TMI Blog2020 (7) TMI 504X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to be examined on merits, but of a very specific cogent information regarding a bank account, with complete details that is good enough for holding at least the prima facie view that income has escaped in the assessment in the hands of the assessee. The peak balance in the account, which has subsequently come to the knowledge of the Assessing Officer and on the basis of which reopening is done, is tens of thousand times more than annual income of the assessee. Assessee had shifted to the United States only just seven days before the beginning of the relevant previous year, and it will be too unrealistic an assumption that within these seven days plus the relevant financial year what the assessee could have earned this huge amount of around ₹ 200 crores, which, at the rate at which she did earn in India in the last year, would have taken her more than 11,500 years to earn. Even if one goes by the basis, though the material on record at the time of recording reasons did not at all indicate so, that the assessee was a non-resident in this assessment year, which is, going by the specific submissions of the assessee, was admittedly first year of her non-resident statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vate letter from HSBC Private Bank (Suisse) SA as gospel truth, and, on the other hand, effectively stall, by declining consent waiver and by stating half truths- even if her statements have an element of truth, the Assessing Officer obtaining direct information from the same organization. There is no meeting ground in this approach. In any case, for the reasons set out above and as evident from the base note, the assessee is beneficial owner of GWU Investments Ltd, Cayman Islands. There is nothing to controvert this fact stated in the base note, and since the assessee has declined consent waiver in this case, the assessee cannot decline correctness of the details obtained from the HSBC Private Bank (Suisse) SA. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot subjected to any scrutiny at any stage. The assessment thus reached finality as such. On 31st October 2014, however, this assessment was reopened by issuance of notice under section 148. The reasons recorded, for so reopening the assessment, are as follows: Reason for re-opening the assessment The case of THARANI RENU TIKAMDAS was centralized with the undersigned vide order u/s 127 of the IT Act- 1961 bearing No. 45/Centralization/CIT-IV/2013-14 dated 20.12.2013. Information has been received in respect of her from the office of DIT(Inv.), Bangalore. The information pertains to her having a bank account with HSBC Bank, Geneva bearing a number BUP_SIFIC_PER_ID-5090178411. From the said bank statement, it is seen that she is having a peak balance of USD 39738122 in the said account during the period 2005-06. The records of this office show that this amount has not been considered by her in her return of income and this income therefore has escaped assessment. This evidence has come into the possession of the undersigned; therefore, I have reason to believe that the income to the extent of at least USD 3,97,38,122 has escaped assessment within the. meaning of para (d) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 1961, the Non-Resident is chargeable to tax only on income which accrues or arises in India, hence, the income which accrues or arises out of India, the same is not chargeable to tax in the hands of the Assessee. In lieu of the above said facts circumstances of the case, any income which accrues arises out of India, which includes the income- deposited in HSBC Bank Geneva is not liable to be taxed in the hands of the Assessee as per the provisions of section 9(1) of the Income Tax Apt 1961. Finally we would like to submit that the assessee has filed its Return of Income for the above mentioned Assessment Year on 29th July 2006, which was enclosed in our letter dated 14/11/2014 as the returned income was below the threshold limit; hence no tax was liable to be paid. Thus, as the information received to you is incorrect (and) there is no reason why the case should be re-opened, hence, we request you to kindly drop the re-opening proceedings oblige. 6. These objections, however, did not impress the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 formation of belief. Rational connection was said to postulate that there must be direct nexus and live link between material coming to the notice of the Assessing Officer and formation of belief that there is some escapement of income which was taxable in the hands of the assessee. That live link, according to the learned counsel, is missing in the facts of this case. Learned counsel then submits that in any event the assessee did not have a bank account with HSBC, Geneva. What is being referred to in the base note , on the basis of which the assessment is being reopened, is not in respect of the assessee but admittedly GWU Investments Ltd, as has been factually found, and, in any case, it is not even a bank statement but statement of investment. It is contended that the Assessing Officer was clearly in error in assuming that the base note is in respect of a bank account. Learned counsel further submits that the assessee has categorically stated, on an affidavit,, that (a) the assessee never had any bank acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 that a completed assessment cannot be reopened only for verification of information received by Assessing Officer from VAT Department relating to purchase alleged to have been made by assessee from hawala dealers. It is also pointed out that SLP against this judgment has been dismissed by Hon