Vam Airtex Pvt.Ltd.,, Ahmedabad v. The Income tax Officer, Ward-8(4),, Ahmedabad

ITA 76/AHD/2008 | 1998-1999
Pronouncement Date: 30-04-2015 | Result: Allowed

Appeal Details

RSA Number 7620514 RSA 2008
Assessee PAN EMBER2005T
Bench Ahmedabad
Appeal Number ITA 76/AHD/2008
Duration Of Justice 7 year(s) 3 month(s) 27 day(s)
Appellant Vam Airtex Pvt.Ltd.,, Ahmedabad
Respondent The Income tax Officer, Ward-8(4),, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2015
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 30-04-2015
Date Of Final Hearing 29-04-2015
Next Hearing Date 29-04-2015
Assessment Year 1998-1999
Appeal Filed On 03-01-2008
Judgment Text
I.T.A. NO. 70 TO 77/AHD/08 ASSESSMENT YEAR: 1992-93 TO 1999-2000 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S.S. GODARA JM] I.T.A. NO. 70 TO 77/AHD/08 ASSESSMENT YEAR: 1992-93 TO 1999-2000 VAM AIRTEX PRIVATE LIMITED .................... .APPELLANT 5/15 VASUPUJYA CHAMBERS ASHRAM ROAD AHMEDABAD VS. INCOME TAX OFFICER WARD 8(4) AHMEDABAD ...RESPONDEN T APPEARANCES BY: S N DIVATIA FOR THE APPELLANT A L KUREEL AND DINESH SINGH FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : APRIL 29 2015 DATE OF PRONOUNCING THE ORDER : APRIL 30 2015 O R D E R PER BENCH: 1. BY WAY OF THESE SEVEN APPEALS THE ASSESSEE APPE LLANT HAS CHALLENGED CORRECTNESS OF THE ORDER PASSED BY THE CIT(A) IN TH E MATTER OF ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 AND 250 OF THE INCOME TAX ACT 1961 FOR THE ASSESSMENT YEARS 1992-93 TO 1999-2000 UPHOLDING AC TION OF THE ASSESSING OFFICER IN DECLINING DEDUCTION IN RESPECT OF ALLEGE D LOSS DUE TO EMBEZZLEMENT. 2. LEARNED REPRESENTATIVES FAIRLY AGREE THAT WHATEV ER WE DECIDE FOR THE ASSESSMENT YEAR 1991-92 WILL EQUALLY APPLY FOR ALL THESE YEARS AS WELL. AS A I.T.A. NO. 70 TO 77/AHD/08 ASSESSMENT YEAR: 1992-93 TO 1999-2000 PAGE 2 OF 7 MATTER OF FACT SO FAR AS ASSESSMENT YEARS 1992-93 T O 1998-99 IS CONCERNED THE ORDER PASSED BY THE CIT(A) IS A COMMON ORDER DEALIN G WITH THESE ASSESSMENT YEARS AS ALSO ASSESSMENT YEAR 1991-92 IN THE SAME O RDER. AS FOR THE ASSESSMENT YEAR 1999-2000 THE CIT (A) HAS PASSED A SEPARATE O RDER BUT THAT ORDER DOES NOT GIVE ANY INDEPENDENT REASONS AND MERELY FOLLOWS THE CONSOLIDATED ORDER FOR THE ASSESSMENT YEARS 1991-92 TO 1998-99. 3. VIDE OUR ORDER OF EVEN DATE AND WHILE REMITTING THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 1991- 92 WE HAVE OBSERVED AS FOLLOWS: 2. GRIEVANCE OF THE ASSESSEE IN SUBSTANCE IS THAT THE CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF RS 5 16 480 IN RESPEC T OF THE ALLEGED LOSS DUE TO EMBEZZLEMENT SUFFERED BY THE ASSESSEE. 