TMI Blog2021 (1) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... is wrong to presume that the properties governed by the trustee will be considered as the properties of the individual beneficiary who exercises the appointment of trustees. In the given case, no doubt the assessee is vested with the power to appoint or remove the trustees, does not change the status of the trust and its independent functioning. Admittedly these trusts and the companies managed by the trustees were not declared by the assessee in the return of wealth. It is pertinent to note that the trusts were created in 1989 and the assessee was nominated as the beneficiary by the Late Shri Pratap Malpani. It is fact on record that there are no investments, which were made by the assessee or the investments were moved from India. There was no obligation on the part of assessee to declare the wealth /assets in the ROI upto AY 2012-13. The declaration of details of foreign bank account and trust were mandated only from AY 2013-14. The offshore assets held by the offshore trust, which is irrevocable discretionary trust in which assessee is one of the beneficiary, who happens to be bestowed with right to appoint /re-appoint the trustees, it does not inherit the right o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entire re-assessment proceedings becomes null and void for non-supply of reasons recorded to the assessee. Assessee challenged the rejection of filing of revised return of wealth which was filed revising the return filed in response to notice issued u/s 17 of the Act - We notice that the assessee filed the return u/s 17 on 13.03.2015 which was itself belated. As per the provision of section 17(1), AO has to serve the notice requiring the assessee to file the return within such period as may be specified in the notice. We notice that the assessee had filed the return only upon serving of show cause notice u/s 35B of the Act. Therefore, it is clear from the fact that the return filed u/s 17 is belated. The assessee can revise the return which was filed u/s 15 of the Act. Since the provision is very clear that the assessee has to file the return u/s 17 within the time prescribed in the notice and if belated, the assessee cannot revise the return treating the same as filed u/s 15. Therefore, we are in agreement with the findings of Ld CWT(A). Accordingly, the ground raised by the assessee in this regard is dismissed. AO treated the additional jewellery declared in revised r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals) - 52 in short referred as Ld. CIT(A) , Mumbai dated 31.10.2019 for Assessment Year (in short AY) 2007-08 to 2013-14 respectively. 2. Since the issues raised in all the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. First of all, we are taking WTA No. 02/Mum/2020 for Assessment Year 2008- 09 as a lead case. 3. The brief facts of the case are, a search and seizure proceedings were conducted u/s 132 of the I.T. Act 1961 on Yash Birla group of cases on 07.01.14. The AO observed that assessee is the main person belonging to this group. Assessee filed his original return of wealth on 29.07.2008 declaring a net wealth of ₹ 42,25,940/-. Subsequently, reassessment proceedings were initiated by issue of notice u/s 17 on 28.03.2014 and duly served on the assessee. In response, the return of wealth was filed on 13.03.2015 admitting net wealth of ₹ 1,62,10,100/-. Notice u/s 16(2) of the Wealth-tax Act was issued and served upon the assessee on 16.03.2015. Subsequently, assessee furnished revised re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation report prepared as on 31.03.2008 and assessee furnished the valuation report in support of wealth tax return. Since the valuation report was based on the wealth tax return, the AO observed, why certain jewelleries were excluded in computation of net wealth. AO did not accept the Methodology for Reconciliation of Jewellery submitted before him and he reworked the net wealth of the assessee and treated the difference of net wealth between the return filed in response to notice issued u/s 17 of the Wealth Tax Act and the net wealth estimated by the AO is treated as undisclosed wealth to the extent of ₹ 3,90,18,345/-. 8. During the course of assessment proceedings and inquiries, AO observed that FT TR division, CBDT, Govt of India, obtained information from various tax jurisdictions and based on the above information, it was observed that assessee is the beneficial owner of several entities held abroad. The details of entities where assessee or his family members have beneficial interest are given below :- S. NO. Account No Account held in the Name Information received from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as per the Wealth Tax Act, 1957, the assets which are productive are not included in the list of assets that are subject to wealth tax. By referring to section 2(ea) of the Act, he observed that it is clear that the wealth tax is levied on the assets which are not put to use by the assessee for commercial use. The intent of the legislature behind levying wealth tax is to disincentivise the act of keeping assets unproductive which otherwise could have been