TMI Blog2023 (5) TMI 944X X X X Extracts X X X X X X X X Extracts X X X X ..... ary to the provision of section 3 of the Black money Act. Charge of tax - Beneficial owner of bank accounts of foreign company - Credits in the bank accounts of the assessee and foreign company - Who is beneficial owner of the alleged undisclosed assets and the income therefrom, of an independent non resident foreign company? - HELD THAT:- Place of Effective Management of the said foreign company is situated outside India because of which, the company is a non-resident in India within the meaning of section 6 of the income tax act and none of the assets were liable to be taxed in India. Reference has been made to the CBDT circular dated 23.02.2017 bearing Circular No. 08/2017. Therefore, in no view of the manner taxability arise in the present case proving that the entire edifice of the case is wholly unjust and illegal. Therefore, we are of the view that the non-resident foreign company M/s. Agrasen Polymers FZE based at UAE is a separate legal entity and all the funds/investments etc. belong to the company and no tax liability can be fastened on the assessee. Additions of transactions in the hands of the appellant which solely belong to the non-resident foreign com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this includes addition of Rs.69.78 crore) u/s 10(3) of the Black Money Act on a substantive basis. Second appeal before the Hon'ble ITAT has already been filed against deletion of substantive addition made by the AO, which is pending for adjudication. 3. The learned CIT Appeal has erred in granting relief to the taxpayer by admitting additional evidence, even though the additional evidence could not have been admitted as per stipulations laid down under Rule 46A of the Income Tax Rules 1962. Further, since the additional evidence itself was not to be admitted, and has been incorrectly admitted, relief (even otherwise contested by revenue), could not have been available to the assessee. 4. The learned CIT appeal has erred in law in not exercising powers granted to her within the meaning of provisions of 17(1)(c) of BMA(UFIA) and Imposition of tax Act, 2015 whereby the learned Commissioner Appeal was mandated to do inquiries herself or to get carried out further inquiries. Instead of doing the same, the learned CIT appeal chose to grant relief to the taxpayer. 5. The Appellant craves leave or reserves the right to amend, modify, alter, add or forego any ground(s) of appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility of the foreign assets. He has relied and read the provision of the Act and the same is haul out here in below: Charge of tax 3. (1) There shall be charged on every assessee for every assessment year commencing on or after the 1st day of April, 2016, subject to the provisions of this Act, a tax in respect of his total undisclosed foreign income and asset of the previous year at the rate of thirty per cent of such undisclosed income and asset: Provided that an undisclosed asset located outside India shall be charged to tax on its value in the previous year in which such asset comes to the notice of the Assessing Officer. (2) For the purposes of this section, value of an undisclosed asset means the fair market value of an asset (including financial interest in any entity) determined in such manner as may be prescribed. 8. Based on the search conducted on 09.07.2018 the assets in dispute comes to the notices of the assessing officer in the financial year 2018-19 relevant to A. Y. 2019-20. The ld. AO based on that provision of section 3 has already charged foreign assets/income in A. Y. 2019-20 on substantive basis, then making the addition in A. Y. 2016-17, 2017- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sr. No. A.Y. Date of Order Amount of Tax Rs. Amount of Addition Rs. 1. 2016 17 31.03.2021 20,93,56,020/- 69,78,53,383/- 2. 2017 18 10,93,08,670/- 36,43,62,230/- 3. 2018 19 2,57,30,120/- 8,57,67,060/- TOTAL 1,14,79,82,673/- G. With regard to the above additions, it is also submitted that the same additions aggregating to Rs. Rs. 1,14,79,82,673/- form a part of the additions made SUBSTANTIVELY BASIS for AY 2019-20. H. Appeals were filed by the Assessee before the Ld. CIT(A) for all the above years. In the impugned orders passed by the Ld. CIT(A), the above-said additions made on PROTECTIVE BASIS for the first three years i.e., AY 2016- 17, 2017-18 2018-19 were deleted by the Ld. CIT(A) on following two grounds: i. On the ground that chargeability of tax on the impugned amounts could only arise in the previous year in which the inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 3, assessment was bound to be made only for the AY 2019-20 and could not have been made for any other year, viz. A.Y. 2016 17, 2017 18 and/or 2018 19. However, on perusal of the assessment order, it is clearly evident that the Ld. AO has made assessment not just in AY 2019-20 only but also made assessment for AY 2016-17, 2017-18 and 2018- 19 on PROTECTIVE BASIS which came to be deleted by the Ld. CIT(A). Therefore, the department appeals filed qua A.Y. 2016 17 to A.Y. 2018 19 are liable to be quashed outrightly. 