ble Supreme Court in the judgment reported as PCIT Vs Manzil Dinesh Kumar Shah [2019] 101 taxmann.com 259 (SC). Learned counsel then invites our attention to the judgment of Hon ble Rajasthan High Court, in the case of Mukesh Modi Vs DCIT [(2014) 366 ITR 418 (Raj)], wherein it is said to have been held that reassessment proceedings only to for his AO s own verification and to clear his doubts cannot be sustained in law. Learned counsel then refers to the decision of a coordinate bench of this Tribunal, in the case of Sonal Arpit Doshi Vs ITO (ITA No. 366/Ahd/16; order dated 21st October 2015), wherein it is held that the reassessment proceedings cannot be initiated merely for verification of certain transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 ₹ 1,70,800, being beneficial owner of ₹ 196,46,79,146 in a Swiss Bank, there is clearly good reason to believe that income has escaped assessment in the hands of the assessee. Learned Departmental Representative submits that there cannot be any reason for anyone, leave aside an entity of unknown people in a tax haven, leaving such a sum for her as a beneficiary. It is contended that based on the material on record, the Assessing Officer indeed had reasons to believe that the income has escaped assessment. Learned Departmental Representative then takes up these judgments and makes efforts to show how the facts of these cases are materially different from the facts of the case before us. He submits that unless the facts of these judicial precedents are in pari materia with the facts of the case before us, the conclusions arrived at in these cases cannot be straightaway applied to the present case. He submits that here is a case in which cogent and specific information has come to be in posse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 is submitted, the initiation of reassessment proceedings are unsustainable in law. We are thus once again urged to quash the reassessment proceedings. Our analysis: 8. As we have given our careful consideration to the rival contentions and the material on record in the light of applicable legal position, we have also taken of the factual matrix of this case. Here is an assessee who files her return of income, disclosing a meagre income of ₹ 1,70,800, giving a Bangalore address and files the income tax return a ward which was meant for resident assessees. Going by the facts placed by the assessee on record, which are also set out in the paper-book, the Bangalore property was sold in the year ended March 2003, but yet income tax return continued to be filed at that address. It is not clear as to what was the basis of filing the income tax return at Bangalore but then let s leave it at that for the time being. The income tax return filed by the assessee, a copy of which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, turns on the facts not on record before the Assessing Officer as on the stage of recording the reasons of reopening the assessment. In any case, when the assessee herself is making an incorrect claim in the income tax return, she cannot claim that because the Assessing Officer believed the claim so made, and took initial steps on that basis, the Assessing Officer was in error in taking that path. Of course, all this does not affect the question of determination of her residential status on merits, but that is not the question as on now. The question is whether the Assessing Officer had reasons to believe income escaping the assessment, or not. It is also important to bear in mind the fact that at the stage of issuance of notice, the Assessing Officer is to only form a prima facie view. Explaining this principle, Hon ble jurisdictional High Court, in the case of Multi Commodity Exchange of India Ltd Vs DCIT [(2018) 91 taxmann.com 265 (Bom )] [SLP dismissed as reported in (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 dealt with in the subsequent proceeding but it will not vitiate the validity of reasons recorded for reopening the assessment. The facts of the decision cited on the line of reasoning that cases of non-residents cannot be reopened on the basis of existence of foreign bank account, in any event, are not in pari materia inasmuch as in none of these cases the assessee had filed the income tax return in the status of resident. As regards the decisions that reopening cannot be done for mere verifications, the present case is not a case which some general and vague information is received about the assessee, which may or may not lead to an income escaping assessment in the hands of the assessee, and which is thus required to be examined on merits, but of a very specific cogent information regarding a bank account, with complete details that is good enough for holding at least the prima facie view that income has escaped in the assessment in the hands of the assessee. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 196.46 crores to the returned income 12. We now turn to the question as to whether or not the learned CIT(A) was justified in upholding the addition in the hands of the assessee for ₹ 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. The relevant material facts: 13. To adjudicate on this question, facts of the case, in detail, need to be taken note of. The assessee before us is an individual. The assessee had filed her income tax return, on 29th July 2006, disclosing an income of ₹ 1,70,800 for the relevant previous year, but subsequently the investigation wing of the income tax department, as noted in the earlier part of this order, received information that the assessee is having a bank account with HSBC Private Bank (Suisse) SA Geneva. Based on this information, a copy of which is placed before us at pages 3 to 