Search in the name of Bank account

Q : Does the search warrant issued in the name of account No.5905 of M/s. Budhiya Marketing Pvt. Ltd is valid ?

The provision of section 153(1)(a) talks of issue of notice to a person in which the search has been initiated and requires the same person to furnish the return within the time as may be specified in the notice. This proves that the search has to be on a person not on the assets of the person. A bank account cannot be a person in whose name the search can be initiated or such warrant can be issued and even if a search is initiated in the name of the bank account, the provision of section 153A will become ineffective because Assessing Officer, will not be able to issue notice to the bank account of the assessee. A Bank account cannot be a person and, therefore, cannot be an assessee. The word ‘person’ has been defined in the Act under section 2(31).

IN THE ITAT KOLKATA BENCH ‘B’

Assistant Commissioner of Income-tax, Central Circle-XXX, Kolkata

v.

Budhiya Marketing (P.) Ltd.

IT APPEAL NOS. 1538 TO 1540, 1545 & 1546 (KOL.) OF 2012
C.O. NOS. 17 TO 21 (KOL.) OF 2013
[ASSESSMENT YEARS 2004-05 TO 2006-07]

JULY  10, 2015

ORDER

P.K. Bansal, Accountant Member – Since all these appeals involved common issues and the facts involved are also common, for the sake of convenience all these appeals are disposed of by this common order. Both the parties agreed that all these appeals be decided on the basis of the appeal in the case of Edward Supply Pvt. Limited.

2. In all the appeals, Revenue has taken the following common grounds of appeals except variation of amounts in ground No. 4:

“1. For that on the facts and in the circumstances of the case, the assessment order dated December 30, 2011 u/s. 143(3)/153A is without and/or in excess of jurisdiction and bad in law and on facts.

2. For that on the facts and in the circumstances of the case, action u/s. 132(1) of the Income-tax Act taken against the appellant and seizure of its entire bank balance was unwarranted, without and/or in excess of jurisdiction and bad in law and on facts.

3. For that further and in any event and without prejudice to the aforesaid, on the facts and in the circumstances of the case, no addition of share capital or share premium received by the appellant can be made in its hands.

5. For that the appellant denies liability to pay the tax assessed and the interest charged u/s. 234B and 234D of the Income-tax Act.”

Ground No. 4 in all the appeals read as under:-

ITA No. 1538/Kol/2012(A.Y. 2004-05)

4. For that further and in any event and without prejudice to the aforesaid, on the facts and in the circumstances of the case, the Assessing Officer erred in adding the share capital of Rs.4,00,000/- and share premium of Rs.36,00,000/-, aggregating to Rs.40,00,000/- and his purported findings in that behalf have been arrived at in gross violation of the principles of natural justice, without providing copies of the statements relied upon or affording opportunity of cross-examination, ignoring the evidence adduced by the appellant and/or obtained by the Assessing Officer from the share applicants and the same are wholly arbitrary, erroneous, unreasonable, perverse and misconceived.

ITA No. 1539/Kol/2012(A.Y. 2005-06)

4. For that further and in any event and without prejudice to the aforesaid, on the facts and in the circumstances of the case, the Assessing Officer erred in adding the share capital of Rs.19,45,000/- and share premium of Rs.3,69,55,000/-, aggregating to Rs.3,89,00,000/- and his purported findings in that behalf have been arrived at in gross violation of the principles of natural justice, without providing copies of the statements relied upon or affording opportunity of cross-examination, ignoring the evidence adduced by the appellant and/or obtained by the Assessing Officer from the share applicants and the same are wholly arbitrary, erroneous, unreasonable, perverse and misconceived.

ITA No. 1540/Kol/2012(A.Y. 2006-07)

4. For that further and in any event and without prejudice to the aforesaid, on the facts and in the circumstances of the case, the Assessing Officer erred in adding the share capital of Rs.17,32,500/- and share premium of Rs.3,29,17,500/-, aggregating to Rs.3,46,50,000/- and share application money of Rs.50,00,000/- in AY 2006-07 and his purported findings in that behalf have been arrived at in gross violation of the principles of natural justice, without providing copies of the statements relied upon or affording opportunity of cross-examination, ignoring the evidence adduced by the appellant and/or obtained by the Assessing Officer from the share applicants and the same are wholly arbitrary, erroneous, unreasonable, perverse and misconceived.

3. In all C.O.s, the assessee has taken the following common grounds:-

1. For that in view of the facts and circumstances of the case the ld. CIT(A) erred in upholding the legality and validity of the order passed under section 143(3)/153A, although such order was void ab initio and passed without jurisdiction and as such bad in law and in view of the facts and in the circumstances it may kindly be held accordingly.

2. For that in view of the facts and circumstances of the case the ld. CIT(A) erred in upholding the legality of proceedings u/s. 132(1) and seizure of bank accounts without there being any search warrant and/or panchnama in the name of the appellant company and such action of the CIT(A) is completely bad in law and in view of the facts and in the circumstances it may kindly be held accordingly.

3. For that your petitioner craves the right to put additional grounds and/or to alter/amend/modify the present grounds at the time of hearing.

4. Similarly in the case of Budhiya Marketing Pvt. Ltd. in ITA Nos. 1545 & 1546/Kol/2012, the Revenue has taken the following common grounds of appeal as stated above except ground No. 4 which read as under:-

ITA No. 1545/Kol/2012 (A.Y. 2005-06)

4. For that further and in any event and without prejudice to the aforesaid, on the facts and in the circumstances of the case, the Assessing Officer erred in adding the share capital of Rs.51,10,000/- and share premium of Rs.9,70,90,000/-, aggregating to Rs.10,22,00,000/- and his purported findings in that behalf have been arrived at in gross violation of the principles of natural justice, without providing copies of the statements relied upon or affording opportunity of cross-examination, ignoring the evidence adduced by the appellant and/or obtained by the Assessing Officer from the share applicants and the same are wholly arbitrary, erroneous, unreasonable, perverse and misconceived.

