2016 (5) TMI 1604 - AT - Income Tax

Loss on account of embezzlement by the employee - HELD THAT - We find the assessee has lodged a complaint before the police authorities to the extent of Rs. 25 lakhs only. After the settlement was arrived on 08-09-2009 Shri E. Srinivas Ex-employee of the assessee paid Rs. 25 lakhs to the assessee company. Since the assessee could not substantiate the claim of embezzlement of Rs. 40, 28, 270/- and has filed police complaint only to the extent of Rs. 25 lakhs therefore we do not find any infirmity in the order of the CIT(A) disallowing the claim of Rs. 15, 28, 270/- which remained unsubstantiated. Assessee before us also could not point out any mistake in the order of the CIT(A) nor could he give the proof of embezzlement of Rs. 15, 28, 270/-. We therefore do not find any infirmity in the order of the CIT(A) and uphold the same. The first issue raised by the assessee in the grounds is accordingly dismissed. Short Income in comparison to the figures in Form 26AS - difference between the ITS data and details in Form 26AS - HELD THAT - As in the instant case although the deductor has stated to have paid more amount to the assessee and since the assessee was unable to show that such income has been offered to tax either in this year or in the preceding or succeeding year therefore the office memorandum of the CBDT is not applicable to the facts of the present case. In view of the above discussion we uphold the order of the CIT(A) and the ground raised by the assessee on this issue is dismissed.

Summary

Issues Involved:
1. Disallowance of Rs. 15,28,270/- due to embezzlement by an employee.
2. Addition of Rs. 1,78,77,487/- due to discrepancies between Form 26AS and the books of account.
3. Levy of interest under sections 234A, 234B, and 234C.

Issue-wise Detailed Analysis:

1. Disallowance of Rs. 15,28,270/- due to embezzlement by an employee:

The assessee claimed a loss of Rs. 15,28,270/- due to embezzlement by an ex-employee, who defrauded the company to the tune of Rs. 40,28,270/-. The company recovered Rs. 25 lakhs and charged the remaining Rs. 15,28,270/- to the profit and loss account. The AO disallowed this amount, noting that the irregularity occurred in previous financial years (2003-04 to 2006-07) and the company failed to provide specific dates of recovery and termination of the employee. The CIT(A) upheld the AO's decision, stating that the claim of embezzlement of Rs. 40,28,270/- was not substantiated, as the police complaint was only for Rs. 25 lakhs, which was recovered. The Tribunal found no infirmity in the CIT(A)'s order, noting that the assessee could not substantiate the claim of embezzlement of Rs. 15,28,270/- and upheld the disallowance.

2. Addition of Rs. 1,78,77,487/- due to discrepancies between Form 26AS and the books of account:

The AO noted a discrepancy of Rs. 1,78,77,487/- between the income shown in Form 26AS and the books of account. Despite several opportunities, the assessee failed to provide a proper reconciliation. The AO added this amount to the total income, which was upheld by the CIT(A), who noted that TDS credit can only be claimed when corresponding income is shown. The Tribunal agreed with the CIT(A), stating that the assessee failed to reconcile the difference or provide evidence that the income was offered in the preceding or subsequent year. The Tribunal dismissed the assessee's reliance on the decision of the Mumbai Bench of the Tribunal and the CBDT office memorandum, stating that they were not applicable to the facts of the case. The addition of Rs. 1,78,77,487/- was upheld.

3. Levy of interest under sections 234A, 234B, and 234C:

The assessee contested the levy of interest under sections 234A, 234B, and 234C, but the Tribunal did not provide a detailed analysis or ruling on this issue in the judgment. The primary focus was on the disallowance of the embezzlement claim and the addition due to discrepancies in Form 26AS.

Conclusion:

The Tribunal dismissed the appeal filed by the assessee, upholding the disallowance of Rs. 15,28,270/- due to unsubstantiated embezzlement claims and the addition of Rs. 1,78,77,487/- due to discrepancies between Form 26AS and the books of account. The levy of interest under sections 234A, 234B, and 234C was not specifically addressed in detail. The judgment emphasized the need for proper substantiation and reconciliation of claims and discrepancies in financial records.