SHRI ANIL KUMAR PRABHUDAYAL CHOUDHARY, Indore V. The ITO 5(3), Indore

ITA 468/IND/2014

• Counselvise Citation: 46822714 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 17-06-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S DESHPANDE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE (SINGLE MEMBER CASE) BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER I.T.A.NO. 468/IND/2014 A.Y. : 2009-10 SHRI ANIL KUMAR PRABHUDAYAL CHOUDHARY, ITO, 5(3), INDORE. INDORE. VS. APPELLANT RESPONDENT PAN NO. ADOPC3815C A PPELLANT S BY : SHRI S.S.DESHPANDE, CA RESPONDENT BY : SHRI R. A. VERMA, DR DATE OF HEARING : 15. 10 .2015 . DATE OF PRONOUNCEMENT : 08 . 1 2 .2015 SHRIL ANIL KUMAR PRABHUDAYAL CHOUDHARY, INDORE VS. ITO, 5(3), INDORE, I.T.A.NO. 468/IND/2014 A.Y.2009-10 2 2 O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)II, INDORE, DATED 27.02.2014, FOR THE ASSE SSMENT YEAR 2009-10. 2. THE FIRST GROUND OF APPEAL RAISED BY THE ASSESSEE R EADS AS UNDER :- 1. THE LD. CIT(A) HAS ERRED IN MAINTAINING THE ADDITI ON OF RS. 5,33,357/- ON ACCOUNT OF EMBEZZLEMENT LOSS. 1.1 IT WAS PROVED BEFORE THE LOWER AUTHORITIES THAT LOSS WAS DETECTED DURING THE YEAR AND AS SUCH IT WAS CLAIMED AS A LOSS DURING THE YEAR. THE LOSS MAY PLEASE BE ALLOWED SINCE THE EMBEZZLEMENT WAS DONE DURING THE YEAR AND THE LOSS WAS SUSTAINED IN THE YEAR UNDER ACCOUNT. THE LOSS MAY PLEASE BE ALLOWED OR IN THE ALTERNATIVE, THE LD. AO MAY BE DIRECTED TO ALLOW THE SAME IN THE SUBSEQUENT YEAR ON THE BASIS OF BOARD CIRCULAR. SHRIL ANIL KUMAR PRABHUDAYAL CHOUDHARY, INDORE VS. ITO, 5(3), INDORE, I.T.A.NO. 468/IND/2014 A.Y.2009-10 3 3 3. THE ASSESSEE HAS CLAIMED A PART OF EXPENDITURE AS EMPLOYEE OF THE ASSESSEE EMBEZZLED THE AMOUNT. THE AO HAD FOUND THAT A CERTIFICATE WAS GIVEN BY C.A. AND AN A MOUNT OF RS. 8,34,207/- WAS REQUIRED TO BE DEPOSITED IN BANK ACCOUNT OF THE ASSESSEE BY AN EMPLOYEE SANJAY SHARMA ON VAR IOUS DATES WAS NOT DEPOSITED IN THE BANK ACCOUNT, AS A R ESULT OF WHICH THE ASSESSEE HAS SUFFERED A LOSS. FIR WAS LOD GED AND THE EMPLOYEE WAS ARRESTED AND PUT BEHIND THE BAR AN D CIVIL PROCEEDINGS WERE ALSO INITIATED. THE AMOUNT OF RS. 5,33,357/- PERTAINED TO ASSESSMENT YEAR 2008-09 AND RS. 1,00,0 00/- PERTAINED TO ASSESSMENT YEAR 2010-11. THE AMOUNT WA S DETECTED BY THE ASSESSEE IN FINANCIAL YEAR 2009-10, DURING THE AUDIT OF BOOKS FOR ASSESSMENT YEAR 2008-09. THE AO TAKING COGNIZANCE OF CIRCULAR NO. 35-D(XLVII-20) (F NO. 10 /48/65- IT(A-I) DATED 24.11.1965, DISALLOWED THE LOSS AMOUN T FOR THE REASONS THAT THE SAME CAN BE ALLOWED IN THE YEAR OF DETECTION NOT IN THE YEAR OF EMBEZZLEMENT AS LAID DOWN IN THE ABOVE CIRCULAR. SHRIL ANIL KUMAR PRABHUDAYAL CHOUDHARY, INDORE VS. ITO, 5(3), INDORE, I.T.A.NO. 468/IND/2014 A.Y.2009-10 4 4 4. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) HAS CONFIRMED THE ADDITION. 5. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT TH E ASSESSEE HAD ALL THE REASONS TO CLAIM HIS EMBEZZLED AMOUNT IN THE YEAR WHEN HE HAS DETECTION. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE EMBEZZLEMENT TOOK PLACE DURING THE YEAR 01.4.2008 TO 31.03.2009. THE RETURN WAS DUE ON 30.09.2009. THE AUDITORS POINTED OUT THE DEFALCA TION ON 01.07.2009 AND THE AMOUNT IN DISPUTE IS DETECTED ON 01.07.2009. THE ASSESSEE BEFORE FILING THE RETURN H AS CLAIMED THE EMBEZZLED LOSS EXPENDITURE IN HIS RETURN. THE L D. AUTHORIZED REPRESENTATIVE HAS RELIED UPON THE JUDGE MENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF NATIONAL N EWSPRINT VS. CIT, 114 ITR 172. THE LD. AUTHORIZED REPRESENTATIVE ALSO SUBMITTED THAT AS PER ACCOUNTING STANDARD AS4, WHIC H CLEARLY LAYS DOWN THAT ANY EVENT DETECTED DURING THE COURSE OF THE AUDIT IS REQUIRED TO BE ACCOUNTED FOR. THEREFORE, T HE ASSESSEE HAS CLAIMED THIS EMBEZZLEMENT EXPENDITURE. THE LD. AUTHORIZED REPRESENTATIVE ALSO RELIED UPON THE DECI SION OF SHRIL ANIL KUMAR PRABHUDAYAL CHOUDHARY, INDORE VS. ITO, 5(3), INDORE, I.T.A.NO. 468/IND/2014 A.Y.2009-10 5 5 I.T.A.T., AHMEDABAD BENCH, IN THE CASE OF PERFECT E QUIPMENTS VS. CY. CIT, 85 ITD 0050, WHEREIN IT IS HELD THAT T HE TRIBUNAL CAN GIVE THE NECESSARY DIRECTION FOR DISPOSAL OF TH E APPEAL. HOWEVER, THAT DIRECTION SHOULD BE SUBJECT TO TIME L IMITATION AS CONTAINED IN THE SCHEME OF THE ACT. 6. ON THE OTHER HAND, THE LD. DR RELIED UPON THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CAS E OF SHIV NARAIN KARMENDRA NARAIN VS. CIT, (2005) 277 ITR 002 7 AND SUBMITTED THAT THE LOSS ON ACCOUNT OF EMBEZZLEMENT COMMITTED BY THE ASSESSEES EMPLOYEE COULD NOT BE A LLOWED AS DEDUCTION IN THE ASSESSMENT YEAR 2008-09 AS THE EXA CT AMOUNT OF EMBEZZLEMENT CAME TO BE KNOWN ON 7 TH JULY, 1979, WHEN THE CHARTERED ACCOUNTANT, WHO WAS APPOINTED TO INVESTIGATE THE MATTER, SUBMITTED THE REPORT. THE LD. DR FURTHER SUBMITTED THAT BUSINESS LOSS CAN BE ALLOWED IN THE YEAR OF LIABILITY HAS ALREADY BEEN DECIDED BY HON'B LE ALLAHABAD HIGH COURT AND IT MAY BE ALLOWED IN THAT YEAR ONLY. THEREFORE, THE APPEAL MAY BE DISMISSED. SHRIL ANIL KUMAR PRABHUDAYAL CHOUDHARY, INDORE VS. ITO, 5(3), INDORE, I.T.A.NO. 468/IND/2014 A.Y.2009-10 6 6 7. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PART IES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND THAT IN THE CASE OF SHIV NARAIN KARMENDRA NARAIN VS. CIT OF HON'BLE ALLAHABAD HIGH COURT, THE FACTS OF THE CASE ARE THAT THE ASSESSEE WAS DERIVING INCOME FROM RUNNING OF OI L MILL, KHANDARI BUSINESS AND THE RUNNING OF ICE AND COLD S TORAGE PLANT. THE ASSESSEE MAINTAINED DEPOTS AT VARIOUS PL ACES INCLUDING CALCUTTA, CUTTACK AND HALDWANI. AND SOMET IME IN OCTOBER 1977, THE SUPPLIES OF RAW MATERIALS FROM TH E HALDWANI DEPOT WAS IRREGULAR. WHILE TRYING TO FIND OUT THE R EASONS FOR THIS IRREGULARITY OF SUPPLIES, THE ASSESSEE FIRM CA ME TO DISCOVER THE IRREGULARITY AND THERE WAS EMBEZZLEMENT IN THE SAME DEPOT BY THE MANAGER, ASSISTANT MANAGER AND THE ACCOUNTANT AND ONE EMPLOYEE HAD EMBEZZLED THE AMOUN T OF RS. 8,50,000/- AND THE ASSESSEE CLAIMED EMBEZZLED L OSS AND LODGED THE FIR ON 31 ST DECEMBER, 1977. THEREAFTER, ONE C. A. WAS APPOINTED TO INVESTIGATE THE MATTER AND HE SUBM ITTED THE REPORT ON 7 TH JULY, 1979. THE AO DID NOT ACCEPT THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THERE WAS DISCREPAN CY SHRIL ANIL KUMAR PRABHUDAYAL CHOUDHARY, INDORE VS. ITO, 5(3), INDORE, I.T.A.NO. 468/IND/2014 A.Y.2009-10 7 7 BETWEEN THE CLAIM OF EMBEZZLEMENT MADE BEFORE THE A O AND THAT CONTAINED IN THE FIR LODGED WITH THE POLICE, T HAT IN THE ABSENCE OF STOCK REGISTER, THE EXTENT OF THE EMBEZZ LEMENT LOSS COULD NOT BE VERIFIED AND THE ASSESSEE HAS NOT TAKE N ANY STEP TO REALIZE THE AMOUNT WITHIN THE PREVIOUS YEAR IN Q UESTION ITSELF. 8. SIMILAR CASE HAD COME UP BEFORE THE JURISDICTIONAL HIGH COURT IN THE CASE OF NATIONAL NEWS PAPER VS. C IT, 114 ITR 172, WHEREIN THE HON'BLE JURISDICTIONAL HIGH COURT HELD THAT THOUGH THE ASSESSEE COMPANY MAINTAINED ITS ACCOUNT ON THE MERCANTILE SYSTEM, IT WAS PRESSING THE GOVERNMENT T O WAIVE THE INTEREST ON THE LOANS AND THE QUESTION OF INTER EST REMAINED UNCERTAIN TILL THE GOVERNMENT FINALLY FIXED THE RAT E AND DECIDED TO CONVERT THE INTEREST INTO EQUITY SHARES. THE LIA BILITY OF INTEREST REMAINED UNASCERTAINED TILL MAY 1957, AND THE ASSESSEE WAS JUSTIFIED IN TREATING IT AS A CONTINGE NT LIABILITY TILL THEN, AND CLAIMING THE SAME IN THE ASSESSMENT YEAR IN WHICH IT WAS CRYSTALLIZED INTO AN ASCERTAINABLE LIABILITY AND BECAME ENFORCEABLE. I ALSO FIND THE DECISION OF AHMEDABAD TRIBUNAL IN SHRIL ANIL KUMAR PRABHUDAYAL CHOUDHARY, INDORE VS. ITO, 5(3), INDORE, I.T.A.NO. 468/IND/2014 A.Y.2009-10 8 8 I.T.A.NO. 2381/AHM/95 IN THE CASE OF PERFECT EQUIPM ENT VS. DY. CIT, 85 ITD 50, WHEREIN THE TRIBUNAL HAS HELD T HAT FINDING OR DIRECTION IN RELATION TO ASSESSMENT YEAR OTHER T HAN ASSESSMENT YEAR UNDER APPEAL CAN BE GIVEN BY THE TR