3. Without prejudice, it is to be noted that the department has filed appeal regarding the same issues for A.Y. 2016 17 to 2018 19 also independently for A.Y. 2019 20, which tantamounts to a double addition and double proceedings regarding the same issues, which is impermissible in the eyes of law. It is worth noting that the taxability of all the above impugned amounts which are subject matter of assessment have been assessed by the Ld. Assessing Officer, examined by the Ld. CIT(A) and not disputed as such by the Ld. Assessing Officer in the remand report dated 13.07.2022 for the A.Y. 2016-17 to A.Y. 2019-20. Therefore, it is prayed that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year 2019-20 is under adjudication before us and therefore, we are of the considered view that the appeal of the revenue on the same very addition on protective addition cannot be litigated once the issue of substantive addition is not disputed by the assessee and its year of chargeability. 12. Based on this observation we are of the considered view that once the substantive addition has been made in the year in which such assets come to the notice of the Assessing Officer that can be charged to tax in the year as per clear mandate of provision of law and since the matter is already under consideration for assessment year 2019-20. The separate addition made in the respective years on protective basis and the appeal filed by the department against the finding of the ld. CIT(A) for these years is not maintainable and has rightly held by the ld. CIT(A) that the protective addition for the year under consideration is not warranted as the same is entirely contrary to the provision of section 3 of the Black money Act. The finding of the ld. CIT(A) for all the three are almost similar and therefore, her finding for the assessment year 2016-17 extracted for the sake of brev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 3 of the Black Money Act is found acceptable. (xxviii) Similarly, Ground of Appeal No. 14 wherein the appellant has contended that the concerned addition of Rs. 69,78,53,383/-in F.Y. 2015-16 relevant to A.Y. 2016-17 results in double taxation of the same amount also finds favour with this office. As the said addition of Rs. 69,78,53,383/- is contrary to the provisions of charging section of Black Money Act and as the said amount has already been added to the Total Income of appellant for A.Y. 2019-20, being the year in which the undisclosed asset came to the notice of the AO, the addition Rs. 69,78,53,383/- is not sustainable in the year under consideration, being made on protective basis, and is deleted in the A.Y.2016- 17. (xxix) In view of the aforesaid discussion, the grounds of appeal no. 1,5 to 14 raised by the Ld.A.R. of the appellant for the A.Y. 2016-17 are treated as allowed. 6. Based on the above discussion and as per provisions of Section 3 of Black Money Act, it is abundantly clear that answer to the question as to whether the addition of Rs. 69,78,53,383/- is legally sustainable or not shall have effect on determination of Total for A.Y. 2019-20 and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of credits in the bank accounts of Agrasen Polymers FZE (Foreign Company ) which do not belong to the Appellant. 3. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in sustaining the addition of Rs. 2,34,26,056/- made by the Ld. AO, which pertains to the dividend earned by the Foreign Company on the investments made. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in sustaining the addition of Rs. 16,76,574/- made by the Ld. AO that pertains to the interest earned by the Foreign Company. 5. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in sustaining the addition of Rs. 1,42,67,290/- on account of cash deposits in the foreign bank accounts without considering that the cash deposits were made out of the withdrawals made from the said accounts. 6. Under the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in sustaining the addition of Rs. 12,54,600/- on account of repayments received from the staff of the Foreign Company to whom the said company gave loans. 7. Under the facts and circumstances of the case and in law, the Ld. CIT(A) and Ld. AO ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case and in law, the Ld. AO has not given due consideration to the fact that the Appellant is above 84 years of age and has not been given due opportunity of being heard to present his case before launching the Prosecution proceedings, which is against the principles of natural justice. 16. The Appellant craves leave to add, amend, and modify all or any grounds of appeal on or before the hearing date. 15. The brief facts of the case are that Shri K.D. Agrawal (hereinafter referred to as the Appellant ) is a senior citizen, aged 84 years and is presently enjoying a retired life. He is a regular taxpayer and has been awarded Certificates of Appreciation from the Income Tax Department. PB 216 217 are the copies of Certificate of Appreciation issued by the Income Tax Department for A.Y. 2016 17 2017 18. 