TMI Blog2017 (10) TMI 1088X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer vide letter dated 13/5/2009 provided the reasons for reopening of the assessment wherein it was specified that a tax-evasion petition (TEP) has been received from CBDT. As per the information contained in the said TEP the assessee is a beneficiary of Ambrunova Trust and Merlyn Management SA. In the return of income the assessee neither offered any income with reference to the trust nor disclosed any details to the effect that the appellant was a beneficiary of the said trust. The Assessing Officer, from the, summary of the trust account in LTG Bank, found credit balance of US $ 24,06,604 as on 31/12/2001 (Rs.11,60,99,390/- @ 48.242 per USD) interest accrued of USD 13500 (equivalent to ₹ 6,51,267/-) was credited to the said account. As the same was not reflected in the return of income thus, the Assessing Officer correctly presumed that income has escaped assessment. So far as the contention of the assessee that enough opportunity was not provided to the assessee is concerned we find no merit in this assertion as is evident from para-28 (pg-14) of the order of the ld. CIT(A) wherein un-controverted finding is that the assessee chose not to use the same when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, A. M.: These are appeals by three assessee s against the orders by the Commissioner of Income Tax (Appeals), Mumbai ( CIT(A) for short) for concerned assessment years. Since the issues are common, the appeals were heard together. These have been consolidated and disposed of together for the sake of convenience. ITA Nos. 5720, 5721 5751/Mum/2016 (A.Y. 2005-06) 2. The appeals by three assessee s are against the respective orders of the ld. CIT(A), pertaining to assessment year 2005-06, wherein reopening as well as merits of the addition have been challenged. The grounds are common except for the change in amounts involved. For the sake reference, the grounds of appeal from ITA No. 5720/Mum/2016 are being referred as under: A) Reopening of assessment 1) On the facts and circumstances of the case and in Law the learned Commissioner of Income Tax (Appeals) - 47, Mumbai [CIT(A)] erred in holding that the reopening of assessment made by the Deputy Commissioner of Income Tax, Central Circle-1, Mumbai (AO) was in accordance with law. 2) That, the Learned CIT(A) erred in agreeing with the AO that on the facts and in the circumstances of the case, the latter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cept for the change in amounts involved. For the sake reference the grounds of appeal from ITA No. 5722/Mum/2016 is being referred as under: A) Addition on account of alleged interest/benefit derived on deposit with LGT Bank, Liechtenstein in the name of Ambrunova Trust -Rs.3,03,259/- 1) On the facts and circumstances of the case and in Law the Learned Commissioner of Income Tax (Appeals) - 47, Mumbai [(CIT(A)] erred in confirming the addition made by the Deputy Commissioner of Income Tax, Central Circle-1, Mumbai (AO) of ₹ 3,03,2597- on account of alleged interest/benefit derived on deposit with LGT Bank, Liechtenstein in the name of Ambrunova Trust. 2) The Learned CIT(A) failed to appreciate that the appellant had not received any income from Ambrunova Trust and that no addition could be made on account of alleged unaccounted interest/benefit received on deposit in LGT Bank, Liechestein in the name of Ambrunova Trust on the basis of surmises and conjectures. 3) The appellant prays that the addition made by the AO of ₹ 3,03,259/- on account of alleged interest on deposit with LGT Bank, Liechtenstein in the name of Ambrunova Trust and as upheld by the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the amount deposited in the bank or the benefit derived out of the interest accrued or otherwise on such deposits was nowhere reflected in the return of income of the assessee for A.Y. 2005-06 in LGT Bank, Liechtenstein in the name of Ambrunova Trust, Vaduz. Therefore, such income/benefit is chargeable to tax as escape assessment to that extent in terms of provision of section 147 of the Act. Accordingly, the assessment was reopened. The Assessing Officer also noted the assessee s objection and also referred to his rejection of the objections. The Assessing Officer also referred to the assessment order in A.Y. 2002-03. The Assessing Officer after noting the submissions of the assessee recorded his findings in assessment order as under: 4.2 The submission of the assessee has been carefully perused and considered and are not found tenable as per following discussion. 