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Soignee R. Kothari Versus Dy. Commissioner of Income Tax & Others

Taxability of income - correct person to be taxed - Additional Solicitor General to contend that the tax in the hands of the Estate of late Ramniklal N. Mehta is not correct and the Revenue is obliged to tax the income in the hands of the correct person i.e. Petitioner herein - Held that:- When we queried the learned Additional Solicitor General with our understanding at the stage of rejoinder, he clarified that the Revenue is not contending that the Estate of late Ramniklal Mehta has been wrong .....

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ission made even though the Executor of the Estate of late Ramniklal N. Mehta, one Mr. Dilip Mehta uncle of the Petitioner clearly admits in his statement made to the Income Tax Authority on 10th January, 2012 that he has limited authority to operate the A/c. No. 5091404580 in the name of M/s. White Cedar. The Revenue ought to have in fact proceeded further and held the uncle of the Petitioner Mr. Dilip Mehta who is Executor of the Estate of late Ramniklal N. Mehta bound by his admission tha .....

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ing its rejoinder. We would expect the Revenue in matters such as these to take decisions with due consideration and some thought before taking a stand as taken in the affidavit in reply 16 December 2015 with regard to the order dated 30 May 2014 passed on the Estate of late Mr. Ramnikal Mehta. - Neither the Petitioner nor her uncle i.e. Executor of the Estate of late Ramniklal N. Mehta is ready to obtain the necessary statement either directly or through M/s. White Cedar from HSBC, Geneva i .....

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in not being forthcoming, to our mind leads us to the conclusion that this is not a fit case where we should exercise our extra ordinary writ jurisdiction and/or interfere with the orders passed by the authorities under the Act. If a person has nothing to hide, we believe the person would have cooperated in obtaining the Bank Statements. - Writ Petition (L) No. 3172 of 2015 - Dated:- 5-4-2016 - M. S. Sanklecha And A. K. Menon, JJ. For the Petitioner : Mr. P.J. Pardiwalla, Senior Counsel a/w Nite .....

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e petition and expedite its hearing as it involved interpretation of Explanation2 to Section 147 and Section 149(1)(c) of the Act, in the context of the jurisdiction of the Assessing Officer to issue the impugned notice. At that time, the learned Additional Solicitor General submitted that instead of admitting the petition, the same could be kept for final disposal at the stage of admission. This request was made as the decision on the interpretation of the law would have a bearing on a large nu .....

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of the Act a Non Resident. It has been so declared in her Return of Income and her status as NonResident is also accepted by the Revenue. (b) For the Assessment Year 2006-07, the petitioner filed her Return of Income on 29th March, 2007 declaring a total income of ₹ 37.96lakhs. This income was the aggregate of interest received by her on her bank balance in accounts in India, on delay in income tax refund being issued and on loans advanced by her in India. The Return was processed under Se .....

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as on 26th March, 2006. Seven individuals, including the petitioner and two Trusts i.e. nine in the aggregate, are shown as beneficiaries of the Account. The seven individuals in turn are beneficial owners of the two Trusts. All the seven individuals including the petitioner in the records of the HSBC, Geneva have, as indicated in the Base Note, have their addresses in Mumbai. (d) Thereafter, during the course of a search on the business premises of onr M/s. Rosy Blue (India) Group of companies .....

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ssessment Order dated 30th May, 2014 under Section 153A r/w Section 143(3) of the Act was passed on the Estate of late Ramniklal R. Mehta. By the above order dated 30th May, 2014, the entire amount of US$ 44,861,171 i.e. ₹ 200.12crores was treated as the income of the Estate of Ramniklal Mehta. This in spite of the fact that the assessee therein was offering only 5.73% of the above amount to tax being his investment in the Account. The Additional (difference) amount was taxed under Section .....