put to productive use. The assets which are put to productive use generate income which directly contributes to the GDP growth of an economy. He further observed that Section 2(ea) of Wealth Tax Act 1957, doesn't include money deposited in the Bank Account. This is because deposit in the bank account generates interest income. Therefore, it is not subjected to wealth tax. He further observed that even the undisclosed money which is stashed away abroad is akin to cash-in-hand. Such investment/deposit abroad in Bank Accounts is unproductive as far as India is concerned, for it will not generate any kind of income in India. Accordingly, the AO treated the total deposit in the bank accounts held by various entities abroad in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the submissions of the assessee, it is apparent the assessee had never sought the reasons recorded for reopening the assessment. The AO is not obliged to furnish reasons recorded for reopening of assessment, unless the assessee specifically seeks the same. The Hon'ble Supreme Court in the case of GKN Driveshafts (I) Ltd. (259 ITR 19) has laid down guidelines for reopening of assessment. As per these guidelines, the AO is bound to furnish the reasons recorded for reopening of assessment when sought by the assessee. However, the said guidelines do not require the AO to suo-moto provide the reasons recorded for reopening even when they have not actually been sought by an assessee. In the instant case, since the assessee had never sought the reasons recorded for reopening, the action of the AO cannot be faulted. Accordingly, Ground No. 1 of the appeal is dismissed. 14.2 With regard to Ground No. 2 raised before us, he observed as below :- 6.3.2 In course of the appellate proceedings, the assessee submitted that he had purchased certain jewellery items from M/s. Shearson Investments Trading Co. P. Ltd. in the year relevant to A.Y. 2014-15 for which the debit notes and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, however, there is no proof of actual payment made and therefore, the genuineness of these transactions is to be doubted. 6.3.4 In view of the above said discussion, no infirmity is found in the action of the AO of making an aggregate addition of ₹ 3,19,18,345/- in respect of diamond jewellery, gold jewellery and silver articles to the net wealth of the assessee. Accordingly, Ground No. 2(c)(i), (c)(ii) and 2(d) of the appeal are dismissed. 15. With regard to ground no. 3 raised before us, after considering the submission of assessee, Ld. CIT(A) rejected the contention of assessee with the following observations :- 7.2 In course of the appellate proceedings, the assessee has contended that the said flats belonged to Kinetic Holdings Ltd. and were not owned by him. It was further contended that any asset belonging to a company is liable to be taxed in the hands of the company itself since a company is a separate legal entity for income/wealth tax purposes. Accordingly, the assessee contended that the immovable properties held in the name of M/s. Kinetic Holdings Ltd. are not chargeable to wealth tax in the hands of the assessee. Moreover, without prejudice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. as a front ostensibly with a view to help the person in keeping his/her identiy as the real beneficial owner of such assets from his/her own jurisdictional authorities concerned. The relevant portion of the order of the Hon'ble ITSC is reproduced as under :- ....this modus which provide layering and the corporate veil as well through licensed fiduciaries to keep the identity of the true owner of the assets and investments made through these entities hidden is quite well known in such offshore accounts. Investments are made and accounts are opened by such entities in their own name, though the real and legal ownership vests with the person concerned. These services are offered for a fee and the terms of such services are mutually agreed upon by the beneficial owner and the service provider which is in the private knowledge of these two contracting parties and hence does not come into the public domain... .... However, as these service providers are also subjected to the laws of their land and international agreements on prevention of black money circulation and anti-money laundering measures, they are subjected to certain disclosure requirements also which m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d herein above that Shri Yashovardhan Birla was in a position to exercise the ultimate control by way of power to remove or appoint the trustees. It is to be noted that it is not the settlor1 or the Trustees' who decide the ownership of such a trust; it is the power to remove and appoint the trustees which decides the ultimate control over the affairs of the so-called discretionary trust structure..... The facts in the present case, as brought out herein above, show that the applicant being sole beneficiary had actual control and authority in respect of the affairs of the trust, as has been clearly stated by Shri G.L.Lath also in his statement recorded u/s.132(4) of the Act.'.. 