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TMI Blog2018 (6) TMI 1109X X X X Extracts X X X X X X X X Extracts X X X X ..... The captioned appeal has been filed at the instance of the assessee against the appellate order of the Commissioner of Income Tax(Appeals)-4, Vadodara [CIT(A) in short] vide appeal no.CAB/4- 191/2015-16 dated 17.08.2016 arising in the assessment order passed under s.143(3)(ii) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) dated 24.03.2015 relevant to Assessment Year (AY) 2009-10. 2. The revised grounds of appeal raised by the assessee are as under:- Your appellant being dissatisfied with the order passed by the Hon'ble CIT(A)-4, Baroda, in Appeal No. CAB/4-191/2015-16 dated 17.08.2016, presents this appeal against the said order on the following amongst other grounds:- 1. The Hon'ble CIT(A) has erred in confirming the validity of the order passed u/s 143(3) r.w.s 147 of the Act. The Hon'ble CIT(A) has not appreciated the provisions of Section 147 of the Act and has confirmed the proceedings u/s 147 of the Act by ignoring the fact that for the year under consideration no income was escaped or understated. Hence the order passed by Hon C1T(A) is unjust and uncalled for and the same be quashed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is pending as on date. However, the AO opined that the amount involved in the embezzlement of funds pertains to the AY 2009-10. Therefore it needs to be added to the year under consideration. In view of above, the AO added the sum of ₹ 1,49,42,167/- on the substantive basis to the total income of the assessee. 6. Aggrieved, assessee preferred an appeal to learned CIT(A) who confirmed the order of AO by observing as under: 3.3. I have considered the submissions of the learned Authorized Representative and the order of the Assessing Officer. Ld. Authorized Representative has fairly admitted that this issue is covered against the appellant by the order of CIT(A)-VI in respect of 2010-11 when this issue of losses due to embezzlement came up for consideration before him. Ld. CIT(A)-VI adjudicated the issue against the appellant vide his order dated 19.09.2013 in Appeal No. CAB-VI/205/2012-13 as under:- 5.3 I have given my careful consideration to the facts of the case, the submissions of the appellant, judicial pronouncements and the material available on record. The issue relates to sale of milk by the appellant, which was not accounted for by certain uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the appellant had not recorded/accounted for this sale in its books of accounts during the immediately preceding assessment year (i.e. F.Y. 08-09, A.Y. 09-10) also and based on its accounting policies, it was for the first time accounted for in F.Y.09-10 relevant to A.Y.10-11. The deficiency in sales figures was detected during the current year and the same was accounted for during the current year. Appellant's plea that income had not accrued to it also does not appeal to me considering the fact that sale is effected as soon as the milk is loaded in to the supply trucks along with proper challans and bills/vouchers. At this point, sale is effected and corresponding income accrues to the appellant. Therefore, appellant's alternate plea that the sales figure for the current year should be reduced by on amount of ₹ 1,49,42,467/- cannot be accepted. When sales are accounted for, as a corollary, loss, if any, should be a/lowed to be written off, when the loss crystallized. Since it has not crystallised during the year under consideration, it cannot be allowed as deduction during the year under consideration. In view of this, the order of the Assessing Officer i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... governed by the directions of the District Registrar and subjected to independent audit by the special auditors. In the course of audit of the financial accounts, the audit deem discovered under reporting of sales in the earlier year i.e. FY 2008-09. This lead to the realization of misappropriation/embezzlement of sale proceeds of milk by its employees in various units aggregating to ₹ 1,49,42,167/-. The assessee, while computing the taxable income seeks deduction of the aforesaid business loss saddled upon the assessee owing to embezzlement discovered during the year and thus purportedly crystallized during the year. 12.2. The revenue, on its part, claims that such loss is not allowable business loss firstly on the ground that the alleged misappropriation/embezzlement loss has not been charged to profit and loss account by the assessee itself. Secondly, the Revenue further contends that such alleged loss cannot be recognized in the absence of any legal action initiated against the unscrupulous employees. Thirdly, the assessee has admittedly recorded the unaccounted sales relevant to Financial Year (FY) 2008-09 as recorded by the assessee in FY 2009-10 (AY 2010-11 in q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e may hasten to add that the observations made in the present appeal shall not operate as any kind of estoppel in any manner for claim of any deduction/loss/expense arising from the impugned issue in any subsequent year, when found allowable in accordance with law. 13. In the result, appeal of the assessee in ITA No.2759/Ahd/2013 for AY 2010-11 is dismissed. From the above order, there remains no ambiguity that the addition was made in the hands of the assessee for ₹ 1,49,42,167/- on account of embezzlement loss pertaining to the previous year 2009-10 relevant to the A.Y. 2010-11. Thus if the addition is sustained in this year too then, it will amount to double addition of the same item which is contrary to the scheme of income tax provisions. Thus the addition has already been made in the hands of the assessee on substantive basis in the AY 2010- 11. Therefore, we have no hesitation in reversing the order of authorities below. Hence, the ground of appeal of the assessee is allowed. The issue involved in the ground no. 3 is regarding charging of interest under Section 234A/B /C of the Act which is consequential and needs no specific adjudication. 8. In the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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