4.2.1 Information was received by CBDT from German Authorities about bank account held by a trust Ambrunova Trust where economically beneficial ownership of the assets is of the assessee and his family members. Specific details such as date of birth, residential address, nationality, domicile, nature of busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can ever be detected or proved . In this background the onus lies on the assessee to prove that the information is wrong and also to prove that no benefits has been derived by the assessee from the deposits made in bank account held by the said trust. The assessee has not denied that it is his name and details mentioned in the list of beneficiaries. The evidence is therefore direct reliable and demonstrative proof of the assessee having stashed unaccounted money, in the name of trust, abroad. Although the assessee has simply denied knowledge of any such trust or bank account, he has no explanation as to how his correct name, address, date of birth, nationality or copy of passport could be available to a person creating trust in a far off place like Vaduz. It is the trust created for the sole benefit of the assessee and his family members. The knowledge of the trust and its other related details sought by the assessee are information which are in the exclusive knowledge of the assessee and the assessee has no option to remain selective, elusive, evasive or restrained in disclosure. It has been held in the above cited judgment of Hersh Win Chadha that The assessee has to give prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;ble ITAT Delhi in the above cited judgment of Hersh Win Chadha that There is no presumption in law that the AO is supposed to discharge an impossible burden to assess the tax liability by direct evidence only and to establish the evasion beyond doubt as fn criminal proceedings. He can assessee on consideration of material available on record, surrounding circumstances, human conduct, preponderance of probabilities and nature of incriminating information/ evidence available on record; 4.2.6 In view of above discussion, I have no hesitation in holding that interest income/benefits derived by the assessee out of the deposits made in the said bank account have to be brought to tax. However, in the absence of any specific details being provided by the assessee of such benefits, the following method of calculation of interest is adopted as reasonable method. Therefore, an average rate of interest (0)3.8225% on US $ (U.S. Department of the Treasury interest rates as on 31.03.2005 on deposits for 1 year: 3.35%, 2 years: 3.8%, 3 years: 3.96% and for 5 years: 4.18%), the interest accrued during the F.Y. 2004-05 on the deposited amount of 1)5524,06,604.9 is worked out to US $92,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the AO was in possession of information received from the German Authorities, through the Central Board of Direct Taxes that the appellant was a beneficiary in an account in the name of Ambrunova Trust, Vaduz with LGT Bank, Leichtenstein. The details received clearly showed that the account in question carried a substantial nee and that interest accrued on this balance. The appellant was to adduce any evidence to the contrary during the assessment proceedings for A.Y.2002-03. From these facts it is clear that the existence of the bank account is proven as is that of the balance standing in deposit 'therein as well the accrual of interest. As such there was enough 'reason to believe' for the AO to initiate the proceedings u/s 147 as courts have repeatedly clarified that it is the existence of reasons and not the sufficiency of reasons that is to be examined at the stage of initiation,; It is also clear that the appellant, in the return originally filed for the year, under consideration did not reflect the interest income accrued on the balance in the said account. So this was not a case where the AO did not have information or where there was no failure of the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done on the basis of findings in other proceedings as well e.g. Wealth Tax (Muljimal N. Raghavanshi - Bom-225 ITR 586). In the present case, the reassessment for A.Y.2002-03 marshalled facts that clearly pointed to escapement of interest income in the subsequent years. The provisions of section 147 do not mandate that the information which forms the basis of the reason to believe must specify the quantification of income which is believed to have escaped assessment with respect to a particular point in time. Thus the reopening of assessment is not without basis. Further, it has not been shown that such interest was offered to tax subsequently, if accounted for on receipt basis. Neither has it been demonstrated that the Trust in question has offered the interest income to tax. As noted earlier, the interest income had not been offered to tax in the return originally filed u/s 139. In view of these facts it cannot be said that there was change of opinion in this case or that the A.O. had no material before him that indicated escapement of income. Thus, in the face of these facts, I find that I must differ from the decision of my Ld. Predecessor in the appellate order for A.Y.2004-05. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owledge. The AO observed that section 166 of the Act specified that direct assessment or recovery was not barred vis a vis any person on whose behalf or for whose benefit the income was receivable. The AO then proceeded to add back the appellant's share of accrued interest for the A.Y. in question. 10. Against the above order, the assessee is in appeal before the ITAT. 11. I have heard both the counsels and perused the records. The ld. Counsel of the assessee has summarized his submissions as under: Prepositions and case laws: 1) There is no evidence that appellant had received any benefit/income from trust. Hence, there could be no reason to believe that income of appellant had escaped assessment. 2) Appellant was not aware that he was beneficiary of any trust outside India. In any case, at the relevant point of time, Return Form did not require assessee to furnish assets held abroad. Hence, no failure to disclose any material facts. 3) Reopening of assessment is after 4 years from the end of the assessment year. No failure on part of appellant. Hence, reopening bad in law: a) ICICI Securities Ltd. v. ACIT (2016) 231 Taxman 460 (Bom) b) Alliance Spac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not be liable to tax in India (Refer para 41 to 43 on page 100 of paper book. c) Trust is a separate entity. Hence, trust itself was liable to tax on its income (Refer para 44 and 45 on pages 100 and 101 of paper book). d) Nature of trust not known i.e. whether specific or discretionary. Accordingly, whether tax is payable by trust or by the beneficiaries is not own (Refer para 44 and 45 on pages 100 and 101 of paper book). e) Appellant has not received a single penny from the trust (Refer para 43 on page 101 of paper book). f) Without prejudice, appellant is following cash method of accounting. Hence, income can be taxed only on receipt basis (Refer para 46 and 48 on pages 101 and 102 of paper book). 4) In rejoinder to Remand Report, appellant drew the CIT(A's) attention to the fact that for a receipt to be taxable, Department has to prove that it is income. Reliance in this regard was placed on the following decisions: a) Parimisetti Seethramamma v. CIT (1965) 57ITR 532 (SC) b) Dr. K. George Thomas v. CIT (1985) 156 ITR 412 (SC) 5) In present case, there is no income or receipt in the first place. How can appellant be taxed? 6) CIT(A) summarily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A's) Order). . 11) AO has in Remand Report kept silent on both these aspects (Refer pages 104 and 105 of paper book). 12) The income of a discretionary trust which is within the accounting year distributed and received by the beneficiary, which would be subject to tax - CIT v. Kamalini Khatau (1994) 209 ITR 101 (SC). As no income received, no amount liable to tax. ... 13) The burden of proving that the assesse received any income, gain or profit, within taxable territories is on the revenue -S. Zoraster Co. v. CIT (1968) 68 ITR 770 (Del). 14) Where a receipt is sought to be assessed as income received in the taxable territories, the burden is on the revenue to prove that the income was received in the taxable territories - Dalmia Dadri Cement Ltd. v. CIT (1974) 94 ITR 303 15) Without prejudice, AO has to determine the year of receipt of amounts and if relating to different years, has to spread over in different year - Fifth Avenue v. CIT319ITR132(SC) 16) Where income can be said not to have resulted at all, there is neither accrual nor receipt of income - CIT v. Shoorji Vallabhdas Co. (1962) 46 ITR 144 (SC). 17) Hence, addition made by AO needs t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese appeals are being disposed of by this common and consolidated order. In the case of Shri Mohan Manoj Dhupelia the facts in brief are that the assessee filed return of income u/s 139(1) of the Act on 1st August 2002 showing total income of ₹ 1,97,650/-. Subsequently, information was received that the assessee is a beneficiary of Ambrunova Trust, having an account in Liechtenstein Bank. The said information contained summary of bank statement as on 31/12/2001 of the said trust in which there was a balance of US $ 24,06,604.90/-. This information was not disclosed by the assessee in the original return thus notice u/s 148 of the Act was issued on 26/03/2009. The assessee requested the revenue to treat the return already filed as having being filed in response to the notice issued and served u/s 148 of the Act. The assessee was also supplied with a copy of reasons recorded for reopening of assessment including English translation of the documents. The assessee also denied of any knowledge of trust by further claiming that he/she has not received any money. The AO found that the address/nationality, country of domicile was the same as of the assessee as mentioned in India in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndation, chart prepared by the U. S. Senate Permanent Subcommittee on Investigations. 