JUDGMENT : G.T. Nanavati, J. The Income-tax Appellate Tribunal has referred the following two questions under section 256(1) of the Income Tax Act, 1961, to this court for its opinion : "1. Whether, on the facts and in the circumstances of the case, it would be correct to hold that the Appellate Assistant Commissioner had not only misconceived the facts but had misdirected himself on all material aspects of the case with regard to the amount of Rs. 23,741 disallowed by the Income-tax Officer ? 2. Whether, on the facts and in the circumstances of the case, the disallowance of Rs. 23,741 claimed by the assessee as defalcated amount was justified ?" 1. During the assessment proceedings pertaining to the assessment year 1973-74 corresponding to Samvat year 2028, the assessee claimed deduction of Rs. 23,741 as business loss on the ground that the said amount was misappropriated by its accountant. According to the assessee, the accountant had collected various amounts from the parties who were liable to pay those amounts to the assessee but had not credited the same in the account books of the assessee and had thereby misappropriated the same. Similarly, by getting false entries in respect of the accounts maintained with the State Bank of Saurashtra and Dena Bank, the accountant had misappropriated certain amounts. This way the accountant had in all misappropriated Rs. 23,741. 2. The Income-tax Officer disallowed that claim on the ground that no material was produced by the assessee even though sufficient time was given to it. 3. In appeal, the Appellate Assistant Commissioner noticed that the assessee had furnished the details of the parties from whom larger amounts were received but lesser amounts were credited. The detailed accounts of all the parties were filed showing how the accountant had manipulated those accounts. On the basis of that material, the Appellate Assistant Commissioner held that the assessee had proved that the said amounts were defalcated by its accountant and, therefore, it was a business loss. On that basis, the Appellate Assistant Commissioner allowed the appeal and allowed the said claim. 4. The Revenue filed an appeal to the Tribunal and it was allowed on the ground that there was no evidence on the record to prove that fact and really the Appellate Assistant Commissioner not only misconceived the fact but had misdirected himself on all material aspects. 4. The Revenue filed an appeal to the Tribunal and it was allowed on the ground that there was no evidence on the record to prove that fact and really the Appellate Assistant Commissioner not only misconceived the fact but had misdirected himself on all material aspects. Dissatisfied with the order passed by the Tribunal, the assessee moved the Tribunal for making a reference to this court. It wanted three questions to be referred to this court but only two questions which are stated above have been referred to this court. 5. What is contended by learned counsel for the assessee is that really the Tribunal is guilty of having misdirected itself on facts when it observed that no evidence was there on the record to show that the assessee's accountant had misappropriated the said amounts. He submitted that detailed accounts were produced before the Income-tax Officer. In the statement of facts filed before the Appellate Assistant Commissioner, it was clearly mentioned that the necessary details of defalcation were filed before the Income-tax Officer and yet this statement was not controverted by the Income-tax Officer even though he was present during the hearing of the appeal. He further submitted that the Appellate Assistant Commissioner passed the order after perusing the material on record and, therefore, the Tribunal went wrong in holding that the Appellate Assistant Commissioner misdirected himself when he held that the assessee had proved that the said amount was defalcated by its accountant. 6. From the statement of case and the written submissions and also from the order passed by the Appellate Assistant Commissioner, it appears to us that some material was produced by the assessee before the Income- tax Officer to show that its accountant had misappropriated in all an amount of Rs. 23,741. It, therefore, cannot be said that the Appellate Assistant Commissioner had misdirected himself in allowing the claim of the assessee even though there was no material on record. It may be said that the Appellate Assistant Commissioner was not justified in holding that the defalcation was proved on the basis of the material which was on the record. The Tribunal has not done so. It may be said that the Appellate Assistant Commissioner was not justified in holding that the defalcation was proved on the basis of the material which was on the record. The Tribunal has not done so. The Tribunal has proceeded on the basis that no material was produced by the assessee and thus there was no material before the Appellate Assistant Commissioner to show that the said amount was defalcated by the accountant of the assessee. We are not expressing any opinion on whether the material which was produced by the assessee was sufficient for the purpose of holding that the said amount was in fact misappropriated by its accountant or not. We are only holding that the Tribunal was wrong in proceeding on the basis that there was no material before the Appellate Assistant Commissioner. There was some material before the Appellate Assistant Commissioner. It was, therefore, not correct to hold that the Appellate Assistant Commissioner had misconceived the facts and had misdirected himself on all material aspects of the case. 7. We, therefore, answer question No. 1 in the negative, that is, against the Revenue and in favour of the assessee and state that it cannot be said that the Appellate Assistant Commissioner had misconceived the facts. Question No. 2 need not be answered at this stage as the Tribunal will have to examine on merits whether, in view of the material on record, it can be said that the said amount was in fact defalcated and the assessee's claim in that behalf was justified. This reference is disposed of accordingly with no order as to costs.