IBUNAL PROVIDED THESE ARE NECESSARY FOR THE DISPOSAL OF TH E APPEAL AND ARE NOT MERELY INCIDENTAL AND, THEREFORE, A FINDING OR DIRECTION IN RESPECT OF ANY CLAIM FOR EXPENDITURE RELATING TO OTHER ASSESSMENT YEAR CAN BE GIVEN BY THE TRIBUNAL SUBJEC T TO TIME LIMITATION CONTAINED IN SCHEME OF THE ACT. THEREFOR E, I AM OF THE OPINION THAT THE YEAR OF ALLOWABILITY OF EMBEZZ LEMENT HAS TO BE ALLOWED IN THE YEAR IN WHICH IT WAS KNOWN TO THE ASSESSEE. SIMILARLY, IN THE CASE OF SHIV NARAIN KAR MENDRA NARAIN VS. CIT, (2005) 277 ITR 0027, WHEREIN THE SI MILAR FACTS OF THE ASSESSEES CASE WAS DECIDED BY THE HON'BLE A LLAHABAD HIGH COURT. HON'BLE HIGH COURT HAS HELD THAT EVEN T HOUGH THE APPLICANT HAD COME TO KNOW ABOUT EMBEZZLEMENT HAVIN G TAKEN PLACE SOME TIME IN OCTOBER, 1997, IN THE PRELIMINAR Y INVESTIGATION MADE BY EMPLOYEE AND APPLICANT, THOUG H THE FIGURE WAS ARRIVED AT EMBEZZLEMENT AMOUNT, HOWEVER, EXACT SHRIL ANIL KUMAR PRABHUDAYAL CHOUDHARY, INDORE VS. ITO, 5(3), INDORE, I.T.A.NO. 468/IND/2014 A.Y.2009-10 9 9 EMBEZZLEMENT LOSS, WHICH WAS ASSESSEE CLAIMING AS B USINESS LOSS DURING THE ASSESSMENT YEAR 1997-98, COME TO KN OW ONLY ON 7 TH JULY, 1979, WHEN THE C. A., WHO HAS BEEN APPOINTED TO INVESTIGATE AND FIND OUT THE EXACT AMOUNT OF EMBEZZ LEMENT HAD SUBMITTED ITS REPORT . THUS, IT WOULD BE TREATE D THAT THE APPLICANT HAD DISCOVERED THE LOSS ONLY ON 7 TH JULY, 1979, AND NOT PRIOR TO IT. IN VIEW OF THE MATTER, THE TRIBUNA L WAS JUSTIFIED IN HOLDING THAT AFORESAID AMOUNT OF EMBEZZLEMENT LO SS COULD HAVE NOT BEEN CLAIMED AS BUSINESS LOSS DURING THE A SSESSMENT YEAR 1978-79 AS THE AFORESAID TRADING LOSS DID NOT FALL IN THAT YEAR. I AM OF THE CONSIDERED OPINION THAT THE FACTS ARE SIMILAR IN THIS CASE. IN THIS CASE, THE EMBEZZLEMENT WAS DE TECTED ON 01.07.2009 AND RETURN WAS DUE ON 03.09.2009. THE ACCOUNTING YEAR WAS ON 01.04.2008 TO 31.03.2009. T HEREFORE, THE ASSESSEE HAS CLAIMED THAT THE EMBEZZLEMENT WAS DETECTED AND CLAIMED IN THE RETURN AND THE EMBEZZLEMENT AMOU NT DID NOT PERTAIN TO YEAR UNDER CONSIDERATION. I FIND THA T THIS CASE IS FULLY COVERED BY THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF SHIV NARAIN KARMENDRA NARAIN VS. CIT (SUPRA). SHRIL ANIL KUMAR PRABHUDAYAL CHOUDHARY, INDORE VS. ITO, 5(3), INDORE, I.T.A.NO. 468/IND/2014 A.Y.2009-10 10 10 THEREFORE, FOLLOWING THE SAME, I DISMISS THE APPEAL OF THE ASSESSEE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISM ISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OP EN COURT ON 8 TH DECEMBER, 2015. SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 8 TH DECEMBER, 2015. CPU* 1526