1980 (5) TMI 51 - AT - Income Tax

Summary

Issues:
1. Deletion of a sum of Rs. 1,53,851 by the CIT(A) for asst. yr. 1974-75.

Detailed Analysis:
The Revenue filed an appeal against the CIT(A)'s order regarding the deletion of a sum of Rs. 1,53,851 for the assessment year 1974-75. The issue revolved around the claim made by the assessee for a loss arising from a debit caused by their principals, Tata Iron & Steel Company Limited. The CIT(A) allowed the claim of loss made by the assessee, leading to the Revenue's appeal before the Appellate Tribunal ITAT Amritsar.

The CIT(A) based his decision on the facts presented in the case, including the agreement between the appellant and the principal, stock verifications revealing excesses and shortages, and the subsequent shortage of 91 metric tonnes discovered during an inspection. The assessee, faced with a shortage and suspicions of employee collusion, decided to withdraw the complaint lodged against the employees for embezzlement. This strategic move enabled the assessee to replace untrustworthy employees, resume supplies from the principals, and write off the amount of shortage as a loss.

During the appeal hearing, the Revenue argued that the withdrawal of the complaint indicated collusion between the assessee and the employees, making the assessee equally responsible for the loss. However, the assessee contended that the loss was genuine, and the withdrawal of the complaint was a prudent business decision to address the situation effectively without incurring additional costs. The Appellate Tribunal, after considering both parties' submissions, agreed with the assessee's stance.

The Tribunal found that the assessee had acted prudently in handling the situation, ensuring the resumption of supplies and avoiding liabilities associated with terminating employees. It concluded that the claim for loss was genuine and incidental to the business operations, dismissing the Revenue's allegations of collusion as speculative. Therefore, the Tribunal upheld the CIT(A)'s decision to allow the claim of loss and dismissed the Revenue's appeal.

In summary, the Appellate Tribunal ITAT Amritsar upheld the CIT(A)'s decision to delete the sum of Rs. 1,53,851 claimed as a loss by the assessee for the assessment year 1974-75. The Tribunal found that the assessee's actions were those of a prudent businessman, and the claim for loss was genuine and legitimate, dismissing the Revenue's allegations of collusion as unfounded.