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TMI Blog2015 (7) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... unt 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 Limited –vs.- DCIT, ITAT, Rajko ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 ₹ 19,45,000/- and share premium of ₹ 3,69,55,000/-, aggregating to ₹ 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 ₹ 17,32,500/- and share premium of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 ₹ 15,72,500/- and share premium of ₹ 2,98,77,500/-, aggregating to ₹ 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 sect ion 132(1) of the Income Tax Act. We, therefore, decided to dispose of the Cross Objections of the assessee befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D 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:- Sr. No. Name of the Account holder A/c. No. Balance as on date (Rs.) 1. M/s. Edward Supply Pvt. Ltd. 6477 11,32,52,630.43 2. M/s. Budhiya Marketing Pvt. Ltd. 5905 13,97,12,704.04 Subsequently search warrant dated 10.02.2010 was issued under sect ion 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 bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 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 share holder 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the undisclosed income of the assessee-company. ITAT, Kol. Bench in the case of DCIT vs. Shaw Aromatics (P) Ltd. on Page 10 of the order has referred to the following observations of the Ape x Court in the cas e of CIT vs. 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 {he shore 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 Hon'ble 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dverse 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(Appeal s). In the case of M/s. Budhiya Marketing Pvt. Ltd. also, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 respec t of the search have not been complied with. Our attention was drawn towards the decision of the Hon ble Supreme Court in the case of KCC Software Limited Others vs.- Director of Income Tax (Investigation) Others reported in 298 ITR 1 (SC), 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 c reditor and not trustee and beneficiary. The banker is entitled to use the moni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch 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 panchnama. For the said bank account a prohibitory order was al ready issued to the banker 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 assessment s 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 init iated 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 pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Hon ble Supreme Court in the case of CIT, Haryana, Himachal Pradesh and Delhi Others reported in 161 ITR 505 held as under:- An amount of ₹ 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 wri t 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y belonging to the assessee. In the instant case, the Bank account was with the banker which is not a Government Department. 16. Hon ble Supreme Court in the case of K.C.C. Software Limited Others vs.- Director of Income Tax (investigation) and Others reported in [2008] 298 ITR 1 (SC) 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 jural 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 ac count held with a banker, the amount does not remain with the banker as trustee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee and for which the regular assessment has al ready 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 document s or any assets are requisitioned under section 132A after the 31s t 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, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 sect ion 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 document s 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) f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of search . 22. In view of the decision of Special Bench in the case of All Cargo Global Logistic s 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 Chetandas Laxmandas, 254 CTR (Del) 392 has taken similar view. In para 11 of this judgement, 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 Anil Kumar Bhatia, 352 ITR 493 (Del), 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 incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aning 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 yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iefs 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 the y 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 i s conferred there under. When the re venue 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oved in ClT 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 Cowl 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 Hon ble ITAT, Panaji Bench, Panaji in ITA No. 112/PNJ/2014 in the case of Sunita [54 taxmann.com 250; 68 SOT 98. We have gone through the decision of B Bench of this Tribunal in ITA Nos. 1533 to 1537/Kol./2012 in the case of Patangi Trade Holdings Pvt. Ltd. dated 12.09.2014. 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 Logistic s Limi ted vs.- DCIT (supra) ; LMJ International vs. - DCIT 119 TTJ 214 (Cal.); Anil Kumar Bhatia vs.- ACIT in ITA Nos. 2660 to 2665/Del./2009 (ITAT Delhi); CIT vs.- Smt. Shaila Agarwal (2012) 346 ITR 130 (All.)(Allahabad HC); Sanjay Agarwal vs.- DCIT in ITA No. 3184/Del./2013 (ITAT-Delhi); CIT vs.- Murli Agro products Limited in Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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