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the petitioner is a nonresident under the Act. (g) On 31st March, 2015, the Assessing Officer issued the impugned notice seeking to reopen the petitioner's assessment for the Assessment Year 2006-07. The reasons recorded in support of the impugned notice dated 31st March, 2015 was also issued to the petitioner. (h) The petitioner by her letter dated 1st September, 2015 filed her objections to the reasons as recorded by the Assessing Officer in support of the impugned notice. By an order dat .....

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he income chargeable to tax should have escaped assessment. In this case, the same Assessing Officer has brought to tax the entire amount of deposit i.e. US$ 44,861,171 to tax in the hands of Estate of Ramniklal Mehta by order dated 30th May, 2014. Further, by order dated 31st March, 2015 all other six individual beneficiaries have been brought to tax to the extent of 1/7th of the amount in their hands and balance 6/7th as protective assessments also in its hands. (III) The Assessing Officer did .....

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reading of Explanation 2 to Section 147 of the Act would mean that the fiction therein would apply only to the income listed therein being deemed to be income, escaping assessment. It would not cover reasons to believe and chargeability to tax. (VI) The reopening notice is without jurisdiction as the sanction for the impugned notice dated 31st March, 2015 which was obtained from the Additional Commissioner of Income Tax on 31st March, 2015 on the basis of reasons recorded on 31st March, 2015 it .....

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interfere with the notice for reopening of an assessment. If the reasons recorded, when read as a whole indicate reason to believe that income chargeable to tax has escaped assessment, the test is satisfied. (d) The impugned order is not barred by limitation as it stands covered by Section 149(1)(c) and the mere finding of an asset in a foreign land would be sufficient to issue a reopening notice within sixteen years from the end of the relevant Assessment Year. (e) The mere fact that the tax ha .....

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ors the fact that the Assessing Officer records reason to believe that income chargeable to tax has escaped assessment without application of Explanation 2 to Section 147 of the Act, would not by itself exclude the Explanation 2 to Section 147 of the Act where a person is found to have an asset outside India, the reopening of reason to believe that income chargeable to tax has escaped assessment is deemed to be satisfied. (h) There is no reason in a fiscal statute to interpret the Act by examini .....

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itioner the Waiver was sought only on 30th October, 2015 i.e. much after the issue of the impugned notice on 31st March, 2015 and also after filing of this Petition in Court on 30th October, 2015. In any case, we asked the Petitioner whether she is now ready to sign the Waiver. Mr. Pardiwalla took time to take instructions from the Petitioner. At the time of the rejoinder we were informed that the Petitioner is willing to sign the Consent Waiver Form with a modification - namely as alleged benef .....

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dated 22nd December, 2011 which states that the following have neither visited nor opened nor operated the account bearing the name of White Cedar Investments Limited (a/c no. 5091404580) Sr. No. Name 1 Arun Ramniklal Mehta 2 Russell Mehta 3 Viraj Russell Mehta 4 Rihen Harshad Mehta 5 Naina Harshad Mehta 6 Soigne Rajeev Kothari 7 Priti Harshad Mehta Moreover, the letter from HSBC dated 22nd December 2011 also states that you have the limited authority to operate the account of White Cedar Inves .....

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tioner stated that he is not in a position to give statement of the HSBC Geneva bank account. Further, when he was requested to fill up the Consent Waiver Form, the authorized representative of the uncle of the Petitioner by letter dated 23rd July, 2013 stated that the executor of the Estate of late R.N. Mehta i.e Mr. Dilip Mehta is unable to attend the office as he is nonresident and not present in India. We, therefore, asked Mr. Pardiwalla whether the petitioner could obtain the Consent Waiver .....

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te account of M/s. White Cedar, being A/c. No. 5091404580 in HSBC, Geneva. Mr. Pardiwalla, learned Sr. Counsel seeks to rely upon para 11. C thereof to contend that the account is operated by the Directors of M/s. White Cedar and his role is limited to advise M/s. White Cedar on behalf of the Estate as an investor. On instructions of the Petitioner, the Learned Senior Counsel Mr. Pardiwalla informed us that her Uncle Mr. Dilip Mehta i.e the Executor of the Estate of late Mr. Ramniklal N Mehta wa .....

