SHRI MEENAWALA CASTINGS, RAJKOT V. DCIT, CIRCLE-2(1), RAJKOT, RAJKOT

ITA 343/RJT/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5920 (ITAT-RAJKOT)
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-06-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 04-10-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AHISH KUMAR PANDEY
• Keywords: Business expenditure
• Section: 143(3); 142(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER AND SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकर अपील सं./ITA No.343/RJT/2023 (Assessment Year: 2015-16) (Hybrid Hearing) Shri Meenawala Castings, Meenawala Chambers, Dera Sheri, Soni Bazar, Rajkot-360001. Vs. The DCIT, Circle-2(1), Rajkot. थायीलेखासं./जीआइआरसं./PAN/GIR No.: AAMFS9938H (अपीलाथ /Assessee) ( यथ /Respondent) नधा रतीक ओरसे / Assessee by : Shri Mehul Ranpura, AR राज वक ओरसे/Revenue by : Shri Ahish Kumar Pandey, Sr. DR स ु नवाईक तार ख/ Date of Hearing : 18/06/2024 घोषणाक तार ख/Date of Pronouncement : 08/07/2024 आदेश/ORDER PER ARJUN LAL SAINI, AM: The captioned appeal filed by the assessee, pertaining to Assessment Year 2015-16, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals-NFAC), vide order dated 17/08/2023, which in turn arises out of an assessment order passed by the Assessing officer under section 143(3) of the Income Tax Act, 1961 (in short, ‘the Act’) vide order dated 15.12.2017. I.T.A No. 343/Rjt/2023 A.Y. 2015-16 Shri Meenawala Catings vs. DCIT 2 2. The grounds raised by the assessee are as follows: 1.The grounds of appeal mentioned hereunder are without prejudice to one another. 2.The Ld.Commissioner of Income-tax(Appeals), National Faceless Appeal Centre, Delhi (CIT(A) erred on facts as also in law in restricting claim of loss due to robbery of gold ornaments at Rs.75,00,000/- as against the claim of Rs.1,93,17,398/-. The Ld.CIT(A) arbitrary disallowed such loss by Rs.1,18,17,398/- on misinterpretation on news items printed in newspaper, the AO may kindly be directed to allow the loss due to robbery as per the books of account. 3.Your Honour’s assessee craves leave to add, amend, alter or withdraw any or more grounds of appeal on or before the hearing of appeal. 3. Brief facts of the issue in dispute are stated as under. The assessee derives income from business during the year under consideration. The assessee, filed return of income, declaring a loss of Rs. 1,62,96,800/-, on 30.09.2015. Later on, the assessee sou-moto filed the revised return of income along with computation of income on 04.10.2016, declaring a loss of Rs. 1,60,50,232/-. The case of the assessee, was selected for complete scrutiny through CASS, hence a notice u/s 143(2) of the Act, was issued to the assessee, on 26.07.2016, which was duly served upon the assessee. The notice u/s 142(1) cum- questionnaire was issued to the assessee. In compliance thereto, the assessee, appeared and filed written submissions and documents before the assessing officer. On perusal of details filed by the assessee, on 10.11.2017, it was observed by the assessing officer that assessee has shown Opening stock of Gold robbery at Rs. 1,93,17,398/- which has been shown, as consumed in the form of loss. Therefore, a show cause notice was issued to the assessee, on 11.12.2017, to explain and justify the reasons and status of the loss occurred on account of robbery and how the same is allowable in the year under consideration. The assessing officer I.T.A No. 343/Rjt/2023 A.Y. 2015-16 Shri Meenawala Catings vs. DCIT 3 noted that the loss was pertaining to previous year, therefore, it should not be allowed, hence the assessing officer issued further notice to the assessee to explain the loss. In compliance thereto, the assessee filed written submission, before assessing officer, on 15.12.2017 stating as under: “Regarding justification as to opening stock of gold robbery of Rs. 1,93,17,398/- is allowable expenses during the year, it is submitted that robbery was happened on 17.02.2014 morning. Immediately, we had reported the same to Police Department. Copy of First Information Report and newspaper cutting are attached at Page 10 to 14. We hoped to recover lost goods through police department. Subsequently robbers were caught by Police Department but could not recover anything from him. And therefore on finalization of event we had written of the same in the books of account. Therefore, it is requested to allow the same as business expenditure and oblige. We have furnished the details as above and hope that same will satisfy your requirement. However, kindly grant us an opportunity of furnishing further details in case required before taking any adverse decision in the matter and oblige." 