ITA No. 1546/Kol/2012(A.Y. 2006-07)

4. For that further and in any event and without prejudice to the aforesaid, on the facts and in the circumstances of the case, the Assessing Officer erred in adding the share capital of Rs.15,72,500/- and share premium of Rs.2,98,77,500/-, aggregating to Rs.3,14,50,000/- and his purported findings in that behalf have been arrived at in gross violation of the principles of natural justice, without providing copies of the statements relied upon or affording opportunity of cross-examination, ignoring the evidence adduced by the appellant and/or obtained by the Assessing Officer from the share applicants and the same are wholly arbitrary, erroneous, unreasonable, perverse and misconceived.

5. Since the grounds in the C.Os. filed by the assessee in all the appeals are legal grounds, which go to the root of the assessment order passed under section 143(3)/153A in consequence of the search carried out under section 132(1) of the Income-tax Act. We, therefore, decided to dispose of the Cross-Objections of the assessee before deciding the appeals filed by the Revenue.

6. Brief facts in the case of Edward Supply Co are that the assessee was incorporated on 08.09.1995 and is a non-banking financial company. There was survey conducted at two premises of Shri Santosh Kumar Shah located at 9/12, Lal Bazar Street, Block-E, 2nd Floor, Kolkata-700 001 and 1A, Grant Lane, 2nd Floor, Kolkata on 14.12.2009. The said survey was converted subsequently into search operation under section 132(1). During the course of the survey operation under section 133A in the case of Shri Santosh Kumar Shah, cash amount of Rs.40.50 lakh and various papers/documents were found which pointed to a number of bank accounts being used to provide accommodation entries to a number of persons/firms and companies. It was also found out that during the course of survey/search in the case of Shri Santosh Kumar Shah that unaccounted cash was received from prospective beneficiaries and same was deposited in the Bank accounts maintained by these entry operators. After various circular transactions, cheques were issued to the beneficiaries and such entry operators charged commission for providing such accommodation entries to real beneficiaries. In consequence to the search in the case of Shri Santosh Kumar Shah, prohibitory orders under section 132(3) were passed in the case of both the assesses addressing to their Banker not to allow any operation to the assessee either in the premises or in the Bank locker. Subsequently survey under section 133A was conducted on 09.02.2010. During the course of the survey in the case of Edward Supply Pvt. Limited, following documents were impounded:—

“Inventory of books of account found in the premises of 32, Ezra St., Room No. 264, 2nd Floor on 09.02.2010 during the course of survey u/s. 133A:-

The above documents bear ID mark PIL/CPU/1, PIL/1, PIL/2 & PIL/3 are being impounded.”

Subsequently vide order dated 11.02.2010 the revenue passed the revocation order in respect of the prohibitory order passed under section 132(3) and asked the banker to issue DD payable in favour of CIT, Central-1, Kolkata in respect of the balance standing as on date on the following account:-

Subsequently search warrant dated 10.02.2010 was issued under section 132 in the following name as mentioned in Panchnama:—

“A/c. No. 6477 with Axis Bank, Lake Town Branch, Kolkata of M/s. Edward Supply Pvt. Ltd.”

7. Similarly search warrant has been issued in the name of account No.5905 of M/s. Budhiya Marketing Pvt. Ltd as submitted by ld. Senior Counsel. This fact is apparent from the copy of the Panchnama which is filed before us. In the Panchnama it is mentioned that the search has commenced on 11,02.2010 at 2 p.m. and closed on 11.02.2010 at 2-30-p.m. Only Pay Orders dated 11.02.2010 in both the cases were seized as has been prepared by the respective banker on the direction of the Authorized Officer dated 11.02.2010 as given in the revocation order of prohibitory order passed under section 132(3). In the Panchnama, no other asset was shown to have been found and seized or found but not seized in the case of both the assessee. The search, therefore, has taken with the Axis Bank in respect of the account maintained by the assesese in the said Bank. Similar search has been taken in respect of bank account maintained by M/s. Budhiya Marketing Pvt. Ltd with its banker. The Assessing Officer completed the assessment vide order dated 30.12.2011 under section 143(3) read with section 153A in the case of M/s. Edward Supply Pvt. Ltd. by making an addition of Rs.40 lakh in respect of the increase of share capital including the premium received by the assessee as well as deferred revenue expenses debited to the Profit & Loss A/c. by the assessee amounting to Rs.7,000/-in the assessment year 2004-05. The assessee went in appeal before the CIT(Appeals). The CIT(Appeals) deleted the addition by holding as under in A.Y.2004-05 and similar findings were given for the A.Y.2005-06 and 2006-07:—

“I have carefully perused the assessment order and the submissions of the A/R. Relevant assessment records of the assessee were also called for from the A.O. and the same were also perused. The A.O., leaning only upon the above extracted portions of the statements of Sri Santosh Kumar Shah, Sri Vinod Kurnar Shah and Sri Barun Nath Roy, wherein they had stated that the assessee company was only a paper company used by Sri Santosh Kumar Shah in his business of providing accommodation entries, concluded that assessee’s share capital/share application money was bogus.

During the appellate proceedings the assessee stated that it had submitted all the details of its shareholders, along with copies of share applications received from the shareholders, copies of relevant bank accounts of share applicants, copies of Income Tax Returns of share applicants, relevant balance sheets of share applicants, copies of Board resolutions passed by the share applicants and share allotment letters showing genuineness of the share application. It further stated that during the assessment proceedings the A.O. conducted verification of assessee’s share capital/share application money by issue of notices u/s.133(6) of the Act and he has not found anything adverse, as is evident from the assessment order.

