Decided on January 18,1994



A. Kalyanasundharam, Accountant Member - (1.) THE assessee, a firm, carrying on the business of jewellery has filed this appeal and has raised the issue of liability of loss of Rs. 36 lakhs worth of jewellery which were stolen from the shop and some minor issues like disallowance of car expenses for personal usage and non-allowing of deduction for donation.
(2.) Shri C. S. Aggarwal, learned counsel for the assessee, submitted that the shop of the assessee which is located in the busy business area of Chandni Chowk at Dariba Kalan, was broken into by some miscreants on the night of February 1, 1981, which was brought to the notice of the partners of the firm on the next morning when some passers-by saw the locks of the shop broken and the shutters of the shop slightly open. The police were called and an inventory of the stocks was also taken. The inventory of the stock so taken indicated that gold ornaments weighing 22,440.400 gms valued at Rs. 36 lakhs were found missing. The assessee had lodged their report immediately on arriving at the shop along with the police authorities and the details of the loss were provided to the police authorities only after complete inventory was taken and correlated with the registers as was required to be maintained under the Gold (Control) Act. The authorities were provided with the report that was lodged with the police authorities along with the list of items that were stolen. The police were investigating. They could not trace the culprit and recover the jewellery till the date of the present hearing before us. The Assessing Officer was informed about the details and also was provided with various copies from the excise registers as required to be maintained under the Gold (Control) Act, which was duly informed to the authorities concerned about the theft. He submitted that the copies of the pages wherein the relevant entries of the losses was so indicated has been filed at pages 31, 32 and 33 of the paper-book. He submitted that the assessee even announced a reward of Rs. 25,000 to the person who could help in the recovery of the stolen jewellery. The assessee claimed deduction of the amount as a trading loss, which was held to be not allowable to the assessee because the police authorities had not yet closed the file mentioning therein that the effort to trace is fruitless. The assessee in its appeal had made reference to the various decisions that have been noted in the third edition of Chaturvedi and Pithisaria and claimed all such losses as allowable deduction. The Commissioner of Income-tax (Appeals) after considering all these claims of the assessee had again formed the same view as formed by the Assessing Officer that the loss could not be said to have occurred till April 5, 1985, because there was still a possibility of recovering the stolen goods. Shri Aggarwal submitted that the Commissioner of Income-tax (Appeals) could not appreciate the difference between the loss on account of theft and irrecoverability of a debt. He submitted that loss on account of theft is an event that happened on February 1, 1981. Therefore, the loss is a trading loss at that point of time. It is not the case of the Revenue that the loss has not been quantified and it is also not the case of the Revenue that the loss is not verifiable. He submitted that the only point of difference between the Assessing Officer and the assessee is that the Assessing Officer feels that since the assessee did not care to take adequate insurance to cover the loss, the loss was not allowable. He submitted that it was because of this non-insuring of the jewellery items that the assessee could not even recover a penny but the character remains that of a business loss which cannot be denied to the assessee under any circumstances. The assessee placed reliance on the following authorities: (i) CIT v. Pretty Cycle Industries [1980] 123 ITR 227 (P & H). (ii) A P. S. Cold Storage and Ice Factory v. CIT [1979] 119 ITR 709 (All). (iii) CIT v. Soorajmull Nagarmull [1981] 129 ITR 169 (Cal). (iv) CIT v. Nainital Bank Ltd. [1965] 55 ITR 707 (SC). (v) Ramchandar Shivnarayan v. CIT [1978] 111 ITR 263 (SC). The learned Departmental Representative, Sh. Bhardwaj, on the other hand, relied very heavily on the orders of the authorities. He pleaded that though the G.S.-11 and G.S.-12 registers do indicate the stocks as were available with the assessee, there was nothing to indicate that the assessee did possess the stock which is stated to have been lost of the value of Rs. 36 lakhs at the time when the assessee closed the shop on February 1, 1981. He submitted that the thief had taken some part of the jewellery and not the entire jewellery as was available in the shop, which itself gives rise to a doubt as to whether the claim as advanced by the assessee that the jewellery being stolen could at all be believed or not. He made reference to the order of the Commissioner of Income-tax (Appeals) wherein it was categorically observed that when the FIR was lodged, the quantification was still to be done and the investigation was still under process during the year.
(3.) WE have given our very careful consideration to the rival submissions. The assessee is found to have maintained accounts during the course of its business. The registers G.S-11 and G.S.-12 are required and prescribed by the Gold Control authorities. These registers have been found to be regularly checked by the concerned authorities. When the intimation regarding the shutter being found partly opened was received the police authorities were informed and an inventory of the various stocks as were remaining in the shop was taken. Comparing this inventory with the registers G.S-11 and G.S-12, the assessee listed out the items which are not available in the inventory. Such items which were not found in the inventory were treated as items that have been stolen from the shop between the close of the shop the previous evening and the opening of the shop the next morning. The list of the jewellery aggregating to 22,440.400 gms. was provided to the police authorities subsequently. Simultaneously, in the G.S.-11 and G.S.-12 registers, entries were made about these items being stolen and the same was also intimated to the concerned gold control authorities. The assessee placed the value at Rs. 36 lakhs for the stolen jewellery and announced a reward of Rs. 25,000 for the recovery of the stolen jewellery.;

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