3. TO ADJUDICATE ON THIS APPEAL ONLY A FEW MATERIA L FACTS NEED TO BE TAKEN OF. IT IS A REOPENED ASSESSMENT AND THE SECON D ROUND OF PROCEEDINGS BEFORE US. THE ASSESSEE BEFORE US IS A COMPANY ENGA GED IN THE BUSINESS OF MANUFACTURING REPAIRING AND RENDERING SERVICES IN CONNECTED WITH AIR CONDITIONERS. THE ORIGINAL ASSESSMENT WAS REOPENED ON THE BASIS OF CERTAIN INQUIRIES CARRIED OUT BY THE DDIT (INVESTIGATION) W HICH INDICATED THAT THE COMPANY HAD BOOKED BOGUS PURCHASES RESULTING IN SUP PRESSED PROFITS THAT SOME CONCERNS USED FOR THE PURPOSES OF BOOKING THES E BOGUS PURCHASES WERE OWNED BY THE EMPLOYEES AND ASSOCIATES OF THE ASSESS EE AND THAT SOME CONCERNS WERE CREATED TO ROUTE UNACCOUNTED SALES OF THE AIR CONDITIONERS MANUFACTURED OR ASSEMBLED BY THE ASSESSEE. THESE FI NDINGS WERE BASED ON INTER ALIA STATEMENT OF ONE K B THAKKAR RECORDED B Y THE DDIT AND IT WAS THIS STATEMENT WHICH WAS FOUNDATIONAL MATERIAL SUPP ORTING THE ALLEGATION OF BOGUS PURCHASES. THE CASE AGAINST THE ASSESSEE THUS WAS THAT A PART OF THE PURCHASES BOOKED IN THE ACCOUNTS OF THE ASSESSE E WAS BOGUS PURCHASES AND THE PAYMENTS MADE BY THE ASSESSEE BY CHEQUES WE RE RETURNED TO THE ASSESSEE IN CASH. THE ASSESSEE HAD REPUDIATED THESE ALLEGATIONS AND POINTED OUT THAT THIS K B THAKKAR WAS ACTING MALAFIDE THAT EVEN IF ANY PART OF THE PURCHASES WAS BOGUS SO FAR AS THE ASSESSEE WAS CON CERNED THE PAYMENTS WERE DULY MADE BY THE ASSESSEE AND IT IS INCORRECT THAT THE ANY PART OF THESE PAYMENTS CAME BACK TO THE ASSESSEE. IT WAS ALSO CON TENDED THAT SO FAR AS THE ALLEGED BOGUS PURCHASES WERE CONCERNED THE ASS ESSEE HAD MADE THE PAYMENTS AND THE MONEY SO PAID WERE TO MADE TO CERT AIN CONCERNS OWNED AND MANAGED BY K B THAKKAR BY K B THAKKAR HIMSELF WHO WAS MANAGING AFFAIRS OF THE ASSESSEE COMPANY. THE LOSS CORRESPON DING TO THESE BOGUS PURCHASES WAS THUS CAUSED TO THE ASSESSEE AS PER T HE ASSESSEE BY MISAPPROPRIATION OF FUNDS BY K B THAKKAR. THE ASSES SEE CLAIMED THE I.T.A. NO. 70 TO 77/AHD/08 ASSESSMENT YEAR: 1992-93 TO 1999-2000 PAGE 3 OF 7 DEDUCTION IN RESPECT OF SUCH LOSS WHICH SO FAR AS THIS ASSESSMENT YEAR WAS CONCERNED WAS RS 5 16 480. WHEN THE MATTER REACHE D THE TRIBUNAL A COORDINATE BENCH OF THIS TRIBUNAL VIDE ORDER DATED 11TH NOVEMBER 2005 REMITTED THE MATTER BACK TO THE ASSESSING OFFICER F OR FRESH ADJUDICATION AFTER FURNISHING A COPY OF K B THAKKARS STATEMENT BEFORE THE DDIT TO THE ASSESSEE. 