To examine the correctness of assessee’s statement assessment records were called for from the A.O. From perusal of the assessment records it is found that the A.O. had indeed carried out verification of share capital/share application money received by the assessee. All the creditors 011 account of assessee’s share capital/share application money had replied to the notices u/s 133(6) issued by the A.O. and confirmed to have subscribed to the assessee’s share capital or given share application money, also explaining the source thereof. None of the shareholder or share applicant had denied those transactions with the assessee. The A.O. did not find anything adverse as result of such verification as no adverse comment has been made by him in this regard in the assessment order. That shows that the AO. was fully satisfied with the results of verification carried out by him. He has also not raised any doubt about the genuineness and correctness of the documents/evidence furnished by the assessee to prove genuineness of its share capital/share application money.

No doubt, the initial burden to prove correctness/genuineness of his claim is on the assessee. In the instant case, it is observed, the assessee had discharged his burden to prove genuineness of its share capital/share application money. Complete addresses of all the shareholders/share applicants were supplied to the A.O. and in response to notices u/s.133(6) all the shareholders/share applicants had filed confirmations before the A.O. This not only proves identity of those persons but also proves genuineness of transactions. During the verification by the A.O. u/s 133(6) the shareholders and the share applicants had explained their sources of such share subscription/share application money. All the subscribers were assessed to Income Tax and their P.A. Numbers were duly furnished before the A.O. along with proof of returns of income filed by those persons. The entire share capital was subscribed to through banking channels. The A.O. has not brought anything on record to show that the shareholders or share applicants were persons of no means or did not possess creditworthiness to subscribe to the assessee’s share capital or extend share application money.

The A.O. has not brought any evidence on record to prove his contention that the share capital of the assessee was bogus or that the subscribers to the assessee’s share capital were persons of no means or were of inadequate means, i.e., subscribers to the share capital were not creditworthy.

In CWT v. Value Capital Services (307 ITR 334) Delhi High Court has held that in a case ‘where it is alleged that persons contributing share application moneys are bogus, it is quite obvious that is very difficult for the assessee-company to show the creditworthiness of strangers. If the Revenue has any doubt with regard to their ability to make the investment, their returns may be reopened by the department and that there is an additional burden on the Revenue that it must show that even if the applicant does not have the means to make the investment, the investment made by the applicant actually emanated from the coffers of the assessee-company so as to enable it to be treated as the undisclosed income of the assessee-company.

ITAT, Kol. Bench in the case of DCIT v. Shaw Aromatics (P) Ltd. on Page 10 of the order has referred to the following observations of the Apex Court in the case of CIT v. Lovely Exports (P) Ltd. (216 CTR J95)(SC):

“Can the amount of share money he regarded as undisclosed income under S.68 of I.T Act. 1961? We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the assessee-company from alleged bogus shareholders, whose names are given to the AO. then the Department is free to proceed to reopen their individual assessment in accordance with law. Hence, we find no infirmity with the impugned judgment.”

In Lovely Export (supra ) the Supreme Court has made following observations also:

“The burden of proof can seldom be discharged to the hilt by the assessee; if the AO harbours doubts of the legitimacy of any subscription he is empowered, may duty bound to carry out thorough investigations. But if the AO fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company.”

Similarly, Hon’ble Madras High Court has gone to the extent of saying in the case of CIT v. Electropolycam Ltd. 294 ITR 661 that even if subscriber to increase in the capital are not genuine, share capital cannot be regarded as undisclosed income of the assessee-company.

In the instant case it is undisputed fact that the entire share capital was received through banking channels. The assessee had, during the assessment proceedings, submitted complete names and addresses of the shareholders along with their P.A Nos. and evidence of their filing Income Tax return. Balance sheets of the shareholders as well as relevant extracts of bank statements of the shareholders were also filed. Thus, the assessee had discharged its onus of proving genuineness of its share capital. Once the assessee had discharged its initial burden of proof, the onus thereafter shifts upon the A.O. to prove otherwise. The A.O. at his end, conducted independent verification of genuineness of assessee’s share capital by issue of notice u/s.133(6) to the shareholders. All those persons duly responded to the A.O.’s notices confirming to have subscribed to assessee’s share capital and also explained their sources thereof. The A.O. has not made any adverse observation regarding the confirmations received from the shareholders in response to his notices u/s.133(6), natural conclusion of which is that he was satisfied with replies of the shareholders. These overwhelming evidences prove the genuineness of the assessee’s share capital.

Despite of verification carried out by the A.O. and despite nothing adverse or doubtful emerging from such verification, the A.O. treated the share capital to be bogus stating only that Sri Santosh Kumar Shah and his two associates had admitted that the assessee-company was a paper company used by Sri Santosh Kumar Shah for his business of entry operation. Even if the assessee-company was being used for providing entries to different persons by Sri Santosh Kumar Shah, it is incomprehensible how that fact alone lends share capital of the assessee-company to be bogus. The A.O. has not brought anything on record to show that it is assessee’s own income from entry operation business or otherwise that travelled to its share capital. In the absence of any such link established or any adverse or doubtful finding emerging from verification from share capital carried out by the A.O., the A.O.’s conclusion that share capital of the assessee-company was bogus referring only to admission of Sri Santosh Kumar Shah to using the assessee-company for his entry operation business is far-drawn, baseless and apparently based only on suspicion, therefore, devoid of any merit.

In the light of the above discussion the addition of entire share capital and share application money by the A.O., treating the same to be bogus, is found to be unjustified and unsustainable. Hence, the addition is deleted.

Grounds No.3 and 4 are, hence, allowed.

Ground No. 5 is against charging of interest u/s 234B and u/s 234D of the Act. Charging of interest under those sections is mandatory. The AO is directed to rework the amount of interest chargeable under those sections as per law while giving effect to this order”.

8. In the similar manner, the Assessing Officer made the addition in each of the assessment years in the case of the assessee but the same were deleted by giving similar finding by the CIT(Appeals). In the case of M/s. Budhiya Marketing Pvt. Ltd. also, the additions were made in each of the assessment years by the Assessing Officer in the similar manner, and deleted by the CIT(Appeals) in the similar manner.

