Deduction for embezzlement loss requires proof of actual loss and irrecoverability before tax relief is allowed.

An alleged embezzlement loss was deductible only if the assessee proved an actual loss and showed that recovery was not reasonably possible. On the facts, the claim failed because the assessee produced no credible evidence of actual embezzlement, did not pursue protest, complaint, or civil recovery steps, and the police filed a final report for want of evidence. The record also left open whether the sum was retained towards the employee's profit share rather than lost by embezzlement. The deduction was therefore not allowable, as the burden of proving an irrecoverable business loss remained on the assessee.

---

---

Issues: Whether the alleged loss of Rs. 1,72,279 said to have arisen from embezzlement by Sri Somani was proved and, if so proved, whether it was an irrecoverable business loss allowable in the assessment year 1968-69.

Analysis: The assessee failed to establish the loss on facts. Although a first information report was lodged, no protest petition, complaint under section 200 of the Code of Criminal Procedure, 1973, or civil recovery proceeding was taken, and the police had submitted a final report for want of evidence. The record did not show that the amount was actually embezzled rather than retained towards Sri Somani's profit share, nor that recovery was impossible. The burden of proving a deductible loss lay on the assessee, and the absence of credible evidence negatived the claim of an actual and present loss.

Conclusion: The claimed deduction was not allowable, and the questions referred were answered in favour of the Revenue and against the assessee.

Ratio Decidendi: A deduction for an alleged embezzlement loss is allowable only when the assessee proves an actual loss and shows that recovery was not reasonably possible; failure to establish either defeats the claim.

---