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TMI Blog1990 (8) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... cash receipts in the normal course of the business of the assessee-firm. The assessee-firm was having the credit facility up to Rs. 28,000 from Central Bank of India, Lal Darwaza Branch, Ahmedabad. Sri Kiran K. Shah used to collect daily cash receipts and had the authority to deposit the same with the said bank in assessee's bank a/c. He also had the further authority to operate the bank account inasmuch as he could obtain the demand drafts from the bank for submission to the Indian Oil Corporation. In short, Sri Kiran K. Shah handled the cash receipts, the tasks of depositing the receipts in bank and obtaining Demand Drafts on behalf of the assessee-finn in ordinary course of assessee's business besides writing its books and maintaining relevant records. 4. It was sometimes in the last week of September 1980 that the bank authorities pointed out to the partners of the assessee-firm that their firm's cash credit a/c had exceeded the sanctioned limit of Rs. 28,000 by an amount of Rs. 1,00,000 approximately. Thereupon the partners took up the matter with the said Sri Kiran K. Shah, who, after interrogation, admitted to have misappropriated an amount of Rs. 50,000 and promised to pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods (Gas Cylinders) sold but sale-proceeds not accounted for in the daily cash collection statements. It was in the above background that the assessee-firm had filed its returns of income for the three years under consideration claiming loss of the aforementioned defalcated amount of Rs. 1,92,119.00 (which had been debited in a " cash and goods misappropriation account " in the books) in the following manner : -------------------------------------------------------------------------------------------------------------------------------------------------- S.No. Accounting period Assessment year Revenue loss Date of claimed filing return -------------------------------------------------------------------------------------------------------------------------------------------------- Rs. 1. (i) 1-9-77 to 3-11-77 (First period) 1979-80 7035.00 24-3-82 (ii) 4-11-77 to 31-12-78 (Ilnd period,) -do- 54368.00 26-3-82 2. 1-1-79 to 31-12-79 1980-81 39876.00 6-5-82 3. 1-1-80 to 31-12-80 1981-82 90840.00 21-6-82 ----------------------- Total Rs. 1,92,119.00 ------------------------------------------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in appeal against CIT(A)'s order for Assessment year 1981-82 and the assessee against his order for Assessment years 1979-80 and 1980-81. 10. It has been mainly urged before us on behalf of the department that since the assessee had not taken appropriate action or steps to realise the defalcated amount and had also not written off the same in its books the same could not have been allowed to it in Assessment year 1981-82. Reliance in this behalf was placed on Gujarat High Court decision in the case of Vithaldas H. Dhanjibhai Bardanwala v. CIT [1981] 130 ITR 95. It was also submitted that excepting the misappropriation of cash in hand the other amounts misappropriated through alteration, manipulation of the account book and other relevant documents had already affected the position of assessee's income and, therefore, those were not required to be further considered as that would amount to double deduction of the same amount. 11. In reply Mr. J.P. Shah, Advocate for the assessee submitted that the CIT(A) has rightly allowed the loss in question in view of the CBDT Circular No. 36-D (XiVII20) [F. No. 10/48/65-IT (A-1), dated 24-11-65]. It was further submitted by the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd at a footing different from the loss resulted from a debt rendered irrecoverable for the purposes of application of the provisions of section 36(2)(i)(b). The distinction between the two is fine but real. For the allowance of the former what is required is that it must be established that the trading loss of that nature has been suffered by the assessee. Once that fact is established the question of allowance thereof in ' a particular Assessment year would arise. And that question now stands answered by the circular of the CBDT which requires the IT authorities to treat loss by embezzlement by employees as incidental to business and to allow the same as deduction in the year in which it is discovered. In issuing this circular the CBDT has taken into consideration the Supreme Court decisions in the cases of Badridas Daga v. CIT [1958] 34 ITR 10 and Associated Banking Corporation of India Ltd. The fulfilment of requirement of writing off the same in books of account is thus not a condition precedent for allowance of such a loss, as held by the Supreme Court in the later decision. For the allowance of the later i.e. bad debt, the writing off of the concerned debt in the books of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to have been alive to that aspect while determining the loss by embezzlement, at assessment stage, yet to protect the interest of revenue we direct the ITO to reconsider that aspect of the case while giving effect to this order. With these observations we would like to dismiss revenue's appeal. 18. Now coming to assessee's appeals for Assessment years 1979-80 and 1980-81, we find that those are barred by limitation by 729 days i.e. almost two years. Ordinarily such an inordinate delay hardly deserves condonation. But the peculiar facts attending on this inordinate delay require the exercise of our discretion in a judicial and judicious manner. 19. Through his affidavitdated 27-7-90 filed in support of assessee's applications for condonation dated 20-1-88, which was filed along with the appeals, Col. N.K. Anklesaria, partner, has solemnly affirmed that since the entire amount of loss by embezzlement had been allowed by the CIT(A) in Assessment year 1981-82, the assessee had not considered the necessity of filing the appeals for Assessment years 1979-80 and 1980-81. It was only on the receipt of the notice under section 252(4) by the assessee on 16-1-88 from the Registry of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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