4. IN THE RESULTANT ASSESSMENT PROCEEDINGS THE ASS ESSING OFFICER INTER ALIA DECLINED THE CLAIM OF DEDUCTION FOR THE LOSS DUE TO EMBEZZLEMENT ON THE GROUND THAT THAT AS HELD IN THE FIRST ROUND OF PROCEEDINGS THE CIRCUMSTANCES UNDER WHICH THE LOSS HAD ARISEN CANNO T BE SAID TO BE IN THE NORMAL COURSE OF BUSINESS THAT NO NEW MATERIAL H AS BEEN BROUGHT ON RECORD TO SUPPORT THE CLAIM OF DEDUCTION THAT EVEN IF LOSS IS ACCEPTED TO HAVE ARISEN IT COULD BE ALLOWED AS DEDUCTION ONLY WHEN IT IS IRRECOVERABLE WHEREAS RIGHT NOW MATTER IS SUB JUDICE AND THE EMBE ZZLED MONIES EVEN IF ANY CANNOT BE SAID TO BE FULLY UNRECOVERABLE. A R EFERENCE WAS THEN MADE TO THE FINDINGS IN THE FIRST ROUND OF PROCEEDINGS WHER EIN IT WAS SAID TO HAVE BEEN HELD THAT THE ASSESSEE WAS ALL ALONG AWARE ABO UT THE BANK ACCOUNTS WHICH WERE ALLEGEDLY USED FOR EMBEZZLEMENT AND THA T IT IS UNBELIEVABLE THAT THE COMPANY WENT ON ISSUING CHEQUES WHICH ARE MENTIONED IN MISAPPROPRIATION WITHOUT GETTING THE AMOUNT BACK I N CASH. A REFERENCE WAS ALSO MADE TO THE OBSERVATION MADE BY THE COORDI NATE BENCH IN ORDER DATED 11TH NOVEMBER 2005 TO THE EFFECT THAT THE FA CT REMAINS THAT THE NAME OF THE ASSESSEE APPEARS IN THESE DUBIOUS TRANS ACTIONS. THE CLAIM OF DEDUCTION ON ACCOUNT OF EMBEZZLEMENT WAS THUS DECLI NED. AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T(A) BUT WITHOUT ANY SUCCESS. WHILE REJECTING THE CONTENTIONS OF THE ASS ESSEE LEARNED CIT(A) HELD AS FOLLOWS: I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUB MISSIONS OF THE APPELLANT. I DONOT AGREE WITH THE VIEWS OF THE APPE LLANT. I FIND THAT THE AO HAS GIVEN PROPER OPPORTUNITY OF BEING HEARD AS ALSO GIVEN COPIES OF THE STATEMENTS RECORDED EARLIER AND PAPER BOOK FILED AS DIRECTED BY THE HONBLE ITAT. HENCE THE APPELLANT S SUBMISSION IN THIS REGARD IS REJECTED. FURTHER FROM THE DISCUSSI ONS MADE BY THE AO IN THE ASSESSMENT ORDER AND THE FACTS GATHERED IT IS CLEAR THAT THERE WERE BOGUS PURCHASES CLAIMED BY THE APPELLANT FOR W HICH DISALLOWANCE WAS CALLED FOR. THE APPELLANTS CONTEN TION THAT IF ANY ADDITION IS TO BE MADE SIMULTANEOUSLY DEDUCTION SH OULD BE ALLOWED FOR CASH EMBEZZLEMENT AS BUSINESS LOSS IS NOT ACCE PTABLE BECAUSE THE CLAIM OF LOSS BY EMBEZZLEMENT PUT FORTH BY THE APPELLANT IS NOT CONVINCING. THE ASSESSEE HAD KNOWLEDGE OF BOGUS BAN K ACCOUNTS OPENED IN THE NAME OF DIFFERENT EMPLOYEES TO ACCOMM ODATE INFLATION OF PURCHASES IN ITS ACCOUNTS. FACT REMAINS THAT THE AMOUNT BEING DEPOSITED IN THESE BANK ACCOUNTS OPENED IN THE NAME OF THE EMPLOYEES WERE BEING WITHDRAWN FROM TIME TO TIME AN D BEING HANDED OVER TO SVS (SUNIL V SHAH A DIRECTOR OF THE COMPANY) AS STATED BY THE KBT (K B THAKKAR A FORMER BUSINESS A SSOCIATE WHO WAS I.T.A. NO. 70 TO 77/AHD/08 ASSESSMENT YEAR: 1992-93 TO 1999-2000 PAGE 4 OF 7 SAID TO BE HANDLING ALL THE ACCOUNTS AND TAX MATTER S AND WHO HAD GIVEN A STATEMENT AGAINST THE ASSESSEE) WHICH WAS A CONTINUOUS PROCESS. IT CANNOT BE SAID THAT TH ASSESSEE COMPANY KEPT ON ISSUING CHEQUES TO THE EMPLOYEES BANK ACCOUNTS WITHOUT REC EIPT OF CASH IN RETURN. HAD