9911796707
TMI Blog2020 (7) TMI 504X X X X Extracts X X X X X X X X Extracts X X X X ..... d CIT(A) was justified in upholding the addition in the hands of the assessee for Rs. 196,46,79,146, being an amount equivalent to US $ 3,97,38,122 at the relevant point of time, held by HSBC Private Bank, Geneva, Switzerland, in the name of Tharani Family Trust, of which the assessee was a beneficiary. Challenge to validity of reassessment proceedings: 3. Let us first take up the challenge to the validity of reassessment proceedings. Relevant material facts: 4. So far as this grievance of the assessee is concerned, the relevant material facts are like this. The assessee before us an elderly lady, now in her late eighties. On 29th July 2006, she had filed her income tax return, stating her residential address as 301, Embassy Erose, Ulsoor Road, Bangalore and disclosing a returned income of Rs. 1,70,800, in Ward 9(1), Bangalore. This case was, by way of an order dated 20th December 2013 passed under section 127 of the Income Tax Act, centralized with the present Assessing Officer. The income tax return filed by the assessee, in the meantime, was not subjected to any scrutiny at any stage. The assessment thus reached finality as such. On 31st October 2014, however, this assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account; hence there is no reason why the above case should be re-opened u/s 148. Without prejudice to above, we would like to submit that the residential status of the assessee during the above said Assessment year is Non resident as defined in section 6(1) of the Income Tax Act, 1961. We enclose herewith a copy of the passport of the Assessee, wherein the dates of departures & arrivals in India are stated therein. From the dates of arrivals in India & departures from India, you would be able to see that the Assessee has not stayed hi India for more than 182 days in any of the financial years starting from 1st April 2001 to 31st March 2005. Moreover, the total number of days which he has stayed in India during the previous 4 (four) financial years preceding the financial year ended 31st March 2006 is less than 365 days and finally during the previous year relevant to the above mentioned assessment the assessee has stayed in India for less than 60 -days, hence all the conditions as specified in section 6(1) of the Income Tax Act 1961 has been complied with, wherein it concludes that the Assessee is a Non-Resident. As per the provisions of section 9(1) of the Income Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such a person is confined to income accruing or arising in India, income deemed to accrue or arise in India, income received in India and income deemed to have been received in India. None of these categories, he submits, covers the income, even if any, on account of an unexplained credit outside India. He then points out that since 23rd March 2004, the assessee is regularly residing in the United States of America, and that, post the financial year ended 31st March 2006 onwards, she assessee is a non-resident assessee. In this backdrop, learned counsel's submission is that so far as a non-resident is concerned, it is not required of such an assessee to disclose any bank account outside India or report any income outside India unless it is covered by the specific deeming fiction which is admittedly not the case at present. It is, therefore, contended that any sums credited in the bank account in question cannot be taxed in the hands of the assessee, and, when it cannot be so taxed, the very foundation of the impugned reassessment proceedings ceases to hold good in law. Leaned counsel submits that the reason for formation of belief must have rational connection with or bearing on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere unjustified. It is thus contended that the assessee also being a non-resident, such an income in foreign bank deposits, even if that be so, cannot be taxed in the hands of the assessee, and when that be so, the allegation in the reasons recorded for reopening the assessment, even if it is hypothetically assumed to be correct, cannot be legally sustainable basis for reopening the assessment. Learned counsel for the assessee then invites our attention to Hon'ble Gujarat High Court, in the case of Sunrise Education Trust Vs Income Tax Officer [(2018) 92 taxmann.com 74], in support of the proposition that assessment could not be reopened for mere verification in respect of alleged unexplained cash deposits in a bank account. A reference is then also made to Hon'ble Gujarat High Court's judgement in the case of Krupesh Ghanshyambhai Thakkar Vs DCIT [(2017) 77 taxmann.com 293] when the assessment is sought to be reopened for deep verification of the claims, such an reopening of assessment cannot be sustained in law. A reference was then made to yet another judgment of the same Hon'ble High Court, in the case of PCIT Vs Manzil Dinesh Kumar Shah (406 ITR 326) wherein it has been held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22. Obviously, this huge income could not have been earned by the assessee in the US, where she was resident, in one year. Learned Departmental Representative then submits that as per the base note, received by the investigation wing, the assessee was holding an account in HSBC Private Bank Geneva, with BUP Code as 5090178411, and this account was created on 28th July 2004, and the assessee was beneficial owner of the said amount. He submits that the unaccounted monies are not deposited in the Swiss Banks in own names, but through a complex web of layering, nominee directors and trusts or companies, and, therefore, as long as an assessee is a beneficiary of the amounts held in trust by Banks in tax havens, that is a good reason to believe that, unless such amounts are found to be disclosed in assessee accounts or tax returns- which admittedly is the case here, these amounts represent income escaping assessment. Learned Departmental Representative submits that so far as reopening of assessment is concerned, all that is to be seen is whether prima facie there is a reason to believe that some income has escaped assessment, and when one sees a person, with returned income of Rs. 1,70,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o examine income of such an assessee outside India or bank accounts held by such an assessee outside. He submits that the Assessing Officer was clearly travelling much beyond the call of, or the scope of, his duty in going into that aspect of the matter. The very foundation of the reassessment proceedings, according to the learned counsel, is vitiated in law, and, for this short reason alone, he must succeed. Once again a reference is made to the judicial precedents, which according