ACIT, Circle-3, Jodhpur V. Smt. Sushila Devi Bafna, Jodhpur

ITA 113/JODH/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6252 (ITAT-JODHPUR)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 12-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK KHANNA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH (SMC), JODHPUR BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 113/JODH/2018 (ASSESSMENT YEAR-2013-14 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-3, JODHPUR. VS SMT. SUSHILA DEVI BAFNA, PROP.- M/S NAVRATAN TEXTILES, DABGARON KI GALI, JODHPUR. (APPELLANT) (RESPONDENT) PAN: ABNPD 5865 E REVENUE BY SH. ASHOK KHANNA JCIT DR ASSESSEE BY NONE DATE OF HEARING 23/05/2018 DATE OF PRONOUNCEMENT 2405/2018 O R D E R PER: R.C. SHARMA, AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-2, JODHPUR DATED 08/11/2017 FOR THE A.Y. 2013-14 IN THE MATTER OF ORDER U/S 143(3) OF THE INCOME-TAX AC T, 1961 [HEREINAFTER REFERRED TO AS THE ACT, FOR SHORT]. 2. IN THIS APPEAL, THE REVENUE IS AGGRIEVED FOR DEL ETING THE ADDITION OF RS. 44,55,428/- MADE BY THE ASSESSING OFFICER, DISALLOWI NG THE ASSESSEES CLAIM OF LOSS DUE TO THEFT OF GOODS. 2 ITA 113/JODH/2018 ACIT VS. SMT. SUSHILA DEVI BAFNA 3. I HAVE HEARD THE LD DR AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD AND FOUND THAT THE LOSS CLAIMED BY THE ASSES SEE ON ACCOUNT OF THEFT, WHICH WAS DISALLOWED BY THE ASSESSING OFFICER, HAD BEE N DELETED BY THE LD. CIT(A) AFTER HAVING FOLLOWING OBSERVATION: 4.2 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSES SMENT ORDER, APPELLANTS WRITTEN SUBMISSION AND VARIOUS EVIDENCES FURNISHED BY THE A PPELLANT IN SUPPORT OF CLAIM OF LOSS DUE TO THEFT. I FIND THAT THE AO DISALLOWED THE ASS ESSEES CLAIM OF LOSS OF RS. 44,55,428/- ON FOLLOWING COUNTS:- I. THAT THE ASSESSEE DID NOT MAINTAIN STOCK REGISTE R AND IN THAT SITUATION QUANTUM OF GOODS STOLEN COULD NOT BE VERIFIED. II. THAT THE ENTIRE TOSS DID NOT PERTAIN TO THE YEA R UNDER CONSIDERATION I.E. AY 2013-14. III. THAT THE GOODS OF THE ASSESSEE WERE INSURED BU T NO CLAIM AGAINST THE THEFT WAS ADMITTED BY THE INSURANCE COMPANY. IV. THAT THE PROCEEDINGS WERE STILL PENDING BEFORE THE COURT, HENCE FACT OF THEFT HAS NOT BEEN ESTABLISHED YET. 4.3 AS REGARDS THE AO'S OBSERVATION THAT SINCE THE ASSESSEE DID NOT MAINTAIN STOCK REGISTER THEREFORE, QUANTUM OF GOODS STOLEN COULD NOT BE VER IFIED, THE APPELLANT SUBMITTED THAT HE TOOK PHYSICAL INVENTORY AT THE END OF VERY YEAR AND HAD ALSO TAKEN THE INVENTORY ON THE DAY AND AFTER DETAILED CALCULATION OF STOCK, HE CAME TO KNOW ABOUT THE THEFT. IT IS ESTABLISHED FACT THE APPELLANT