9. Ld. A.R. before us contended that there was no search in the case of the assessee. The search had taken place at the premises of the banker and for this our attention was drawn towards the copy of panchnama. It was also pointed out that during the course of the search no incriminating material has been found or seized except the Pay Orders of the amount standing in the Bank A/c of the assessee, which has been prepared by the Bank in view of the direction of the ITO (Investigation)-II vide letter dated 11.02.2010 by which the revenue has revoked the order under section 132(3) which has been passed in respect of the said account during the course of search taken place not in the case of assessee but in the case of Shri Santosh Kumar Shah on 15.02.2009, the copy of which was filed before us. It was pointed out that there had been survey in the case of assessee under section 133A and during the course of the survey the revenue has impounded the following documents:—

“Inventory of books of account found in the premises of 32, Ezra St., Room No. 264, 2nd Floor on 09.02.2010 during the course of survey u/s. 133A:-

The above documents bear ID mark PIL/CPU/1, PIL/1, PIL/2 & PIL/3 are being impounded”.

The search has to be on the person or on the premises of the person not at the Bank account of the person. A search warrant was issued on 10.02.2010 which was executed at the banker premises in respect of the account of the assessee maintained by Axis Bank Limited. This fact is apparent from the copy of the Panchnama. The search warrant has to be in the name of the assessee. The search warrant relates to the bank account of the assessee to which the Revenue was already aware of as the order in respect of the Bank account was passed under section 132(3) on 15.12.2009. It is not a case where the revenue was not aware of about the bank account of the assessee. The bank account of the assessee was duly disclosed in the return filed by the assessee and for this our attention was drawn towards the copy of the return for the assessment year 2009-10 which was filed on 26.09.2009 which we verified. It was not a case where the bank account was not disclosed. Once the revenue was aware of about the bank account of the assessee, there was no reason to issue the search warrant in respect of the bank account. The conditions as has been stipulated in respect of the search have not been complied with. Our attention was drawn towards the decision of the Supreme Court in the case of KCC Software Ltd. v. DIT (Investigation) [2008] 298 ITR 1/167 Taxman 248 , wherein the proposition of the law laid down is that when the monies are deposited in the Bank, the relationship between the banker and the customer is one of the debtor and creditor and not trustee and beneficiary. The banker is entitled to use the monies without being called upon to account for such user. His only liability remains to return the money in accordance with the terms agreed between him and the customer. In view of this proposition of law, it cannot be said that search has taken place at the assessee or at his premises.

10. Attention was also drawn towards the decision of the Supreme Court in the case of CIT v. Tarsem kumar [1986] 161 ITR 505/27 Taxman 305 , especially page 511, 512 & 513. Thus it was contended that there was no valid search in the case of the assessee. Reliance was placed on the decision of the Hon’ble Karnataka High court in the case of C. Ramaiah Reddyv. Asstt. CIT [2011] 339 ITR 210/[2012] 20 taxmann.com 781 . It was further submitted that it is a case where the assessment for the impugned assessment year has already been completed by the Assessing Officer. No incriminating material was found during the course of the search. The fact relating to the share capital was already on record. Assessment for the impugned assessment year has not been abated. No addition can be made in respect of the unabated assessment which has become final if no incriminating material is found during the course of the search. Reliance was placed in this regard on the decision of the Honble Bombay High Court in the case of CIT v. Continental Warehousing Corpn. (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78 . Reliance was also placed on the decision of the Honble Delhi High Court in the case of CIT v. Gangeshwari Metal (P.) Ltd. [2014] 361 ITR 10/[2013] 214 Taxman 423/30 taxmann.com 328 and in the case of CIT v. Expo Globe India Ltd. [2014] 361 ITR 147/227 Taxman 149 (Mag)/51 taxmann.com 208 to support the order of the CIT(A) on merit.

11. Ld. D.R., on the other hand, relied on the order of the ITAT, ‘B’ Bench, Kolkata in ITA Nos. 1533 to 1537/Kol/2012 in the case of ACIT v. Patangi Trade & Holding Pvt. Ltd. and contended that the case of the assessee is duly covered by the said order. The order of the coordinate bench is binding on this Tribunal.

12. We have heard the rival submissions and carefully considered same along with the orders of the authorities below and also perused the material available on record as well as referred to us during the course of hearing. We have also gone through the various case laws cited before us.

13. First we would like to deal with the submissions of the ld. Senior counsel whether the search is valid or not. We noted that in the case of the assessee, copy of the panchanama in column (A) read as under ‘Warrant in the case of a/c No.6477 with Axis Bank lake town branch Kolkata of M/s Edward Supply Pvt. Ltd.’. This description gives an impression that search has taken place not on the assessee but in respect of the bank account of the assessee, on the banker in respect of these bank account on 11.2.10 as contended by the ld. AR on the basis of the panchanama. For the said bank account a prohibitory order was already issued to the banker on 15.2.2009 u/s 132(3) and subsequently vide letter dated 11.2.2010 the prohibitory order was revoked. The assessments for the assessment years 2004-05, 2005-06 and 2006-07 have already been completed before the date of search in the case of the assessee. The impugned assessments were not pending before the Assessing Officer.

14. We noted that the provision of section 153(1)(a) talks of issue of notice to a person in which the search has been initiated and requires the same person to furnish the return within the time as may be specified in the notice. This proves that the search has to be on a person not on the assets of the person. A Bank account, in our opinion, cannot be a person in whose name the search can be initiated or such warrant can be issued, even if a search is initiated in the name of the bank account, the provision of section 153A will become ineffective and the Assessing Officer, in our view, in view of the specific provision of section 153(1)(A) will not be able to issue notice to the bank account of the assessee. A Bank account cannot be a person and, therefore, cannot be an assessee. The word ‘person’ has been defined in the Income-tax Act under section 2(31), which reads as under:—

“Section 2(31) – ‘person’ includes –

Explanation – for the purposes of this clause, an association of persons or a body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or established or incorporated with the object of deriving income, profits or gains”.

From this sub-section, it is apparent that a Bank account of an individual cannot be regarded to be a person. The submission of the ld Sr. Counsel is based on the panchanama not on the basis of the warrant of authorisation. The copy of the warrant of authorisation was not produced by the assessee. Panchanama in our opinion is not the conclusive evidence that the search is not in the name of the assessee or search warrant is not in the name of the assessee. In the similar circumstances, we noted in ITA No. 78/KOL/2012 when the similar plea was taken that the search is in respect of the bank account of the assessee, this Tribunal when called for the copy of search warrant, noted that the search warrant was in the name of the assessee but in the panchanama similar language was used as in the impugned case. In view of this fact we directed the ld. DR to produce search warrant i.e. Form No. 45 as prescribed under Rule 112. The ld. D.R. produced the copy of the Form 45 and from the said form we noted that the warrant of authorisation is in the name of M/s. Edward Supply Pvt. Ltd. In view of this fact, we hold that this submission of the ld. AR does not have any leg to stand.

15. We have gone through the cases relied on by the Sr. Counsel in this regard. We noted that Supreme Court in the case ofTarsem Kumar (supra ) held as under:—

‘An amount of Rs.93,500/- which was, inter alia , seized from the respondent by the Customs authorities and lay in their custody, had to be returned to him pursuant to an order of the High Court in a writ petition. Before the amount was returned, the Income tax Officer served a warrant of authorisation dated May 10, 1972, issued under section 132 of the Income-tax Act, 1961, on the respondent as well as on the Customs authorities and the Income Tax authorities took possession of the amount. On a writ petition filed by the respondent, the High Court held that the Income Tax authorities could not seize the amount from the Customs authorities under section 132, and that the search and seizure warrants were liable to be quashed and the money returned to the Customs department. On appeal to the Supreme Court:

Held, affirming the decision of the High Court, (i ) that on a construction of section 132 and the context in which the words, “search”, “possession”, and “seizure” had been used in the section and the rules, there could not be any order in respect of goods or moneys or papers which were in the custody of another Government department under legal authority;

(ii ) that when physical custody of the moneys and goods was with the Customs authorities and that too by legal sanction and authority to have that custody, it would not be proper to say that possession as contemplated by section 132 was still with the respondent. The use of the expression “immediate possession” in section 132(3) did not detract from the meaning of possession in the popular sense. It could not be said that, where an authority or a person had retention and custody with the legal sanction behind it, it was not the intention of the Legislature to say that he was not in possession as contemplated in section 132.

(iii ) That it was true that title was not transferred to the Customs authorities by seizure under the Customs Act. But in the context in which the expressions “possession” and “seizure” had been used, it could not be considered to mean that possession was where the legal title was: physical possession was with the Customs authorities, title was with the respondent. In this context, physical possession, having regard to the language used, was relevant and material.

(iv ) That where the exact location of the property was known and certain, there was nothing to search or look for. There was no need to seize the money: the Income Tax Department could direct handing over of the money to the income Tax authorities or take steps for such direction through appropriate authorities.

(v ) That, in the context in which the expression “seizure” and “search” were used, where the location of the property was known to the Government, it could not be said that one Government department could search any other Government department and seize documents, money, etc .’

This decision relates to when the amount has already been in the possession of another Government Department i.e. with the Customs Authority and revenue wants to seize the said amount. The Supreme Court under these facts took the view that one Government Department could not search any other Government Department and seized the documents and money belonging to the assessee. In the instant case, the Bank account was with the banker which is not a Government Department.

16. Supreme Court in the case of KCC Software Limited (supra ) held as under:—

“When moneys are deposited in a Bank, the relationship between the banker and the customer is one of debtor and creditor and not trustee and beneficiary. The banker is entitled to use the monies without being called upon to account for such user, his only liability being to return the amount in accordance with the terms agreed between him and the customer. And it makes no difference in the rural relationship whether the deposits were made by the customer himself, or by some other persons, provided the customer accepted them. There might be special arrangement under which a banker might be constituted a trustee, but apart from such an arrangement, his position qua banker is that of a debtor, and not trustee”.

This decision lays down the proposition that once the amount is deposited in the account held with a banker, the amount does not remain with the banker as trustee of the assessee but relationship between the banker and the assessee becomes that of debtor and creditor. This decision no doubt assist the assessee that there cannot be warrant of authorisation in the name of the bank account of the assessee or in the name of the banker where the assessee holds its bank account. But, in our opinion, this decision will also not assist the assessee under the present facts and circumstances as in the case of the assessee we have already held that the warrant of authorisation is in favour of the assessee not in the name of the account of the assessee with the banker. Therefore, the search cannot be held to be invalid and we have to dismiss this plea of the ld. Sr. Counsel of the assessee.

17. We are aware of that there are contrary views of different High Courts in respect of the issue whether the Tribunal can consider the validity of the search or not. Honble Punjab & Haryana High Court in the case of Paras Rice Mill and Honble Allahabad High Court in the case of CIT v. Dr. A.K. Bansal (Individual) [2013] 355 ITR 513/216 Taxman 23 (Mag)/33 taxmann.com 94 has taken a view in favour of the revenue while Honble Karnataka High Court in the case of C. Ramaiah Reddy v. Asstt. CIT [2011] 339 ITR 210/[2012] 20 taxmann.com 781 and Honble Rajasthan High Court in the case of CIT v.Smt. Chitra Devi Soni [2009] 313 ITR 174/[2008] 170 Taxman 164 has taken a view that this Tribunal can consider the validity of the search. SLP in the case of Smt. Chitra Devi Soni (supra ) filed by the revenue has been dismissed by the Supreme Court. This is the settled-law in view of the decision of Supreme Court in the case of CIT v. Vegetable Products Ltd. v. [1973] 88 ITR 192 that if there are contrary decisions on a particular issue, the view in favour of the subject has to be followed. We have also gone through the decision of Bench, Kolkata in the case of Patangi Trade & Holding (P.) Ltd.(supra ). We noted in this decision vide order dated 12th day of September, 2014, the Tribunal has dealt with the plea of the assessee that the panchanama is in the name of the account of the assessee and Tribunal ultimately took the view under para 20 that the search had validly been conducted on the assessee.