15.1. In the earlier years, the appellant along with a group of persons came together and incorporated a company in the Free Trade Zone of Ras-Al-Khaimah (UAE) Agrasen Polymers FZE, in order to deal in master batches / polymers. That, however, after a while, prices of the master batches in Indian markets became ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,443 INR 1,12,98,84,412 AE470271226001850542017 Appellant Fiduciary Capacity AE410271226001850542028 Appellant Fiduciary Capacity AE920271161201822102010 Company AE610271161371822102026 Company AE060276031498079255014 Appellant Fiduciary Capacity AE550271031591850542039 Belongs neither to the company, nor to the Appellant in fiduciary/individual capacity 2. Income Allegedly earned on Investments in OMI INR 9,69,34,026 - INR 9,69,34,026 TOTAL INR 146,42,44,881 INR 23,74,26,443 INR 1,22,68,18,438 17. Before us, the ld. A/R of the assessee has submitted his ground-wise written submissions as under :- GROUND NOS. 1, 8, 11, 15 16 ARE GENERAL AND INCIDENTAL TO THE OTHER GROUNDS OF APPEAL AND THEREFORE, BE READ IN CONJUNCTION. GROUND NO. 9 THAT THE LD. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agrasen Polymers FZE where at point 1 (b), the factum of the company being duly registered and undertaking activities of trading Plastic and Nylon raw materials and also the fact that the company has invested its own resources to earn dividend/interest/gains has duly been mentioned. PB 296 is the copy of the Notes to Financial Statements whereby at point no. 4, Investments to the tune of AED 7,457,719 made by the Company are mentioned. PB 297 Copy of the Notes to Financial Statements for year ending 31st December 2015 whereby at point number 6, the bank accounts held by the company in its own name and also that of the two bank accounts held by the manager (Appellant) maintained for making investment and to take benefit of Leverage from banks. PB 297 298 is the copy of the Notes to Financial Statements of M/s Agrasen Polymers FZE whereby at point no. 8 (PB 297) point 12 (PB 298), the Financial Liabilities in the form of Trade and Other Payables to the tune of 9,976,302/- (18.6 Cr INR) is duly mentioned to be belonging to the company. AY 2016 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grasen Polymers FZE audited approved by M/s Ramesh Ramu Audit Associates, UAE on 13.05.2018 which was even submitted to the authorities of the Free Trade Zone of Ras Al Khaimah PB 591 is the copy of the Director s Report prepared by the directors of the company. PB592-593 is the independent Auditor s Report prepared by M/s Ramesh Ramu Audit Associates, UAE on 13.05.2018. PB 594 is the copy of Statement of Financial Position of M/s Agrasen Polymers FZE akin to a Balance Sheet. PB 595 is the Copy of the Statement of Comprehensive Income audited by the Auditors M/s Ramesh Ramu Audit Associates on 13.05.2018 whereby the Net Revenue, Expenses, Net Income/Loss is duly mentioned. PB 598 is the copy of notes to Financial Statements of M/s Agrasen Polymers FZE where at point 1 (b), the factum of the company being duly registered and undertaking activities of trading Plastic and Nylon raw materials and also the fact that the company has invested its own resources to earn dividend/interest/gains ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copy of the Notes to Financial Statements whereby at point no. 4, Investments to the tune of AED 3,195,075/- made by the Company are mentioned. PB 723 Copy of the Notes to Financial Statements for year ending 31st December 2018 whereby at point number 6, the bank accounts held by the company in its own name and also that of the two bank accounts held by the manager (Appellant) maintained for making investment and to take benefit of Leverage from banks, in fiduciary capacity on behalf of the company. PB 723 724 is the copy of the Notes to Financial Statements of M/s Agrasen Polymers FZE whereby at point no. 8 (PB 723) point 12 (PB 724), the Financial Liabilities in the form of Trade and Other Payables to the tune of 3,358,200/- is duly mentioned to be belonging to the company. 