5. a. Statement of former LGT Treuhand employee, formerly known as Henrich Kieber. b. Liechtenstein warrant for the arrest of Henrich Richer. DOCUMENT RELATING TO MARSH ACCOUNTS: 6. Letter of wishes, Lincol Foundation, October 15, 1985. 7. LGT receipt for US $3,310,700 cash from Lincol Fondation, dated October 15, 1985. 8. Handwritten letter signed by Shannon N. Marsh to Mr. Alvate, to give Kerry M. Marsh permission to review all documents and receipts pertaining to Lincol Foundation and Chateau Foundation, dated May 23, 1992. 9. Instructions signed by Shannon Neal Marsh, empowering Marsh family members to act as principals for Lineal Foundation, dated November 17, 1993. 10. Correspondence from James A. Marsh, Jr. to Peter Meier, LGT, dated October 4, 1994, re: Lincol and Chateau. 11. Letter of wishes, Lincol Foundation and Foundation Chateau, October11, 2000 12. LGT Memorandum to File about Lincol and Chateau Foundations, dated February 7,2002. 13. Deed of Signature accepting appointment as Protector of the Chateau Foundation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A Foundation, showing assets as per 31 December2006 amount to USD 422,249.10, dated April 18,2007. 29. WI report on Veline Foundation after a March 27, 2000, client visit. 30. Statement of asset as per 31.12.2000, Veline Foundation, dated February 5, 2001. 31. Bearer Share Certificate, Manta Company Limited, dated September 3,1997. 32. Handwritten organizational chart showing Veline Foundation ownership of corporations and property, undated DOCUMENTS RELATED TO LOWY ACCOUNTS: 33. LGT Memorandum for the Record, dated November26, 1996, memorializing a November21, 1996, Meeting in Sydney regarding Westflelds, Adelphi, Crofton between LGT and Frank Lowy, David Lowy, David Gronski and Joshua Gelbard. 34. LGT Memorandum for the Record, dated November 27, 1996, regarding New Establishment Westfield/Lowy. 35. LGI Note for File, dated December 17, 1996, regarding telephone conversation with Frank Lowy and Joshua Gelbard regarding Westfields, Adelphi, Crofton. 36. LGT Memorandum for the Record, dated January 23, 1997, regarding January 20, 1997 meeting in Los Angeles between LGT and Frank Lowy, David Lowy, and Peer Lowy regarding Westfi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of December 31, 2001, dated January 1, 2002., 56. LGT report on Maverick Foundation, undated. 57. LGT report on TSF Company Limited, undated. 58. LGT report on Chiu Fu (Far East) Limited, undated. 59. LGT Background Information/Profile for Maverick Foundation, dated October 12,2001. 60. LGT Background Information/Profile for TSF Company Ltd., BVI, dated December 20, 2001. DOCUMENTS RELATING TO GONZALEZ ACCOUNTS: 61. Foundation Tragique flow chart, undated. 62. LGT report for Tragunda Foundation, dated December 3,2001. 63. LGT Background Information/Profile for Auto and Moteren [Motors] Corp. dated October 3, 2001. 64. LGT report on Asmeral Investment Anstalt. 65. LGT Memorandum for the File, dated September 11,2001, regarding Foundation Tragique. 66. Stiftung flow chart, undated. 67. LGT Background Information/Profile for Foundation Tragique, Vaduz, dated December 18, 2001. 68. LGT Background Information/Profile for FIWA AG, Vaduz, dated December 10, 2001. DOCUMENTS RELATING TO CHONG ACCOUNTS: 69. LGT Background Information/Profile on Yue Shing Tong Foundation. 70. Documents relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15, 2007, re: Changes in business model for U.S. private clients. 94. Talking Points for Informing U.S. Private Clients With Securities Holdings About The Realignment Of Our Business Model Plus Q .A. DOCUMENTS RELATED TO OLENICOFF: 95. Statement of Facts, United States of America vs. Bradley Birkenfelc4 dated 2008. 96. Plea Agreement For Defendant Igor hi Olenicoff, dated 2007. 97. Emails between Birkenfeld/Olenicoff, dated July2001, re: Meeting in California. 98. Correspondence of Igor Olenicoff, dated October2001, re: Guardian Guarantee Co. Ltd. 99. Email between Staggl/Olenicoff, dated January2002, re: Structure. 100. UBS documents related to opening of account for Guardian Guarantee Company, Ltd. 101. Emails related to Liechtenstein trust and a Danish Corporation. 102. Fax from Olenicoff to Birkenfeld, dated December 2001, re: Structure. 103. Emails dated April 2002, re: transferring U.S. securities to a Liechtenstein account. OTHER DOCUMENTS: 104. Tax Haven Bank Secrecy Tricks, chart prepared by the U. S. Senate Permanent Subcommittee on Investigations. 