COMMISSIONER OF INCOME TAX Vs. TROILAKYA CHANDRA BORA

JUDGEMENT

(1.) FOR the assessment year 1981-82, the assessee-Troilakya Chandra Bora, has submitted his return. The Income-tax Officer has found that the assessee constructed a house property, the value of which was determined by the Valuation Officer of the Department at Rs. 5,92,803. The construction of the said property was started on February 25, 1980, and completed on March 31, 1981. While ascertaining the source of investment during the course of assessment proceeding it came to the light that the assessee was an employee of Eastern Tea Brokers Pvt. Ltd., Guwahati, and has managed to embezzle cash of the said company. The Income-tax Officer assessed the embezzled amount of Rs. 3,53,220 as income of the assessee and that amount was subjected to tax. The assessee preferred appeal before the Commissioner of Income-tax (Appeals), Guwahati. The appellate authority held that the embezzled amount cannot be treated as taxable income in view of Section 2(24) of the Income-tax Act, 1961, and has placed reliance on the previous decision rendered by the Tribunal in the assessee's case and the decision of the Madras High Court in the case of CIT v. A. R. Adaikappa Chettiar, 1973 91 ITR 90. Against this order, the Revenue preferred appeal before the Income-tax Appellate Tribunal, Guwahati. Before the Tribunal the respondent stated that at the relevant period the assessee was an employee of Eastern Tea Brokers Pvt. Ltd., and he has embezzled an amount of Rs. 3,53,220 of the said firm. The amount embezzled has been utilised by the assessee for construction of a house property and that the assessee had executed a pro-note dated October 12, 1981, for a sum of Rs. 4,73,535.21 in respect of the amount embezzled by him to his employer. The Tribunal while dismissing the appeal filed by the Revenue held that all types of receipts cannot constitute income of an assessee. Capital receipts, loan receipts and receipts purely of windfall nature certainly do not constitute the income of the recipient. As the assessee acknowledged the liability in respect of the embezzled amount to his employer the said amount forms merely a liability payable at a future date by him and cannot constitute his income, inasmuch as, the embezzled amount cannot be considered to be the business or professional income of the assessee, as the assessee was not in the business or profession of embezzling money. The Tribunal also strongly relied upon the decision of the Madras High Court in CIT v. A. R. Adaikappa Chettiar, 1973 91 ITR 90.

(2.) AGGRIEVED by the said order of the Tribunal, the present appeal is preferred under Section 260A of the Income-tax Act, 1961. The High Court posed for itself the following two questions for consideration :

(3.) THE judgment of the apex court clearly lays down that "income" has to be construed in its widest amplitude. THE question before us is whether the amount embezzled can be construed to be an income when the amount was not received or taken by the assessee with the authority of his employer. In the instant case the assessee has accepted his liability to pay it back by executing a pro-note, at the same time, we cannot lose sight of the fact that the amount embezzled by the assessee had been utilised by him for construction of his house and it was only on the later stage he has executed a pro-note in favour of his employer for the embezzled amount. THEre is no dispute of the fact that the assessee has received the amount though illegally from his employer has utilised the same for the purpose of construction of his house.