VALUED ITS CLOSING S TOCK BY PREPARING PHYSICAL INVENTORY AND IN THAT PROCESS HE CAME TO KNOW ABOUT THE THEFT . IT MAY BE NOTED THAT THE AO HAS NOT DOUBTED THE VALUATION OF CLOSING STOCK IN RESPE CT OF OTHER GOODS. THE AO ONLY RESTRICTED HIS CONCERN TO THE EXTENT OF LOSS CLAIME D BY THE APPELLANT, WHICH IN MY VIEW IS NOT A JUSTIFIABLE ACTION. EITHER THE AO WAS SUPP OSED TO REJECT THE VALUATION OF CLOSING 3 ITA 113/JODH/2018 ACIT VS. SMT. SUSHILA DEVI BAFNA STOCK OR THE METHOD ADOPTED BY THE ASSESSEE IN PREP ARING THE PHYSICAL INVENTORY. HOWEVER, IN THE INSTANT THIS IS NOT THE CASE OF THE AO. HERE, I MAY REFER TO THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF BO MBAY FORGINGS PVT. LTD. VS. CIT AS CITED ABOVE BY THE APPELLANT SUPRA, WHEREIN THE HON 'BLE GUJARAT HIGH COURT HELD THAT: '...IT WAS AN ADMITTED POSITION THAT THE EMBEZZLEMENT HAD TAKE N PLACE DURING THE RELEVANT PREVIOUS YEAR AND THE SAME WAS DULY REFLECTED IN THE BOOKS OF ACC OUNT BY OMISSION OF THE VALUE OF SUCH GOODS FROM ORE SAL ES AS WELL AS CLOSING STOCK OF THE ASSESSEE IN PREPARATION OF THE FINAL ACCOUNTS. IN A SITUATION LIKE THIS, SO FAR AS LOSS WAS CONCERNED, DETECTION WAS NOT RELEVANT. THE LOSS CAUSED TO THE ASSESSEE BY EMBEZZLEMENT DURING THE RELEVANT PREVIOUS YEAR WA S ALLOWABLE AS DEDUCTION IN THE COMPUTATION OF THE INCOME IN THAT PREVIOUS Y EAR ITSELF. (P. 566, C, D) ONCE THE AO HAS ACCENTED THE VALUATION OF CLOSING STOCK AND DID NOT FIND OUT ANY DISCREPANCIES THEREIN THEN THERE IS NO JUSTIFICATIO N TO DOUBT THE VALUE OF THE GOODS STOLEN. HENCE, THIS OBSERVATION OF THE AO HAS NO ME RITS. 4.4 AS REGARDS THE AOS OBSERVATION THAT THE ENTIRE LOSS DOES NOT PERTAIN TO THE YEAR UNDER CONSIDERATION I.E. AY 2013-14,1 FIND THAT THIS IS N OT A JUSTIFIABLE BASIS FOR DISALLOWING THE CLAIM OF LOSS DUE TO THEFT. IT MAY BE NOTED THAT TH E APPELLANT HAD NOT CLAIMED ANY LOSS IN AY 2012-13 IN RESPECT OF GOODS STOLEN. ONLY IN T HE YEAR UNDER CONSIDERATION, WHEN SHE WAS VALUING CLOSING STOCK BY PREPARING PHYSICAL INVENTORY, IT CAME TO HER KNOWLEDGE THAT THERE IS VARIATION IN STOCK AND THIS WAS DUE TO SOME GOODS THAT WERE STOLEN AND IN THAT SITUATION, SHE HAD NO OPTION BUT TO CLAIM LOSS OF THE GOODS ALREADY VALUED IN AY 2012-13 AND GOODS PERTAINING TO AY 201 3-14. EVEN OTHERWISE ALSO, THE HON'BLE P&H HIGH COURT IN THE CASE OF PUNJAB STEEL STOCKHOLDERS SYNDICATE LTD. VS. CIT (125 ITR 519) SPECIFICALLY HELD THAT IT IS WELL SE TTLED THAT IF THE LOSS IS NOT KNOWN, AND IT COMES TO BE KNOWN DURING A PARTICULAR ASSESS MENT YEAR, THE ADJUSTMENT CAN BE CLAIMED IN THE ASSESSMENT YEAR WH EN IT CAME TO BE KNOWN'. THE