12 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 may have asked GWU Investments Ltd the proof of identity as well as proof of address of all the beneficiaries. The company may have provided my passport as proof of her identity and proof of address. As the address mentioned in the passport is that of Mumbai, hence the base note showed the account of GWU Investments Ltd along-with my Mumbai address. As the address does not maintain any bank account with HSBC Private Bank (Suisse) SA in Switzerland, the question of explaining any source of deposit does not arise. Without prejudice to above, the HSBC Private Bank (Suisse) SA also confirms the fact, in their letter dated 5th January 2015, that according to their best of knowledge, Tharani Family Trust (GWU Investments Limited) has been terminated and none of the assets deposited with HSC Bank Private Bank (Suisse) SA were distributed to Mrs Renu Tharani 14. A copy of the assessee affidavit dated 12t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 alleging that the account number BLIP_SIFIC_PER_ID_5090178411 is in the name of GWU INVESTMENTS LTD wherein it is said that I am the beneficial owner or the beneficiary. To this I would like to solemnly affirm that I have not received any amount from the above said company, either as a beneficiary or as a beneficial owner. 8) The bank account stated in the base note belongs to GWU Investments Ltd and does not belong to me. The HSBC Bank in Geneva may have asked from the GWU Investments Ltd the proof of identity proof of address of all the potential beneficiary's beneficial owners. The company might have provided my passport as a proof of identity proof of address. As the address mentioned in my Indian passport is that of Mumbai hence the base note states the same address. 9) I personally had a residential property in Bangalore which was sold by, me during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 28B RD Churchgate, Mumbai - 400 020 which is recorded as her legal address. Further, during the years under assessment, she was filing her return of income with ITO, Ward 9(1), Bangalore in which her address is NO. 7, Embassy Erose, Ulsoor Road, Bangalore, Karnataka' and '38/2, Berlie Street, Langford Road, Bangalore. Even though the returned income were not substantial, these facts show that she is having her interests in India. (d) Having interests and assets in India and not producing the details of an account that she ought to know creates a circumstance in which she is holding back the information that is prejudicial to her interests. 13. The assessee relied on the decision of the Hon'ble Supreme Court in the case of Commissioner of Wealth Tax Rajkot Vs. Estate of Late HMM Vikramsinhji of Gondal (Civil Appeal 2312 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leged 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 need not necessarily control the affairs of the trust. The bank account of the trust represents unaccounted money of the beneficiaries even though no benefit were transferred to them. 13.1 Considering the facts of the case and the decision of the Hon ble Mumbai ITAT as cited above it can be concluded that the bank account of the trust represents unaccounted money of the assesse. Considering the fact that the assessee is an Indian having interests and assets in India that no details were given to show the source of money deposited in the HSBC account leads to the circumstances that this unaccounted money is sourced from India. In absence of anything contrary, the only logical conclusion that can be inferred is that that the amounts deposited are unaccounted deposits sourced from India and therefore taxable in India. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 satisfactory. It placed no duty upon him to point to the source from which the money was received by the assessee. 13.4 The Hon'ble Supreme Court in the case of Sumati Dayal Vs. Commissioner of Income Tax (1995) 214 ITR 801 (SC) held that income tax proceedings are civil proceedings and the degree of proof required is to be judged by preponderance of probabilities. The Hon ble Supreme Court, in the case of CIT v Durga Prasad More [1971] 82 ITR 540 (SC), has held that the taxing authorities were not required to put on blinkers while looking at the documents produced before them they were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents....The apparent must be considered as real only it is shown that there are reasons to believe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee 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. Renu Tharani is the beneficiary of Tharani Family Trust. B. Smt. Renu Tharani is the sole beneficiary C. Tharani Family Trust is the sole beneficiary of GWU Investments Ltd D. Smt. Ren Tharani holds interest in GWU Investments Ltd through Tharani Family Trust E. Income attributable directly or indirectly to GWU Investments Ltd or Tharani Family Trust pertains to Smt. Renu Tharani F. GWU Investments Ltd having address in Cayman Islands has investment managed as Shri Haresh Tharani, son of the appellant. The Assessing Officer has rebutted the submission of the assessee before him. Virtually the same submission on the aspect is reiterated before me. As Assessing Officer has effectively rebutted the same, backed by judicial preced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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) SA were distributed to Mrs. Renu Tharani. This is a private letter. Again in the background of refusal to file consent waiver which can provide Assessing Officer information having backing of law weakens case of appellant also as to why the letter was obtained from Zurich branch is not