Fraudulent Income Taxable on Accrual Despite Recovery; No Deductions Allowed for Recovery Expenses Under Tax Law.

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....The ITAT upheld the taxability of fraudulent income earned by the assessee through forgery and defrauding the government. Despite recovering the entire amount, the income accrued to the assessee and was utilized for economic gains like investments, making it taxable in the year of accrual under the Income-tax Act, 1961. The doctrine of real income requires taxation at accrual, irrespective of later recovery or repayment. Deductions claimed for subsequent recovery were disallowed as they did not qualify as expenses incurred for earning taxable income u/s 57. The prosecution initiated u/s 277 was for making false statements, separate from the taxability aspect. The order confirmed the addition of fraudulent income and denial of deductions for recovery.....