4. However, the assessing officer rejected the above contention of the assessee and observed that robbery was happened on 17.02.2014, which is pertaining to Financial year (F.Y.) 2013-14 and relevant to assessment year (A.Y.) 2014-15. The contention of the assessee- firm that the FIR was filed on the same day and even the Police Department caught the robbers but could not recover anything from them, therefore, the assessee wanted to claim loss on robbery in the year under consideration, however, the assessing officer, noted that the assessee did not file any evidences in support of details, such as, date of arresting the robbers and also about when the police department filed the Final Report in the assessee`s case.Therefore, the loss on account of robbery, amounting Rs. 1,93,17,398/- was disallowed by the assessing officer. 5. Aggrieved by the order of the assessing officer (AO), the asseessee carried the matter in appeal, before the Ld.CIT(A), who has partly allowed I.T.A No. 343/Rjt/2023 A.Y. 2015-16 Shri Meenawala Catings vs. DCIT 4 the appeal of the assessee. The learned CIT (A) noticed that assessee was definitely hopeful of recovery of stolen goods. The ld CIT(A) also noted that period from 17.02.2014, when robbery happened to date of filing return could not be held to be an excessive period to make efforts to recover the money and consequently the consciousness of the loss should be attributed to the assessee, only after 1-4-2014. Therefore, ld. CIT(A) held that the assessee is eligible for deduction in the Assessment year 2015-16, even though the loss happened on 17.02.2014 ( pertaining to assessment year 2014-15). Hence, the ld. CITA(A) allowed the loss by way of robbery, to the tune of Rs. 75,00,000/-, for the assessment year under consideration, out of the total loss incurred by the assessee amounting Rs. 1,93,17,398/-. 6. Since, the ld CIT(A) allowed the part loss to the tune of Rs.75,00,000/-, therefore, the assessee is in appeal before us for balance loss of Rs.1,18,17,398/- (Rs. 1,93,17,398- Rs. 75,00,000). 7. Shri Mehul Ranpura, Ld. Counsel for the assessee, vehemently argued, that the robbed gold/jewellery remain un-quantified at the end of the accounting year 2013-14, and to be specific till the due date of filing of return of income for assessment year (A.Y.) 2014-15, therefore, while finalizing the accounts for the year ending 31.03.2014, the assessee has shown the said stock of Rs. 1,93,17,398/- under the head "Gold Robbery” in the trading account which was part and parcel of the return of income for assessment year (A.Y.) 2014-15. The AO disallowed the claim just because it was not debited to the trading account in the year of event, though it appears in the balance sheet for the year 2014-15 under the head 'Gold Robbery'. The robbery loss was not debited to the trading account in the year I.T.A No. 343/Rjt/2023 A.Y. 2015-16 Shri Meenawala Catings vs. DCIT 5 ended 31.03.2014, as at initial stage the robbers / conspirators were apprehended and there was hope for recovery gold. The ld. Counsel contended that the loss by robbery must be deemed to have arisen when the assessee came to know that the amounts robbed could not be recovered, and in the assessee’s case under consideration, the assessee came to know in the assessment year 2015-16 and therefore debited the entire amount in the profit and account in the assessment year 2015-16. Hence, loss by robbery should be allowed to the assessee. 8. On the other hand, the Ld.DR for the Revenue, argued that Ld.CIT(A), has partly allowed the addition made by the assessing officer, (AO) based on the documents and evidences and for balance amount, the assessee did not have sufficient evidences. The Ld.DR also pointed out that assessee has not submitted quantitative details of gold robbed and there are no quantitative details in the FIR. The quantitative details of books of accounts, should be tallied with the quantitative details mentioned in the FIR, however, the assessee has failed to do so. Therefore, the Ld.DR contended that the Ld.CIT(A) has allowed the appeal of the assessee partly relying on the documents available before him. However, for balance amount, the assessee does not have any cogent documents and evidences and therefore the order passed by the Ld.CIT(A), may be upheld. 9. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.We note that the assessee submitted before us the following documents and evidences to prove its claim of loss by robbery, which are reproduced as under: I.T.A No. 343/Rjt/2023 A.Y. 2015-16 Shri Meenawala Catings vs. DCIT 6 Sr.No. Particulars Paper book Page no. i. Copy of FIR and news paper cuttings 12 to 18 ii. Copy of investigation Report of Rajkot Police Station 19 to 23 iii. Copy of trading account & balances sheet for the AY 2014-15 24 & 25 iv. Copy of letter dated 22.05.2015 by Police inspector, “A” Division Police Station, Rajkot to Judicial Magistrate, Rajkot 26 & 27 v. Copy of summons dated 07.07.2018 to witness Shri Dineshbhai Mansukhbhai Pau 28 As per the above evidences, we note that on 17.02.2014, at around 7.30 a.m. a robbery of Gold stock of Rs. 1,93,17,398/-, while bringing the stock from home by partner Amitbhai Kaushikbhai Adesara, on the way to the shop, on the vehicle Activa was happened. Immediately the assessee filed FIR on the same day at 8.30 a.m. at registered No. 53/14, under the IPC and other Acts at 'A' Division Police Station Rajkot. Copy of the FIR and news- paper cutting are filed by the assessee before the Bench, vide paper book Page no. 2 to 18. The investigation by the Police Department was immediately started and as per report of PSI, DCB, Rajkot city dated 12.03.2014, addressed to PSO, DCB, Police Station, Rajkot City, robbers and conspirator, namely Dinesh Keshusingh Bhokta of Jharkhand, Shri Vijay Sambhaji and Arjun Rambachan have been caught and they admitted the crime. It was also reported that on 12.03.2014 at 11.15 a.m. police recovered Gold Butti Jodi weighing appx. 100 grams valued at Rs. 1,45,000/- and seized by police. In addition to this, police also seized motor cycle Hiro Honda slender No. GJ- 3-CB-7144 and GJ-3-PG-1673 u/s 102 of the CRPC. Copy of the reports are submitted before the Bench, vide paper book Page no.12 to 23. However, as per assessee, these articles seized are under the possession of the police I.T.A No. 343/Rjt/2023 A.Y. 2015-16 Shri Meenawala Catings vs. DCIT 7 Department. Since partial robbed material has been recovered, it was hoped by the assessee that they would get balance amount in future. Thus, robbed gold/jewellery remain un-quantified at the end of the accounting year, and relating to ( financial year) 2013-14, and to be specific till the due date of filing of return of income for assessment year (A.Y.) 2014-15, therefore, while finalizing the accounts for the year ending 31.03.2014, the assessee has shown the said stock of Rs. 1,93,17,398/- under the head "Gold Robbery in the trading account, which was part and parcel of the return of income for assessment year (A.Y.) 2014-15. Copy of trading account, balance sheet as on 31.03.2014 are filed by the assessee, vide paper book Page 24 to 25. 10. From the above narrated facts, it is vivid that event of robbery is not in dispute. That is, there was robbery in the assessee`s case under consideration. However, the dispute before us is that how much amount is to be allowed as deduction on account of loss by robbery. We find that further investigation was under process; by Police, however, there was no desired progress, as far as recovery of the robbed gold/jewellery from these persons is concerned. After prolonged investigation, the Police Inspector, 'A' Division Police Station Rajkot City, vide his letter dated 22.05.2015, had sought permission from Judicial Magistrate, First Class, Rajkot City to add section 120 of IPC in assessee`s case. The Copy of the said letter dated 22.05.2015 is attached at Page 26 to 27 of paper book. Under these circumstances, the assessee understood that there is very little possibility to recover the robbed gold/jewellery in near future; hence the robbed stock was debited to the trading account. However, if any robbed gold/jewellery are found in future or get possession of seized gold ornaments weighing appx. 100 grams from the police department / court, the assessee would be liable I.T.A No. 343/Rjt/2023 A.Y. 2015-16 Shri Meenawala Catings vs. DCIT 8 to offer to tax in the year of possession. We also note that the Police Department has not treated the assessee`s