Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2019 (8) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (8) TMI 837 - ITAT AHMEDABADTaxability of withdrawals from private discretionary trust as income in hands of beneficiary and settlor - differentiating between the trust corpus and accretion of income - explanation of source of funds in the hands of the trust - assessment of trust - Penalty u/s 271(1)(c) - HELD THAT:- No doubt, Dr A T Patel has made a statement, during the course of search operation recorded on 29.9.2011- and more specifically in response to question no. 3, that during seven years of his and his wife’s employment in the United Kingdom, the assessee had accumulated funds, on which taxes were duly paid in the UK, which were parked in a bank account in British Virgin Islands. It was also explained that these monies were kept in BVI bank account since, in accordance with the legal requirements then in existence, they could not have kept these monies in the UK. Once this position is found to be correct, the taxation will no doubt be confined to the accretion part but that stage has not yet come. As for the impact of Pratibha Pankaj Patel [2018 (12) TMI 272 - ITAT AHMEDABAD] on the facts of this case, that was a case in which the assessee before us was only a beneficiary and not the settlor. So far as the beneficiary is concerned, once the source of funds received by beneficiary is explained, taxation could possibly be confined only to the income component, and but that would not essentially hold good for the settlor as well. He has to explain the investments, which were not accounted for in his books of accounts or disclosed to the income tax authorities at any stage earlier, detected during the search operations. There is no escape from the onus of explaining the investments made by the assessee. The trust investments were made much earlier but since these investments were unaccounted and undisclosed, the assessee has to explain the source of these investments now. When the investment in trust itself stands unexplained and uncorroborated, the legal position with respect to taxability of such trust funds is altogether at a different level. As we so observe, we are conscious of the fact that the evidence of trust investments is found in the search proceedings and these investments in the trust were prima facie unaccounted and undisclosed to the tax authorities. Learned representatives fairly agree that the matter can be remitted to the file of the AO for examination de novo on all these aspects, including, but not limited to, in respect of the subsequent taxation of entire trust funds in the hands of the beneficiaries. All aspects remain open.
|