TaxTMI 
TaxTMI 
2015 (7) TMI 647
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 appeal s 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, wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng such accommodation entries to real beneficiaries. In consequence to the search in the case of Shri Santosh Kumar Shah, prohibitory orders under sect ion 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 document s were impounded:- Inventory of books of account found in the premise of 32, Ezra St., Room No. 264, 2n d Floor on 09.02.2010 during the course of surv ey u/s. 133A:- Sr.No. Description No. of written pages ID Mark 1. One CPU 2. One register of share application deals 82 PIL/1 3. One file with Misc. documents 72 PIL/2 4. A Bunch of loose sheets 34 PIL/3 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, K....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 carr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lue 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 re opened by the department and that there is an additional burden on the Revenue that it must show that e ven 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 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 alle....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2.2010 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 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 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 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. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 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 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 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 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 cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e. with the Customs Authority and revenue wants to seize the said amount. The Hon'ble Supreme Court under these facts took the view that one Government Department could not search any other Government Department and seized the document s and money 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 arran....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h 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 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 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 asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ount, 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 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....puted 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 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 Divis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urther, revenue would submit that the above observations and conclusions of the Special Bench are specifically disapproved 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); Sa....