CHANDARANA SOAP FACTORY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Income -tax Appellate Tribunal has referred the following two questions under section 256(1) of the Income -tax Act, 1961, to this court for its opinion :

(2.) DURING the assessment proceedings pertaining to the assessment year 1973 -74 corresponding the Samvat year 2028, the assessee claimed deduction of Rs. 23,741 as business loss on the ground that the said amount was misappropriated by its accountant. According to the assessee, the accountant had collected various amounts from the parties who were liable to pay those amounts to the assessee but had not credited the same in the account books of the assessee and had thereby misappropriated the same. Similarly, but getting false entries in respect of the accounts maintained with the State Bank of Saurashtra and Dena Bank, the accountant had misappropriated certain amounts. This way the accountant had in all misappropriated Rs. 23,741.

(3.) IN appeal, the Appellate Assistant Commissioner noticed that the assessee had furnished the details of the parties from whom larger amounts were received but lesser amounts were credited. The detailed accounts of all the parties were filed showing how the accountant had manipulated those accounts. On the basis of the material, the Appellate Assistant Commissioner held that the assessee had proved that the said amounts were defalcated by its accountant and, therefore, it was a business loss. On that basis, the Appellate Assistant Commissioner allowed the appeal and allowed the said claim.