explained. Thus, when appellant had to opportunity to cooperate with provision of law by filing consent waiver, by with authentic information would have come, the appellant furnishes letters purportedly by HSBC Bank, Geneva to her and HSBC Bank, Zur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 Kothar 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 etc. It also deals with impact of refusal to sign consent waiver. These goes against the assessee. An extract from the order is reproduced below: In the normal course of human conduct if a person has nothing to hide and serious allegations/questions are being raised about the funds a person would make available the documents which would put to rest all questions which seem to arise in the mind of the Authorities. The conduct on the part of the Petitioner and her uncle in not being forthcoming, to our mind lead ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, denials and providing alternate Correct decision comes when correct input is presented. The following questions were recurring in course of hearing and stood unanswered. (a) if Renu Tharani denies the ownership or any connection with the account in individual capacity or as a trustee or as a beneficiary in any form, has it been notified to HSBC Geneva? (b) Did she or the trust or any other person or beneficiary report income which accrued or arisen from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase 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 Products , Advances and Loans , Bonds , Fiduciary Deposits etc.. Nevertheless it is debit and credit entries. Since a finding is made that the income on the basis of information contained in the base note is assessable under Income Tax Act 1961, correct computation is necessary. The assessing officer can assess only such sums that fit into definition of sections 5(2) r.w 8 r.w 9 r.w 69,69A,69B, as applicable in the case, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 nevertheless files a note pointing out errors in the assessment order and the CIT(A) s order which is reproduced below for ready reference: A. Analysis of the Assessment Order Para Page no. AO‟s Observations Remarks Pg 1, Para 1 Reopening has been done on the basis of the information received that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 the AO. In this affidavit, in para 4 it was categorically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of discretionary trust income arises in the hands of the beneficiary only at the 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, Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts onus. It was for AO to demonstrate that the amount fall within the ambit of Indian Tax Law. Pg 10, Para 13.3 AO has referred to the judgment of Delhi High Court in the case of Nova Promoters and Finlease Pvt. Ltd. 342 ITR 169 (del) Suffice to say that 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As per provision of section 139(1), every person being a person other than a company or a firm, if his total income during the previous year exceeded the maximum amount which is not chargeable to tax is required to file the return. Thus, the obligation to file the return is only when income chargeable to tax exceeds the maximum amount not chargeable to tax. In order to expand the scope of filing return, the Finance Act, 2012 has inserted 4th Proviso below section 139(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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The CIT(A) in this para has referred to section 9(1)(i) and has admitted that it has never been the case of the AO that assessment has been made as a result of business connection. This finding of the CIT(A) in this para is in favour of the assessee. The CIT(A) has held that section 68 is not applicable. The CIT(A) has also held that assessee does not have a business connection in India and section 9(1}(i) is not applicable. If that be the case, the addition is absolutely untenable and he ought to have deleted it. Pg 8 to 12 Para 19 to 21 The CIT(A) in these paras has referred 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 M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treating it to be the sole beneficiary is untenable and bad in law. Pg 14. Para 24 The CIT(A) has held that the assessee has failed to discharge the onus of explaining the source of income. The CIT(A) has put a negative onus on the assessee. It is an admitted fact that the assessee is a non-resident and accordingly only such income as has accrued or arisen or received or deemed to be received in India is chargeable to tax. The money is not in India as per the allegation itself. Thus, it was for the AO/CIT(A) to show that the money has accrued or arisen in India or was received in India. In fact, AO is ignoring the facts and the explanation of the assesses that she has been a non-resident all along and has no business connection whatsoever in India. The assessee having 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avit and even the earlier affidavit categorically stated that the source of deposit in HSBC account have no source in India. The affidavit has been rejected arbitrarily ignoring the Mehta Parikh Co. vs. CIT 30 ITR 181 (SC). 