18. Now, coming to the issue whether any addition can be made on account of share capital and share premium by the assessee, which has already been shown in the regular return filed by the assessee and for which the regular assessment has already been completed, let us look into the provisions of the section 153A under Chapter 14 under the title ‘Assessment in case of search or requisition’. The provisions of section 153A, 153B & 153C were inserted by the Finance Act, 2003 w.e.f 1.6.2003. Originally section 153A of the Act did not have any sub-section. However, sub-section (2) to Section 153A was inserted by the Finance Act, 2008 w.e.f from 1.6.2003. Section 153A provides for an assessment in case of a person in whose case search is initiated u/s.132 of the Act or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003. Section 153B provides for time-limit for completion of assessment under section 153A and Section 153C of the Act. Section 153C provides for assessment of income of person or other than person in respect of whom warrant or authorisation is issued u/s.132 of the Act.

19. Section 153A which is relevant in this case to decide the issue whether any addition can be made in the case of the assessee, the basis of the incriminating document not found during the course of the search, is extracted below:

“153A. Assessment in case of search or requisition ,— (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall-

(a ) issue notice to such person requiring him to furnish within such period as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b) in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;

(b ) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made:

Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years:

Provided further that assessment or reassessment; if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate.

(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner:

Provided that such revival shall cease to have effect, if such order of annulment is set aside.

Explanation – For the removal of doubts, it is hereby declared that-

(i ) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section;

(ii ) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year”.

20. From the reading of the provisions of section 153A, it is apparent that this section mandates that where in the case of a person, a search is initiated under section 132 on books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall issue notice to such person requiring him to furnish within such period as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b) in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed in this regard. The Assessing Officer thereupon assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made under proviso to section 132(b). Section 153(b) further states that where the assessments are pending on the date of the initiation of the search under section 132 or making the rectification under section 132A shall get abated. This implied that the assessments which were not pending as on the date of initiation of the search shall not get abated. In view of this clear-cut provision, the assessment for the impugned assessment years does not get abated.

21. We noted that on the issue whether any addition can be made in the assessment made u/s.153A, when no incriminating documents is found during the course of search, a Special Bench was constituted in the case of All Cargo Global Logistics Ltd v. Dy. CIT [2012] 137 ITD 287/23 taxmann.com 103 (Mum.) by referring following question:

“Whether, on the facts and in law, the scope of assessment u/s 153A encompasses additions, not based on any incriminating material found during the course of search?”

Before the Special Bench, Ld Sr. Counsel relied on the decision of LMJ International Ltd v. Dy. CIT [2008] 22 SOT 315 as is apparent from para 16 of that order. We noted that in the said judgment in para 52 of its order, the Tribunal has held that section 153A comes into operation if a search or requisition is initiated after 31.5.2003. On the satisfaction of this condition, the AO is under obligation to issue notice to the persons requiring him to furnish the return of income of six years immediately preceeding the year of search. This finding implied that the proceedings u/s.153A is not to be restricted to the years for which incriminating material is found during the search. Ultimately, in respect of question referred to the Special Bench, the Special Bench in para 58 of its order held as under:

“58. Thus, question No. 1 before us is answered as under:

(a ) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment years separately.

(b ) In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means -(i ) books of account, other documents, found in the course of search but not produced in the course of original assessment, and; (ii ) undisclosed income or property discovered in the course of search”.

22. In view of the decision of Special Bench in the case of All Cargo Global Logistics Ltd. (supra ), no doubt the addition in the case of the assessee can be made by the Assessing Officer only on the basis of incriminating material found during the course of search under section 153A as in the case of the assessee the assessment was not abated for the impugned assessment years in respect of which proceedings were taken under section 153A.

23. We noted that Hon’ble Delhi High Court in the case of CIT v. Chetan Das Lachman Das [2012] 211 Taxman 61/25 taxmann.com 227 has taken similar view. In para 11 of this judgment, the Hon’ble High Court held that “obviously an assessment has to be made under this section only on the basis of the seized material”, Even we noted that the Hon’ble Delhi High Court in the case of CIT v. Anil Kumar Bhatia [2013] 352 ITR 493/[2012] 211 Taxman 453/24 taxmann.com 98 , under para 20, it has been observed as under:

“even if assessment order had already been passed in respect of one or any of the six relevant assessment years either u/s143(1)(a) or 143(3)prior to the initiation of search, still the AO is empowered to reopen those proceedings u/s 153A without any fetters and reassess total income taking note of undisclosed income, if any, unearthed during the search.

”20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search”.

24. The above observations of Hon’ble High Court, which are though obiter dicta , make it clear that where an assessment order has already been passed for a year or years within the relevant six assessment years, then the AO is duty-bound to reopen those proceedings and reassess the total income but by ‘taking note of the undisclosed income if any, unearthed during the search’. The expression ‘unearthed during the search’ is quite significant to denote that in respect of completed or non-pending assessment, the AO albeit duty-bound to assess or reassess the total income but if there is scope for additions in such assessment, on the basis of income ‘unearthed during the search’, he can make the addition. In other words, the determination of ‘total income’ in respect of the assessment years for which the assessments are already completed on the date of search, shall not be influenced by the items of income other than those based on the material unearthed during the course of search. However, the scope of such determination of total income is different in respect of the years for which the assessments are pending vis-a-vis the years for which assessments are non-pending. The total income shall be determined in respect of assessment year for which original assessments have already been completed on the date of search by restricting additions only to those which flow from incriminating material found during the course of search. If no incriminating material is found in respect of such completed assessment, then the total income in the proceedings u/s 153A shall be computed by considering the originally determined income. If some incriminating material is found in respect of such assessment years for which the assessment is not pending, then the ‘total income’ would be determined by considering the originally determined income plus income emanating from the incriminating material found during the course of search. In respect of assessment pending on the date of search which got abated in terms of second proviso to section 153A(1), the total income shall be computed afresh uninfluenced by the fact whether or not there is any incriminating material.

25. We noted that in the case of the assessee, the addition has been made in each of the assessment years on account of the share capital and the share premium as well as the disallowance of the expenses. During the course of the search taken place in the case of the assessee, we noted that no incriminating material was found in respect of the additions made by the Assessing Officer in each of the assessment years. The only material which was found was the Bank account which the assessee was having with the banker. The said Bank account was duly disclosed in the income-tax return filed by the assessee. The said Bank account can also not be regarded to be the incriminating material. Even the Assessing Officer has also not made any addition on the basis of said bank account in each of the assessment years. The banker has made the Pay Order in respect of the balance of the Bank account in favour of the Revenue as per the order of ADIT vide letter dated 11.02.2010, only that Pay Order was seized. It is not the case that the Bank account was not disclosed. Except the Bank account, no other assets, documents or material were brought to our knowledge by the ld. D.R., which has been found or seized by the Department, so that it could be regarded to be the incriminating material in respect of the share capital and the share premium as well as the disallowance of the expenses in respect of which the addition has been made in the assessment completed under section 153A. Since there was no incriminating material found in the course of the search and brought to our knowledge by the ld. D.R. in respect of the share capital and share premium, therefore, we are of the view that no addition on this account can be made in the case of the assessee in each of the assessment years. We also noted that recently Hon’ble Bombay High Court has also approved the decision of the Special Bench, Mumbai in the case of All Cargo Global Logistics Ltd. (supra ).

26. We find that in the case of Continental Warehousing Corpn. (Nhava Sheva) Ltd. (supra ), Hon’ble Bombay High Courtvide decision dated 21st April, 2015 held as under:—

“A bare perusal of section 153A would indicate as to how a non-obstante clause has been inserted and with a defined intent. Where search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31-5- 2003, that the Assessing Officer is in a position to and mandated to issue notice within the meaning of sub- section (l) of section 153 A. That is because, Chapter XlII within which the powers of search and seizure and powers to requisition books of account are spelt out enable the revenue to take care of cases where it effects a search and seizure. That search and seizure is effected and after the same is effected, books of account, other documents, money, bullion, jewellery or other valuable article or thing is found as a result thereof that notwithstanding anything and within the meaning of the above provisions having been concluded, it is open for the revenue to make an assessment. It is also open to the revenue to make a reassessment in cases where it exercises the powers to requisition books of account etc. This is because it is of the view that the books of account are required to be summoned or taken into custody. It, therefore, issues a summons in that regard. It may also requisition the books of account or other documents for that might be useful and or any assets representing withholding or part income or property which has not been or would not have been disclosed for the purpose of the Indian Income-tax Act 1922 or the Income-tax Act of 1961 by any person from whose possession or control they have been taken into custody. This is when the authorities have reason to believe that such powers need to be exercised. Therefore, the fetters and which are to be found in other provisions are removed and a notice of assessment in such cases is then issued. That is mandated by sub-section (l) of section 153A. It is not only the issuance of the notice but assessment or reassessment of total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition has to be made. [Para 22]

There is much substance in the contentions of the assessee that the provisions such as section 153A enabling assessment in case of search or requisition making specific reference to the provisions which enable carrying out of search or exercise of power of requisition that the assessment in furtherance thereof is contemplated. [Para 23]

Assessee’s reliance upon the Division Bench judgment of this Court rendered in CIT v. Murli Agro Products Ltd.[2014] 49 taxmann.com 172 in that context is, therefore, well placed. [Para 24]

The Division Bench outlined the ambit and scope of the powers conferred by section 153A and observed that on a plain reading of section 153A, it becomes clear that on initiation of the proceedings under section 153A, it is only the assessment/reassessment proceedings that are pending on the date of conducting search under section 132 or making requisition under section 132A stand abated and not the assessments/reassessments already finalised for those assessment years covered under section 153A. By a Circular No. 8 of 2003, dated 18-9-2003 (See 263 ITR (St) 61 at 107) the CBDT has clarified that on initiation of proceedings under section 153A, the proceedings pending in appeal revision or rectification proceedings against finalised assessment/reassessment shall not abate. It is only because, the finalised assessments/reassessments do not abate, the appeal revision or rectification pending against finalised assessment/re assessments would not abate. Therefore, the argument of the revenue, that on initiation of proceedings under section 153A, the assessments/reassessments finalised for the assessment years covered under section 153A stand abated cannot be accepted. Similarly on annulment of assessment made under section 153A(1) what stands revived is the pending assessment/reassessment proceedings which stood abated as per section 153A(l).

