Financial loss claims not allowed in absence of clarity of deceit: ITAT

Financial loss claims not allowed in absence of clarity of deceit: ITAT

The revenue department had challenged the order of the Commissioner of Income Tax (Appeals)

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that a claim of loss made by the branch employee of a financial institution is not allowable if it is unclear that it occurred due to embezzlement by certain employees.

The assessee incurred losses of Rs.1,63,27,011 on account of certain irregularities, allegedly, by the branch employees of Aditya Birla Money Mart Limited (ABML). He sought that it be allowed as a business loss/expenditure under the Income Tax Act, 1961.

The assessing officer (AO) had disallowed the loss on the basis that no details were furnished by the assessee during the assessment proceedings.

The assessee made the disclosure of the loss in the accounts and in the computation of income notes. Thereafter, the Commissioner of Income Tax (Appeals) ruled in favor of the assessee.

However, the revenue department challenged the action of CIT(A) in deleting the disallowance of the assessee's claim.

The Coram of Vikas Awasthy (judicial member) and M Balaganesh (accountant member) observed that the assessee furnished the details of the loss due to embezzlement before the CIT(A). But it was not clear if the loss was due to embezzlement by the employees of ABML or his own employees.

The tribunal held that if the employees of ABML were responsible, the assessee should recover the amount from ABML. The allowability of loss could be decided on the facts on record. The bench, thus, remanded the issue back to the AO for decision.