to the learned counsel, have not been specifically dealt with beyond too general a line of arguments. It is again pointed out that the assessee did not have any bank account in HSBC Private Bank, Geneva, and that this account was operated by some GWU Investments Ltd which is neither owned by the assessee nor the assessee is a shareholder in the said company. The existence of this account, therefore, cannot be a good ground for reopening of the assessment of the assessee before us. He submits that it is not even a bank statement, but a statement of investment, which is referred to in the base note. The reasons for reopening the assessment are thus factually incorrect too. Whichever way we look at it, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the residential status of the assessee as shown in the income tax return was "resident", and definitely not "non-resident", that the peak credit at her disposal in this Swiss Bank account was over 11,500 times of her annual income, and that the assessee had admittedly not taken into account this account in her return of income. The claim of the assessee regarding her having a non-resident status in the relevant previous year came much after the reasons recorded, and, quite contrary to this claim, as our perusal of records shows, the assessee herself had claimed the residential status as "resident" in the income tax return. The Assessing Officer has to record his satisfaction about income escaping assessment as on the basis of material in his possession and on record as on the time of recording the reasons for reopening the assessment. A subsequent claim, which was not on record at the time of the reasons being recorded, cannot affect the correctness of these reasons, even though once this claim is made in the assessment proceedings, it will have to be examined on merits and it will have to be adjudicated as such in the outcome of the assessment proceedings. Nothing, therefore, tur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... caped assessment, has to be determined. At the same time, the sufficiency of the reasons for reopening an assessment does not fall for determination, at the stage of a reopening of assessment". In the light of this legal position, in our considered view, based on the facts above i.e. credible information about existence of her account with HSBC Private Bank Geneva with a peak credit of around Rs. 200 crores in the relevant financial year- which is far disproportionate to her reported annual income and which is not taken into account in her return of income, the Assessing Officer was perfectly justified in holding the view that the income has escaped assessment. 9. As regards the judicial precedents cited at the bar, all these cases deal with the situation in which the assessee was stated to be non-resident or when the reassessment was done only for verification of some information. That's not the case here. The income tax return filed by the assessee, which was available at the time of recording the reasons for reopening the assessment, did not show the status of non-resident. The recording of reasons cannot thus be faulted. Whatever claim is made subsequently is required to be de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income tax return" shows that "income has escaped assessment" in the hands of the assessee. Be that as it may, since the assessee did not disclose the status of "non-resident" in the income tax return filed by the assessee anyway, and the reasons recorded for reopening the assessment can only be on the basis of material on record or the information coming in the possession of the Assessing Officer- which indicated that the assessee was a "resident" in the relevant previous year, this aspect of the matter is wholly the sole and decisive factor leading to our conclusion about correctness of the reasons recorded for reopening the assessment. Our conclusions on validity of reassessment proceedings: 11. In the light of the detailed reasons analyzed in the foregoing discussions, as also bearing in mind entirety of the case, in our considered view, the correctness of reopening of assessment, on the facts of this case and in the light of settled legal position, cannot be faulted with. We confirm the action of the authorities below on this point and decline to interfere in the matter. Challenge to addition of Rs. 196.46 crores to the returned income 12. We now turn to the question as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny account with HSBC Bank Geneva bearing number BUP_SIFIC_PER_ID_5090178411 or any other number". Copies of HSBC Private Bank (Suisse) SA's letters dated 5th January 2015 from to one Mr Mahesh Tharani in China, and dated 5th September 2011, copies of which were also placed on record at pages 39 and 40 of assessee's paper-book, were also furnished to the Assessing Officer. In a subsequent communication dated 16th February 2015- a copy of which is placed before us at paper-book pages 41 onwards, the Assessing Officer was further, inter alia, informed as follows: In the letter dated 5th January (2015) received from HSBC Private Bank (Suisse) SA in Zurich also confirms the fact that account number 1414771 which is started in your base note belongs to GWU Investments Ltd, having its address at Avalon Management Limited, Landmark Square, 1st floor, Earth Close 64, West Bet Beach South, Grand Cayman, (PO Box No 715, KY1-1107), and it does not belong to Mrs Renu Tikamdas Tharani. The bank further clarifies that as per their records GWU Investments Ltd used to be an underlying company of Tharani Family Trusts for Mrs Renu Tharani was a discretionary beneficiary The HSBC Bank in Geneva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Act 1961 dated 3151 October, 2014 for the Assessment Year 2006-2007 as well as for Assessment Year 2007-2008 under the pretext that I maintain a bank account with HSBC Bank in Geneva Switzerland bearing number BLIP_SIFIC_PER_ID_5090178411 & that I have maintained a peak balance of USD $ 3,97,38,122/- during the financial year relevant to the Assessment Year 2006-2007 & a peak balance of USD $ 23,55,851.60 during the financial year relevant to Assessment year 2007-2008. To this, I solemnly affirm under oath that I do not maintain nor I had any account with HSBC in Geneva in my name, hence the question of being the owner of the above said funds does not arise. A certificate from HSBC Private Bank (Suisse) SA dated 05th January 2015 & 5th September, 2011 confirms the fact that I do not have or maintain any bank account in HSBC Geneva hence the question of mentioning you the source of deposits in HSBC Geneva does not arise. 