Prohibitory order on the owner or person in immediate possession or control. - Income Tax - 1108/CBDT

INSTRUCTION NO. 1108/CBDT Dated : October 6, 1977 Section(s) Referred: 132(3) Statute: Income - Tax Act, 1961 Under section 132(3), the authorised officer can serve a prohibitory order on the owner or the person who is in immediate possession or control of any books of account, other documents, money, bullion, jewellery or other valuable article or thing when it is not practicable to seize such books of account, etc. 2. The question whether an order under section 132(3) can be served on a bank prohibiting it from removing, parting with or otherwise dealing with the money in an account standing in the name of an assessee, whose premises are searched, has been considered by the Kerala High Court in the case of M.Shahjahan and another (1976) 104, I.T.R. 347. The High Court has inter alia, observed that the monies deposited in a bank belong to the bank, which has full liberty to use the money in such manner as it deems fit, subject to the obligation that if the customer demanded payment in the proper manner by issue of cheques, such cheques should be honoured. The court has further observed as follows:- " Such monies deposited in a bank, we consider, are impracticable to seize. In such cases, we conceive that action can be taken under sub-section (3) of section 132. We are of the view that the proper way in which the order under the sub-section should be worded is to address to customer who had deposited the money in the bank directing him not to remove, part with or otherwise deal with money except with the previous permission of the officer. This is permissible because we are of the view that the customer though he has no ownership or immediate possession of the money has certainly the right, at his will to withdraw the money from the bank and dispose of the same as he liked. Instead of issuing such an order, the order in question has been issued to the bank not to deal with the money. This may not be a correct procedure and the order, exhibit P-1, might imply that the bank had no authority to use the money after the order has been served on the bank." 3. In order to steer clear of difficulties in future the Income-tax Officer should, wherever a notice under section 132(3) is warranted, serve the notice on the bank concerned, and endorse a copy of it to the assessee. He should simultaneously also serve a notice under section 132(3) on the assessee, endorsing a copy to the bank. Such a course will preclude avoidable controversies about "ownership", "control" etc. of the assets which are sought to be covered by the prohibitory order. Wherever the facts of the case justify, the powers available under section 281B may also be resorted to, without prejudice to the action taken under section 132(3).