9911796707
TMI Blog1996 (7) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... was justified in holding that the loss of Rs. 1,72,279 was completely irrecoverable during the previous year relevant to the assessment year 1968-69 ? 3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the loss of Rs. 1,72,279 was a business loss allowable in the assessment year 1968-69 ? " The assessee is a registered firm and the reference relates to the assessment year 1968-69. Amongst the claims made by the assessee before the Income-tax Officer in the proceedings for the assessment year 1968-69, the claim of deduction of bad debts amounting to Rs. 1,72,279 was made on account of embezzlement said to have been committed by one Sri Ganesh Narain Somani, who was appointe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Collectorganj Police Station on December 11, 1965, but it appears that after lodging the first information report the assessee did not pursue and care to find out the fate of the same. Thereafter, the assessee neither filed a protest petition if a final report was filed nor any complaint under section 200 of the Criminal Procedure Code for taking appropriate action against Sri Somani although the huge amount of Rs. 1,72,279 was involved. No civil proceedings have been initiated to recover the huge amount said to have been embezzled by Sri Somani. The finding reached by the Income-tax Officer is that the claim of loss was not proved. The finding is affirmed in appeal by the Appellate Assistant Commissioner. It is settled that the burde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary that if they enjoy sufficient or more powers, they cease to be employees. These reasonings cannot be inferred from the statements made by the assessee in his reply dated October 22, 1971, which reads as under : " However, Sri Ganesh Narain Somani had no money and since there was hardly any chance of recovery." If the reasoning assigned by the Tribunal that Sri Somani was having more powers on managerial post attracting high fixed salary and in lieu thereof was being paid 40 per cent. of the profits in the said business, the statement of the assessee that Somani had no money and, therefore, the money was not recoverable, does not remain worth believing. Taking into account the fact that the police submitted a final report fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tore wholly or partially his ill-gotten gains. Therefore, so long as a reasonable chance of obtaining restitution exists, loss may not in a commercial sense be said to have resulted. In the instant case, as discussed above, the assessee did not compel Sri Somani by process of law or otherwise to restore wholly or partially his ill-gotten gains. Therefore, the aforesaid case does not help the assessee. In Kothari and Sons' case [1966] 61 ITR 23 (Mad), it is held that the question when loss by embezzlement can be said to occur was a mixed question of fact and law. A decision on this point would rest on the facts and circumstances of each case, the basic principle to be considered in this connection being that the loss must be actual and p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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