RATIO OF THIS JUDGMENT IS SQUARELY APPLICABLE T O THE FACTS OF THE PRESENT CASE IN AS MUCH AS FACT OF LOSS DUE TO THEFT CAME T O BE KNOWN IN THE YEAR UNDER 4 ITA 113/JODH/2018 ACIT VS. SMT. SUSHILA DEVI BAFNA CONSIDERATION. HENCE, THIS OBSERVATION OF THE AO HA S NO RELEVANCE WHILE DECIDING THE ISSUE OF LOSS. 4.5 AS REGARDS THE AOS ANOTHER OBSERVATION THAT TH E GOODS OF THE ASSESSEE WERE INSURED BUT NO CLAIM AGAINST THE THEFT WAS ADMITTED BY THE INSURANCE COMPANY, I FIND THAT MERE REJECTION TO ADMIT CLAIM BY THE INSURANCE COMP ANY CANNOT BE THE GROUND FOR REJECTION OF CLAIM OF LOSS UNDER THE INCOME-TAX ACT . THERE IS AGREEMENT WITH THE PERSON AND INSURANCE COMPANY AND THIS AGREEMENT HAS VARIOU S CONDITIONS THEREIN FOR CONSIDERING AND ALLOWING THE CLAIM. HOWEVER, THE IT AUTHORITIES ARE NOT BOUND BY THESE TERMS AND CONDITIONS. THE ASSESSEES CLAIM CAN BE E XAMINED IN THE LIGHT OF VARIOUS SECTIONS AND SUB-SECTION OF INCOME-TAX ACT, 1961 AN D IF THE SAME IS FOUND WITHIN THE PRECINCTS OF LAW, THE CLAIM OF EXPENSES/LOSS IS ALL OWABLE TO AN ASSESSEE. 4.6 AS REGARDS THE AOS OBSERVATION THAT THE PROCEE DINGS ARE STILL PENDING BEFORE THE COURT, HENCE FACT OF THEFT HAS NOT BEEN ESTABLISHED YET, I FIND THAT DURING THE COURSE OF APPEAL PROCEEDINGS, THE APPELLANT ALSO FILED A COPY OF FIR DATED 05-11-2012 AGAINST THREE PERSONS NAMELY SH. NARSINGH, SH. SAWAI SINGH AND SANJAY KUMAR. IN THE FIR, THE APPELLANT HAS ALLEGED THAT THESE PERSONS WERE EMPLO YED WITH THE ASSESSEE AND HAD FRAUDULENTLY STOLEN THE GOODS. THE APPELLANT HAS AL SO FURNISHED COPY OF FIR DATED 30- 11-2012,COPY OF DETAILS OF GOODS SEIZED BY THE POLI CE AUTHORITY DURING THE INVESTIGATION OF THE CASE AND COPY OF APPLICATION SUBMITTED TO MA GISTRATE FOR RELEASE OF GOODS SEIZED ALONGWITH LIST OF GOODS. THE APPELLANT HAS A LSO FURNISHED LIST OF PHYSICAL STOCK TAKEN ON 05-11-2012 ALONG WITH COMPUTATION OF LOSS BY THEFT AND COPIES OF PURCHASE INVOICES. ALL THESE DETAILS AND EVIDENCES PROVED TH AT THE APPELLANT HAD PURCHASED GOODS WHICH WERE FOUND SHORT WHILE VALUING THE CLOS ING STOCK. PRIMA FACIE THERE IS SUFFICIENT EVIDENCE TO DRAW THE CONCLUSION THAT ASS ESSEES THEORY OF THEFT AND LOSS DUE TO THIS THEFT IS CORRECT. THE HON'BLE PUNJAB AND HA RYANA HIGH COURT IN THE MATTER OF PUNJAB STEEL STOCKHOLDERS SYNDICATE LTD VS CIT (125 ITR 519) WHEREIN IT HAS BEEN HELD THAT 5 ITA 113/JODH/2018 ACIT VS. SMT. SUSHILA DEVI BAFNA 'IF THE ASSESSEE IS ABLE TO PLACE RELEVANT MATERIAL BEFORE THE AUTHORITIES FOR PROVING THE LOSS IRRESPECTIVE OF THE FACT WHETHER T HE ACCUSED CHARGED OF EMBEZZLEMENT HAS BEEN CONVICTED OR NOT THE AUTHORIT IES CANNOT REFUSE TO CONSIDER THE MATERIAL BY OBSERVING THAT THE CONVICT ION OF THE PERSON ACCUSED OF EMBEZZLEMENT, HAS NOT BEEN RECORDED IN THE PRESENT CASE, THE ASSESSEE PRODUCED ITS BALANCE-SHEETS, AUDIT REPORT, COPY OF THE FIRST INFORMATION REPORT, COPY OF THE LETTER DATED 10TH SEPTEMBER, 1969, OF T HE ASSESSEE ALONG WITH ITS ENCLOSURE.' 