRECTED TO ALLOW THE SET-OFF OF BROUGHT FORWARD BUSINESS LOSS AGAINST THE CURRENT YEAR'S INCOME AS CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATI ON I.E. A.Y. 2010-11. HOWEVER, THE CIT(A) HAS OBSERVED THAT THE LOSS SOUGHT TO BE BROUGHT FORWARD RELATES TO THE ALLEGED MISAPP ROPRIATION OF CERTAIN RAW MATERIAL BY SOME OF THE EMPLOYEES OF TH E ASSESSEE COMPANY DURING THE PERIOD RELEVANT TO THE A.Y. 2008 -09. IN THE ASSESSMENT ORDER PASSED FOR THAT YEAR, THE CONCERNE D ASSESSING OFFICER HAS DENIED THE CLAIM ON THE GROUND THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE THAT THERE WAS MISAPPROPRIAT ION OR LOSS OF MATERIAL CLAIMED, RESULTING IN CONSEQUENT REDUCTION IN THE OVERALL LOSS FOR THAT YEAR SOUGHT TO BE CARRIED FORWARD. A CCORDING TO THE CIT(A), WHILE DECIDING THE APPEAL FILED BY THE ASSE SSEE FOR A.Y. 2008-09 WHEREIN THE SAID DISALLOWANCE WAS CONTESTED BY THE ASSESSEE, THE DISALLOWANCE OF THE CLAIM OF LOSS OF RS.4 CRORES MADE BY THE ASSESSING OFFICER WAS SUSTAINED IN THE APPELLATE ORDER DATED 30.11.2012 BY OBSERVING THAT:- (I) THE ASSESSEE FAILED TO SUBSTANTIATE THE CLAIM OF MISAPPROPRIATION WITH CREDIBLE AND COGENT EVIDENCE EXCEPT FILING A COPY OF FIR LODGED WITH THE POLICE. (II) EVEN OTHERWISE THE LOSS, IF ANY, IS NOT YET CRYSTAL LIZED AND IT COULD NOT BE SAID TO HAVE RESULTED IN A COMMERCIAL SENSE IN THE YEAR UNDER CONSIDERATION AN D IT WAS PREMATURE TO CLAIM THE IMPUGNED LOSS. 4.1 AS WE HAVE ALLOWED THE CLAIM OF LOSS IN THE YEA R 2008-09 AS DISCUSSED IN PARA 6.4 OF THIS ORDER WITH DETAILED R EASONING THEREON, IT IS UP TO THE ASSESSEES COMMERCIAL DECI SION AS FAR AS CRYSTALLIZATION OF THE SAME IS CONCERNED. UNDER TH E FACTS AND CIRCUMSTANCES, THE ASSESSEE HAS TAKEN THE DECISION OF 19 ITA NOS.1039, 784 & 785 OF 13 SUZLON INFRASTRUCTURE SERVICES LTD CRYSTALLIZATION FOR THE LOSS IN THE YEAR UNDER CONS IDERATION I.E. 2010-11. SO, THE ASSESSING OFFICER SHOULD NOT HAVE DENIED THE BENEFIT OF SET OFF OF BROUGHT FORWARD UNABSORBED BU SINESS LOSS OF RS.4,01,33,146/- AGAINST THE CURRENT YEARS INCOME AND THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. THIS TA KES CARE OF ASSESSEES APPEAL IN ITA NOS.784 & 785/PN/2013 FOR A.YS.2008- 09 & 2010-11 RESPECTIVELY. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED AND THAT OF APPEALS FILED BY THE ASSESSEE ARE ALLOWED A S INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 28 TH DAY OF AUGUST, 2014. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 28 TH AUGUST, 2014 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-III, PUNE 4) THE CIT-III, PUNE 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE