As per section 17(5) of the CGST Act 2017 if goods are lost, stolen or destroyed and are not used for the furtherance of business then the ITC has to be reversed for such goods.
Relevant Section: Section 17(5) of CGST Act 2017
When Insurance claim is filed by the taxpayer, then the auditor can check the insurance documents to find out what value of goods they have declared as lost, stolen or destroyed.
Since all those goods were not used for furtherance of business and the credit for those goods is blocked under section 17(5) of CGST Act 2017, the taxpayer has to reverse the ITC pertaining to lost, stolen or destroyed goods.
To read more about the cases where credit is blocked or ITC needs to be reversed, please read our article on Ineligible/blocked credit under GST.