GOTHAMCHAND GALADA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee family carried on a money -lending business at Madras. In the relevent year of account which ended on 1st Nov., 1948, Inderchand Galada, the Kartha of the assessee family, was in charge of the business. Suganchand Ranka, who had been appointed cashier in December, 1947, was in charge of cash, and he continued to be in charge of cash during the temporary absence of Inderchand Galda from Madras in March, 1948. Whether any one else was left in charge of the business during the absence of Inderchand Galda is not clear. But that Ranka was all along in charge of the cash was clear. During the absence of Inderchand Galda, Ranka misappropriated a sum of Rs. 13,330, which he appears to have lost on bets on horce races. When the shortage of cash was discovered and reported to him, Inderchand Galada returned to Madras. Ranka confessed in writing to the defalcation and prayed for forgiveness (see annexures A, A -1 and A -2). He was not prosecuted. On 7th April, 1948, Inderchand Galada obtained from Ranka a promissory note for Rs. 13,125, after adjusting Rs. 205, which was due to the cashier as his salary. At the end of the year of account, the assessee wrote off the amount of Rs. 13,125 as irrecoverable.

(2.) IN the asst. year 1949 -50, the assessee claimed that this sum of Rs. 13,125 which he had lost should be deducted in computing his taxable income. That the cashier Ranka had taken the money and the assessee had lost it were never doubted by the Department, the ITO and the Asstt. Commr.. But they rejected the claim of the assessee that it constituted an allowable deduction. The Tribunal sustained that rejection when it dismissed the appeal preferred to it by the assessee.

(3.) THE Department, it should be remembered, accepted the factual position, that Ranka had misappropriated the amount and that the assessee had lost it in the year of account. Even in the statement of the case submitted by the Tribunal there was nothing to indicate that the factum of loss was not established in the assessment proceedings. In the course of its appellate judgment, however, the Tribunal recorded :