Once it is held that the assessment has attained finality, then the Assessing Officer while passing the independent assessment order under section 153A read with section 143 (3) could not have disturbed the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under section 153A establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. If there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings, the Assessing Officer while passing order under section 153A read with section 143(3) cannot disturb the assessment order [Para 28]

The stand of revenue that these observations are made in passing or that they are not binding on instant Court is not agreeable because the essential controversy before the Bench was somewhat different. Revenue urged that was only in relation to the legality and validity of the order of the Commissioner under section 263. Had that been the case, the Division Bench was not required to trace out the history of section 153A and the power that is conferred thereunder. When the revenue argued before the Division Bench that the power under section 153A can be invoked and exercised even in cases where the second proviso to sub-section (1) is not applicable that the Division Bench was required to express a specific opinion. The provision deals with those cases where assessment or reassessment, if any, relating to the assessment years falling within the period of six assessment years referred to in sub-section (l) of section153A were pending. If they were pending on the date of the initiation of the search under section 132 or making of’ requisition under section 132A, as the case may be, they abate. It is only pending proceedings that would abate and not where there are orders made of assessment or reassessment and which are in force on the date of initiation of the search or making of the requisition As that specific argument was canvassed and dealt with by the Division Bench and that is how it was called upon to interpret section 153A, then, each of the above conclusions rendered by the Division Bench would bind the instant Court.[Para 29]

Even otherwise, Court is in agreement with the Division Bench when it observes as above with regard to the ambit and scope of the powers conferred under section I53A. Even if the exercise of power under section I53A is permissible still the provision cannot be read in the manner suggested by the revenue. Not only the finalised assessment cannot be touched by resorting to those provisions, but even while exercising the power can be exercised where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after 31-3- 2003. There is a mandate to issue notices under section 153(l)(a) and assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Thus, the crucial words ‘search’ and ‘requisition’ appear in the substantive provision and the provisos. That would throw light on the issue of applicability of the provision It being enacted to a search or requisition that its construction would have to be accordingly. That is the conclusion reached by the Division Bench inMurli Agro (supra ). These are the conclusions which can be reached and upon reading of the legal provisions in question [Para 30]

Therefore, the Special Bench’s understanding of the legal provision is not perverse nor does it suffer from any error of law apparent on the face of the record. [Para 31]

Further, revenue would submit that the above observations and conclusions of the Special Bench are specifically disapproved in CIT v. Anil Kumar Bhatia [2012] 24 taxmann.com 98/211 Taxman 453 (Delhi). However, this argument is not found to be accurate. Upon reading of the observations of the Delhi High Court as a whole and in entirety, it is not possible to agree with revenue that the High Court of Delhi reached a conclusion different than the view taken by the Division Bench [Para 35].”

27. Similar view has been taken by the Honble ITAT, Panaji Bench, Panaji in ITA No. 112/PNJ/2014 in the case of Smt. Sunita Bai v. Dy. CIT [2015] 54 taxmann.com 250/68 SOT 98 (URO). We have gone through the decision of ‘B’ Bench of this Tribunal in the case of Patangi Trade & Holding (P.) Ltd. (supra ). We noted that in this decision, even though the ld. A.R. has relied on the decisions of the Special Bench, Mumbai in the case of All Cargo Global Logistics Ltd’s (supra ); LMJ International Ltd’s case (supra ); Anil Kumar Bhatia v. Asstt. CIT [2010] 1 ITR (T) 484 (Delhi); CIT (Central) v. Smt. Shaila Agarwal [2012] 346 ITR 130/204 Taxman 276/[2011] 16 taxmann.com 232 (All.);Sanjay Agarwal v. Dy. CIT [IT Appeal No. 3184 (Delhi) of 2013; CIT (Central) v. Murli Agro products Ltd. [2014] 49 taxmann.com 172 (Bom.);Asstt. CITv. Jayendra P. Jhaveri [2014] 46 taxmann.com 457/65 SOT 118 (URO) (Mum. – Trib.); ACIT v. Hindustan Storage & Distribution Co. Ltd. [IT(SS) Appeal No. 133 (Kol.) of 2011], but the Tribunal has not considered these decisions at all. The Tribunal has dealt with only the issue about the validity of the search when the Panchanama is in the name of the Bank account of the assessee.. The issue whether the addition in an assessment framed under section 153A can be made on the basis of the incriminating material found during the course of the search where the assessment has not been abated, has not been considered or decided by this Tribunal. Therefore, this decision, in our opinion will not assist the revenue while disposing of the plea of the assessee that since no incriminating material is found during the course of the search relating to the share capital and the share premium, therefore, no addition can be made while making an assessment under section 153A of the Income-tax Act. No contrary decision was brought to our knowledge by the ld. D.R. In view of the aforesaid discussion and the decision of the Hon’ble Special Bench, Bombay High Court, as well as Hon’ble Delhi High Court, we confirm the order of the CIT(Appeals) deleting the addition made in each of the assessment years as we hold that the Assessing Officer was not correct in law in making the addition in the assessment made under section 153A read with section 143(3) when no incriminating material was found during the course of the search in respect of the addition made by him. We accordingly partly allowed the Cross-Objections taken by the assessee.

28. Since now coming to the appeal filed by the Revenue, in our opinion, the appeal filed by the revenue does not require any adjudication as we have already confirmed the order of the CIT(Appeals) deleting the addition made in each of the assessment years in the case of the assessee while disposing of the C.O. filed by the assessee in the preceding paragraph since no addition can be made in the case of the assessee in each of the assessment years in the assessment made under section 153A, therefore, the ground taken by the Revenue in its appeal for each of the assessment years challenging the deletion of the additions became infructuous and, therefore, the same stands dismissed.

29. Since the facts involved in the case of the appeal and the C.O. M/s. Budhiya Marketing Pvt. Ltd. In ITA Nos. 1545 & 1546/KOL/2012 and C.O. Nos. 20-21/KOL/2013 for the assessment years 2005-06 & 2006-07, the facts involved as well as ground of appeals and Cross-Objections are similar to the case of Edward Supply Pvt. Ltd. as agreed by both the parties, we, therefore, respectfully following the finding given hereinabove in ITA Nos. 1538-1540/KOL/2012 and C.O. Nos. 17- 19/KOL/2013 in the case of Edward Supply Pvt. Ltd. dismiss both the appeals of the revenue and partly allow the Cross-Objections of the assessee.

30. In the result, all the appeals filed by the Revenue stand dismissed while all the Cross-Objections filed by the assessee are partly allowed.

SUNIL