case as closed and the latest summon was issued to Shri Dineshbhai Mansukhbhai Pau, a witness on 07.07.2018 to remain present on 26.07.2018, the Copy of the same is filed vide paper book Page No. 28. In view of the above facts, the assessee debited the robbed gold/jewellery in the assessment year under consideration. We find that assessing officer disallowed the claim of the assessee just because it was not debited to the trading account, in the year of event, though it appears in the balance sheet for the year 2014-15, under the head 'Gold Robbery'. The robbery loss was not debited to the trading account in the year ended 31.03.2014, as at initial stage the robbers / conspirators were apprehended and there was hope for recovery. Subsequently, the assessee lost his hope, therefore debited the loss in the profit and loss account for the year ended 31.03.2015. 11. From the above narrated events, it is abundantly clear that assessee is entitled to claim the loss on account of robbery/theft. The loss due to embezzlement, theft, dacoity, etc, is allowable deduction, if it can be proved to have arisen, out of the carrying on of the business and the same must be incidental to it. What is material is it should be caused in the course of his business activity and closely connected with business. If that is so, it (loss) will be an allowable deduction in computing the "profits". It is also undisputed that one should make possible efforts to recover the loss occurred due to theft/ embezzlement, etc. It has been held by the Hon`ble Allahabad High Court in U.P. Vanaspati Agency v. CIT (1968) 68 ITR 120 (All) that a dispossessing would become loss only after the recovery becomes of impossible or the chances of recovery become very remote. The Hon`ble I.T.A No. 343/Rjt/2023 A.Y. 2015-16 Shri Meenawala Catings vs. DCIT 9 Supreme Court in Ramchander Shivnarayan vs. CIT (1978) 111 ITR 263, has held that it is open to the assessee to claim the loss if it has a proximate connection with its business. Hence, it is settled law that the loss arising by embezzlement/robbery of money by a stranger to the business is also a trading loss and the loss is liable to be allowed as deduction provided the loss is incidental to the normal operation of the business. The arguments, advanced by the ld. DR for the revenue to the effect that no quantitative details in the FIR is mentioned and the assessee does not have any cogent documents and evidences to claim loss, is not acceptable, particularly considering the above facts, that assessee had submitted police reports related to the robbery and FIR and apart from this assessee submitted newspaper clippings also. 12. On identical facts, we find that Hon`ble High Court of Madhya Pradesh has in the case of CIT v. Durga Jewellers [1988] 37 Taxman 261 (Madhya Pradesh) held that, theft took place in business premises of assessee on 13-8-1974 and FIR was lodged on next day. The second FIR was lodged by the assessee on 22-9-1974 indicating the extent of the properties which had not yet been recovered. This indicates that the assessee was still hopeful of the recovery being made even of the remaining properties. As seen above, the final report was made by the police on 21-11- 1974. Consequently, it cannot be said that the petitioner was unjustified in entertaining the hope that the remaining properties would also be recovered till 21-11-1974. On the final report being made, he finally came to know that there are no, or at any rate, little chances of recovery. Since 21-11-1974, in the instant case, fell within the assessment year 1976-77, the Tribunal was right in holding that the claim for deduction of Rs. 25,000/- was rightly I.T.A No. 343/Rjt/2023 A.Y. 2015-16 Shri Meenawala Catings vs. DCIT 10 made in the year 1976-77. The facts of the assessee under consideration are similar to CIT v. Durga Jewellers (supra), hence, considering these facts and circumstances, we allow the loss suffered by robbery and delete the balance loss of Rs.1,18,17,398/- (Rs. 1,93,17,398- Rs. 75,00,000). 13. In the result, assessee`s appeal is allowed. Order pronounced in the open court on 08-07-2024 Sd/- Sd/- (DINESH MOHAN SINHA) (A. L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Rajkot Dated: 08/07/2024 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Rajkot 6. Guard file. By order/आदेश से, // TRUE COPY // Assistant Registrar/Sr. P.S./P.S. ITAT, Rajkot