TMI Blog2018 (11) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... trust, the same cannot taxed be in the hands of the beneficiaries. Similarly, the present case for us, the deposits held in HSBC, Geneva account cannot be taxed in the hand of beneficiaries/ appellants at all. Additions cannot be made and sustained in the hands of the appellants as the Balsun trust is a discretionary trust created by the Mr. Dipendu Bapalal Shah and said trust has neither made any distribution of income nor did the two beneficiaries/appellants receive any money by way of distribution. While the department has failed to bring any conclusive evidence to establish nexus between these two appellants and bank account in HSBC, Geneva and more so when the Mr. Dipendu Bapalal Shah has owned the balance in the HSBC, Geneva bank account, we are not in agreement with the conclusions of the CIT(A) in sustaining the additions equal to fifty percent of the peak balance in the hands of both the appellants. CIT(A) is wrong in assuming that the said money may belongs these two appellants and such conclusion is against the facts on record and based on surmises and presumptions - direct the AO to delete the additions made u/s 69A in respect of HSBC Bank account for assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have Foreign Bank Accounts in HSBC Bank, Geneva, Switzerland which were not disclosed to the Indian Taxation department. The said information was received in the form of a document known as base note wherein various personal details of account holders such as name, date of birth, place of birth, sex/gender, residential address, profession, nationality, date of opening of bank account in HSBC bank, Geneva and balances in certain years etc. were mentioned. In 2011 after receiving base note with the details as mentioned above as a part of Swiss leaks, the Investigation Wing of Income tax Department conducted a survey u/s. 133A of the Act on 30.09.2011 at the premises of M/s. Kanubhai B. Shah and Co. During the course of survey proceedings the base note was shown to the assessees and it was indicated that the revenue was of the view that both the assessees have foreign bank account. Both the assessees denied having any knowledge of any foreign bank account with HSBC, Geneva during the course of survey proceeding itself. Besides no incriminating material was found during the course of survey. As a matter of fact the said account with HSBC Bank, Geneva was opened in 1997 by an ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and now the appellants have challenged the impugned order of the ld. CIT(A) qua the addition sustained equal to 50% of peak balance. It is pertinent to mention that in the hands of Shri Dipendu Bapalal Shah the revenue added the same peak balance vide assessment order dated 03/03/2015 for assessment years 2006-07 and 2007-08. As a result, the peak balances were added thrice by revenue in the hands of both the appellants in two successive assessment years and also in the case of Shri Dipendu Bapalal Shah in the same years. In the appellate proceedings of Shri Dipendu Bapalal Shah, the ld. CIT(A) vide order dated 28/3/2016 set aside the addition on the basis that as an NRI, none of his business monies earned outside India could be brought to tax in India unless they are shown to have arisen or accrued in India. He also held that there was no linkage of the amounts to India and the revenue has not discharged its duty on this issue . The said order of CIT(A) in the case of Shri Dipendu Bapalal Shah was also upheld by Tribunal in ITA No. 4751 4752/Mum/2016 AY 2006-07 2007-08 dated 19.06.2018. The Hon ble Tribunal upheld the order of the ld. CIT(A) in the case of Shri Dipendu B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 2007-08 of the said NRI but were deleted by the CIT(A) on the ground that he is a non-resident under section 6 of the Income tax Act, 1961 and such decision of CIT(A) has also been upheld by the Tribunal vide order dated 19.06.2018. The learned counsel argued that the peak balances in two years in the HSBC account have already been held to be in the ownership of Shri Dipendu Bapalal Shah and was not taxable in his hands on account of his NRI status. He further contented that, in any case, in the absence of any proven linkage of the amounts to India the amounts cannot be added and taxed in the hands of present appellants. Further, the learned AR argued that there is a clear assertion by Shri Dipendu Bapalal Shah that the money lying in HSBC account belonged to him and the department has failed to prove the said assertion to the contrary by brining any cogent evidence on record. Therefore, he contended that there is no reason as to why and how the said amounts can be taxed in the hands of the present appellants. He further submitted that it is a well settled position of law that decision of co-ordinate Benches of the Tribunal are binding on other co-ordinate Benches by relying on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of the I.T Act, and, therefore, the said money held by a non-resident in a foreign bank account cannot be taxed in the hands of the two appellants, as the appellants in their respective affidavits denied the ownership of the said money. 9. The learned AR further submitted that no tax can be levied in the hands of the present appellants, who are discretionary beneficiaries of the said trust and have not received any distribution from the said trust. The learned AR further stated that it is settled principle of the taxation of trusts that the beneficiary of a discretionary trust is not liable to tax in respect of income of the trust unless it is distributed to such beneficiary. He, therefore, placed reliance on the following: CIT vs. Smt. Kamalini Khatau 74 Taxman 392 (SC) CWT Rajkot vs. Estate of HMM Vikramsinhji of Gondal 45 taxmann.com 552 (SC) He further submitted that in view of the ratio laid down in both these decisions, it is the trustee who is the representative assessee of a trust and in whose hands the income of the trust is to be assessed. A discretionary beneficiary can never be taxed until and unless he has received a distribution from the trust, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee under a taxing statute. The assessee relied heavily on two decisions viz., K P Varghese vs. ITO 4 SCC 137 and Advani Oerlikon Ltd. and Anr. Vs. UOI and Ors [1981 ELT 432]. In the present cases, the appellants have clearly stated that they are not the owners of the bank account and also time and again confirmed by way of sworn in affidavits that bank account does not belong to them nor did they enter into any transaction in relation to the said account nor received any benefit from the said account. Additionally, it was also submitted that appellants have not executed or signed any documents in relation to opening or operating the account. It is noteworthy that the survey u/s. 133A of the Act at the KBS premises did not yield any incriminating evidence qua the appellants. The learned counsel finally submitted that the presumption sought to be raised by the Revenue stands rebutted by the consistent, clear and unequivocal statements of the appellants affirming that the funds in the bank account belong to the non-resident Shri Dipendu Bapalal Shah and no distribution has been made to the appellants. The learned AR finally submitted that in view of the totality of facts and ratio l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y u/s 133A of the IT Act the premises of Kanubhai B. Shah Co. on 30/09/2011. During the course of survey, the Base Note was shown to the Appellants namely Deepak B Shah Kunal N. Shah and told the assessees that the Income Tax Department has reasonable belief on the basis of information received in the Base Note that foreign bank account is held by the appellants. The appellants denied the knowledge of any such bank account in HSBC, Geneva during the course of survey proceedings itself and it is also fact that no incriminating material was found during the course of Survey. The facts as are culling out from the record show that a person named Mr. Dipendu Bapalal Shah created and constituted an overseas Discretionary Trust known as Balsun Trust by making contribution to the said trust from his own fund/ sources with discretionary beneficiary of the said trust Shri Deepak B. Shah and Shri Kunal N. Shah. It is pertinent to state that during the year under consideration both the appellants did not receive any distribution of income from the said trust as no such distribution done by the trust during these years. Mr. Dipendu Bapalal Shah is a foreign resident since 1979 and is a no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee in his affidavit dated 13 October 2011 has clearly stated that the he was a settlor of a trust outside India which he had created for the benefit of his family members with his initial contribution. Further, he has also stated that none of the discretionary beneficiaries have contributed any funds to the said trust. However, the content of this affidavit was nowhere declined by the AO nor was held to be not true.In view of the above, the assessee being a non-resident, having money in a foreign country cannot be called upon to pay income tax on that money in India unless it satisfies the tests of taxability of non-resident under the provisions of the Act, which in the instant case is not getting satisfied in the case of the assessee. Thus, the bank account of HSBC Bank, Geneva is outside the preview of this Act. 15. We found that CIT(A) as dealt with the issue threadbare and after applying judicial pronouncement laid down by High Court and Supreme Court reached to the conclusion that assessee being non-resident is not liable in respect of money lying in the foreign country unless AO bring something on record to show that assessee has not fulfilled the test of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s vs. CIT (supra) it was observed by the Hon ble Kolkata High Court that ownership is one of the considerations when the matter comes u/s 69A. Similarly in the case of CIT Vs. K.T.M.S. Mohamood supra in order to make an assessment under section 69A for undisclosed income, the assessee must not only be the person who is in possession of the undisclosed income but he should also be the owner of the same. 17. In the present case, undisputedly Mr. Dipendu Bapalal Shah is owner of HSBC Bank account, Geneva and the appellants are discretionary beneficiaries which leads to positive inference that the appellants are not the owners of the said bank account and hence the additions under Section 69A cannot be sustained. In the present case before us, admittedly both the appellants namely Deepak B. Shah and Kunal N. Shah are discretionary beneficiaries of the Balsun trust created by Mr. Dipendu Bapalal Shah and the two appellants have not made any contribution nor done any transaction with said trust at all. In our opinion in the case of discretionary trust, the income of the trust could not only be added in the hand of beneficiary but the trustees are the representative assessees who are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his hands and tax thereon would be recoverable from him. Such income would squarely fall within the broad sweep of total income under section 5 and the beneficiary would be liable to assessment and recovery of tax thereof under section 4 In the second case the Hon ble Apex Court has held as under: - Commissioner of Wealth Tax, Rajkot vs. Estate of HMM Vikramsinhji of Gondal [2014] 45 taxmann.com 552 (SC) 18. A discretionary trust is one which gives a beneficiary no right to any part of the income of the trust property, but vests in the trustees a discretionary power to pay him, or apply for his benefit, such part of the income as they think fit. The trustees must exercise their discretion as and when the income becomes available, but if they fail to distribute in due time, the power is not extinguished to so that they can distribute later. They have no power to bind themselves for the future. The beneficiary thus has no more than a hope that the discretion will be exercised in his favour. [ Snell s Principles of Equity, 28the Edition, Page 138] So applying the ratio laid down by the Hon ble Apex Curt in the above said two decisions, we are of the consider ..... X X X X Extracts X X X X X X X X Extracts X X X X
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