IT BEEN SO THE ASSESSEE COMPANY WOULD NOT HAVE ISSUED CHEQUES ONCE THE AMOUNT WAS WITHDRAWN BY THE ASSESS EE WERE NOT RECEIVED BACK BY SVS BECAUSE SVS WAS FULLY AWARE OF THE FACT THAT THE ACCOUNTS WERE BOGUS AND THE FOR THE SPECIFIC PURPOS ES OF INFLATING THE PURCHASES. THE ASSESSEE COMPANYS PLEA I.E. IGNORA NCE ABOUT THE ENTRIES MADE IN THE BOOKS OF ACCOUNTS ALSO WAS FON D NOT SOUND AND CONVINCING IN THE SENSE THAT THE ASSESSEE COMPANY W AS FULLY AWARE OF THE FACT THAT CHEQUES BEING DEPOSITED INTO ACCOUNT WHICH WAS INTRODUCED BY ITS OWN DIRECTOR. OTHERWISE ALSO THE BOOKS WHERE THE ENTRIES WERE MADE WERE IN POSSESSION OF THE COMPANY EVEN AFTER THE ENTRIES HAVE BEEN MADE. STATEMENT OF GAUTAM DALAL WHO HAPPENED TO BE AN EMPLOYEE OF THE COMPANY CORROBORATED THIS . IN VIEW OF THE ABOVE DISCUSSIONS ALL THE GROUNDS O F APPEAL ARE HEREBY REJECTED. 5. THE ASSESSEE IS AGGRIEVED OF THE STAND SO TAKEN BY THE CIT(A) AND IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 7. WE HAVE NOTED THAT IN THIS ROUND OF PROCEEDINGS ALSO THE ASSESSING OFFICER HAS HEAVILY RELIED UPON FINDINGS IN THE FIR ST ROUND OF PROCEEDINGS AND PROCEEDED TO ADOPT THE SAME AS THE ASSESSEE HAS NOT BROUGHT ON RECORD ANY NEW MATERIAL AND THEREFORE AS PER THE ASSESS ING OFFICER THESE FINDINGS HAVE REACHED FINALITY. THIS APPROACH IS CLEARLY FAL LACIOUS. WHEN THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IN THE FIRST ROUND HAS BEEN REMITTED TO THE FILE OF THE ASSESSING OFFICER BY THE COORDINATE BENCH ON THE GROUND THAT IT HAS BEEN PASSED WITHOUT CONFRONTING THE ASSESSEE WITH THE CERTAIN STATEMENTS RECORDED BY THE INVESTIGATION WI NG ALL THE FINDINGS IN THAT ASSESSMENT ORDER CANNOT BE TREATED TO HAVE ACH IEVED FINALITY. THERE WAS NO OCCASION FOR THE TRIBUNAL TO ADJUDICATE ON T HESE FINDINGS AS THE ASSESSMENT ORDER WAS HELD TO BE VITIATED IN LAW ON ACCOUNT OF VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE INASMUCH AS THE A SSESSEE WAS NOT CONFRONTED WITH THE MATERIAL WHICH WAS USED AGAINST THE ASSESSEE. THE RESULT OF PROCEEDINGS IN THE FIRST ROUND EXCEPT TH E VALIDITY OF REASSESSMENT WHICH WAS SPECIFICALLY HELD TO BE LEGALLY SUSTAINAB LE CASES TO HOLD GOOD IN LAW WITH THE MATTER HAVING BEEN RESTORED TO THE FIL E OF THE ASSESSING OFFICER. THE TRIBUNAL HAS NOT CONFIRMED ANY PART OF THE ORDE R NOR HAS THE TRIBUNAL DEALT WITH THE MERITS OF THE MATTER. THERE CANNOT B E A DEEMED APPROVAL OF ANY FINDINGS OF THE AO OR THE CIT(A) WHEN THE TRIBU NAL HAS NOT EVEN EXAMINED THAT ASPECT OF THE MATTER. THERE IS NO MAT ERIAL BEFORE US TO COME TO A DEFINITE CONCLUSION AS HAS BEEN ARRIVED BY TH E CIT(A) THAT THE ASSESSEE I.T.A. NO. 70 TO 77/AHD/08 ASSESSMENT YEAR: 1992-93 TO 1999-2000 