4. That the concept of a separate legal entity has been a time old principle, which rather forms the backbone of legal jurisprudence. For ready reference reliance is placed on the following judicial precedents as under: MRS. BACHA F. GUZDAR vs. CIT SUPREME COURT OF INDIA (1955) 27 ITR 0001 Agricultural ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the company. LEE V LEE`S AIR FARMING LTD (1961) In this case, Mr. Lee formed his crop spraying business into a limited company in which he was director, shareholder and employee. When he was killed in a flying accident, his widow sought social welfare compensation from the State, arguing that Mr. Lee was a workman under the law. The State argued that Mr. Lee was self-employed and thus not covered by the legislation. The court held that Mr. Lee and the company he had formed were separate entities, and it was possible for Mr. Lee to be employed by Lee`s Air Farming. STATE TRADING CORPORATION OF INDIA LTD. AIR (1963) SC 1811 It was held that as soon as citizens form a company, the rights guaranteed to them by article 19(1)c has been exercised and no restraint has been placed on the right and no infringement of that right is made. Once a company or corporation is formed, the business which is carried on by the such company or corporation is the business of that company or corporation and is not the business of the citizens who get the company or corporation incorporated and the rights of the incorporated body must be judged on that footing and cannot be judged o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made to the CBDT circular dated 23.02.2017 bearing Circular No. 08/2017. Therefore, in no view of the manner can taxability arise in the present case proving that the entire edifice of the case is wholly unjust and illegal. GROUND NO. 14 THE ASSESSEE MADE DUE DISCLOSURES AS ALLOWABLE IN LAW, THAT TOO PRIOR TO THE ISSUANCE OF NOTICES UNDER THE BLACK MONEY (UFIA) IMPOSITION OF TAX ACT, 2015, PROVING THAT THE ENTIRE CASE IS BASED ON A PRE-CONCEIVED NOTION. 9. It is to be noted that the alleged information admittedly came to the notice of the Ld. Assessing Officer during the course of search proceedings conducted in July 2018, i.e., during F.Y. 2018 19 relevant to A.Y. 2019 20, therefore, taxability if any, can only be made for the year under consideration, viz. A.Y. 2019 20. 10. In this regard, it is pertinent to note that the Appellant made due disclosures in his Original Return filed u/s 139(1) of the Income Tax Act, 1961 for A.Y. 2018 19 2019 20 regarding having financial interest (in a fiduciary capacity) and a signing authority for and on behalf of the company. Therefore, even the case of non-disclosure cannot be made out against the Appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 022] Where assessee was a signatory in a foreign bank account owned by her mother and she failed to disclose same while filing her income-tax return, however disclosure was made while filing return under section 153A, since such non-disclosure of a foreign asset was a bona fide mistake, penalty could not be imposed under section 43 of Black Money Act. Therefore, the additions of transactions in the hands of the Appellant which solely belong to the non-resident foreign company cannot be added in the hands of the Appellant. GROUND NO. 10 THE LD. ASSESSING OFFICER AND THE LD.CIT(A) ERRED IN HOLDING THE APPELLANT TO BE A BENEFICIAL OWNER OF THE ALLEGED UNDISCLOSED ASSETS AND THE INCOME THEREFROM, WHICH SOLELY AND INDEPNDENTLY BELONGS ONLY TO THE NON-RESIDENT FOREIGN COMPANY, M/S AGRASEN POLYMERS FZE. 11. The said issue has been addressed by the Ld. Assessing Officer at Para 5.12 Page 56 of his order. 12. On Appeal, the Ld. CIT(A) has placed blind reliance on the version of the Ld. Assessing Officer the said issue has been dealt by the Ld. CIT(A) at Para 6.2 (xiii) Page 37 of his order, whereby, without considering the basic tenets / provisions of law, the Appellant h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts and foreign investments, were solely the assets of the foreign company and consideration for the said assets, i.e., the money flew from the bank account of the Foreign Company itself. The Foreign company deposited or made investments out of its own funds in the bank accounts in question. Thus, the Appellant clearly does not fall in the ambit of the term beneficial owner as he is not the provider of the consideration of the asset. Hence, the allegation of the Ld. Assessing Officer confirmed by the Ld. CIT(A) that the Appellant is the beneficial owner of the assets of the Foreign Company is misconceived, against the law and deserves to be annulled. Reliance is placed on the following judgments: ITO v. Electro Ferro Alloys Ltd. [2012] 25 taxmann.com 458 (Ahd. - Trib.) where the relevant finding of the coordinate bench reads as under: 5. 2. On consideration of the facts of the appellant's case it is noticed that the motor car was purchased, though in the name of the appellant's director, it was purchased out of the funds of the appellant-company and it is also not in dispute that the motor car was purchased for the purpose of business of the appellant. Thus th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 2015 audited approved M/s Ramesh Ramu Audit Associates, wherein the investments have duly been disclosed. PB 435-436 is the copy of the Financial Statement of M/s Agrasen Polymers FZE for the period ending on 31st December 2016 audited approved by M/s Ramesh Ramu Audit Associates, wherein the investments have been disclosed and dividends received thereon have also been disclosed. PB 600-601 is the copy of the