7) Subsequently I received a base note from the Deputy Director of Income Tax (International Taxation) -1 (1), Room No. 117, Scindia House, Ballard Estate, N. M. Road, Mumbai-400 038 which is neither signed or sealed by the Income Tax Department alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant point of time, by observing as follows: 12. The submission of the assessee are considered. The assessee has not provided the bank account statement in which she is the discretionary beneficiary nor has explained the sources of deposits made in the said amount. This is not acceptable because of the following reasons: (a) The assessee is a discretionary beneficiary of the account held by the Tharani family Trust in HSBC, Geneva in the name of GWU Investments. She is a senior member of the family (Date of Birth 10.5.1934). It is surprising that she does not know about the settler of the Trust as well as the sources of deposits made in the HSBC account. No bank account statement has been provided nor the source of deposits made in the account explained by the assessee even after specific queries were raised on this. (b) It is also surprising that as a beneficiary she did not receive any assets when the Tharani Family Trust was terminated and if that be so, then where all the money went after termination of the Tharani Family Trust is open to question and the same remains unexplained. (c) The assessee has an address in India. As per the base note, the address is 1Prabhat, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a beneficiary of Ambrunova Trust having an account in Liechtenstein Bank which is another tax jurisdiction known for its secrecy law and modest tax regime. In fact, in the order of the ITAT, it has been concluded that 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 in the principality of Liechtenstein to the enjoy the advantages of off-shore financial centre The ground of appeal before the Hon'ble ITAT in this case was as follows: "The ld. Commissioner of Income tax (Appeals), erred in confirming the order of the Assessing Officer making an addition of Rs. 2,34,64,398/- on account of alleged undisclosed income, without appreciating the fact that the alleged trust was discretionary trust as neither the amount was accrued nor credited to the Appellant's name, hence addition cannot be made in the hands of the Appellant". The Hon'ble Mumbai ITAT dismissed this ground of appeal raised by the assesse and held that discretionary trusts are created for the benefit of particular persons and those persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assesse has chosen not to produce the details of his HSBC bank accounts and the source of deposits thereof, even though he could have been obtained all the details/evidences for the same, the only corollary that could be drawn is that the assesse has decided to withhold the information as if producing it would have gone against him. Thus, as per the provisions of Section 114 of The Indian Evidence Act, 1872 also, it need to be held at this stage that the information/details not furnished were unfavorable to the assesse and that the source of the money deposited in the HSBC account is undisclosed and sourced from India. Nova Promoters and Finlease (P) Ltd. 342 ITR 169 (Del), highlighting the legal effect of section 68 of the Act, the Division Bench has observed in para 32 that " The tribunal also erred in law in holding Assessing Officer ought to have proved that the monies emanated from the coffers of the assesse company and came back as share capital. Section 68 permits the Assessing Officer to add the credit appearing in the books of account of the assesse if the latter offers and explanation regarding the nature and source of the creditor the explanation offered is not satisfac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me tax Act is of civil nature. To fasten a tax payer with such a liability it is not necessary that the evidence should be in the nature of "beyond doubt" as is required to fix a criminal liability. Tax liability can be fastened on the basis of preponderance of probabilities." 14. In view of the above, the peak amount as appearing in the Base Note of the assessee's HSBC account in AY 2006-07 being USD 44,041,227.22 which translates to Rs. 196,46,79,146/-(@Rs. 44.61 per USD being the exchange rate on 31.03.2006 as per RBI) is hereby added to the total income of the assessee which is received or it deemed to be received in India in this year by the assessee or on his behalf or accrues or arises or is deemed to accrue or arise to him in India during this year. 17. Aggrieved, assessee carried the matter in appeal but without any success. Learned CIT(A) confirmed the conclusions so arrived at by the Assessing Officer, and observed as follows: 21. The focus of the submission is shifting responsibility on Assessing Officer without furnishing any supplementary and relevant details. Vital facts (at cost of repetition) regarding the entities involved/persons are as under A. Smt. Ren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account opened in the books of HSBC Private Bank(Suisse) SA. However, you are a discretionary beneficiary of a trust called the Tharani family Trust for which HSBC Guyerzeller Trust Company, C.1 acts as trustee. No bank account is maintained in the name of the trustee, and we confirm that you are not, nor have your even been, an authorized signatory on the bank account held in the name of the trust‟s underlying company This contradicts the base not Exactly for the same reason consent waiver was sought. This was refused. This is a letter addressed to Mrs. Renu Tharani. The information with Assessing Officer has backing of law which outweighs the documents now relied upon. Letter addressed to Mr. Mahesh Tharani by HSBC Private Bank (Suisse) Zurich Dear Mr. Tharani, As per the request of director, we hereby confirm that, GWU Investments Ltd. Was holder of the account 1414771. According to our records GWU Investments Ltd. Used to be an underlying company of the Tharani Family Trust for which Mrs. Renu Tharani was a discretionary beneficiary. To the best of our knowledge, The Tharani Family Trust was terminated and none of the assets deposited with HSBC Private Bank (Suisse) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Address to a Foreign Bank is held on her behalf. These facts reinforce the case against her. 24. Settlor means "a person who makes a settlement, especially of property on establishing a trust". This adds additional dimension to case. Settlor is Indian, holder of asset is India. Address given to asset based abroad by the beneficiary (sole beneficiary) is in India and not proven to be reported in the country of residence. Lastly and most important consent waiver" was never filed before Assessing Officer showing that the appellant was disinclined to department collecting authentic