PAGE 5 OF 7 HAD FULL KNOWLEDGE OF THE BANK ACCOUNTS BEING USED TO SIPHON FUNDS AND FOR BOOKING BOGUS PURCHASES AND THAT THE ASSESSEE OR SU NIL V SHAH WERE INVOLVED IN RECEIVING CASH IN LIEU OF THE CHEQUES I SSUED BY THE ASSESSEE. A STATEMENT HAVING BEEN GIVEN BY AN INDIVIDUAL WHICH STATES SO CANNOT BE TREATED AS THE LAST WORD BECAUSE AS A MATTER OF R ECORD THE ASSESSEE HAS MADE COUNTER ALLEGATIONS IN CIVIL AND CRIMINAL PROC EEDINGS. THERE HAS TO BE SOMETHING MORE THAN AN ALLEGATION TO COME TO A DEFI NITE CONCLUSION IN THIS REGARD. THE STATEMENT OF K B THAKKAR IS UNDOUBTEDLY AN IMPORTANT PIECE OF DOCUMENT BUT SUCH A STATEMENT PER SE CANNOT BE CON CLUSIVE TO DECIDE THE ISSUE AGAINST THE ASSESSEE. ALL THE SURROUNDING FAC TORS INCLUDING STAND OF THE ASSESSEE AS ALSO THE PROCEEDINGS INITIATED BY T HE ASSESSEE AS INDEED THE CIRCUMSTANCES UNDER WHICH SUCH PROCEEDINGS ARE INIT IATED AND THE ALLEGATIONS OF K B THAKKAR ARE ALSO TO BE EXAMINED IN A HOLISTIC MANNER TO COME TO A CONCLUSION ON THIS ISSUE. AS FOR THE REFE RENCE HAVING BEEN MADE TO THE OBSERVATION MADE BY THE COORDINATE BENCH IN ORD ER DATED 11TH NOVEMBER 2005 TO THE EFFECT THAT THE FACT REMAINS THAT THE NAME OF THE ASSESSEE APPEARS IN THESE DUBIOUS TRANSACTIONS IT IS IMPORTANT TO APPRECIATE THAT IT WAS IN THE CONTEXT OF VALIDITY O F REOPENING AND AT THE COST OF REPETITION WE HAVE TO POINT OUT THAT THE C OORDINATE BENCH HAD NO OCCASION TO EXAMINE MERITS OF THE CASE AT ALL. THIS ASPECT WILL BE ALL THE MORE CLEAR WHEN THE ENTIRE RELEVANT OBSERVATION OF THE TRIBUNAL IS READ TOGETHER. THIS OBSERVATION IS AS FOLLOWS: WE HAVE HEARD THE PARTIES AT LENGTH REGARDING THE I SSUE OF REOPENING OF ASSESSMENT AND VIOLATION OF PRINCIPLES OF NATURA L JUSTICE. FIRST WE SHALL DEAL WITH THE PLEA OF THE LEARNED COUNSEL THA T REASSESSMENT PROCEEDINGS ARE BAD IN LAW. WE ARE UNABLE TO AGREE WITH THIS PROPOSITION OF THE LEARNED COUNSEL AS SUFFICIENT (F OR THE PURPOSE OF REOPENING THE ASSESSMENT) MATERIAL HAS COME ON THE RECORD TO COME TO A REASONABLE BELIEF THAT THE ASSESSEE WAS INDULG ING IN BOGUS PURCHASES. WHETHER IT WAS AT THE BEHEST OF THE ASSE SSEE OR NETWORK OF AN EMPLOYEE THAT IS ALTOGETHER A DIFFERENT ASPECT (BUT THE) FACT REMAINS THAT THE NAME OF THE ASSESSEE APPEARS IN TH ESE DUBIOUS TRANSACTIONS. THIS INFORMATION THOUGH MAY BE AVA ILABLE FOR A PARTICULAR PERIOD BUT LOOKING AT THE SYSTEM A REASO NABLE BELIEF CAM BE FORMED THAT BOGUS PURCHASES MAY BE THERE IN ALL THESE YEARS. IN VIEW OF THESE OBSERVATIONS WE UPHOLD THE REOPENING OF THE ASSESSMENTS. 