21. Learned Departmental Representative vehemently relies upon, and elaborately justifies, the orders of the authorities below. He submits that it is a case in which a specific information has come to in the possession of the Government of India, through official channels, and this information, amongst other things, categorically indicates that the assessee was beneficiary and beneficial owner of a particular account which had peak assets worth US $ 3,97,38,122. The genuineness of this account is not in doubt and has not even been challenged by the assessee. These realties cannot be wished away. The income tax department has discharged its burden of proof by brining on record authentic information received from, through Government channels, about the bank relationships which were unaccounted in India and unaccounted abroad. Whatever documents the assessee has given are self-serving documents and hyper technical explanations, which do not cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ywhere in the world. He reiterates that it is not the case of the assessee that the taxes are paid on this hidden wealth anywhere in the world, and the assessee is simply living in denial by taking hyper-technical defences. We are thus urged to confirm the action of the authorities below and decline to interfere in the matter. 22. In brief rejoinder, learned counsel submits that these sweeping generalizations have no relevance to the facts before us. The hard reality is that the account does not belong to the assessee, that there is no direct or indirect evidence to support that inference, that the assessee was only a beneficiary of a trust but the taxability in her hands must, at best, be confined to the monies actually received from the trust, that admittedly GWU Investments Ltd was owner of the account- in which neither the assessee is a director or a shareholder, and that, in any case, nothing remains in the account as the same stands closed now. It is then reiterated that the assessee is a non-resident and she cannot be taxed in respect of monies credited, even if that be so, in her accounts outside India. He once again reiterates that there is no evidence whatsoever of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fe and two daughters and made a beeline for the French border. He telephoned the Swiss police from southern France, telling them he wanted to spend Christmas with his family in France, but that he would return in the new year. The then-36-year-old dual French-Italian national did not make good on this promise, however, and Swiss authorities have been trying to get their hands on him ever since, thus far to no avail. Depending on who you believe, Herve Falciani is either a courageous whistleblower responsible for exposing industrial-scale fraud at one of the world's largest banks that deprived governments in dozens of countries of many millions of pounds, or a cynical, calculating criminal who maliciously stole sensitive data on tens of thousands of clients with the intention of lining his own pockets. Lebanon trip Herve Falciani grew up in Monaco, which, he says, made going into the financial sector an obvious choice . In 2000 he joined HSBC in the principality, before transferring to HSBC Private Bank (Suisse) in Geneva, Switzerland six years later. Between 2006 and 2007, he collected confidential data on more than 106,000 of the bank's custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt refused to extradite him to Switzerland the following year, saying violation of banking secrecy was not a crime in Spain, with the state prosecutor praising the former HSBC man as a whistleblower. In December 2014, the Office of the Attorney General of Switzerland levelled several charges against Herve Falciani, accusing him of qualified industrial espionage, unauthorised obtaining of data, and violation of banking secrecy, noting that several bank customers whose data he leaked were also involved as private claimants. As to his own motivations, Mr Falciani, who has a security detail provided by the French government due to concerns about his personal safety, says he feels a kinship with Edward Snowden, whose revelations about the snooping activity of the US National Security Agency sent shockwaves around the world in 2012. Mr Falciani says it's crucial that there are people who, speak the truth and point out systemic problems, and believes that banks such as his former employer HSBC, have created a system for making themselves rich at the expense of society, by assisting in tax evasion and money laundering. https://www.bbc.com/news/world-europe-3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hore accounts are not illegal, but many people use them to hide cash from the tax authorities. And while tax avoidance is perfectly legal, deliberately hiding money to evade tax is not. https://www.bbc.com/news/world-asia-india-31282677 25. These actions of the HSBC Private Bank (Suisse) SA have not gone unnoticed so far as law enforcement agencies. It had to face criminal investigations in several parts of the globe, and had to pay millions of dollars in settlement for its lapses. A rather recent press release dated 10th December 2019 from the US Department of Justice, which indicates the nature of aftermath it had to face and the collusion it had in systematic tax evasion by unscrupulous taxpayers from different parts of the world, is as follows: Department of Justice Office of Public Affairs FOR IMMEDIATE RELEASE Tuesday, December 10, 2019 Justice Department Announces Deferred Prosecution Agreement with HSBC Private Bank (Suisse) SA Bank Admits to Helping U.S. Taxpayers Conceal Income and Assets from the United States; Agrees to Pay $192.35 Million Penalty HSBC Private Bank (Suisse) SA (HSBC Switzerland), a private bank headquartered in Genev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayers accountable. Today s DPA shows that engaging in this type of behavior has consequences. According to court documents, HSBC Switzerland admits that between 2000 and 2010 it conspired with its employees, third-party and wholly owned fiduciaries, and U.S. clients to: 1) defraud the United States with respect to taxes; 2) commit tax evasion; and 3) file false federal tax returns. In 2002, the bank had approximately 720 undeclared U.S. client relationships, with an aggregate value of more than $800 million. When the bank s undeclared assets under management reached their peak in 2007, HSBC Switzerland held approximately $1.26 billion in undeclared assets for U.S. clients. According to the terms of the DPA, HSBC Switzerland will cooperate fully with the Tax Division and the IRS. The DPA also requires HSBC Switzerland to affirmatively disclose information it may later uncover regarding U.S.