TaxTMI 
TaxTMI 
1977 (7) TMI 73
X X X X Extracts X X X X
X X X X Extracts X X X X
....evious year. In the course of the assessment proceedings, the ITO found that the assessee had debited a sum of Rs. 51,962 to the Profit & Loss a/c as "goods lost on account of theft." On inquiry, he found that an ex-employee of the assessee-firm, in collusion with the servants of the assessee, was taken away large quantities of manufactured goods without fully paying for the same. This pilferage continued for about ten months when it was detected by one of the partners of the assessee firm on 30th Jan., 1974. Then, the partners of the assessee-firm contacted the aforesaid ex-employee and confronted him with the facts and the confessions made by its own employees. It is stated that the ex-employee admitted his guilt and offered to pay a sum ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of 4 per cent profit on the sales was applied in order to find out the cost of goods sold and the closing stock on the date of the stock-tally was found out. The AAC did not agree that the profits could be only 4 per cent. Secondly, the AAC also did not agree with the quantum of loss because the assessee agreed to close the matter on receipt of Rs. 10,000 and at another place the loss was stated to be only Rs. 30,000. Finally, he took note of the fact that the Police dropped the criminal case but came to the conclusion that the ITO was quite justified in not allowing the full amount by way of loss. Then, he proceeded to consider as to whether any portion of the loss claimed could be allowed. After going through the relevant documents, he ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rther against the accused because of insufficient evidence. A copy of the final report submitted by the Police to the sub-Divisional Magistrate on 12th Sept., 1974 was produced. He relied on the cases of Badridas Daga vs. CIT 1958 34 ITR 10, CIT vs. Nainital Bank Ltd. 1965 55 ITR 707 and Hopkin & Williams (Travancore) Ltd. vs. CIT 1967 64 ITR 76. 6. Shri S.K. Mohanty, the learned Representative for the Department, on the other hand, supported the order of the ITO and claimed that the entire loss should have been disallowed. He contended that the sum of Rs. 9,000 promised by the ex-employee to be paid later constituted a bad debt and the conditions for allowing the same were not fulfilled. 7. We have carefully considered the contention....
X X X X Extracts X X X X
X X X X Extracts X X X X
....less than 4 per cent adopted the rate of 4 per cent only to inflate the loss. We, therefore, do not see any force in this argument. We have gone through decisions relied on by the learned Representative for the assessee. In the case of Hopkin & Williams (Travancore) Ltd. vs. CIT, the assessee made the necessary attempts to recover the loss from the persons concerned, and it filed, and it was held that the loss was an admissible deduction. In the case before us, the loss by theft and/or embezzlement of the sale proceeds is established. The question is about its quantification. As has been stated earlier, the quantum of loss has been correctly arrived at Rs. 51,926. This loss was incidental to the business carried on by the assessee and arose....