8. THE COORDINATE BENCH THEN PROCEEDS TO EXAMINE TH E ISSUE OF VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. THE ABOVE OBSERVA TION IS IN THE CONTEXT OF REOPENING AND IN OUR HUMBLE UNDERSTANDING THIS O BSERVATION CANNOT BE PUT AGAINST THE ASSESSEE ON MERITS. THERE ARE NO IN DEPENDENT FINDINGS IN THE IMPUGNED ASSESSMENT ORDER OR THE ORDER OF THE CIT(A ) BUT YET THE CIT(A) PROCEEDS ON THE BASIS THAT THE ASSESSEE WAS FULLY A WARE OF THE BOGUS PURCHASES AND DUBIOUS TRANSACTIONS BUT THEN AS POI NTED OUT EARLIER THERE IS NO INDEPENDENT FINDING ABOUT THE REASONS OF PROC EEDING ON THIS BASIS. THE CIT(A) CANNOT SIMPLY REFER TO THE FINDINGS IN THE F IRST ROUND OF PROCEEDINGS I.T.A. NO. 70 TO 77/AHD/08 ASSESSMENT YEAR: 1992-93 TO 1999-2000 PAGE 6 OF 7 AND DECIDE THE MATTER IN THE LIGHT OF THESE FINDING S BECAUSE IN SUCH A SITUATION THE TRIBUNAL WILL NOT HAVE ANY OPPORTUNI TY OF EXAMINING CORRECTNESS OF THE STAND TAKEN BY THE ASSESSING OFF ICER. THE FINDING OF THE AUTHORITIES BELOW SHOULD BE THROUGH A SPEAKING ORDE R AND WITH APPROPRIATE REFERENCE TO THE MATERIAL ON THE BASIS OF WHICH SUCH FINDINGS ARE BASED SO THAT THESE FINDINGS CAN BE EXAMINED O N THE STANDALONE BASIS. IT IS ALSO A MATTER OF RECORD THAT THE ASSESSEE HAS INITIATED CERTAIN CIVIL AND CRIMINAL PROCEEDINGS BUT THESE PROCEEDINGS HAVE NOT REACHED FINALITY AS YET. NONE OF THE AUTHORITIES BELOW HAS DEALT WITH OR ANA LYSED ANY OF THESE DOCUMENTS. WE HAVE ALSO NOTED THAT DURING THE COUR SE OF THE PROCEEDINGS BEFORE US IT WAS VEHEMENTLY CONTENDED BY THE LEARN ED DEPARTMENTAL REPRESENTATIVE THAT EITHER THE INCOME SHOULD BE TAX ED IN THE HANDS OF THE PERSON WHO IS ALLEGED TO HAVE EMBEZZLED THE MONIES OR DEDUCTION FOR THE EMBEZZLEMENT SHOULD NOT BE ALLOWED IN THE CASE OF T HE ASSESSEE. WE ARE UNABLE TO SEE ANY LEGALLY SUSTAINABLE MERITS IN THI S OBJECTION. WHETHER OR NOT AN AMOUNT IS BROUGHT TO TAX IN THE HANDS OF THE PERSON WHO IS ALLEGED TO HAVE OR HAS ACTUALLY EMBEZZLED THAT AMOUNT CANNOT BE DETERMINATIVE OF THE DEDUCTION IN THE HANDS OF THE PERSON SUFFERING THE LOSS. THERE CAN BE SEVERAL REASONS WHOLLY UNRELATED TO THE GENUINENES S OF EMBEZZLEMENT LOSS WHICH MAY RESULT IN NON-TAXABILITY OF INCOME IN THE HANDS OF THE BENEFICIARY OF SUCH A CRIMINAL ACTIVITY AND THEREFORE SUCH A NON-TAXABILITY BY ITSELF CANNOT BE REASON ENOUGH TO DECLINE THE DEDUCTION IN THE HANDS OF THE PERSON SUFFERING THE EMBEZZLEMENT LOSS. THE PLEA CANVASSED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE HOWSOEVER APPEALING IT MAY SEEM TO BE AT THE FIRST SIGHT ON THE GROUND OF EQUITY LACKS LEGA LLY SUSTAINABLE MERITS. WE MAKE IT CLEAR THAT THE TAXABILITY OR NON-TAXABILITY OF INCOME ON ACCOUNT OF EMBEZZLEMENT EVEN IF ANY IN THE HANDS OF THE PERS ON WHO IS ALLEGED TO HAVE OR HAS ACTUALLY EMBEZZLED THE MONEY WILL NOT HAVE ANY BEARING ON THE DEDUCTIBILITY OF THIS LOSS IF OTHERWISE