2015 (10) TMI 6

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....4F of the I.T. Act, by admitting the additional evidences. 2. Whether on the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 10,15,252/- on account o the business loss pertaining to the amount recovered by the police from the alleged culprits. 3. The appellant craves leaves to amend or alter or ay of the aforesaid ground of appeal and amend, after or add any other ground of appeal. 2. The brief facts of the case are that the asseessee is engaged in the business of decorative handicrafts items. The assessee filed its return of income showing a loss of Rs. 22,59,021/- on 30.9.2008. In the assessment order, the assessing officer has disallowed claim of exemption u/s. 54F of the Act. The Assessing....

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....r considered opinion, in the interest of natural justice, this issue requires thorough investigation at the level of the Assessing Officer. Hence, we remit the ground no. 1 relating to addition Rs. 60,62,443/- made by the AO in regard to the disallowance u/s. 54F of the I.T. Act with the directions to consider the same, after giving adequate opportunity of being heard. 7. We have heard both the counsel and perused the records. With regard to ground no. 2 relating to addition on account of business loss pertaining to the amount recovered by the police from the alleged culprits, we find that Ld. CIT(A) has elaborately discussed the issue in question and adjudicated the same as under:- "I have considered the observation of the assessing offi....

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.... also claimed by the AR of the appellant that more than four years have elapsed to the incident but till date not a single paisa has been received by the appellant. Therefore, the total loss on account of fraud of Rs. 48,82,000/- has to be allowed as capital loss. I have considered the facts of the case, it is seen that entire amount ofRs.48,82,000/- have been fraudulently transferred from the appellant's proprietary concern M/s Omet Homes in November, 2007. Though the police have caught the culprit who has committed fraud but till date, the appellant has not received a single paisa. M/s Omet Homes is engaged in the business of exporting decorative handicrafts items. Therefore, this loss occurred to the proprietary firm is incidental t....

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....ere is no provision for allowing deduction of a trading loss on account of embezzlement, yet section 37 of the Act provides for any expenditure for the purpose of business and there has to be nexus between the business operation and the loss. If loss was directly connected with the business operation and incidental to carrying on' of business, the same has to be allowed as a deduction. Badridas Daga v. CIT [1958J34 ITR 10(SC), an agent of the assessee withdrew amount from bank and misappropriated the same. It was held that having regard to accepted commercial practice and trading principles, it could be held that loss arose out of carrying on of business and was incidental to it. Same principle was followed in CIT v. Nainital Bank Ltd.....