2024 (9) TMI 271 - AT - Income Tax

Claim of loss due to robbery of gold ornaments - CIT(A) restricted such loss by on misinterpretation on news items printed in newspaper as compared to loss due to robbery as per the books of account - how much amount is to be allowed as deduction on account of loss by robbery? - HELD 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. The Hon'ble Supreme Court in Ramchander Shivnarayan 1977 (11) TMI 2 - SUPREME COURT 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 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. Thus we allow the loss suffered by robbery and delete the balance loss. Assessee s appeal is allowed.

Summary

Issues Involved:
1. Restriction of claim of loss due to robbery of gold ornaments.
2. Assessment year eligibility for claiming the loss.
3. Adequacy of evidence provided by the assessee to substantiate the loss claim.

Detailed Analysis:

1. Restriction of Claim of Loss Due to Robbery of Gold Ornaments:
The assessee claimed a loss of Rs. 1,93,17,398/- due to a robbery, which was restricted by the CIT(A) to Rs. 75,00,000/-. The CIT(A) disallowed Rs. 1,18,17,398/- based on the interpretation of news items and the lack of sufficient evidence. The assessee argued that the entire loss should be allowed as per the books of account. The Tribunal noted that the robbery event is undisputed and that the loss due to embezzlement, theft, or dacoity is an allowable deduction if it arises out of the business and is incidental to it. The Tribunal found that the assessee had made possible efforts to recover the loss and that the loss should be allowed when it becomes clear that recovery is impossible or very remote.

2. Assessment Year Eligibility for Claiming the Loss:
The robbery occurred on 17.02.2014, relevant to the financial year 2013-14 (assessment year 2014-15). The assessee initially did not debit the loss in the trading account for the year ended 31.03.2014, as there was hope for recovery. The loss was debited in the profit and loss account for the year ended 31.03.2015 (assessment year 2015-16) when the assessee realized that recovery was unlikely. The CIT(A) allowed the loss for the assessment year 2015-16, even though the event occurred in the previous year, recognizing the period of hope for recovery. The Tribunal upheld this view, stating that the loss should be allowed when the assessee becomes aware that recovery is improbable.

3. Adequacy of Evidence Provided by the Assessee:
The assessee provided several documents, including the FIR, newspaper cuttings, police investigation reports, trading account, balance sheet, and letters from the police department. The assessing officer disallowed the claim due to the lack of quantitative details in the FIR and other supporting evidence. The Tribunal found that the assessee had submitted sufficient evidence, including police reports and newspaper clippings, to substantiate the claim. The Tribunal also referred to similar cases, such as CIT v. Durga Jewellers, where the loss was allowed when the final report indicated no recovery. The Tribunal concluded that the loss due to robbery should be allowed as a deduction, deleting the balance loss of Rs. 1,18,17,398/-.

Conclusion:
The Tribunal allowed the assessee's appeal, recognizing the loss due to robbery as an allowable deduction for the assessment year 2015-16 and deleting the disallowed balance of Rs. 1,18,17,398/-. The judgment emphasized that the loss should be claimed when recovery becomes improbable and that sufficient evidence was provided to substantiate the claim. The order was pronounced in the open court on 08-07-2024.