information from HSBC Geneva. The legally settled principle of discharging the onus that the assessee is out of explained source fails in her case. 25. In this connection, during course of hearing specific attention was brought to contents of decision in Soignee. R Kotharí Vs DCIT, Central Circle-8(3), Mumbai &Ors in Writ Petition (L) No. 3177 of 2015 of Mumbai High Court dated 05.04.2016. This considers many issues involved starting from issue of notice under section 148 on Non- Resident. Assessment of information in similar case received from French authorities on bank account in HSBC, Geneva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eks the same: As this is not considered in my decision making since it contained no meaningful comments and is basically for seeking extension of time, the same is not provided. No prejudice is caused to assessee. e. Certain information from foreign tax jurisdiction is still due: As these have not been received there is no case of drawing any inference. Some information is to come from foreign jurisdiction like Cayman Islands, and receipt is uncertain and appellate proceedings cannot be held in abeyance indefinitely under uncertain circumstances. f. Reasons for not signing consent waiver: In para 12.9 some reasons are stated. It is that the account does not pertain to the appellant and hence not signed. If there is nothing to hide, the same could be provided and the Assessing Officer or the foreign tax agency, in accordance with provisions of tax treaty will decide whether to provide the information or not. The reasons adduced is unconvincing and unacceptable. 27. This is a case were the decision was to be made by Assessing Officer and the undersigned where information flow for taking decision appellant. It is more not inadequate form side of on producing case decisions, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch according to Appellant is on identical cannot be adopted as such. Only when facts and circumstances are identical rules of precedence is followed. That is not the case here. The layering/structure of entities, information on the case etc are different. Hence they were not considered. 30. In view of foregoing discussion, I hold that the Assessing Officer has approached the assessment correctly in assessing income as per the base note received from French Government. 18. Coming to the quantum of additions, however, learned CIT(A) upheld the stand of the assessee, and gave certain directions to the Assessing Officer, which are reproduced below for ready reference: 31. Coming to quantum of income to be assessed (raised against revised grounds 22 and 27) the objection of appellant is that the addition is not correct. The AR of the appellant has produced an excel sheet to demonstrate same and prima facie there is a probability of duplication. This however is a matter of computation. Upon perusal of the base note it is seen that the entries are styled as if it is normal banking transaction with debit/credit entries titled "Mutual Fund", "Liquid assets", "Stocks", "Structured Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the Assessing Officer is based on gross misconception of facts and ignoring the well settled legal position. He points out all these fallacies once again. The assessee does not have any account with the HSBC Private Bank (Suisse) SA, and yet assessee is treated as owner of the account. The account is of the investments, and it is treated as a bank account. The assessee is a non-resident, taxable in India in respect of its income earned in India, and yet the assessee is being taxed in respect of an account which undisputedly has no connections with India. Denying the tax liability in respect of such an account at all, it is submitted that if at all it has tax implications anywhere in the world, this liability is in the jurisdiction of which the assessee is a resident. The assessee is taxable only on disbursement of the benefits to the beneficiary, but then the beneficiary is being taxed in respect of the corpus of the trust. Learned counsel thus submits that the impugned additions are, even on merits, wholly devoid of any substance. He, however, submits that all these aspects are wholly academic inasmuch as the reassessment itself is devoid of legally sustainable merits. He ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where was the need for AO to ask the assessee to give bank statement. Further, the assessee has categorically stated that she does not have any bank account and as such there was no way she could have provided her statement. Pg 7, Para 12 AO has alleged in this para that assessee has not stated that the source of deposit in HSBC account is not from India. The allegation by the AO is incorrect. Assessee has filed an Affidavit placed at Paper Book Page 41-46 where in she has categorically stated that the bank account does not belong to her. Having stated so on oath the onus was on AO to bring material that there is a bank account in the name of the assessee or the deposits in the bank account are out of the income earned from India. It was also stated that the assessee does not have any business connection in India and hence, there is no business income which is earned in India. Thus, there was a categorical assertion that source of deposit in the bank account is not from India. Further, after receipt of the assessment order and in order to remove any apprehension the assessee filed another affidavit before the CIT(A) on which remand report was also called by the CIT(A) from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time of distribution only. 1 .Shri Harshad Ramaniklal Mehta Versus DCIT in ITA No. 7307/Mum/2011 dated 04.09.2019 It may be relevant to point out that in this case there were four beneficiaries of the trust out of which two were non-resident. The proceeding against two persons were dropped by the AO itself as these two persons were nonresidents and the dispute before the 1TAT was with respect to resident only. This fact has been captured in para 9 of the Order which is a Synopsis filed by the Revenue in the course of the hearing before the bench. 