Financial Statement of M/s Agrasen Polymers FZE for the period ending on 31st December 2017 audited approved by M/s Ramesh Ramu Audit Associates, wherein the investments have been disclosed and dividends received thereon have also been disclosed. PB 722-723 is the copy of the Financial Statement of M/s Agrasen Polymers FZE for the period ending on 31st December 2018 audited approved by M/s Ramesh Ramu Audit Associates, wherein the investments have been disclosed and dividends received thereon have also been disclosed. PB 885-888 is the copy of the Reply dated 08.08.2022 filed before the Ld. CIT(A) whereby the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding on 31st December 2018 audited approved by M/s Ramesh Ramu Audit Associates, wherein the interest income has been disclosed. PB 773 is the copy of Annexure 8 of Reply dated 12.07.2022 filed before the Ld. CIT(A) wherein the details of the Interest Received by M/s Agrasen Polymers FZE was categorically provided. (Also see PB 755) PB 883 is the copy of the Reply to the Remand Report filed before the Ld. CIT(A). 25. That however, no specific adjudication has been done by the Ld. CIT(A) and this amount has been sustained from the general pool of additions, which is evident from Page 43 of the Order of the Ld. CIT(A). Therefore, as due submissions backed up by clinching evidence, the impugned addition sustained by the Ld. CIT(A) deserves to be quashed. GROUND NO.5 THE ADDITION OF RS. 1,42,67,290/- IS ILLEGAL AS THE SAME WERE MERE DEPOSITS MADE OUT OF THE WITHDRAWLS FROM THE BANK ACCOUNTS AND THEREFORE CANNOT BE ADDED AGAIN 26. The said amount formed a part of the total credits, hence has not been expressly discussed by the Ld. Assessing Officer either in his order, however, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 12.07.2022 filed before the Ld. CIT(A) wherein the details of the staff loan repaid to the non-resident company viz. M/s Agrasen Polymers FZE alone was categorically provided. 31. Without prejudice to the above, the said addition is made qua the repayment of loan given by the Company to its staff, the initial amount of loan given (being a part of the total credits) has already been considered. Therefore, addition of this amount amounts to double addition. 32. Without prejudice, the said amount pertains to repayment of loan by the staff to the non-resident company viz. M/s Agrasen Polymers FZE and therefore, is not in the nature of income. Let alone that of the Appellant, who is only a director in the non-resident company, M/s Agrasen Polymers FZE gave the loan and received the repayment thereof. GROUND NO. 2 13 CREDITS OF RS. 19,68,01,923/- APPEARING IN THE ACCOUNT BELONGS TO THE COMPANY, M/S AGRASEN POLYMERS FZE, AND NOT TO THE APPELLANT, AND THAT TOO IN THE NATURE OF A LIABILITY AND THEREFORE NOT LIABLE TO BE TAXED IN HIS HANDS OF THE APPELLANT 33. The said amount of Rs. 19,68,01,923/- formed a part of the total credits of Rs. 136,73,10,855/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Sheet and, therefore, cannot be added as an asset of the assessee. PB 236-237 496 are the copies of the respective Bank Statement reflecting the amount of funds being received in the bank account of the company. PB 290, 297 are the copy of the balance sheet which clearly reflects the amount of loan taken by the non-resident foreign company. PB 771 - 755 is the copy of Annexure 6 submitted to the Ld. CIT(A) along with the reply dated 12.07.2022, which clearly demonstrates the amount of loan received by the non-resident Foreign Company. 38. Further, it can be seen from the balance sheet that major portion of loan has already been returned and only Rs 6.70 Cr (Approx.) is outstanding as trade and other payables under the head liabilities, as per the balance Sheet of 2018. PB 724 is the copy of the Notes to Accounts forming part of the Audited Financials of M/s Agrasen Polymers FZE, whereby Trade and other Payables have reduced to 3,358,200 Dirhams (equivalent to Approx. 6.5 Cr) PB 801 802 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PERSONS OF UAE AND TURKEY DIRECTLY IN HIS UAE-BASED BANK ACCOUNTS WITHOUT APPRECIATING THE CORRECT FACTS ON RECORD. 40. It is most respectfully submitted that the facts of case have been incorrectly interpreted and wrongly portrayed. It has been alleged that the Appellant admitted that certain commission received by him was taken aboard directly to UAE in M/s Agrasen Polymers FZE, which is wholly incorrect and unjust. PB 200 201 is the copy of the statement of the Appellant recorded u/s 132(4) of the Income Tax Act, 1961 whereby the Appellant mentioned that commission / incentive was paid by the Turkish companies to maintain continuity. 41. The statement has been misinterpreted as the transactions were between foreign companies and the companies in which the Appellant was acting in Fiduciary Capacity. No such amount was received by the Appellant on his personal account. Neither was the same the income of the Appellant. 