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but only authorized to instruct M/s. White Cedar. This would show that if the Petitioner and/or her uncle so deems it fit they could ask M/s. White Cedar to obtain Bank Statement of A/c. No. 5091404580 from HSBC Bank. We cannot turn a blind eye to the fact that family relationship amongst Indians is strong and the money in A/c No. 5091404580 in HSBC, Geneva apparently for the benefit of the family would presumably further bind them together. This itself would raise a presumption that they are ve .....

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before us has been that she is nonresident and it is only her income which is received or accrued or arising in India which can be brought to tax under the Act. Thus, it is submitted that it is for the Revenue to establish that the income had accrued or arisen in India which was lying on 26th March, 2006 in A/c. No. 5091404580 in HSBC, Geneva. We find that the Petitioner and/or her uncle - Dilip Mehta i.e. Executor of the Estate of late Ramniklal N. Mehta who could probably amongst others be abl .....

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td. which has been taken on record and marked X for identification. This bank statement if obtained from HSBC, Geneva, would reveal and/or possibly give clues as to the source of amounts deposited in the Account No. 5091404580 of HSBC Bank, Geneva . Neither the Petitioner nor her uncle i.e. Executor of the Estate of late Ramniklal N. Mehta is ready to obtain the necessary statement either directly or through M/s. White Cedar from HSBC, Geneva in respect of A/c. No. 5091404580 by exercising or ca .....

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e conclusion that this is not a fit case where we should exercise our extra ordinary writ jurisdiction and/or interfere with the orders passed by the authorities under the Act. If a person has nothing to hide, we believe the person would have cooperated in obtaining the Bank Statements. 12. Before concluding, we cannot help but comment on the manner in which the Revenue has conducted these proceedings. The Revenue filed an affidavit in reply dated 16th December, 2015 - wherein it has been stated .....

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by citing that certain income was offered in the name of Estate of Late Ramniklal Mehta. The plea of the assessee is without any basis. Undisclosed income must be assessed in the hands of the person, to whom that undisclosed income belongs. Income of other beneficial owners viz. Shri. Arun R. Mehta, Shri Russel A. Mehta, Shri Viraj R. Mehta, Ms. Naina H. Mehta,Ms. Priti H. Mehta and Shri Rihen H. Mehta on account of their beneficial ownership interest in HSBC Bank account in the name of White Ce .....

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this 5.73% share was given and hence to protect the interest of the revenue, the AO added the whole amount. The matter is contested before the CIT(A) including legality of the proceedings. However, the fact remains that name of Late Shri Ramniklal Mehta or his Estate appears nowhere in the base note and bank account in the name of White Cedar Investment Ltd. was opened much later on 23.03.2004 after death of Shri Ramniklal Mehta who died on 07.04.2002. The actual beneficial owners of the said ba .....

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er, the bank account in the name of M/s. White Cedar was opened only on 23rd March, 2004 i.e. almost two years after the death of Shri Ramniklal N. Mehta. During the course of arguments, we understood the learned Additional Solicitor General to contend that the tax in the hands of the Estate of late Ramniklal N. Mehta is not correct and the Revenue is obliged to tax the income in the hands of the correct person i.e. Petitioner herein. By virtue of the aforesaid affidavit read in the context of t .....

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has been wrongly taxed but it was his submission in the alternative that even if the said Estate of late Ramniklal N. Mehta has been wrongly taxed, it is the obligation of the Revenue to tax the right person (s) including the Petitioner. We accept this as an alternative submission made by the Revenue and we concede that it is likely that we may have not correctly understood the same when voiced by the Revenue at the first instance. This submission of Additional Solicitor General was an alternati .....

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