105. Liechtenstein Secrecy Laws, chart pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y shall have the right to such secrecy subject to the applicable rules of procedure in court proceedings and other proceedings before Government authorities. Article 10- Data Confidentiality: Whoever processes data or has data processed must keep data from applications entrusted to him or made accessible to him based on his professional activities secret, notwithstanding other legal confidentiality obligations, unless lawful grounds exist for the transmission of the data entrusted or made accessible to him, Processing of Personal Data - 1173., Art. The AB~ (General CMI Code): The employer may not process data relating to the employee unless such data concern his or her qualification for the employment or are indispensable for the performance of the employment contract. In addition, the provisions of the Data Protection Act shall apply. Article 8-Transhorder Data Flows: No personal data may be transferred abroad If the personal privacy of the persons affected could be seriously endangered, in particular where there is a failure to provide protection equivalent to that provided under Liechtenstein law. This shall not apply to states which are party to the EM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axpayers who have used the services of the LGT Group and Its trustee entity, LGT Treuhand Aktiengesellschaft in Vaduz. Liechtenstein (LGT.) LGT Treuhand A.O. operates a fiduciary or trustee service and establishes and administers legal entitles such as anstalts, stiftungs (foundations) and trusts for its clients. * LGT Bank in Liechtenstein A.G. Is the banking division of the LGT Group. It has responsibility for banking services related to the investment functions of the LGT Group. The services provided by LGT include administration and Investment of offshore assets which appear to be beneficially owned by the client LGT acts on Instructions from a client to establish or create a Liechtenstein entity and subsidiary entitles In other tax haven jurisdictions. In the Australian examples, the parent entity Is usually a foundation or trust. In some instances, LGT appears to have been retained as an agent of the client, and ban established and administered a Liechtenstein entity acting in that capacity. The beneficial owners of the Liechtenstein entity are commonly a natural person and their family members, however their identity and control appear to be con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LGT structure and who do not need access to these funds to supped their domestic lifestyle. LGT plays an active role in servicing and administering the clients Liechtenstein entity. For example the bawd members of a foundation will be LGT employees. They are responsible for administration of the entity and are the approved signatories. The use of LGT employees as board members or trustees and in-house or omnibus entities as nominee directors of Interposed entities is considered to be another means by which the beneficial owner is distanced from being connected to their Liechtenstein entity. This may facilitate the avoidance or evasion of tax on any offshore Income derived by the Liechtenstein entity by an Australian taxpayer, who is the beneficial owner. LGT also arranges for shell entities Incorporated hi other tax haven jurisdictions (such as BVI or Panama) to be set up as Interposed entitles of the Liechtenstein entity for its clients. The ATO considers that these special purpose vehicles are used to layer the transactions and the flow of funds, and (nay be designed to prevent regulators and tax administrators from deter mining the underlying ownership and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in disclosures or settlements. 2.3. We are reproducing hereunder the salient features of the Host Trust reg. Home -The trust Reg. can be structured like a company limited by shares or foundations as an instrument for commercial activities or for the administration of assets. Company overview -The trust reg. qualifying as private asset structure pays an annual tax of CHF 1,200 only Executive Sum Company norms many Liechtenstein -Distribution to the beneficiaries as well as profits earned are not subject to any further tax Trust. Reg. -The Supreme Authority is vested in the settlor and is transferable. Foundation Trust -The beneficial interests may be Establishing a Company Liechtenstein Fees and costs in assigned to persons other than the settler -The administration is taken care by the board of trustees. Conclusion -If commercial activities are perused or the articles make p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned are not subject to any further tax. - Bearer or registered shares are admissible. The minimum nominal value is not regulated. It is also possible to issue voting shares. The Liechtenstein law does not ask for any qualifying shares to be held by the directors. - The general meeting of the shareholders is the supreme authority. - The board of directors conducts and manages the company business. - The auditor has to examine the annual accounts