42. Furthermore, there is no whisper as to any amount / transaction which could ve been this alleged commission amount, if any. Therefore, taxing any/all transactions, that too of a non-resident foreign com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Section 31 of the Evidence Act, 1872 also assumes significance in this regard. It reads: Admissions not conclusive proof, but, may estop: Admissions are not conclusive proof of the matters admitted, but they may operate as estoppels under the provisions hereinafter contained B.R. Associates Pvt. Ltd. Vs ACIT (ITAT Delhi) In absence of adverse material found during search, no addition could be made merely on the basis of statement recorded under section 132(4) of Income Tax Act, 1961 which did not constitute conclusive evidence and having been given under pressure was immediately retracted. Additions made u/s 153A of the Act, in the absence of incriminating material found as a result of search is outside the scope of section 153A of the Act. 44. It is therefore submitted that no reliance can be placed on such a statement without there being any corroborative material found the course of search or otherwise, to justify the allegation. ADDITIONAL SUBMISSION ON GROUND NO.1 13: THE LD. ASSESSING OFFICER AS WELL AS THE LD. CIT(A) ERRED IN TAXING THE APPELLANT WITHOUT CONSIDERING THAT THERE IS NO SCOPE OF UNDISCLOSED FOREIGN INCOME ASSET IN THE HANDS OF THE APPELLA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn has been furnished and c) Value of undisclosed asset located outside India. 47. That the first condition, viz. income from a source located outside India not disclosed in return, is not met in the case as there is no income of the Appellant which has not been disclosed to tax in India and nor is there any allegation to that effect. Without prejudice, there must be cogent, tangible material showing the income earned abroad and not disclosed to tax in India. Unless, shown to exist, there can be no liability which can be imposed on the Appellant. 48. Coming to the second condition, it stipulates where no return is furnished, which is not the case, the Appellant is a regular tax filer and has also disclosed the bank account held by him in fiduciary capacity and other details of the foreign asset of the company, in his return. Thus, making the second condition also inapplicable. 49. The third condition is the value of undisclosed asset located outside India . In order to examine this issue, it is crucial to ascertain whether the conditions of section 2(11) of the Act - undisclosed asset located outside India , which is reproduced as under: (11) undisclosed asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not been addressed by the ld. AO and ld. CIT(A) and as already evidence from the evidence adduced before the assessing officer, he failed to appreciate the legal entity concept and illegally taxed the assets of that separate legal entity. The ld. AR of the assessee to support his view on facts relied upon the audit reports and thereby demonstrated that the assets and liability are separately recorded by the that legal entity and since the same is already disclosed in that entity the same cannot be added in the case of the assessee. To substantiate this view, he has relied upon the decision in the case various case law where in the view is taken that; a) Shareholder has no direct relationship with land as the same belongs only to the company, nor its shareholders, nor directors. [ Mrs. Bacha F. Guzdar Vs. CIT (SC) 27 ITR 001] b) The shareholder does not own and cannot claim any portion of the property held by the company of which he is a shareholder.[ Bacha F. Guzdar Vs. CIT 27 ITR 1 SC] c) Salmon Vs. Salmon Co. Ltd.(1897), the company was a different legal person from the shareholders, and thus Mr. Salomon, as shareholder and creditor, was totally separate in law from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erseas company. Relying on the judgement of the coordinate bench of ITAT Mumbai bench in the case of ACIT Vs. Leena Gandhi Tiwari 96 ITR 384 the bench has taken a view that Where assessee was a signatory in a foreign bank account owned by her mother and she failed to disclose same while filing her income-tax return, however disclosure was made while filing return under section 153A, since such non-disclosure of a foreign asset was a bona fide mistake, penalty could not be imposed under section 43 of Black Money Act. Based on that set of facts he has submitted that since, the disclosure already made no addition can be made in the hands of the assessee in respect of the assets of the separate legal entity M/s. Agrasen Polymers FZE. Since the assessee has already adopted and considered the disclosure of his financial assets in return of income, therefore, revenue can very well charge the income when the assessee liquidate these investments and tax the assessee. Therefore, in the light of these facts and considering the fact that the assessee has made disclosure so as to comply the provision of Black Money Act. 23. The ld. AR of the assessee also submitted that the lower aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue. The ld. AR of the assessee submitted that all the investment made by that M/s. Agrasen Polymers FZE are duly disclosed in the financial statement and relevant records placed on record (APB 296, 435-436, 600- 601, 722-723, 885-888) and does not belong or benefit the assessee and therefore, that income is not in the nature of income of the assessee and is not an asset belonging to or pertaining to the assessee. 