2017 (11) TMI 1850 - AT - Income Tax

Reopening the assessment u/s. 147 - Unexplained deposits - HELD THAT - The assessee s claim that the said deposits do not belong to the assessee or they have no information about the same has already been decided against the assessee by the tribunal in the order as above. We find that in the present case from the employee of the said foreign bank sovereign government of Germany comes into possession of documents relating to the deposit in the said bank. These deposit and detail give the name and address date of birth passport copy and all relevant particulars of the assessee. Then the sovereign government of Germany passes on this information to the sovereign government of India. Thereafter the said document and information comes into the possession of Central Board of Direct Taxes and thereafter to the assessing officer. In this scenario the assessee claim that the assessee has no information about the said bank deposit is totally unsustainable. Assessee s name and address date of birth passport copy and other particulars were planted in those documents to the prejudice of the assessee by some unknown person is totally an unbelievable story. That some good Samaritan deposited that huge amount for the benefit of the assessee in the said foreign bank account and gave all the names and address and particulars of the assessee without any information to the assessee is equally an unbelievable story. We do not find any relevance in ld. Counsel of the assessee s submission that the data were stolen by the foreign bank employee and it was not the case of a whistle blower. How this affects the veracity of information has not been spelt out. The above evidence is cogent and sufficient. Furthermore we note that in terms of the extant secrecy provisions of liechestein no further information from the said bank can be obtained by the A.O. The assessee is clearly trying to get benefit under this provision and denying the existence of the said bank account. This as per the facts discussed hereinabove is a self serving statement not at all sustainable. In the background of the above discussion the onus now is clearly on the assessee to prove that the assessee has no beneficial interest in the said bank account or that the said bank account is a fictitious story which the assessee has failed to discharge. Hence the impugned additions in the hands of the assessee are justified and uphold the same. As regards reference of the learned counsel of the assessee for the tax treatment of the discretionary trust is concerned it is noted that the said trust is in Liechestein the tax laws of government of India do not apply. Hence reference to cases which are in the Indian context are not at all applicable. Some of the salient features of trust in liechestein are already mentioned in the above said tribunal order.The assessee to apply Indian case laws to trust that are governed by law of Liechestein is bereft of cogency. The assessee s reference that data regarding bank balance is as on 31.12.2001 does not oxygenate the case of the assessee. The A.Y. 2002-03 very much encompasses the same. The reference by ld. Counsel of the assessee for A.O. mentioning sometimes US Dollars and sometimes Euro as currency is also not relevant as some error in mentioning the name of the currency in transcontinental transfer of information regarding surreptitious bank holdings is not fatal.

Summary

Issues Involved:

1. Reopening of assessment under Section 147 of the Income Tax Act.
2. Addition of deposits in foreign bank accounts.
3. Taxation of interest income from foreign bank accounts.
4. Validity of evidence obtained from foreign sources.
5. Application of Section 166 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 147 of the Income Tax Act:

The reopening of assessments for the years 2002-03 and 2005-06 was challenged. The Tribunal upheld the reopening, stating that the Assessing Officer (AO) had "reason to believe" that income had escaped assessment based on specific information received about the assessees being beneficiaries of a foreign trust with undisclosed deposits. The Tribunal referenced the Supreme Court decision in Rajesh Jhaveri Stock Brokers P. Ltd. which clarified that at the stage of reopening, the AO only needs a reason to believe, not conclusive proof of escapement of income. The information received from German authorities was deemed reliable and specific, justifying the reopening within the statutory time limits.

2. Addition of Deposits in Foreign Bank Accounts:

The AO added the amounts deposited in the LGT Bank, Liechtenstein, in the name of Manichi Trust to the income of the assessees. The Tribunal upheld these additions, noting that the assessees failed to provide any documentary evidence to counter the information received. The Tribunal emphasized that the deposits represented unaccounted income as they were not disclosed in the assessees' tax returns. The Tribunal also referred to the ITAT Mumbai Bench decision in the case of Shri Ambrish Manoj Dhupelia and others, which had similar facts and upheld the addition of undisclosed foreign deposits.

3. Taxation of Interest Income from Foreign Bank Accounts:

For the years 2005-06 and later, the AO added the interest income accrued on the undisclosed deposits in the foreign bank accounts. The Tribunal upheld these additions, stating that once it is established that the assessees have undisclosed deposits, the interest income from these deposits should be taxed unless the assessees provide evidence of liquidation of these deposits. The method of calculating the interest income was deemed reasonable and justified.

4. Validity of Evidence Obtained from Foreign Sources:

The Tribunal addressed the assessees' contention that the information from the German authorities was unauthenticated and unreliable. It held that the information was obtained through official channels and was specific and credible. The Tribunal also noted that the assessees were provided with copies of the relevant documents and had the opportunity to respond. The Tribunal dismissed the argument that the information was based on stolen data, stating that the origin of the information did not affect its reliability.

5. Application of Section 166 of the Income Tax Act:

The Tribunal addressed the assessees' argument that they could not be directly assessed as beneficiaries of the trust. It cited Section 166, which allows for direct assessment of the person on whose behalf income is receivable. The Tribunal held that this section does not prevent the department from making direct assessments on the assessees, thus upholding the AO's action in taxing the undisclosed income directly in the hands of the assessees.

Conclusion:

The Tribunal dismissed all the appeals, upholding the reopening of assessments, the additions of undisclosed deposits and interest income, and the validity of the evidence obtained from foreign sources. The application of Section 166 was also affirmed, allowing for direct assessment of the assessees as beneficiaries of the foreign trust.