2019 (10) TMI 1060

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....and on facts in ignoring the documents filed by your appellant to support that irrecoverable amount of Rs. 55,18,606/- was on account of misappropriation of funds by one of the directors, Mr. P.K. Advani. 2. The ld. CIT(A) erred in law and on facts in confirming the disallowance of Rs. 55,18,606/- claimed as Bad Debts/Business Loss considering the same as personal expenses. 3. The ld. CIT(A) erred in law and on facts in confirming disallowance of Rs. 20,99,056/- being arbitration award granted in favour of Mr. P.K. Advani, considering the same as not incurred in the ordinary course of business of your appellant. Your appellant craves leave to add, amend, modify, substitute, alter or withdrawn any of the grounds of....

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....trum group, Mr. Advani was removed as a director of the company. After the exit of Mr. Advani, the assessee company on perusal of its books of accounts realised that a sum of Rs. 95,44,693/- [details at pg 6 of CIT(A) order] was misappropriated by Mr. Advani by debiting the assessee company's accounts on account of his various personal expenses or non-business expenses. The assessee company recovered a sum of Rs. 40,26,087/- and the balance amount of Rs. 55,18,606/- was written off and claimed as business loss which is agitated in this appeal. 5. From the record we also found that the assessee in arbitration proceedings initiated by Advani group before NSE made a claim of the said amount as evident from pgs 3, 4 and 5, paras 6 and 10....

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....that "the loss by embezzlement must be deemed to have occurred when the assessee came to know about the embezzlement and realized that the amount embezzled could not be recovered". In another decision, the Hon'ble Supreme Court in the case of Badridas Daga V/s CIT reported in 34 ITR 10) (SC) has held that "the losses which have been suffered by the assessee as a result of misappropriation by an employee have (1) which was incidental to the carrying on the business and should therefore be deducted in computing the profit of the business. 8. In view of the above discussion, we direct the A.O. to allow sum of Rs. 55,18,606/- as business loss. 9. The next grievance of the assessee relates to addition of sum of Rs. 20,99,056/- being ar....