Case: M/S. K.C.C. Software Ltd.  Vs. Director Of Income Tax (Inv.)

requiring special attention.(i) Details of packages of cash which are to be deposited into the Personal deposit Account in the Reserve Bank/State Bank.(j) Details of packages of bullions, jewellery etc. required to be deposited in the strong room/safe deposit vault of the bank.(k) Work regarding valuation of jewellery seized.(l) Details of sealed covers containing damaged/mutilated documents.(m) Particulars of complaints filed in police, as result of any incident during the search, which are required to be followed up.5.02. Deposit of CashThe cash seized is required to be deposited in the bank in the Personal Deposit Account of the Commissioner, at the earliest opportunity preferably on the next working day. However, if due to unavoidable reasons, it is not possible, the cash with other valuables may be kept in the strong room of the Commissioner or the safe deposit vault of the bank. Where cash has been brought in sealed packet, it is expected that the authorized officer has already issued a letter to the assessee requesting him to be present before the ADIT-in-charge on the following morning before 12 O’ clock. Where the cash seized relates to an assessee who is assessed in the charge of some other Commissioner, a crossed account payee demand draft in favour of the concerned Commissioner should be obtained and dispatched to him.” 15. It is stated that amount has not become a part of the Consolidated Fund of India and is deposited in separate PD account of the concerned Commissioner and is held in the custody till final determination of the tax liability by the assessing officer for the relevant assessment years. 16. On a bare reading of the Manual it is clear that the same is relatable to cash seized and cash in bank is conceptually different from cash in hand. 17. In Shanti Prasad Jain v. The Director of Enforcement (1963 (2) SCR 297 ) it was inter alia observed as follows: “Under the law the time relationship between a Banker and a customer is that of a debtor and creditor and that it makes no difference in that relationship that the deposits were conditional.xx xx xxNow the law is well settled that when moneys are deposited in a Bank, the relationship that is constituted 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 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. The law was stated in those terms in the old and well-known decision of the House of Lords in Foley v. Hill (1848 11 H.L.C. 289 E.R. 1002) and that has never been questioned.” 18. In the judgment of House of Lords in Foley v. Hill [(1843 to 1860) All E.R. Re-print 16] referred in the aforesaid judgment of the Constitution Bench, it was inter alia held as under: “Money, when paid into a bank, ceases altogether to be the money of the owner, it is then the money of the banker, who is bound to return an equivalent by paying a similar sum to that deposited with him when he is asked for it. The money paid into the bankers, is money known by the customer to be placed there for the purpose of being under the control of the banker; It is then the banker’s money; he is known to deal with it as his own; he makes what profit on it he can, which profit he retains to himself, paying back only the principal, according to the custom of bankers in some places, or the principal and a small rate of interest, according to the custom of bankers in other places’. He is guilty of no breach of trust in employing it, he is not answerable to the customer if he puts it into jeopardy, if he engages in a hazardous speculation; he is not bound to keep it or deal with it as the property of the customer, but he is, of course, answerable for the amount because he has contracted, having received that money, to repay to the customer, when demanded, a sum equivalent to that paid into his hands. That has been the subject of discussion in various cases, and that has been established to be the relative situation of banker and customer. That being established, to be the relative situation of banker and customer, the banker is not an agent or factor, but he is a debtor.” 19. At this juncture, it is to be clarified about the impermissibility to convert assets to cash and thereafter impound the same. We need not go into the broader issue in view of the fact that there is no challenge to the order passed under Section 132B of the Act. But it has been stated by learned counsel for the revenue that it is permissible to complete the assessment by 31st March, 2008. In view of the aforesaid scenario, we dispose of the appeal with the following directions: (i) In view of the non challenge to the order passed under Section 132B, no relief can be granted to the appellants.(ii) However, it would be in the interests of the assessee as well as the revenue if the amount transferred to the PD account of the Commissioner is kept in interest bearing fixed deposit as ultimately in the event the assessee succeeds, would be entitled to interest as provided in the statute. The assessment has to be completed on or before 31st March, 2008 i.e. within the time statutorily provided. 20.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]is to be clarified about the impermissibility to convert assets to cash and thereafter impound the same. We need not go into the broader issue in view of the fact that there is no challenge to the order passed under Section 132B of the Act. But it has been stated by learned counsel for the revenue that it is permissible to complete the assessment by 31st March, 2008. In view of the aforesaid scenario, we dispose of the appeal with the followingIn view of the non challenge to the order passed under Section 132B, no relief can be granted to the appellants.(ii) However, it would be in the interests of the assessee as well as the revenue if the amount transferred to the PD account of the Commissioner is kept in interest bearing fixed deposit as ultimately in the event the assessee succeeds, would be entitled to interest as provided in the statute. The assessment has to be completed on or before 31st March, 2008 i.e. within the time statutorily provided.