TaxTMI 
TaxTMI 
2017 (11) TMI 1346
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....Rs..15,32,573/- on account of travelling expenses by holding that the loss on account of embezzlement is an allowable loss without appreciation that the said loss was not wholly and exclusively incurred for the purpose of business within the meaning of Sec.37(1) of the I.T. Act. 3. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the disallowance of Rs..15,32,573/- on account of travelling expenses even though the assessee itself agreed that these expenses were incurred by the CFO in their personal capacity." 3. Briefly stated the facts are, the assessee filed its return of income originally on 05.10.2010 declaring income of Rs..9,56,84,279/- which was revised to Rs..9,57,09,928/- by filing revised return on 05.10.2010. The assessment was completed u/s. 143(3) on 28.03.2013 determining the income of the assessee at Rs..16,58,44,110/-. The Assessing Officer while completing the assessment made addition of Rs..1,08,80,401/- as unexplained expenditure being the purchases made by the assessee from four parties referred to in Page No.6 of the Assessment Order and treated them as bogus purchases. Further, Assessing Officer disallowed trav....
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....ness of the purchases made from those parties since according to him those parties were providing only accommodation entries without transportation of goods as found out by the Sales Tax Department in their investigations. Assessing Officer also disallowed travelling expenses incurred by CFO observing that the expenses were incurred for personal purposes by the CFO and her family members but not for the purposes of business of the assessee. 6. On appeal Ld.CIT(A) deleted the addition/disallowance made by the Assessing Officer towards bogus purchases and the travelling expenses of the CFO and her family members accepting the contentions of the assessee that there is an embezzlement in assessee's company by the employees, where employees have siphoned off the funds of the assessee company by making various provisions, entries in the Books of Accounts fraudulently and siphoned off the assessee's funds and such embezzlement by the employees is clearly a business loss u/s. 28 of the Act which is deductible in computing the income of the assessee. Against this decision the Revenue is in appeal before us. 7. The Ld. DR supported the orders of the Assessing Officer in treating the bogus ....
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....her documents of Haldyn Glass Ltd to Tata Capital Ltd. and use them as genuine and thereby fraudulently obtained vehicle loan of Rs. 44,65,000/- for purchase of the Mercedes Benzh E 350 bearing the registration No. MH02CH5500 in her personal name. The Processing Fee and equated monthly installments to the tune of Rs. 9,09,500/- in respect of the said vehicles were fraudulently paid by her from the bank account of the company thereby committed a punishable crime under section 465,467,468,471 of IPC. In the second chargesheet which is a detail one and is placed on record along with the paper book, there has been details of fraud committed by the employees of the appellant including purchase of a flat No. 1602A and 1602B in Orion I Building. Further there has been details of bogus purchases made by the employees and cheques were issued to the fraudulent parties namely Bright Corporation, Pravesh Enterprises, Universal Enterprises, Om Enterprises, Classic Enterprises, Suman Trading Co., Sagar Enterprises, Indira Steel Industries, Macto Enterprises, Krishna Steel lmpex, Kundan Jewellers., H.G.Mehta and Company and Trinity Air Travel & Tours Private limited. The police have investigated ....
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.... 3.3.3. Having come to the conclusion that a fraud has been committed on the appellant by its own employee who have been entrusted with the work by the management of the company and funds embezzled, the next question arises, is the loss allowable to. the appellant under such circumstances or not. In the case of Sassoon J. David & Co: (P) Ltd vs. CIT (1975) 98 ITR. 50 (BOM) wherein the facts were that at the material time the assessee-company was dealing in shares and securities, was acting as an agent for a textile company and an insurance company and had a business in 'cotton yarn; (ii) 25 per cent of its share capital was held by P; (iii) The remaining 75 per cent of the share capital was held by a trust of which P was the sole beneficiary; (iv) A joined the company in 1925, became a director in 1931 and held one share as the nominee Of P; (v) P and A were the only two directors of the company; (vi) P resided out of India at all material times; (vii) Under a general power of attorney dated the 1st of Feb., 1929, executed by the company in favour of A the latter was authorised to manage the company's business, to deposit in the bank moneys which would come to his hands as....
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....t during a span of about nine months. He withdrew the amount as if the withdrawal was for. the purpose of the business of the company and then pocketed it. In other words, he withdrew the amount in the purported exercise or under colour of authority conferred upon him by the power of attorney and misappropriated it. In these circumstances, it seems to us clear that the loss to the company arose out of the carrying on of its business and is incidental to it. It cannot be disputed. that A was in the sole and exclusive charge of the company's business in India. But the contention that for that reason or for any other, he could be said to be in the position of a proprietor cannot be accepted. There is no substance in the contention that the loss in the instant case cannot be allowed as a deduction as the amount was withdrawn by the agent after it was collected and credited in the company's account in the bank. The loss caused to the company on account of the 'embezzlement committed by its agent A must be deducted while computing the company's assessable profits under S.10(1). Therefore, the loss caused to the company on account of the embezzlement committed by the agent....
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....es in the course of business is an allowable loss. It is also equally trite law that the act of fraud is punishable in the competent court of law on the basis of charges framed by the Prosecution. The Police Authority after nearly three years have filed the charge sheet against the employees of the appellant for embezzlement of funds. The police authority in the chargesheet have also not indicated the recovery of any asset however it is evident that they have attached the immovable property of the employees and during the course of the search operation on the premises of the employees some immovable properties have also been seized, however that being the case property has not yet been handed over to the appellant. According to learned AR of the appellant there is a little hope that the money or any asset could be recovered from the employees in the near future as the case is likely to take more time, the filing of the chargesheet itself took almost 3 years. it is also submitted by the appellant that in case if any losses are recovered the same will be offered to tax in the year of recovery as per the extant provision of the Act. Looking to the entire facts and circumstances of the....