-related accounts, as well as to disclose information consistent with the department s Swiss Bank Program relating to accounts closed between Jan. 1, 2009 and Dec. 31, 2017. Under the DPA, prosecution against the bank for conspiracy will be deferred for an initial period of three years to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... changes to restrict its cross-border business with U.S. persons, but the bank did not immediately cease that business. In fact, some HSBC Switzerland bankers assisted clients in closing their accounts in a manner that continued to conceal their offshore assets, such as withdrawing the contents of their accounts in cash. Acting Deputy Assistant Attorney General Goldberg, U.S. Attorney Fajardo Orshan, and Chief Fort commended special agents of IRS-Criminal Investigation, who investigated this case, as well as Senior Litigation Counsel Mark F. Daly, Assistant Chief Jason H. Poole, and Trial Attorney Grace E. Albinson of the Tax Division, who prosecuted this case. Acting Deputy Assistant Attorney General Goldberg also thanked Assistant U.S. Attorneys Thomas P. Lanigan and Danielle N. Croke of the Southern District of Florida, Assistant U.S. Attorney Gordon Kromberg of the Eastern District of Virginia, and agents with the U.S. Postal Service for their assistance in this case. Topic(s): Financial Fraud Tax Component(s): Tax Division USAO - Florida, Southern Press Release Number: 19-1368 https://www.justice.gov/opa/pr/justice-department-announces-de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Solutions is one of the leading international private client trust businesses, with a history of more than 70 years. Our 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. These capabilities will help you develop and implement solutions that comply fully with all legal and regulatory requirements. We offer a full range of solutions and can hold a wide range of assets, within structures that are often designed to span generations of one family. While we are proud to be part of one of the most strongly capitalised banks in the world, we are happy to work with your preferred advisers and managers (and with other private banks). https://www.hsbcprivatebank.com/en/plan/wealth-planning/trust-administration 28. What is essentially implies that so far as the trust structures are concerned, it is a structure, to use the words of the HSBC Private Bank- parent company of the HSBC Private Bank (Suisse) SA Geneva, whereby you, as the settlor, transfer the legal ownership of your assets (which then become the trust assets) to the trustee, who manages and ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary to take note of the above position so as to understand that the assessee has not come with clean hands, and, quite to the contrary, the assessee has made conscious efforts to scuttle income tax department s endeavours to get at the truth. 31. For the sake of completeness, we may add that a consent waiver states, on a document titled Privileged and Confidential addressed by the assessee to the HSBC Private Bank (Suisse) SA in respect of account(s) held by the said bank, inter alia, that: I/We hereby declare and confirm that I am/we are cooperating with the income tax department, Government of India. In connection with our cooperation, I am/We are providing this waiver to the Income Tax Department, Government of India. I/We hereby instruct and authorise HSBC Private Bank (Suisse) SA to provide to me any and all documents in HSBC Private Bank (Suisse) SA s possession relating to the above accounts. With this instruction, I/we waive all protections under the data protection privacy and/ or bank secrecy laws of Switzerland. I/We understand that accounts records encompass all documents that a customer is entitled to, including - documents identifying t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ify this position, as noted by Their Lordships, On instructions of the Petitioner, the Learned Senior Counsel Mr. Pardiwalla informed us that her Uncle Mr. Dilip Mehta i.e the Executor of the Estate of late Mr. Ramniklal N Mehta was also willing to sign a modified consent waiver form. Thus both the Petitioner and her uncle agreed to give a modified Consent Waiver Form in effect disputing being either the beneficiary or being the person who has authority to operate the account but, as noted by Their Lordships, on enquiry by the Revenue from HSBC, Geneva, it was learnt that a modified Consent Waiver Form would not enable the bank to give copies of the bank statement of A/c. No. 5091404580 since the Waiver would have to be provided without modifications . Their Lordships then noted that neither the assessee has furnished the requisite information nor allowed the authorities to collect the information by giving unqualified consent waiver forms, and added that In the normal course of human conduct if a person has nothing to hide and serious allegations /questions are being raised about the funds a person would make available the documents which would put to rest all questions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and enforcing the right to privacy, in the course of an income tax investigation about a