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TMI Blog1994 (1) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee had lodged their report immediately on arriving at the shop along with the police authorities and the details of the loss were provided to the police authorities only after complete inventory was taken and correlated with the registers as was required to be maintained under the Gold (Control) Act. The authorities were provided with the report that was lodged with the police authorities along with the list of items that were stolen. The police were investigating. They could not trace the culprit and recover the jewellery till the date of the present hearing before us. The Assessing Officer was informed about the details and also was provided with various copies from the excise registers as required to be maintained under the Gold (Control) Act, which was duly informed to the authorities concerned about the theft. He submitted that the copies of the pages wherein the relevant entries of the losses was so indicated has been filed at pages 31, 32 and 33 of the paper-book. He submitted that the assessee even announced a reward of Rs. 25,000 to the person who could help in the recovery of the stolen jewellery. The assessee claimed deduction of the amount as a trading loss, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the shop on February 1, 1981. He submitted that the thief had taken some part of the jewellery and not the entire jewellery as was available in the shop, which itself gives rise to a doubt as to whether the claim as advanced by the assessee that the jewellery being stolen could at all be believed or not. He made reference to the order of the Commissioner of Income-tax (Appeals) wherein it was categorically observed that when the FIR was lodged, the quantification was still to be done and the investigation was still under process during the year. We have given our very careful consideration to the rival submissions. The assessee is found to have maintained accounts during the course of its business. The registers G.S-11 and G.S.-12 are required and prescribed by the Gold Control authorities. These registers have been found to be regularly checked by the concerned authorities. When the intimation regarding the shutter being found partly opened was received the police authorities were informed and an inventory of the various stocks as were remaining in the shop was taken. Comparing this inventory with the registers G.S-11 and G.S-12, the assessee listed out the items which are no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sales of the jewellery. The assessee, therefore, in our view, had no other basis of even finding out that there was a loss of jewellery by theft except by taking physical inventory of the available jewellery and comparing the same with the G.S.-11 and G.S.-12 registers. The registers G.S.-11 and G.S.-12 provided entries describing along with the weight of each of the jewellery. Consequent upon the theft, the G.S.-11 and G.S.-12 registers were updated by providing only entries along with description, weight, quantity of jewellery stolen. There is no material on record available as is evident from a reading of the order of the Assessing Officer and the Commissioner of Income-tax (Appeals) that the Gold Control authorities even indicated that the entries in G.S.-11 and G.S.-12 registers were either incomplete or had given wrong particulars and that they had not accepted or raised a doubt or rejected the claim made by the assessee in regard to the entries of the various items stated to have been stolen. Keeping these factors in our mind, we feel that the claim advanced by the assessee cannot be brushed aside as irrelevant. The theft had occurred on February 1, 1981, and the police ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rading loss in computing the business income. They, however, observed that the retention of the monies in the premises of the bank to meet the demands of its constituents is part of the operation of banking, carrying with it the ordinary risk of being subject to embezzlement, theft, dacoity or destruction by fire. Such risk of loss is found to be incidental to the carrying on of the operation of the banking business. Since the assessee deals in gold, jewellery and it is the stock-in-trade as far as the assessee is concerned, which necessarily is required to be kept in the shop suffering the risk of theft, etc., the loss that arises on account of theft, etc., is clearly a loss suffered in the course of business and in view of the decision of the Supreme Court, it is clearly allowable to it as a trading loss. We have only to direct the Assessing Officer to allow the loss to the extent of the cost as was incurred by the assessee in purchasing these items. The ground in regard to disallowance of car expenses was not pressed and accordingly this is treated as dismissed. On the last issue regarding claim of deduction under section 80G in respect of donations provided by the assessee as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppealed to the Commissioner of Income-tax (Appeals) and filed written submissions dated March 8, 1990 (paper book pages 1 to 7). It was claimed that, since the assessee had furnished a report from the police department that the FIR had been held as untraced, the assessee was entitled to deduction in the year of the theft. Reliance was placed on various authorities in support of the claim that the loss incurred by the assessee in the course of carrying on of business is permissible as a deduction. The Commissioner of Income-tax (Appeals) rejected the claim of the assessee by agreeing with the Assessing Officer on both counts, i.e., the assessee had not established by satisfactory evidence the availability of jewellery on the date of the theft nor had any reasonable basis been furnished for valuation of the jewellery. The second ground for which the loss was held to be not allowable was that the loss could not be held to relate to the year under appeal. The Commissioner of Income-tax (Appeals) further held that if at all the loss could be said to have matured, it would be only after April 5, 1982, and not on February 1, 1981. It was pleaded before us that the assessee had suffered t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x (Appeals) and apart from the First Information Report lodged with the police authorities, the assessee did not point out to any other evidence in order to support the claim of the loss. Though before the Commissioner of Incometax (Appeals), in the first round it was assured by the assessee that sufficient evidence would be produced before the Assessing