7.5 Respectfully following Order u/s.245D(4) dated 27- 09-2017 of Hon'ble ITSC, no infirmity is found in the action of the AO in holding that it is held that assessee Shri Yashovardhan Birla, is a beneficial owner of the assets of M/s Kinetic Holdings Ltd. Hence, all the off- shore assets of M/s Kinetic Holdings Ltd. including the flat at Singapore, flat at London and also the amounts in its foreign bank accounts are to be considered for wealth tax purposes in the hands of the assessee. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Barclays Bank PLC, Singapore (stated to be disclosed to Department) 8 91312600 Yashovardhan Avanti Birla and Yashovardhan Birla 9 91321300 Vedant Birla and/or Yashovardhan Birla 8.4 Further, as per information received from Competent Authorities of Switzerland and Jersey, there were more than 70 bank accounts held by the above said offshore entities, where the assessee is referred to as the beneficial owner. The AO computed the aggregate deposits in the undisclosed foreign bank accounts of the assessee to be of ₹ 96,29,53,356/- and added the same to the net wealth of the assessee. 8.5 It is noted that the Wealth Tax Act, 1957 provides for levying of wealth tax on an individual, HUF or company on the net wealth owned by a person on a valuation date, i.e. 31st March of every year. A person may own assets in India as well as abroad. The taxability of an asset will be determined on the basis of the residential status and the location of the asset. Residential status will be ascertained in the same manner as is determined under the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that if any assets which are not exempt from Wealth Tax have been created on application of the amounts deposited in the said undisclosed foreign bank accounts, the same also have to be considered for wealth tax purposes in the hands of the assessee. However, to identify such undisclosed assets it is imperative that the assessee provides explanation of the various entries in the said various undisclosed foreign bank accounts, however the same has not been done. On application of the bank deposits, only the nature of asset changes from one form to another. Moreover, it is noted that undisclosed assets are in the form of money laundering and therefore are more serious in nature. Therefore, no infirmity is found in the action of the AO of considering the entire amount of deposits in the various undisclosed foreign bank for wealth tax purposes in the hands of the assessee being the actual/beneficial owner. 8.8 The other contention of the assessee is that the AO did not provide breakup/details of ₹ 96,29,53,356/- added to his returned wealth and that three of the foreign bank accounts, viz. A/c.nos.91321400, 91312600 and 91321300 with Barclays Bank, Singapore were opened ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said jewellery to be undisclosed is bad in law and needs to be quashed. c) (i) Further the Learned CIT(A) has erred in stating that Wealth tax returns along with computation of the group Companies were not provided for verification without appreciating that the wealth returns along with Computations of the respective group Companies had been provided vide letter dated 24th March, 2015, 25th March, 2015 and 27th March, 2015 to the Learned AO the vide the written submission filed to the Learned CIT(A). The order passed by the Learned CIT(A) confirming the said addition is based on incorrect facts and hence needs to be quashed. (ii) The Learned CIT(A) has erred in considering Silver weighing 104 kgs amounting to ₹ 72,37,200/- to be undisclosed and added to the net wealth of the assessee without considering the facts that the Silver was duly reconciled as appearing either in the wealth tax returns of the assessee, his family members or group Companies. Hence, the same be considered as disclosed and the said addition be deleted. (iv) The Learned CIT(A) has erred in considering the Diamond Gold Jewellery totaling to ₹ 2,46,81,145/- as a undisclosed je ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eds to be deleted. d) The Learned CIT(A) has erred in treating the amounts held in Foreign Bank accounts of Corporate entities belonging to the assessee without considering the facts and circumstances of the case. Hence the said order is bad in law and needs to be quashed. The Appellant craves leave to add, alter or delete to the ground of appeal at the time of or before hearing. 18. At the time of hearing, Mrs. Fereshte Sethna appearing on behalf of the assessee filed her written submission which are reproduced hereunder for the sake of convenience :- 1. An offshore irrevocable discretionary trust came to be settled in 1989, (voluntarily duly disclosed by assessee including since AY 2014-15) by the maternal uncle of the Assessee, one (Late) Pratap Malpani, non-resident Indian (Settlor), in relation to offshore assets in the ownership of Pratap Malpani, recorded in Declaration of Trust dated 7 September 1989 (PB Vol. C, pgs.3 to 23), executed by the offshore trustee-Albany Trustee Company Limited of Guernsey (Instrument of Trust).The offshore trust is comprised entirely of offshore assets, held through offshore corporate vehicles. 2. The overall framework of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary trust. 