4.6.1. THE HON'BLE ITAT JAIPUR BENCH IN THE MATTER OF M/S. PAWAN SPECIALITIES (P) LTD. VS THE ACIT (ITAT JAIPUR) HELD AS UNDER:- I HAVE HEARD THE RIVED CONTENTIONS AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. IT IS NOTED FROM THE RECORDS THAT THE ASSES SEE HAD CLAIMED LOSS OF GOODS (I.E. TATA SKY VOUCHERS / COUPON OF THE SUPPLIER COMPANY) BY THEFT HOWEVER, I N THE ASSESSMENT PROCEEDINGS, THE AO REQUIRED THE JUS TIFICATION IN THIS REGARD OR ALSO TO PRODUCE THE COPY OF THE FIR FOR THE LEGAL A CTION TAKEN BY THE ASSESSEE WHICH THE ASSESSEE COULD NOT PRODUCED BEFORE THE AO . THE AO FOR WANT OF THE EVIDENCE OR JUSTIFICATION AS TO THE THEFT OF THE GO ODS DISALLOWED THE CLAIM OF RS. 4,77,500/-MADE BY THE ASSESSEE WHICH HAS BEEN CONFI RMED BY THE ID CH(A) IN FIRST APPEAL. FURTHER, THE HON'BLE ITAT FOLLOWING THE DECISIONS O F THE HON'BLE APEX COURT AND HIGH COURT HELD THAT 'IN THE APPELLATE PROCEEDINGS, THE ID AR OF THE PRA YED THAT IT IS AN ADMITTED POSITION THAT THEFT/FRAUD HAD INDEED TAKEN PLACE IN THE ASSESSEE COMPANY AND THE AO HAD NOWHERE DOUBTED THE FACT OF FRAUD BUT HE DISALLOWED THE CLAIM OF THE ASSESSEE FOR THE REASON THAT THE ASSESSEE COULD NOT ESTABLISH THE FACT OF FRAUD LIKE NON- PRODUCTION OF COPY OF FIR AND NOT TAKING ANY LEGAL ACTION AGAINST THE EMPLOYEE WHO WAS INVOLVED IN THIS ACTIVITY OF FRAUD . THE LD AR FURTHER SUBMITTED THAT NON ACTION AGAINS T THOSE EMPLOYEES CANNOT BRING THE GENUINENESS OF THE LOSS IN QUESTION AND M ORE PARTICULARLY WHEN THE FACT OF LOSS ON ACCOUNT OF FRAUD IS AN ADMITTED POSITION ARID THUS THE GENUINENESS THEREOF AUTOMATICALLY GETS ESTABLISHED. THE LD AR OF THE ASSESSEE RELIED ON DECISION OF HO N'BLE SUPREME COURT IN THE CASE OF ASSOCIATED BANKING OF INDIA LTD VS. CTT (SUPRA). FURTHER THE ID AR OF THE ASSESSEE TOOK RESORT OF CBDT CIRCULAR NO. 25 OF 193 9 AND CIRCULAR NO. 13 OF 1994 WHEREIN IT WAS CLARIFIED THAT LOSSES ARISING DM TO EMBEZZLEMENT OF EMPLOYEES OR 6 ITA 113/JODH/2018 ACIT VS. SMT. SUSHILA DEVI BAFNA DUE TO NEGLIGENCE OF EMPLOYEES SHOULD BE ALLOWED IF THE LOSS TOOK PLACE IN THE NORMAL COURSE OF BUSINESS AND THE AMOUNT INVOLVED W AS NECESSARILY KEPT FOR THE PURPOSE OF THE BUSINESS IN THE PLACE FROM WHICH IT WAS LOST. THE HON'BLE SUPREME COURT HAS FURTHER CONSIDERED T HE MATTER AND