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Issues involved: Assessment of losses claimed by the assessee for embezzlement in the assessment years 1965-66 and 1969-70.
Assessment Year 1965-66: The assessee, a private limited company dealing in iron and steel, claimed a loss of Rs. 60,000 due to embezzlement by the previous secretary, Shri D. D. Mehta. However, the Income Tax Officer (ITO) rejected the claim. The Appellate Assistant Commissioner (AAC) also dismissed the appeal. The Tribunal concurred with the lower authorities, stating that there was no satisfactory evidence to establish the embezzlement and resultant losses. The Tribunal emphasized the lack of concrete proof linking the losses to the alleged embezzlement, highlighting the absence of admission or clear evidence against Shri D. D. Mehta. The High Court directed the case to be sent back to the Tribunal for reconsideration, emphasizing that the authorities should assess the material presented by the assessee objectively to determine the validity of the claimed losses. Assessment Year 1969-70: For this assessment year, the ITO estimated sales and gross profit due to concerns over the accuracy of the company's accounts. The AAC reduced the estimated income, but the assessee still claimed deductions, including the loss on account of embezzlement. The AAC rejected this claim as well. The Tribunal consolidated the appeals for both assessment years and upheld the disallowance of the claimed losses. The High Court found that the Tribunal's assessment lacked a proper consideration of the material presented by the assessee, emphasizing that the mere pendency of criminal proceedings against Shri D. D. Mehta did not negate the possibility of proving the embezzlement and subsequent losses. The Court directed the Tribunal to reevaluate the appeals, considering the evidence provided by the assessee and the principles outlined in the judgment.
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