10. The Revenue asserts that the Assessee is the beneficial owner and/or sole beneficiary of the trust, overlooking the First Schedule Part II of the Instrument of Trust, which stipulates in that the Assessee is one of several beneficiaries. Reliance on appointment and removal of trustee clauses to the exclusion of the schedules, is erroneous. 11. Applying settled legal principles that it is not available to 'approbate and reprobate'2, the Instrument of Trust must be read as a whole, and it must follow then that all that the Assessee had, at the highest, upon being nominated as beneficiary of such trust, was an expectancy or anticipation or hope of 'distribution' in his favor, subject always to exercise of absolute unfettered discretion for 'distribution' by the trustees, and nothing more. 12. The fallacy in the contention of the Revenue lies in overlooking the framework of a 'trust', including quintessential requirements for' appointment' of a trustee which is inherent to, absent which no trust can come into, or continue to remain, in existence. 13. The Instrument of Trust records, in clauses 1 13, that it sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc., may be reserved by the settlor to himself, or for joint exercise with a beneficiary(ies), or in his absence (death or disability) to any nominated beneficiary(ies), or to a third institution, or third party, etc. 19. In circumstances where the settlor of an irrevocable trust reserves unto himself the power to appoint new trustees or remove such trustees, capable of exercise upon any such eventuality, neither the law, nor the extant framework of the Instrument of Trust, renders the exercise of such power to appoint new trustees to deem a reversion of control over assets irrevocably settled upon trust to the hands of the settlor and/or render to wealth tax such assets in the hands of the settlor. 20. Similar exercise of analogous powers of appointment or removal of trustees by a nominated beneficiary of an offshore irrevocable discretionary trust, who has no specific determined right or 'interest' in the assets of the trust, or third institution or third party, whether such power were exercised in the absence (upon death or disability) of the settlor, or jointly with the settlor, or otherwise, cannot have the legal effect of the beneficiary subsuming the powers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incipal Commissioner of Income Tax (Central)-2 dated 28 August 2017 to the Income Tax Settlement Commission [ITSC] (Paperbook Vol. C, pg.102-105), conclusively establishing the position admitted by Revenue, i.e. that the equity interests in Kinetic Holdings Limited belonged to (Late) PratapMalpani6; it follows that it is not in dispute that the (Late) Pratap Malpani appointed Albany Trustee Company Limited as the trustee of the offshore 'corpus' settled upon trust by him. 26. Under the First Schedule Part II of the Instrument of Trust, the following persons were nominated as beneficiaries, viz.:(i) the Settlor, (ii) his wife, sons, spouses and lineal descendants of the Settlor; (iii) Ashokvardhan Birla (brother-in-law of Settlor) and his wife Sunanda Birla (sister) [late parents of the Assessee], children (including, Assessee), spouses and lineal descendants; (iv) charitable organizations in India Guernsey. 27. Independently, clause 8 of the Second Schedule to the Instrument of Trust stipulated that the power of appointment of new or additional trustees will be vested in (Late) Ashokvardhan Birla during his lifetime, i.e., husband of the Settlor's sister, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he mandate of the statutory framework, construed in tandem with the Instrument of Trust. 33. The Revenue's argument fails to factor in the outcome upon the Assessee ceasing to be a beneficiary of the offshore irrevocable discretionary trust. If the trust assets purportedly stood vested in the Assessee by virtue of conferment of powers of appointment and removal, a requirement for divestiture would arise, which is neither prescribed statutorily, nor by covenant within the framework of the Instrument of Trust. 34. The Instrument of Trust, as the governing document determinative of the objects of the settlor, and the rights, duties, privileges, entitlements, limitations inter se the beneficiaries, capable of exercise subject always to and within the strict ambit of discretionary powers conferred upon the trustees, is liable to be given full force and effect. Accordingly, assets comprised in the offshore trust structure, i.e. immovable properties, equity investments and bank accounts, all held through offshore corporate vehicles, are liable to be chargeable to tax strictly in the hands of the corporate vehicles. 35. Absent 'financial interest' or ownership of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the offshore trust would remain liable to be discharged by the (offshore) trustee, in the relevant tax jurisdiction(s), either where the (offshore) trust is situated and/or where the assets or investments of the (offshore) trust are situated. 