Officer to establish the loss, no such evidence was produced during the course of fresh assessment proceedings except a copy of the report from the police station that as on April 5, 1982, the report sent to the Metropolitan Magistrate, Tis Hazari Court, was that the theft was untraced. The contentions raised before us for the first time that an inventory of the stocks was taken in the presence of police authorities and the customs authorities were informed about the details of the theft has remained a mere contention unsupported by any evidence. A perusal of the assessment orders and the orders of the first appellate authority in two rounds as well as the written submissions before the Commissioner of Income-tax (Appeals) placed at pages (1 to 7) of the paper book, clearly indicates that the contentions regarding the preparation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eport lodged at the first instance that the weight and the amount of ornaments lost had not at all been indicated in the First Information Report. This does not lend credence to the contention on behalf of the assessee that the shop was opened in the presence of police authorities, inventory taken and the First Information Report lodged. Copy of a hue and cry announcement is filed before us, which is undated and unsigned. I. It is not known as to when the assessee furnished the details of the jewellery to the police authorities and the customs authorities. II. Whether the assessee was able to recover the jewellery or not as a consequence of the arrest of the main accused is also very relevant to be taken into consideration in deciding the issue of admissibility of the loss. I am, therefore, of the firm view that the claim of the loss cannot be allowed on the basis of evidence on record. However, in order to be fair to the assessee in the background of the Revenue authorities declining to consider the claim of the assessee in the year under appeal on the ground of it being related to the subsequent assessment year, the matter deserves to be set aside to the file of the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t originally on November 5, 1985, disallowed this loss with the following observations : " Huge losses shown in the statement of income is due to big theft committed at the business premises of the assessee on February 1, 1981, in which gold ornaments weighing 22,440.400 gms valuing Rs. 36 lakhs were stolen. The theft has been claimed as loss in the statement of income resulting in net loss in the return at figures mentioned above. The assessee has also filed a copy of the First Information Report under section 154, Criminal Procedure Code, lodged with Delhi Kotwali, Chandni Chowk, Delhi, vide form No. 245 (1), Book No. 142, dated February 1, 1981, along with list of ornaments with weight stolen. The police is stated to be still investigating the theft. In the letter dated October 20, 1985, it has been stated that shop and goods were not insured. In these circumstances, it is premature to allow loss on account of theft as the police is still investigating the case. " With these observations, the Assessing Officer disallowed the claim. Being aggrieved, the assessee filed an appeal before the Commissioner (Appeals). The Commissioner (Appeals) disposed of this ground in a very shor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion as to what would have happened if the goods were insured and what would be the punishment (sic) for the goods if not insured. Lastly he held : " In any case, I find force in the Assessing Officer's conclusion that, if at all, the loss could be said to have matured and final, it will be held to be after April 5, 1982, and not on February 1, 1981. Accordingly, the appeal on this ground is dismissed. " Against dismissal of this ground, the assessee preferred a further appeal before the Tribunal. After hearing the parties, the Bench could not agree on the conclusions and they formed their difference of opinion as mentioned above. Now, going through the order of the learned Accountant Member who wrote the leading order, with which the learned Judicial Member disagreed, I find the following findings : (a) The assessee was found to have maintained accounts in a regular way during the course of its business and in particular maintained such registers as are prescribed under the Gold (Control) Act, namely, G.S.-11 and G.S.-12 registers. These registers were found to be regularly checked by the concerned authorities and there were no mistakes whatever pointed out in the entries made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account itself and that the loss should be allowed to it at cost price. But, the learned Judicial Member disagreed with this view. The learned Judicial Member felt that the burden that rested upon the assessee to establish that the loss had taken place was not discharged. According to him the only evidence was that of the FIR lodged with the police on February 1, 1981, and that was not sufficient to prove the loss. Though the assessee had stated before the Commissioner (Appeals) in the first round that it would adduce sufficient evidence to prove the loss but when the assessment was set aside, the assessee did not produce any evidence before the Assessing Officer to establish the loss other than the report that the police had closed the case on April 5, 1982. It appears that, during the course of hearing before the Bench, two contentions were raised for the first time, namely, that the inventory of the stocks was taken out in the presence of the police authorities and that the Customs authorities were informed about the details of the theft but no evidence was adduced to support these contentions. According to him, a perusal of the assessment order and the orders of the first appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said, on the facts and in the circumstances of this case, to have discharged the burden that lay upon it in regard to the loss of jewellery by burglary and that the claim of loss of jewellery by burglary could be said to have been established on the basis of the evidence adduced by the assessee and no more is required to establish the loss of jewellery. It is no doubt true that, when an assessee puts up a claim for the allowance of a deduction in computing its income, the burden rests upon him to establish the claim to the satisfaction of the Assessing Officer. In this case, the claim put up by the assessee was that there was a loss of Rs. 36 lakhs by way of theft of its stock-in-trade. There is no doubt that the loss of stock-in-trade by way of theft or fire or destruction is a revenue loss allowable as a deduction in