ADMISSIBLE IN THE HANDS OF THE ASSESSEE. IN VIEW OF THESE DISCUSSIONS IN OUR CON SIDERED VIEW THE ENTIRE ISSUE OF ADMISSIBILITY OF DEDUCTION IN RESPECT OF A LLEGED EMBEZZLEMENT NEEDS TO BE CONSIDERED AFRESH IN A FAIR AND OBJECTIVE MAN NER AND IN THE LIGHT OF RELATED LEGAL DEVELOPMENTS AS A RESULT OF CIVIL AND CRIMINAL PROCEEDINGS INITIATED BY THE DIRECTORS OF THE COMPANY AGAINST K B THAKKAR AND VICE VERSA. 9. AS THE VERY BASIC ISSUE OF ADMISSIBILITY OF DEDU CTION IN RESPECT OF THE LOSS DIE TO EMBEZZLEMENT IS REQUIRED TO BE IN THE LIGHT OF THE ABOVE DISCUSSIONS REQUIRED TO BE DECIDED AFRESH WE DONO T CONSIDER IT APPROPRIATE TO DEAL WITH OTHER PERIPHERAL ISSUES RAISED IN THE ORDERS OF THE AUTHORITIES BELOW. SUFFICE TO SAY THAT THE MATTER WILL BE DECID ED AFRESH UNINFLUENCED BY THE FINDINGS IN THE FIRST ROUND OF PROCEEDINGS (WHI CH HAVE COME TO A NAUGHT DUE TO THE MATTER HAVING BEEN RESTORED TO THE FILE OF THE ASSESSING OFFICER DUE TO THE PROCEEDINGS IN THE FIRST ROUND HAVING BE EN HELD TO BE VITIATED IN LAW DUE TO VIOLATION OF PRINCIPLES OF NATURAL JUSTI CE) BY WAY OF A SPEAKING ORDER ON A STANDALONE BASIS AFTER TAKING INTO ACCO UNT ALL SUCH DOCUMENTS INCLUDING DOCUMENTS RELATING TO LEGAL PROCEEDINGS AS THE ASSESSEE MAY RELY UPON AND AFTER GIVING A FAIR AND REASONABLE OPPORTU NITY OF HEARING TO THE I.T.A. NO. 70 TO 77/AHD/08 ASSESSMENT YEAR: 1992-93 TO 1999-2000 PAGE 7 OF 7 ASSESSEE. WE CONSIDER IT APPROPRIATE TO CLARIFY TH AT ON MERITS THE ASSESSEE IS AT LIBERTY TO RAISE ALL SUCH ARGUMENTS AS HE MAY DEEM FIT AND PROPER. 10. FOR THE REASONS SET OUT ABOVE WE ONCE AGAIN RE MIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATIO N DE NOVO IN TERMS OF OUR DIRECTIONS ABOVE INTER ALIA IN THE LIGHT OF THE LE GAL PROCEEDINGS IN RESPECT OF THE EMBEZZLEMENT THAT THE ASSESSEE CLAIMS TO HAVE S UFFERED. WITH THESE DIRECTIONS THE MATTER STANDS RESTORED TO THE FILE OF THE ASSESSING OFFICER. 4. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY US FOR THE ASSESSMENT YEAR 1991-92. RESPEC TFULLY FOLLOWING THE SAID ORDER WE REMIT THE MATTER FOR THESE ASSESSMENT YE ARS ALSO TO THE FILE OF THE ASSESSING OFFICER IN THE SAME TERMS. THE OBSERVATIO NS MADE FOR THE ASSESSMENT YEAR 1991-92 WILL APPLY MUTATIS MUTANDIS FOR THESE ASSESSMENT YEAR AS WELL. 11. IN THE RESULT THE APPEALS ARE ALLOWED FOR STAT ISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 30 TH APRIL 2015. SD/- SD/- S. S. GODARA PRAMOD KUM AR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD THE 30 TH DAY OF APRIL 2015 COPIES TO: (1) THE APPELLANT (2) THE RESPOND ENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT/DEPUTY REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES AHMEDABAD