Fraudulent Income Taxable at Accrual Despite Later Recovery; Deductions Disallowed.

The Income Tax Appellate Tribunal (ITAT) ruled that fraudulent income obtained by an assessee through forgery is taxable in the year it accrues, even if the amount is later recovered. This income, used for economic gains such as investments, falls under the Income-tax Act, 1961. The principle of real income mandates taxation at accrual, regardless of subsequent recovery. Deductions for the recovery were disallowed as they were not expenses incurred to earn taxable income under section 57. Additionally, prosecution under section 277 for false statements was deemed separate from the taxability issue. The order upheld the addition of fraudulent income and denied deductions for recovery. .....

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