transaction, stalling obtaining full, complete and correct information about the same. The presumption thus has to be that such information, as in possession of the income tax department and in respect of which the assessee has declined consent waiver for further probe, is correct, and that the assessee is consciously trying to stall further probe in the matter so as to prevent further information, prejudicial to the interests of the assessee, coming to the light. When an assessee seeks protection on account of the position that the income tax department has not conclusively proved the things against the assessee, the assessee also has to show that he contributed to the efforts for getting at the truth or at least that he did not stall the efforts of the income tax department to get at the truth. By not signing the consent waiver, the assessee ends up protecting the actual facts coming to the lights by enforcing his own privacy under the Swiss secrecy and data protection laws, and, therefore, he cannot claim protection of the position that the income tax department has not conclusively esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t domicili e (domiciled company) Lien personne/ profil client (Person / customer profile link): Beneficial owner D tails du lien (link details); BENEFICIAL OWNERSHIP/ BENEFICIARY Info Signatures (Signature Information): non r f rence (no reference) Correspondance (Correspondence): envoy e au client (sent to client) .. . personnes l gales li es (related legal persons) nom-structure juridique : THE THARANI FAMILY SETTLEMENT (code BUP) (name- legal structure) (5090278408) lieu de domiciliation (place of domicile): non r f rence (No reference) date de creation (creation date): non r f rence (No reference) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 102, GWU Investments Limited no longer exists in the records of the Government of Cayman Islands. 42. Interestingly, however, even this trust stands terminated and nothing is now known about the trust. We have noted that the assessee has taken a plea that she has nothing to do with the funds in the HSBC Private Bank (Suisse) SA account, as she was only a beneficiary of the Tharani Family Settlement Trust. The assessee is at least, by her own admission, a beneficiary of the trust but she is not in a position to throw any light about the trust or enlighten anyone about the trust structure. All she has submitted is that GWU Investments Limited is the company that runs the trust and she has no idea as to where the monies came in the possession of GWU Investments Ltd. In letter dated 7th March 2015, a copy of which is placed before us at pages 57-58 of the paper-book also, the submissions of the assessee was as follows: With reference to your query on the date of last hearing held on 26th February 2015, wherein you wanted to know the following facts: (1) Who is settlor of Tharani Family Trust, and (2) What are the sources of funds which are deposited in GWU Investments Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been indicted by several Governments worldwide and how it has even confessed to be being involved in money laundering. 44. The assessee states that she is neither a shareholder nor a director in GWU Investments Ltd. That s not even in dispute. GWU Investments Ltd is a Cayman Islands entity, and it needs no special knowledge to know that, more as a rule rather than as an exception, the Cayman Island entities are owned by nominees of the beneficial owners. The operations carried out by these entities, are mainly to facilitate financial manoeuvring for the benefit of its clients, or, with that predominant underlying objective, to give the colour of genuineness to these entities. These offshore entities, which are routinely used to launder unaccounted monies, are a fact of life, and as much a part of the underbelly of the financial world, as many other evils. Even a layman, much less a Member of this specialized Tribunal, cannot be oblivious of these ground realities. Nothing, therefore, really turns on the assessee not being a director or shareholder of the GWU Investments Ltd. The relevant question is whether she is beneficial owner of the said company or not. HSBC documents s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents . As a final fact finding authority, this Tribunal cannot be superficial in its assessment of genuineness of a transaction, and our call is to be taken not only in the light of the face value of the documents sighted by the assessee but also in the light of all the surrounding circumstances, preponderance of human probabilities and ground realties. There may be difference in subjective perception on such issues, on the same set of facts, but that cannot be a reason enough for the fact finding authorities to avoid taking subjective calls on these aspects, and remain confined to the findings on the basis of irrefutable evidences. Hon'ble Supreme Court has, in the case of Durga Prasad More (supra), observed that human minds may differ as to the reliability of a piece of evidence but in that sphere the decision of the final fact finding authority is made conclusive by law . This faith in the Tribunal by Hon'ble Courts above makes the job of the Tribunal even more onerous and demanding and, in our considered view, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not a public personality like Mother Terresa that some unknown person, with complete anonymity, will settle a trust to give her US $ 4 million, and in any case, Cayman Islands is not known for philanthropists operating from there; if Cayman Islands is known for anything relevant, it is known for an atmosphere conducive to hiding unaccounted wealth and money laundering, and that