and reports to the general meeting. - The annual accounts approved have to be submitted to the Liechtenstein tax administration. - The minimum capital to constitute a company limited by shares is CHF 50'000. The organization of an individual establishment may be adopted to its specific needs: like a company limited by shares or a foundation, as an instrument for commercial objectives or for the administration of assets. Establishment - The establishment qualifying as private asset structure pays an annual tax of CHF 1 '200 only. - Distributions to the beneficiaries as well as profits earned are not subject to any further tax. - The supreme authority is vested in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collators and auditors. - An individual as founder may by creating retained founder's rights preserve for himself the authority to revoke the foundation and to amend the foundation documents. - Only if the foundation pursues commercial activities the annual accounts approved by the auditor must be submitted to the Liechtenstein tax administration. - The minimum capital to constitute a foundation is CHF 30'000. The Liechtenstein trust settlement is shaped according to the English law trust. Trust (Trust Settlement) - Trusts are used in a similar manner as the foundation. - However, the trust is not a legal entity itself, but a kind of contractual relationship. - The settlor transfers movable or immovable assets or rights to the trustee with the obligation to hold and make use of this trust property against third parties in his own name as independent legal owner for the benefit of one or more beneficiaries. - The trust comes into existence with the stipulation of the trust settlement (trust deed) between the settlor and the trustee or by means of a trust letter accepted. - The trustee must keep his personal ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rotection by means of a holding company If assets - earmarked for the personal benefit only - are held by a holding company (normally a foundation) not all assets are endangered in case of losses or liabilities incurred during the course of business activities pursued by the beneficiary. Fees and Costs in General The fees and costs involved with the constitution and administration of a Liechtenstein company or trust are approximately the following: . For the constitution of a company/trust between CHF 5'000 and 6'000; The court fees (costs) coming along with the constitution depend on the kind of company, normally approx. CHF 600 - I '300; For the local director/trustee of the company/trust an annual lump sum between CHF 5'000 and 6'000; For the legal representative in charge to accept services on behalf of the company an annual lump sum between CHF 500 and 600; Petty expenses. - While the fees for the director and legal representative are payable in advance and cover the acceptance of the respective position by the person or company retained, further services provided by the local director and hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y that formulates global tax standards to fight tax evasion and concealment of illicit funds. Switzerland, in October, had joined the same convention. Liechtenstein and San Marino became the 62nd and 63rd signatories of the multilateral convention on mutual administrative assistance in tax matters at a ceremony marking the first day of the November 21-22 meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes, the OECD said in a statement. A senior Finance Ministry official in Delhi said the step, announced by Liechtenstein last week, is a boost to India's efforts to combat black money instances overseas. Indian investigating agencies have come across a number of cases where individuals or entities from India have been detected using banking channels of Liechtenstein to hide their illegal incomes or stash funds. By joining the comity of nations, the Central European nation, Liechtenstein has virtually pulled down the wall of secrecy and will allow partner nations like India to seek information about suspect individuals and entities and provide for obtaining banking information about such people. The mult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e financial years relevant to Assessment Year 2002-03 to 2007-08 (page 21 ). The assessee vide letter dated 14/10/2009 denied the allegation of the Assessing Officer (page-22). The assessee also informed that she/they had not received any benefit from the trust or for that matter in any other Assessment Years. Vide letter dated 26/10/2009 the Assessing Officer furnished the copies of documents (pages 24 to 28) which formed the basis for initiating proceedings u/s. 148/147 of the Act. The Assessing Officer vide letter dated 8/12/2009 informed that he has information that the assessee deposited USD 24,06 604.90 in the name of Ambrusova trust in LTG Bank (pg-31). The assessee was asked to explain as to why it may not be treated as investment out of undisclosed sources and added to the income (pg-34). The assessee vide letter date 18/12/2009 informed the Assessing Officer that the evidences furnished by him in no way showed that the assessee deposited the said amount in the name of the said trust during the year (pg-35 para-1). The Assessing Officer was again requested to furnish the evidence of such deposit by the assessee and the person who deposited the amount (pg-36). Vide para-13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain documents evidencing that the names of all the assessees were appearing, who are beneficiaries of the said trust. 