2. Deepak B Shah and Kunal N Shah Versus ACIT in ITA NO. 6065/Mum/2014 dated 30.10.2018 3. Shri Dwarka Prasad Agarwal Versus ITO in ITA No. 4591/Mum/2016 dated 05.10.2017 Accordingly, even if the assessee was beneficiary no income can be imputed to her till the time the same is distributed. In the present case, there is no dispute to the fact that the assessee was not the settler of the trust and the trust was discretionary trust as per the information collected by the AO himself and forming part of the remand report. Pg 8, Bottom Para AO has stated that the account in HSBC Geneva was opened in Para Cayman Island which is a known tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat this judgment is in respect of Share Capital raised by a resident company and hence, same has no relevance with that of the assessee. In the case of the resident Global Income is chargeable to tax. Further, in this case the amount was found credited in the bank account in India. The assessee is a non-resident and the issue is that of deposit in foreign bank account which is not chargeable to tax in the hands of nonresident in view of provision of section 5(2) of the Income Tax Act. Pg 14, Para 13.4 In this para the AO has relied upon the Supreme Court judgment in the case of Sumati Dayal vs CIT 214 ITR 801 (SC) and few other judgments. In fact, these judgments support the case of the assessee. In the case of Sumati Dayal, the issue was that of human probability and it was held that it was humanly not probable that assessee would have won jackpots at number of times at the Race Course at Hyderabad and Bangalore. Thus, the Court has applied the Principal of Human Probability. If we apply this principle here it is not probable that a person who is a non-resident all alone and has a bank account in Geneva, such deposit would have arisen from income earned from a country i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) making it mandatory for a person who is a resident to furnish a return in case at any time during the previous year, he has held a foreign asset including financial asset in any entity located outside India. Further, income tax return form was amended by inserting foreign asset schedule called FA applicable only for resident and not for non-resident. Thus, there is no requirement for a non-resident to furnish a return in case his income does not exceed the maximum amount not chargeable to tax. Further, in case the income of non-resident exceed the maximum amount not chargeable to tax and he is required to file the return then there is no requirement to furnish the details of the foreign assets (including financial interest in any entity) located outside India. Further, it is important to point out that for the Assessment Year under consideration 2006-07 there was no such condition and there was no column in the tax return to disclose foreign assets even by a resident. It was only Finance Act, 2012 which inserted 4th Proviso to section 139(1) and consequent thereto tax returns form were amended providing a schedule for disclosure of foreign assets by resident. This requirement wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the beneficial ownership of the assessee stating that the assessee has right to receive directly or indirectly a mandatory distribution or may receive directly or indirectly discretionary distribution from the trust. The CIT(A) relied on the judgment of ITAT in the case of Mohan Manoj Dhupelia. It is submitted that judgment of ITAT in the case of Mohan Manoj Dhupelia was that of a resident not non-resident. Further, judgment of Supreme Court was delivered on 16.04.2014 and was not considered in the case of Mohan Manoj Dhupelia which was delivered on 31.10.2014. Further, the judgment of the Supreme Court in the case of Vikramsinhji has been now considered in following cases whereby it has been held that in the case of discretionary trust income arises in the hands of the beneficiary only at the time of distribution only. Further, the reliance is placed on the following decisions: I.Shri Harshad Ramaniklal Mehta Versus DCIT in ITA No. 7307/Mum/2011 dated 04.09.2019 It may be relevant to point out that in this case there were four beneficiaries of the trust out of which two were non-resident. The proceeding against two persons were dropped by the AO itself as these two persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated these facts and the same having not been rebutted or found false, the assessee has discharged its onus. It was for AO to demonstrate that the amount fall within the ambit of Indian Tax Law. Pg 14.Para 25 The CIT(A) has relied upon the judgment of Bombay High Court in the case of Soignee R Kothari vs. DCIT The CIT(A) has ignored the fact that this judgment was in a writ petition where the High Court has refused to invoke its extra ordinary jurisdiction under article 226. Further in this judgment in para 1. Further in this judgment in para 15 it has been clearly stated that the court is not expressing any opinion on merits and the parties are entitled to raise all contentions available to it in law before the Authorities. Pg 14, Para 26 The CIT(A) on considering the remand report has held that * the structure is that there cannot be beneficiary of assets/income under the consideration of AO without authorization of appellant. * The CIT(A) again in this para has upheld the order of the AO on the reasoning that assessee is a citizen of India and has provided Indian Address. This CIT(A) has himself admitted that the assessee is not the settler of the trust or Sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... road. Whatever documents the assessee has given are self-serving documents and hyper technical explanations, which do not contradict the official information received by the Government of India, through official channels, and it does in fact corroborate and evidence the existence of account with the assessee as beneficiary, and, in any case, these documents cannot be considered enough to discharge burden of the assessee that the evidences are not genuine or the inescapable conclusions flowing from the same. All that the assessee says is that she has no idea as to who did it, and passes on the blame to a Cayman Island based company which was operating the said account, but then Cayman Island company cannot be a person unconnected with the assessee. It is inconceivable that a rank outsider will be generous enough to put that kind of huge money at her disposal or for her benefit, but, as a beneficiary, she is expected to know the related facts to which she alone knows. The fact of the Swiss Bank accounts being operated, through conduit companies based in tax havens, is a common knowledge, and, seen in this light, if the assessee has an account for her benefit in a Swiss Bank- whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted, even if that be so, in her accounts outside India. He once again reiterates that there is no evidence whatsoever of the assessee having account abroad, that whatever evidence has been given to the assessee is successfully controverted by the assessee, that assessee is a non-resident and her taxability is confined to the incomes sourced in India, and that, for the detailed reasons advanced by him, the impugned addition of Rs. 196,46,79,146 in respect of assessee's alleged and non-existent bank account in HSBC Private Bank (Suisse) SA, Geneva, must be deleted. Our analysis on the merits of the impugned addition of Rs. 196,46,79,146 in respect of assessee's account with HSBC Private Bank (Suisse) SA, Geneva. A: The backdrop 23. It is also important to recall the backdrop in which the information about assessee's account with the HSBC Private Bank (Suisse) SA was received by the Government of India. That will also refresh memories, and certain undisputed facts, about the "HSBC Private Bank Geneva scandal" as it is often referred to. In 2006, after a whistle-blower named Herve Falciani, an employee of HSBC Private Bank (Suisse) SA, Geneva, walked out with information on thousan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 007, he collected confidential data on more than 106,000 of the bank's customers from more than 200 countries, pertaining to more than 300,000 private accounts. Many of them belonged to prominent figures in business, film, music, sport, and even the heads of royal families. Thousands of pages pertaining to the accounts were obtained by French newspaper Le Monde and shared with the BBC and more than 50 other international media outlets. The publication of their findings has raised questions as to why HSBC did not do more to prevent tax evasion via its Swiss subsidiary. In early 2008, Herve Falciani flew to Lebanon with a colleague, Georgina Mikhael. She says the pair were lovers, and that he had confessed to her that he had joined HSBC in the first instance with the intention of obtaining sensitive client data to sell on to third parties. Herve Falciani transferred to HSBC Private Bank (Suisse) in 2006, having joined the company in his native Monaco six years earlier He denies any romantic connection between the pair, and says Ms Mikhael's involvement came about after men claiming to be agents of the Israeli intelligence agency Mossad instructed him to visit Leba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... https://www.bbc.com/news/world-europe-31296007 24. One more BBC report, which could throw some light on the backdrop of this case, is also worth a look. This is as follows: India will investigate a new list containing names of Indians suspected to have parked untaxed wealth in a foreign bank, Finance Minister Arun Jaitley has said. Secret documents leaked from HSBC's private bank in Switzerland have revealed that it helped thousands of customers to evade taxes. The names of nearly 1,200 people from India feature in these papers. It is estimated that these Indians held $4bn (GBP2.63bn) in their accounts. India says illegal funds are often sent to tax havens, including Mauritius, Switzerland, Liechtenstein and the British Virgin Islands, and the new government has said "unearthing black money is an important issue" for them. Experts estimate that Indians hold $500bn (GBP297bn) in overseas tax havens. In June, India set up a special task force to find "black money", in one of the first decisions taken by the new Prime Minister, Narendra Modi. In October, the government gave a list of 627 names of Indians suspected of concealing wealth kept in HSBC from incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred prosecution agreement (DPA) with the Department of Justice today in the U.S. District Court for the Southern District of Florida, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Department of Justice's Tax Division, United States Attorney for the Southern District of Florida Ariana Fajardo Orshan, and Chief Don Fort for Internal Revenue Service (IRS), Criminal Investigation. HSBC Switzerland admitted to conspiring with U.S. taxpayers to evade taxes and, as part of the agreement, HSBC Switzerland will pay $192.35 million in penalties. "HSBC Switzerland conspired with U.S. accountholders to conceal assets abroad and evade taxes that every American must pay," said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Department of Justice's Tax Division. "Banks, asset managers and other financial firms enable such crimes - and we will hold these institutions to account, right along with the taxpayers that use them to facilitate and disguise illegal activities." "Financial institutions that conspire with U.S. accountholders to hide income in undeclared bank accounts abroad, to avoid being held accountable for tax obligations and augmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trate good conduct. The agreement provides no protection for any individuals. The $192.35 million penalty against HSBC Switzerland has three parts. First, HSBC Switzerland has agreed to pay $60,600,000 in restitution to the IRS, which represents the unpaid taxes resulting from HSBC Switzerland's participation in the conspiracy. Second, HSBC Switzerland agreed to forfeit $71,850,000 to the United States, which represents gross fees (not profits) that the bank earned on its undeclared accounts between 2000 and 2010. Finally, HSBC Switzerland agreed to pay a penalty of $59,900,000. This penalty amount takes into consideration that HSBC Switzerland self-reported its conduct, conducted a thorough internal investigation, provided client identifying information to the Tax Division, and extensively cooperated in a series of investigations and prosecutions, as well as implemented remedial measures to protect against the use of its services for tax evasion in the future. According to court documents filed as part of the DPA, the bank assisted U.S. clients in concealing their offshore assets and income from U.S. taxing authorities. To conceal its clients' assets and income from the IRS, H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [Emphasis, by underlining and by using bold letters, supplied by us] 26. As we refer to the above press reports, this is just to set the backdrop in which the present case is set out, and, as we go along, we will see relevance of this backdrop. B: Trust structures employed by HSBC Private Bank 27. Since a lot has been said about the assessee being a discretionary beneficiary of a trsut which is said to have the account with HSBC Private Bank (Suisse) SA Geneva, it may also be of some use to understand the nature of trust services offered by HSBC Private Bank, as stated on their website even today. Some of the relevant extracts are as follows: Why consider trust and fiduciary services? Trusts, foundations and other wealth structures help manage complex family wealth scenarios. They help to protect your family business and manage your wealth privately and independently, whilst providing continuity, preserving capital and helping family members enjoy financial benefits across generations. Our trusts and other solutions are designed to suit your particular needs and ambitions, giving you a global structure for managing your wealth. Choosing a trustee Determining