does not advance the case of the assessee. This is a jurisdiction which has double the number of companies than resident, most of which remain only on paper, and it will be no na ve to believe that these companies are located here, in a country with around 65,000 residents, for bonafide core activities, rather than the benefits of anonymity, secrecy and liberal tax laws. Cayman Island is one of the few jurisdictions in the world where public records of the beneficiaries of firms and companies, like GWU Investments Ltd, are not maintained, and it is only with effect from 2023, that is if the promises made by the Government of Cayman Islands can be believed at face value, that such public records will be maintained. That is an ideal situation, as on now, for holding the unaccounted monies through a web of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court in the said case, it is upon the alleger to prove that it is so, ignores the reality . When we follow the path, as laid down by Hon ble Supreme Court in the case of Sumati Dayal (supra), by considering surrounding circumstances and applying the test of human probabilities and donot take a superficial approach to the problem , the inescapable conclusion is that the explanation of the assessee is only fit to be rejected. In the present case, there is even direct evidence available on record. As the base note categorically states, this is synth se individuelle (individual synthesis, in literal meaning, which refers to individual s profile ) and name of the person is Renu Tikamdas Tharani, and her address is under the heading Adresses de la personne physique (i.e. addresses of the natural person). In the heading Profils client lies a la personne (i.e. customer profiles linked to the person), GWU Investments Limited is shown as Nom du profil client (customer profile name) but then the same note shows nature de profil (i.e. profile nature) as Nominatif (nominative, or nominal) and that the D tails du lien ( i.e. link details) between the individual and the company is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor, he would have at least known the director because director requested the Bank to provide this information to Tharani. Nothing is clear, nor does the assessee throw any light on the same. Be that as it may, this letter does not show deny, nor show any material to controvert, what is stated in the base note i.e. GWU Investments Ltd and the assessee are linked as beneficial owner. There is no dispute that account was in the nominal name of GSW Investments Ltd but the question is who is the natural person beneficial owner thereof. As for the Trust, there is no corroborative evidence about the statement, but nothing turns thereon as well. The assessee being discretionary beneficiary owner of the trust, and beneficial owner of the underlying company, is not mutually exclusive anyway but the claim of the assessee being a discretionary beneficiary of the trust is without even minimal evidence. There is another letter from HSBC Private Bank (Suisse) SA to the assessee which states that Further to your request, we hereby confirm that you, Mrs Renu Tharani, are not the holder nor, to the best of our knowledge, the beneficial owner of any account opened in the books of HSBC Private Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Suisse) SA as gospel truth, and, on the other hand, effectively stall, by declining consent waiver and by stating half truths- even if her statements have an element of truth, the Assessing Officer obtaining direct information from the same organization. There is no meeting ground in this approach. In any case, for the reasons set out above and as evident from the base note, the assessee is beneficial owner of GWU Investments Ltd, Cayman Islands. There is nothing to controvert this fact stated in the base note, and since the assessee has declined consent waiver in this case, the assessee cannot decline correctness of the details obtained from the HSBC Private Bank (Suisse) SA. 47. As regards the repeated references to Hon ble Supreme Court s judgment in the case of Estate of HMM Vikramsinhji of Gonda (supra), it is important to understand that it was a case in which a discretionary trust was settled by the assessee and the limited question for adjudication was taxability of income of the trust, after the death of the settlor and in the hands of the beneficiary. It was in this context that Hon ble Supreme Court held that the question of taxation in the hands of the beneficiary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is, for all practical purposes, still continuing, with limited functionality of our office, the order is being pronouncement today on 16th July 2020. However, in the light of a coordinate bench decision in the case of DCIT Vs JSW Limited, and vice versa [(2020) 116 taxmann.com 565 (Mum)], the period of lockdown is to be excluded in computation of 90 days period. As further noted in the said order, Hon ble Bombay High Court has observed that while calculating the time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly and the said order continued to operate till 15th July 2020. Viewed thus, this order is being passed within the permissible time limit in terms of Hon ble High Court s directions. The second point is that this decision cannot be an authority for the proposition that wherever name of the assessee figures in a base note from HSBC Private Bank (Suisse) SA Geneva, an addition will be justified in each case. The mere fact of an account in HSBC Private Bank (Suisse) SA Geneva, by itself, cannot mean that the monies in the account ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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