40. In view of the settled position that tax assessment in relation to a discretionary trust with several beneficiaries must occur in the hands of the trustee until 'distribution', the Revenue cannot do indirectly what it cannot directly. 41. The Revenue has no statutory right, power or jurisdictional authority to issue notices to the offshore trustee and/or non-resident corporate entities under the (Indian) Wealth Tax Act, 1957, which it seeks to overcome through initiating proceedings against a resident beneficiary, and thereby seek to bring assets of the offshore irrevocable discretionary trust to wealth tax in his hands. 42. The Revenue overlooks that there are several other similarly situate beneficiaries of the offshore trust, i.e. all of whom may be considered for distribution (in the absolute discretion of the trustees), including non- resident beneficiaries. 43. On settled principles of 'territoriality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neither identified nor established any source or other form of evidence to support its case that the Assessee has made contribution or addition to the offshore trust. The principle of law that negative facts, where required to be proven by the Assessee, must stand the test of preponderance of probabilities, as held in CIT v Babu Lal [1980] 122ITR 1006 (Patna). 49. The case of the Revenue that the Assessee is the sole beneficiary of the trust structure, is premised on the abstract surmise that Anti-Money Laundering (AML) compliance records maintained by bankers of corporate entities within the trust structure, bearing declarations that the Assessee is 'beneficial owner', overlooking that: (A) the Assessee is neither shareholder nor director, and is not signatory to bank accounts of the corporate vehicles within the trust structure; (B) the declarations of the trustee neither bears the Assessee's signature, nor prior acquiescence or concurrence to such declarations by the trustees, if any; (C) the corporate vehicles in the trust structure are incorporated (excluding Kinetic Holdings Limited and Avit Investments Limited) and managed entirely by trustee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifying AML compliances have no bearing on taxation, and that the trust fund constitutes undistributed inheritance(under EOI under DTAA), the Revenue is liable to be deemed to have conceded that AML compliances are not determinative of matters of taxation, and has also failed to establish that undistributed inheritance from Assessee's maternal uncle has bearing on taxability. 50. The Revenue has not relied on statements or other documentary evidence whatsoever to exclude entitlement of other beneficiaries within the Instrument of Trust to be considered for 'distribution', whether by way of surrender, or relinquishment, or waiver, or otherwise at all. On the contrary, after the Assessee ceased to be a beneficiary, the discretionary trust continues to remain intact, with other beneficiaries. 51. Attributing sole beneficial ownership to the Assessee in respect of offshore bank accounts or other assets held through non-resident companies, based merely on AML declarations, in circumstances where such offshore companies form part of a trust structure settled in 1989 by the non-resident maternal uncle of the Assessee, overlooks that as beneficiary of the discretionary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Wealth Tax Act, held to be an exhaustive definition, does not permit exigibility of offshore assets of an offshore trust to wealth tax in the hands of the Assessee, there is no room for intendment in a taxing statute. 59. The 2012 retrospective amendments purporting to extend duration for reassessment where an asset, including 'financial interest', is found to exist outside India, have not amended the definition of 'assets' to 'deem' sums lying to the credit of offshore bank accounts as 'cash in hand and/or that a resident beneficiary of an offshore discretionary trust shall be deemed to have an 'asset' or 'financial interest' therein. A deeming fiction created by legislature is liable to be confined to the purpose for which it is enacted, i.e. to extend time for reassessment under section 17, but no further. 60. Following, the binding ratio decidendi in CWT v Arvind Narottam. There must be a right, present or contingent, before it can be said that an assessee has an interest, and I am supported in this by what was said by the House of Lords in Gartside v. IRC LR [1968] AC 553 where it was also observed that a mere right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's initial burden justifying a reasonable inference that this was not a case of undisclosed wealth, which shifted the onus back upon the Revenue, but remained undischarged. 65. The facts set forth in the ITSC order can, at best, prove of limited assistance to examining the case placed before the ITSC, particularly where the stand of the Revenue before this Hon'ble Tribunal betrays a marked departure specifically on matters of 'contribution' by the Assessee. Analysis and conclusions of ITSC currently remain sub judice in a pending writ petition (#862 of 2018) before the Hon'ble Bombay High Court, founded on the ITSC considering irrelevant facts and ignoring relevant facts and materials on record, which in law must vitiate the findings. 