TaxTMI 
TaxTMI 
2022 (7) TMI 171
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....off on account of embezzlement and this was noticed by AO from the profit & loss account for the year ended 31.03.2008, which was shown as Extraordinary item vide Note-V of the audited accounts. The AO required the assessee to explain and the assessee explained that during financial year 2001-02 some cheque leaves of the assessee company for their account maintained with Central Bank of India had been clandestinately removed and signature of the company officials were forged and an amount of Rs.1,07,35,908/- were withdrawn from this account. The assessee company came to know about the embezzlement in the course of bank reconciliation. It lodged a complained with the Crime Branch of Chennai City Police in December 2001. The assessee company pursued the matter with the Central Bank of India requesting them to reimburse the amount withdrawn from the account of the company by means of forged cheques. It was the contention of the company that primary responsibility of passing of forged cheques rested with the Bank. But, the bank consistently refused to admit the responsibility for these fraudulent withdrawals and embezzlement. The company filed a petition before Banking Ombudsman on 29.....
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....e AO and CIT(A) and further argued that the company perused the matter with the Central Bank of India requesting them to reimburse the amount withdrawn from the account of the assessee company by means of old cheques. The bank consistently refused to admit the responsibility for these fraudulent withdrawals and embezzlement and finally the assessee company filed petition before banking Ombudsman on 29.10.2004. But the banking Ombudsman dismissed the complaint lodged by the assessee company. He stated that despite the fact that the Ombudsman dismissed the complaint, the company continued dialogue with the bank and it had personal meeting with their Executive Director and even Chairperson. However the bank had steadfastly refused to accept any responsibility and it was made clear to the company that bank will not pay any amount. It was contended by ld. counsel that as a final attempt, the company had met officials of bank in March, 2008 and bank replied the same answer. Hence, there being no scope of recovery for the above amount of Rs.1,07,35,908/-, the assessee company was left with no other alternative except to write off the amounts in financial year 2007-08. The company came to ....
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....d cheques. The assessee filed complain with Central Bureau of Investigation (CBI) also and the CBI filed charge sheet in FIR No.RCMAI 2001A0052 dated 28.12.2001 accusing Shri R. Anantharaman, S/o Shri Raghavan, Shri R.K. Kannan, S/o Late R. Krishnamurthy, Shri N.Hemkumar, S/o Shri Narayanasamy, Shri N.C. Prabhu, S/o Shri N.V. Chandran, Shri S. Venkatesan, S/o Shri Subramanian and Shri J.C. Joseph, S/o Shri James. The assessee company came to know that Shri J.C. Joseph and Shri N. Hemkumar made wrongful use of facility provided to them as they had access to the banking transactions of the assessee company. The investigation has also revealed that the assistance of the other accused was made use of towards encashing cheques stolen from George Oakes Ltd., and drawn in favour of fictitious companies by fraudulently affixing the signature of the Managing Director. The assessee has explained the entire sequence of fraud committed and the assessee company raised the issue of fraudulent encashment of cheques with Central Bank of India vide various letters starting from 04.12.2001. The company perused the matter by filing complaint with Banking Ombudsman on 29.10.2004 but the same was dismi....
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.... should be related as incidental to a business and this loss should be allowed as deduction in the year in which it is discovered. 7.2 The ld.counsel for the assessee has drew our attention to para 2, wherein it is clearly mentioned that the loss should be allowed as deduction in the year in which it is discovered. The ld.counsel for the assessee then took us through the decision of Hon'ble Jammu & Kashmir High Court in the case of J and K Bank Ltd., supra, wherein the meaning of expression 'discovery' is explained and the relevant para 9 & 10 reads as under:- "9. The expression detection and discovery have different connotations. When embezzlement comes to the notice of an employer, it can be said that such embezzlement is detected by the employer. However, the expression "discovers" indicates detection as the result of uncovering, revealing or laying open to view what was hidden, concealed or unknown. But words do not always retain their abstract or primary definitions and their meanings vary in accordance with contextual use. The work "discovers" has been interpreted by English Courts to means "comes to the conclusion from the examination the Inspector makes, and from any i....