Loss by shop burglary arisen during the course of business allowable u/s 37(1) – ITAT

Loss by shop burglary arisen during the course of business allowed u/s 37(1) even when Insurance company assessed loss at lower amount – ITAT

ABCAUS Case Law Citation:
ABCAUS 2859 (2019) (04) ITAT

This appeal was filed by the assessee against the order of Commissioner of Income Tax (A) on the issue of disallowance made by the Assessing Officer (AO) for the excess claim on account of shop burglary.

The assessee was an individual and Proprietor. During the course of assessment proceedings on perusing the Profit and Loss account, AO noticed that assessee had claimed deduction on account of goods lost in burglary which had taken place in assesses’s shop.

The AO noticed that against the claim of the assessee, the Insurance Company had assessed the loss at a lower amount. However, the assessee had claimed deduction based on the claim made.

The AO considered the difference being excess claim and disallowed the same while framing u/s 143(3) of the Income Tax Act, 1961 Act (the Act).

 Aggrieved by the order of AO, assessee carried the matter before CIT(A), who upheld the order of AO.

The Tribunal observed that the uncontroverted fact was that the loss occurred due to burglary which had taken place in assessee’s shop and FIR for loss due to burglary was lodged with the police authorities. The reason for disallowance by AO was that assessee had made an excess claim.

The Tribunal noted that there was no material to demonstrate that the claim of loss made by the assessee was excessive or bogus. Further, it was neither the case of Revenue that the complaint lodged with the police for burglary in the shop of assessee was false nor that the police stated in the report that the FIR lodged by the assessee was false.

Further it was not the case of Revenue that the claim lodged by the assessee with the Insurance Company had been reduced on account of the claim be false.

The Tribunal also noted that the contention of the assessee was that the Insurance Company calculated the insurance claim on the basis of average clause wherein the cost of goods lost as per the books is taken “at cost” and the calculation considered by Insurance Company was only for computation for payment of claim, was not found to be false.

Further the conclusion of the AO that assessee had made excess claim of loss was also not supported by any material evidence.

Accordingly, the Tribunal opined that the loss by burglary had arisen during the course of business and was hence allowable u/s 37(1) of the Act.

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