3.1 We note that (Pg-14 of the document filed by the ld. Spl. Counsel) the trust was established on 21/3/1997 and the status of the account is active . On 21st Nov. 2013, Liechtenstein joined India as important partner in fighting overseas tax abuse and black money and shed its secrecy cloak and joined the league of a host of other countries for automatic exchange of information and mutual assistance in tax matters. Thus, became 62nd signatory to a world- wide convention, accepted by almost by all economic super powers and formulated by Paris based Organization for Economic Co-operation and Development (OECD), an international policy advisory body which formulates global tax standard to fight tax evasion and concealment of illicit funds. Switzerland joined the same convention in October, 2013. The ld. Spl. Counsel showed the bench a confidential list containing the names of the present assessee as trustee/beneficiaries of the trust. It was requested that since the investigation is in progress, therefore, at this stage it will hamper the investigation if the docu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no lurking landmine, nor a judicial cureall. If fairness is shown by the decision-maker to the man proceeded against, the form features and the fundamentals of such essential processual propriety being conditioned by the facts and circumstances of each situation. no breach of natural justice can be complained of. Unnatural expansion of natural justice. without reference to the administrative realities and other factors of a given case, can be exasperating. Courts cannot look at law in the abstract or natural justice as a mere artifact. Nor can the), fit into a rigid mould the concept of reasonable opportunity. If the totality of circumstances satisfies the Court that the party visited with gelverse order has not suffered from denial of reasonable opportunity the Court will decline to be punctilious or fanatical as if the rules of natural justice were sacred scriptures. In the instant case, the Board cannot be anath-ematised as condemning the man without being heard. The respondent has, in the form of an appeal against the report of the Regional Inspector, sent his explanation to the Chairman of the Board. He has thus been heard dad compliance with Regulation 26 in the circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned are not subject to any further tax and, further, the supreme authority is vested in the settler and is transferable. It can be concluded that the Liechtenstein jurisdiction qualifies as an off shore financial centre due to a very modest tax regime, high standard of secrecy laws and further foreign investors had the opportunity to establish companies or trust with HOST trust reg. in the principality of Liechtenstein to enjoy the advantages of off-shore financial centre. As per the report Indian Investigating Agencies came across a number of cases where individual or entities from India were detected using banking channels of Liechtenstein to hide their illegal income or stash funds and it was only possible when India became signatory to a world-wide convention formulated by OECD an international policy advisory body which formulated global tax standards to fight tax evasion and concealment of illicit funds. It also provided option to undertake automatic exchange of information. It is a common knowledge that discretionary trusts are created for the benefit of particular persons and those persons need not necessarily control the affairs of the trust. Still the fact remains that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 91) 191 ITR 662, for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is reason to believe , but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the AO is within the realm of subjective satisfaction ITO v. Selected Dalurband Coal Co, (P.) Ltd. (1996) 217 ITR 597 (Supreme Court): Raymond Woollen Mills Ltd. v. ITO (1999) 236 ITR 34 (Supreme Court). 17. The above Hon ble Apex Court decision duly complements the validity of reopening in this case. 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. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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