who w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owner of the assets in a trust situation, even going by the HSBC Bank- as indeed a common knowledge, is a trustee in a fiduciary capacity and not the one who de facto owns the trust monies. It is also important to note that these trustees are sometimes provided by the HSBC Private Bank itself as the HSBC Private Bank takes pride in stating that their "team is based across the globe and includes accountants, lawyers, bankers and trust specialists, whose skills and experience form the basis of the service we provide". It is also a common knowledge that trustees are often corporate entities based in the jurisdictions in which secrecy laws are very strict. B: The asesseee's conduct- Running with the hare and hunting with the hounds: 29. We must, at this stage, take note of the fact that the assessee had, in response to a specific request from the Assessing Officer, declined to sign 'consent waiver' so as to enable the income tax department to obtain all the necessary details from the HSBC Private Bank (Suisse) SA, Geneva. This aspect of the matter is clear from the extracts from the assessee's submissions dated 25th February 2015 filed by the Assessing Officer, a copy of which is pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehalf of the Indian taxpayer; - account opening documents; - correspondence between the bank and customer and/or beneficiary and other persons in relation to the account; - account statement and statement of assets; 32. Clearly, therefore, the consent waiver being furnished by the assessee does not put the assessee to any disadvantage so far as getting at the actual truth is concerned. Of course, when the monies so kept in such banks abroad are legal or the allegations incorrect, the assessee can always, and many a cases assesses do, cooperate the investigations by giving the consent waivers. 33. The case before us, however, is in the category of cases in which consent waiver has been emphatically declined by the assessee, and thus deeper probe by the income tax department have been successfully scuttled. C: Hon'ble Bombay High Court on the assessee's declining such consent waivers: 34. While on this aspect of the matter, it may also be useful to refer to a judgment of Hon'ble jurisdictional High Court on materially similar facts, wherein Their Lordships has disapproved and deprecated the conduct of the assessee in not signing the consent waiver form, in the judgment repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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 co-operated in obtaining the Bank Statements". Quite interestingly, in this case, when all these things came out in the open, the petitioner sought leave to withdraw the petition, but even that prayer was rejected by observing that, "It may be pointed out that just before giving our reasoned order, Mr. Nitesh Joshi, the learned Counsel appearing for the Petitioner sought permission to withdraw this Petition. We declined. This is particularly, so as after having taken up substantial time of the Court and only after we expressed our final view that we are dismissing the Petition, an attempt is made to withdraw the petition. This cannot be permitted". That was a case in which even after the assessee was willing to sign a modified consent waiver form, Their Lordship disapproved the conduct of the assessee in no uncertain terms. Here is a case, in which the assessee has declined to sign the consent waiver form outright, and taken a stand that the question of sig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee are to be considered nevertheless, but, when such evidences turn out to be unreliable, inconclusive or insufficient, in our considered view, even adverse inference could indeed be justified. E: The base note received about the assessee account with HSBC Private Bank (Suisse) SA, Geneva 37. Let us, in this light, look at the base note containing information received in respect of the assessee. 38. This note, titled "synthèse individuelle" (individual synthesis, in literal meaning, which refers to 'individual's profile') BUP , inter alia, sets out the following information: Nom (name) : Tharani Prénoms (first name) : Renu Tikamdas Nationalité (Nationality) : INDIA Date de naissance (date of birth) : 10-05-1934 Sexe (sex) : F Lieu de naissance (place of birth) : Hyderabad/ Pakistan Adresses de la personne physique (Addresses of the natural person) Mrs Renu Tikamdas Tharani 1, Prabhat, 28, B Road, Churchgate Mumbai 400 020 (Legal address) Profils client lies a la personne (Customer profiles linked to the person) Nom du profil client (customer profile name): GWU Investments Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incidence if it is, that within a short time of the information about the above account coming to the possession of the Government of India, this account was closed. Whatever assets were being held in this bank account were thus transferred back to GWU Investments Limited, a company based in Cayman Islands- a tax haven where it is almost impossible to find out about beneficial owners of a corporate entity, as it is not having "a regular system of monitoring of compliance with ownership and identity information keeping requirements in respect of companies and partnerships", as very mildly put in a peer review report- as stated in Rahul Navin's "Information Exchange and Tax Transparency: Tackling Global Tax Evasion and Avoidance" (ISBN-10: 9350358891). 41. It must also be a coincidence, coincidence if it could be, that the process of covering the tracks did not stop with closure of the HSBC account. It is a further coincidence that even the GWU Investments Limited, after the disclosure in respect of account, was closed as its name is struck off from the records of Registrar of Companies, Cayman Islands. As a Cayman Islands Government notification, available in public domain at http: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a completely separate distinct entity in the eyes of law, and hence, under no circumstances, can anyone treat the bank account in the name of GWU Investments Ltd as the bank account of the assessee and thereby tax the deposits in her hand. In light of the above said facts, the return of income filed by the assessee is correct, and hence there is no reason for making any addition to the returned income. With this, we have submitted you all the details called for. 42. To put a question to ourselves, is it an explanation which can be accepted by any reasonable person? 