computing the income. There used to be some controversy as to whether loss by theft either of stock-in-trade or money could be allowed as a deduction in computing the income. But, now that controversy was settled by a series of decisions of the Supreme Court, the first major decision was that in the case of CIT v. Nainital Bank Ltd. [1965] 55 ITR 707, to which refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y was in their custody and that the assessee had done nothing to identify that person and the result of that enquiry was not disclosed and that the result of that enquiry was very relevant to consider whether the loss was established or not. The hue and cry announcement made in the papers was considered by him again as insufficient because it was neither dated nor signed. In my opinion, it cannot be said that the FIR lodged with the police was not sufficient to prove the loss. In all cases of loss, the first thing that the owner of the articles lost was required to do under the law is to report it to the police to enable the police to initiate investigation and recover the lost articles by taking such action as is open to the police. If the police is unable to trace the culprit and recover the articles, it cannot be said that the lodgement of the FIR was not sufficient to prove the loss. If no FIR was lodged, it can be said that the assessee was making a false claim because no person who had lost such a huge sum of Rs. 36 lakhs, would not have kept quiet without lodging a police complaint, that too a businessman. It is not the case of the Revenue at any point of time that the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by any police officer subordinate to him, in the manner provided by this code, and such officer shall have all the powers of an officer in charge of the police station in relation to that office. '' The object of the provision of section 154 is to obtain early information of the alleged criminal activity to record the circumstances before there is time for them to be forgotten or embellished. To give information under section 154 of the Criminal Procedure Code is one of the modes by which a person aggrieved may set the criminal law in motion and this is usually known as the FIR. This information, when recorded, is the basis of the case set up for investigation by the informant. The information given under section 154 makes available to the judicial officers the materials on which the investigation is commenced. It is a safeguard against embellishment or forgetfulness. The Supreme Court observed in Hasib v. State of Bihar, AIR 1972 SC 283 that the principal object of the FIR from the informant's stand point is to set the criminal law in motion and from the view point of the investigation authorities is to obtain information about the alleged criminal activity so as to be able to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. '' This shows that the Police Officer had to send a report to the Magistrate empowered to take cognizance of such offence and then proceed with the enquiry either by himself or by deputing one of his subordinate officers. That means that the Police Officer had to send the report to the Magistrate also and the closing of the case can also be with the knowledge of the Magistrate and that the Magistrate having jurisdiction to try the case was informed that the matter was untraceable, showed that the police made investigations and then came to the conclusion that the case was untraceable. It was open to the police to say that no theft had taken place, if the report was false. The police had not said that. Therefore, it is, in my opinion, not very correct to ignore the FIR and then come to the conclusion that it is not sufficient to establish the theft. Another safeguard provided in this respect is the provisions made in section 158 of the Criminal Procedure Code which states that every report sent to a Magistrate under section 157, which I have just referred to, shall be submitted through such superior officer of the police as the State Government by general or special order, appoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Judicial Member did not find anything to the contrary on this point. Therefore, when these registers were continuously and constantly checked by the Gold Control authorities and such registers contained the entries made for the loss of jewellery by theft, no other evidence can be more conclusive than this to prove the loss of jewellery to the assessee. Now, the question comes as to the quantity as well as its value. As regards the quantity, the only way to arrive at the quantity was to compare the stocks available in the shop after theft by taking physical verification and compare that quantity with the quantity mentioned in G.S.-11 and G.S.-12 registers. There is no other way to find out the quantity lost in the theft. These G.S.-11 and G.S.-12 registers served the purpose of not only meeting the requirement of the statute but also the purpose of a stock register. Thus when the quantity available on physical verification in the shop on February 1, 1981, was compared with the stock particulars already recorded in the stock register, namely, G.S.-11 and G.S.-12 registers, the difference represented the stock lost by theft. The Departmental authorities have not pointed out any mist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss of huge quantity of gold ornaments, interrogated the assessee as to the loss of the goods from the stocks, if they had not placed reliance upon G.S.-11 and G.S.-12 registers. This not having been done, the hue and cry announcement made in the papers should also be taken as lending support to the claim of the assessee that it had lost goods on theft of the quantity shown in the announcement. No one so far has come forward claiming that the advertisement was false. There was also a reward announced, which nobody claimed. This, in my opinion, would show that all that was to be done by the assessee to recover the stolen goods was done. If the police was unable to do anything in the matter, the assessee cannot be blamed. The learned Judicial Member had held that the assessee raised two contentions for the first time which were unsubstantiated. It may be true that an inventory of the stocks was not taken in the presence of the police authorities but the fact that an inventory was taken and sent to the police was an undeniable fact irrespective of the time when it was taken. The inventory was furnished to the police authorities. This was accepted by the Assessing Officer also. It m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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