66. The scope, nature and legal ambit of proceedings under the Income Tax Settlement Commission(ITSC) framework of the Income-tax Act, 1961, is independent of the analogous framework available under Chapter V-A of the Wealth Tax Act, 1957. This Hon'ble Tribunal is entitled to examine matters bearing on taxability of Assessee. 67. Absent Chapter V-A proceedings under the Wealth Tax Act, 1957, no fetter whatsoever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of reliance. 72. Furthermore, ss. 91, 92 of the Evidence Act, 1872 proscribe reliance upon oral evidence inconsistent with documentary evidence; statements of Shri G L Lath, relied upon by Revenue, are contrary to documentary evidence, and thus incapable of cognizance. 73. By virtue of Shri G L Lath, under cross-examination on 21 March 2016 (PB Vol. C, pg.62-68), Q.2, confirming the Assessee is neither a contributory to the trust nor the recipient of 'distribution', absent re- examination, Revenue is not entitled to contend otherwise. 74. Notably, the Revenue is running inconsistent cases across the Income Tax and Wealth Tax proceedings of the Assessee (inter alia which includes matters with regard to non-disclosure, full and true nondisclosure, wrongful statement on oath):as set forth above, in asserting that 'contribution' by Assessee is irrelevant, the Revenue has finally given up this contention altogether in the wealth tax proceedings of the Assessee, evidently in recognition of its unsustainability. Separately, Assessment Orders U/153A r/w 143(3) IT Act for AY 2008-09 to 2013-14 (Paper Book Vol. C, pg.106-117) establish 'peak value' ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al. 80. By letter dated 12 October 2020, the Assessee's Authorized Representative called upon the AO to produce the file at the hearing, to enable this Hon'ble Tribunal to examine whether reasons exist, if so the sufficiency thereof, and compliance with mandatory sanctions required under section 17(1-A); but none were produced at the hearing, which by itself, without more, must vitiate the impugned reassessment proceedings under s.17. 81. Resort cannot be had by the Revenue to the extended period of limitation (beyond four years) for reassessment proceedings, through alleging 'financial interest' in an offshore asset, where none is established. In the case of Arjun Singh v. ADIT [2000] 246 ITR 363(MP)it was held that absence of germane 'reason to believe' has a direct bearing on the entitlement of the Revenue to avail enhanced limitation under s.17 of Wealth Tax Act. 82. Additions to net wealth of the Assessee pertaining silver / jewellery / ornaments are erroneous. The AO and the CWT have overlooked reconciliation against group companies and/or family members, supported by relevant documents, including valuation reports and wealth tax returns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is not productive, it is taxable assets under Wealth Tax Act. Accordingly, cash in hand more than 50,000/- is treated as taxable wealth and he supported the findings of lower authorities that deposits in foreign bank accounts are not potentially productive in Indian context. Therefore, these cash deposits in foreign bank accounts are taxable wealth. 21 With regard to foreign trust, he submitted that as per the findings of ITSC, the trust does not have the real power to function independently and therefore the corporate veil has to be lifted in this case and the real owner of these assets is only the assessee. Therefore, he supported the findings of Ld. CIT(A). 22. Considered the rival submission and material placed on record. We notice from the record that the offshore irrevocable discretionary trust was settled in the year 1989 by Late Shri Pratap Malpani, a non resident Indian, in relation to offshore assets owned by him. He settled these assets by way of declaration of Trust dated 07.09.1989 (refer page 3 to 23 of paper book volume 3) executed with offshore trustee, M/s Albany Trustee company Ltd of Guernsey. The offshore trust is comprised entirely of offshore assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered for wealth tax purposes in the hands of assessee, since according to revenue, assessee is the beneficial owner. 26. On careful consideration, we notice that the private discretionary trust was established by a non-resident with the offshore assets, which is irrevocable and the beneficiaries consist of lineal descendants of Late Shri Pratap Malpani and Late Ashokvardhan Birla together with charitable organizations. 