LAID DOWN THE LAW IN THIS REGARD IN THE FOLLOWING TWO CASES. (1) BADRI DAS DAGA VS. CIT (1958] 34ITR 10 (SC): TC 14R.202. (2) ASSOCIATED BANKING C ORPORATION OF INDIA LTD VS. CIT (1965) 56 ITR 1 (SC) ON THE ENQUIRY BY THE BENCH, IT WAS CONFIRMED BY T HE ID AR OF THE ASSESSEE THAT THE TURNOVER OF THE ASSESSEE COMPANY IS MORE THAN R S. 1.00 CRORE. IT IS FURTHER NOTED THAT SUCH ISSUE HAS BEEN DECIDED BY THE HON'B LE COURTS IN FAVOUR OF THE ASSESSEE. (4) SHITLA PRASAD SHYAM LAI VS. CH, 188 ITR 514 (A LL) (5) BOMBAY FORGINGS CO. LTD VS.CIT 226 ITR 562 (BO M) (6) KAMLA COTTON CO. VS. CIT 226 ITR 605 (GUJ.) IN VIEW OF THE ABOVE DELIBERATIONS, CASE LAWS AND THE CBDT CIRCULAR RELIED ON (SUPRA), I DO NOT CONCUR WITH THE VIEWS OF THE LOWE R AUTHORITIES ON THIS ISSUE. THUS THE APPEAL OF THE ASSESSEE IS ALLOWED. 3.0 IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS ALLOWED. 4.7 THE APPELLANTS CASE IS MORE STRONGER THAN THE CASE OF M/S PAWAN SPECIALTIES (P) LTD. (SUPRA) AS IN THE INSTANT CASE THE APPELLA NT HAS BROUGHT ON RECORD SUFFICIENT EVIDENCES TO ESTABLISH THAT THERE WAS LOSS DUE TO T HEFT OF GOODS. CONSIDERING THE OVERALL FACTS OF THE CASE, EVIDENCES BROUGHT ON RECORD BY T HE APPELLANT, IT IS HELD THAT THE A.O. WAS NOT JUSTIFIED IN DISALLOWING THE APPELLANTS CL AIM OF LOS OF RS. 44,55,428/- DUE TO THEFT. THE GROUNDS RAISED BY THE APPELLANT REGARDIN G THIS ISSUE ARE ALLOWED. HOWEVER, IT MAY BE NOTED THAT I HAVE DECIDED THE ISSUE ON THE B ASIS OF DOCUMENTS BROUGHT ON RECORD BY THE APPELLANT BEFORE ME AND EXAMINING THE SAME WITH INCOME TAX ACT AS WELL AS EXISTING JUDICIAL DECISIONS AS OF NOW SUBJE CT TO THE FINAL OUTCOME OF THE CRIMINAL CASE FILED BY THE APPELLANT. 05. IN THE RESULT, THE APPEAL IS ALLOWED. 7 ITA 113/JODH/2018 ACIT VS. SMT. SUSHILA DEVI BAFNA 4. IT IS CLEAR FROM THE ORDER OF THE LD. CIT(A) THA T AFTER RELYING ON VARIOUS JUDICIAL PRONOUNCEMENTS, HE HAS RECORDED A FINDING TO THE EFFECT THAT THE SUFFICIENT EVIDENCES WERE PLACED ON RECORD BY THE AS SESSEE THAT THERE WAS LOSS DUE TO THEFT OF GOODS. THE FINDINGS SO RECODED BY THE LD. CIT(A) HAS NOT BEEN CONTROVERTED BY THE LD DEPARTMENTAL REPRESENTA TIVE BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, I DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF THE LD. CIT(A) REGARDING DELETIN G THE DISALLOWANCE MADE ON ACCOUNT OF LOSS DUE TO THEFT OF GOODS. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/05/2018. SD/- [R.C. SHARMA] ACCOUNTANT MEMBER DATED : 24/05/2018 *RANJAN COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR 6. GUARD FILE (ITA NO. 113/JODH/2018) ASSISTANT REGISTRAR JODHPUR BENCH