43. Let us also not lose sight of the fact, as we have noted earlier, that HSBC Private Bank even today publicly offers assistance, in trust structures, whereby you, as the settlor, transfer the legal ownership of your assets (which then become the trust assets) to the trustee, who manages and holds the assets for the benefit of the beneficiaries, and the beneficiaries may include you and your family". It is also proudly stated on the bank website itself that their "team is based across the globe and includes..........trust specialists, whose skills and experience form the basis of the service we provide". We have a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cious call is to be taken, in a fair and objective but a realistic, manner about reliability of such evidence. As observed by Hon'ble Supreme Court, in the case of CIT Vs Durga Prasad More [(1971) 82 ITR 540 (SC)], "Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities". As Hon'ble Supreme Court has observed, in this case, "..it is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n about purchase of winning ticket takes place in secret and direct evidence about such purchase would be rarely available. An inference about such a purchase has to be drawn on the basis of the circumstances available on the record. Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on the record an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. We are, therefore, unable to agree with the view of the Chairman in his dissenting opinion. In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winning from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rejected unreasonably and that the finding that the said amounts are income of the appellant from other sources is not based on evidence". 45. Viewed in the light of factual backdrop of the case, and in the light of the above legal position, no reasonable person can accept the explanation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly. If the assessee was indeed not the owner of the account, there was all the more reason to sign the consent waiver form because it would have established that fact when the HSBC Private Bank (Suisse) Geneva was to decline the information on the basis of that consent waiver. A consent waiver signed by the assessee would have been infructuous in that case, and it could not have done any harm to the assessee. Consent waiver form does not prejudice the claim of the assessee that he does not own the account in question; all it does is, as can be seen from the extracts from consent waiver form format reproduced earlier, is that it waiver assessee's rights, if any, under the data protection and banking secrecy laws. The plea of the assessee, as noted earlier, is fit, if at all it is fit for anything, only to be rejected. It is only elementary that direct evidence of illegal transactions of the assessee, as indicated by Hon'ble Supreme Court in the case of Sumati Dayal (supra), "would be rarely available" as such transactions "take place in secret", and therefore, simply on the ground that such direct evidence is not brought on record by the revenue authorities, the assessee cannot go s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer, there is a reference to some unsigned draft copy of the trust deed having been filed before him but neither this deed is authentic nor is it placed before us in the paper-book. The assessee has not submitted the trust deed or any related papers but merely referred to a somewhat tentative claim made in a letter between one Mahesh Tharani, apparently a relative of the assessee and the HSBC Private Bank (Suisse) SA- an organization with a globally established track record of hoodwinking tax authorities worldwide. All that this letter, addressed to one Mahesh Tharani, states is "As per the request of director, we hereby confirm that, GWU Investments Ltd was holder of the account 1414771. According to our records GWU Investments Ltd. Used to be an underlying company of the Tharani Family Trust for which Mrs. Renu Tharani was a discretionary beneficiary. To the best of our knowledge, The Tharani Family Trust was terminated and none of the assets deposited with HSBC Private Bank (Suisse) SA were distributed to Mrs. Renu Tharani". It is not clear as to how is the director, and of which company; if Mahesh Tharani was a director of GWU Investments Ltd, when he could share this letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this available information, neither the assessee asks for the trust deed nor does the HSBC share the same. On the contrary, assessee, in one of the communications to the Assessing Officer, specifically states her inability to furnish the same. What these letters state may have some truth- half truth or technical truth, but then these qualified truths are only different forms of falsehood in entirety. There is something seriously amiss in all this; something is rotten in the State of Denmark. There is a series of coincidences, right from the HSBC account being closed after the information contained in the base note coming out and to the underlying company being removed from the name of Register of Companies in Cayman Island, right from assessee living in complete denial about any knowledge about a HSBC Private Bank (Suisse) SA account in her name to her lack of information about the company which is holding US $ 4 million for her, and, despite assessee being purportedly so clean in her affairs, her thwarting any efforts of the income tax department to get at the truth by declining to sign the consent waiver form. It is wholly un-understandable as to how can assessee, on one hand, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cayman Island based company, by the assessee. Finally, even if there is a dispute about the alleged trust, the dispute is with respect of taxability of funds found with the trust and the source thereof. Clearly, therefore, the issue adjudicated upon in the said decision has no relevance in the present context. The very reliance on the said decision presupposes that the assessee was discretionary beneficiary simplicitor of a discretionary family trust, and nothing more- an assumption which is far from established on the facts of this case. 48. As regards the question of income which can be brought to tax in the hands of the assessee being a non-resident and certain errors in computations on account of duplicity of entries etc, we have noted that the learned CIT(A) has given certain directions which we have reproduced below paragraph 18 of this order, and neither these directions are challenged nor any infirmities are shown therein. Obviously, therefore, there is no occasion, or even prayer, for interference in the same. 49. As we part with the matter, we have a couple of observations to make. The first observation is that we must add that though the hearing in this case was concl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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