Case Law Details
ACIT Vs Davangere District Central Co-op Bank Limited (ITAT Bangalore)
Introduction: Delve into the recent judgment by ITAT Bangalore in the case of ACIT vs Davangere District Central Co-op Bank Limited. The matter revolves around the deduction claimed for losses resulting from an employee’s embezzlement, challenging the CIT(A)’s erroneous presumption. The analysis unveils the intricacies of claiming such deductions and the impact of the CBDT’s circular on the proceedings.
Detailed Analysis: The appeal before ITAT Bangalore stemmed from the CIT(A)’s misconception that the deduction sought was related to the write-off of bad debts. Contrary to this, the factual scenario involved an employee’s embezzlement, leading to a financial setback for the bank.
During the proceedings, attention was drawn to Circular No. 35-D (XLVII-20) issued by the CBDT, providing guidelines on when a deduction for losses due to embezzlement can be claimed. The circular emphasizes that such losses should be treated as incidental to business and allowed as a deduction in the year of discovery.
The Tribunal highlighted the necessity for the AO to reevaluate the case, specifically focusing on the year in which the embezzlement was detected. The factual aspect regarding the discovery year was neither examined nor substantiated by the assessee during the initial proceedings.
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