27. The trust deed empowers the trustees to control the offshore assets and in case of distribution, it can be on the basis of trustees discretion. Even though the trust was established in Guernsey, the provision of trust is universally accepted and consistently followed worldwide. Even Indian Trust Act, 1882 is followed consistently and it is enacted in pre-independent era. This shows that the provisions of trusts are universally accepted and there were no major amendments in the Indian Trust Act, 1882. Therefore, the duties, responsibilities, liabilities and privileges of settlor, trustees and beneficiaries are standard. Therefore, sections 11, 73, 74 and 75 of Indian Trust Act, 1882 are applicable to trustees. The new trustees can be appointed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same as a tool for money laundering and to hide the true owners of the assets and investments. First of all, these trusts were created by the non-resident Indian and the assets or investments were also offshore and created outside India. These kind of arrangements are legally accepted mode of investments and accepted tax planning by the International Community. The case of the revenue is not that the investments were moved from India by the settlor or any beneficiaries. Admittedly these trusts and the companies managed by the trustees were not declared by the assessee in the return of wealth. It is pertinent to note that the trusts were created in 1989 and the assessee was nominated as the beneficiary by the Late Shri Pratap Malpani. It is fact on record that there are no investments, which were made by the assessee or the investments were moved from India. 31. Further, we notice that there was no obligation on the part of assessee to declare the wealth /assets in the ROI upto AY 2012-13. The declaration of details of foreign bank account and trust were mandated only from AY 2013-14. 32. In conclusion, it clearly indicates that the offshore assets held by the offshore tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sujata Birla/Yashovardhan Birla, Avanti Yashovardhan Birla/Yashovardhan Birla and Vedant Birla/Yashovardhan Birla, the AO treated the above deposits in banks belongs to the assessee by observing that the assessee is the beneficial owner. The AO treated the balance in these accounts as undisclosed foreign bank accounts and treated the same as non-productive cash in hand which is liable for Wealth Tax. The AO held that the legislature in its wisdom treated the amounts lying in the bank accounts in India as not liable to Wealth tax since they are of the nature of productive assets and contribute to the growth of the domestic economy. AO came up with the argument that the undisclosed foreign bank accounts do not contribute to the growth of the domestic economy, accordingly the same are liable for Wealth Tax. The Ld CWT(A) also agreed with the above proposition and sustained the addition to the wealth of the assessee. 37. We notice from the record that the bank balance are in the name of offshore companies, trusts and joint accounts of the family members. As far as the bank balance in the offshore companies and trusts are concerned, they are separate taxable entities and the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact on record that assessee is not the only beneficiary. Therefore, we have to consider the actual legal ownership rather than deemed ownership which is without any evidence on record, to show that assessee has the legal ownership on bank account and other assets held by Trust. 40. Therefore, in our considered view, the addition made by the AO on account of bank balance of the offshore entities as part of wealth of the assessee is farfetched and without any evidence of ownership as well as the definition of assets does not include the offshore bank account as part of assets as per the Wealth Tax Act, 1957. Accordingly, the ground raised by the assessee in this regard is allowed. 41. With regard to ground no. 1 raised by the assessee challenging the validity of reassessment on the ground that reasons recorded were not communicated to assessee, we find that the assessee raised this objection even before Ld CIT(A). We hold that the assessee has been deprived of his legitimate right of filing objections to the reasons recorded and the same were to be disposed off by a separate speaking order by the AO. In the instant case, admittedly, the reasons recorded for reopening the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the time prescribed in the notice and if belated, the assessee cannot revise the return treating the same as filed u/s 15. Therefore, we are in agreement with the findings of Ld CWT(A). Accordingly, the ground raised by the assessee in this regard is dismissed. 43. With regard to ground no 2(b), we notice that the AO treated the additional jewellery declared in revised return as undisclosed jewellery and in appeal, the commissioner has affirmed the same. After considering the fact in this case, we notice that the jewellery found during the search belongs to assessee and other family members. The assessee has disclosed the additional jewellery only after reconciliation of jewelleries of various family members and it is not something which was unearthed by AO. Further, we observe that the AO has rejected the revised return filed by the assessee and the AO cannot once again take the figures from the revised return and treat the same as undisclosed wealth. When the AO rejects the revised return then the whole return is invalid. In case AO makes addition from the revised return then it means that he recognizes the revised return. Therefore, we reject the contention of the tax aut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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