26. The ld. AR of the assessee further submitted that the ld. AO erred in adding a sum of Rs. 16,76,574/- being the amount of interest earned by the non resident company and that interest earned by that company cannot be taxed in the hands of the assessee. He further submitted that the ld. CIT(A) has not recorded his findings qua this issue in her order. To drive this contention the ld. AR of the assessee relied upon the financial statement as at 2017 2018 ( APB 601 723). Based on this evidence the ld. AR of the assessee submitted that addition to that extent required to quashed. 27. As regards the deposit of cash of Rs. 1,42,67,290/- the ld. AR of the assessee submitted the amount of credit which has already been considered and from that the amount has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. AR of the assessee relied upon the judgment in the case of CIT Vs. Harjeev Aggarwal 29 DLT 33, CIT Vs. Naresh Kumar Agarwal ITTA No. 112 of 2003 and B. R. Associates Private Limited (ITAT Delhi). Based on these he submitted that no reliance can be placed on such statement without any corroborative evidence. 31. To support the ground no. 1 13 the ld. AR of the assessee submitted that there is no income earned by the assessee which has been omitted to be disclosed in the return, nor is there any undisclosed asset located outside India which can be taxed in the hands of the assessee, therefore, the liability ascribed is wholly without jurisdiction as there exists no Scope of total undisclosed foreign income and asset in the hands of the assessee as per section 4 of the Act. He has further discussed the condition mentioned in that section so as make charge on the assessee. 32. Finally, the ld. AR of the assessee submitted that the asset in question belonged to the company and the assessee did not contribute, withdraw and / or benefit from any of the assets and in such circumstances no addition can be made in the case of the assessee. 33. On the other hand, the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in UAE/Turkey and in order to maintain good relationship and in order to maintain continuity of goods to these clients and credited money/commission in his UAE based bank account. Thus, it is clear that the assessee has received the commission income from the foreign source and parked that income in the company named M/s. Agrasen Polymers FZE. The stake in this company is 100 % as it is evident from the audit report, bank account opening form and he being the signatory to the account. This evidence clearly establish that the assessee is the beneficial owner of the income and asset of that company. In the course of the search the assessee has not co-operated to the revenue. As the revenue has credible information based on that the search was conducted and various incriminating material found suggesting the foreign asset and income. When these details found from the Mcbook and email account of the assessee has confirmed that he has income which is parked outside India and is very well invested outside and based on this fact he is very well covered under the provision of BMA. The fact that in that company the assessee is holding 100 % stake and it proves beyond doubt that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of excel files were recovered from the e-mail account and personal Macbook of the assessee. The print out of these excel sheets were seized as Exhibit Nos. 13 14. These excel files had details of UAE based bank accounts held in the name of M/s. Agrasen Polymers FZE. In addition, the excel files also contains details of foreign based investment products such as mutual funds, bonds etc. held by the said firm. 34.2 The excel files reproduced by the AO in the body of the assessment order contain the details of UAE based bank accounts and investment products located in various countries around the world such as Sri Lanka, Peru, Germany, Isle of Man etc. In these excel files, the assessee had maintained a meticulous and detailed account of all the transactions entered into by that firm in his foreign based bank accounts and investment products. The AO observed that these excel files clearly prove that the assessee making all the decisions relating to this firm s foreign bank accounts and investment products and therefore, the assessee was fully aware that he was holding foreign based financial assets and that he is also the signing authority in such accounts. The AO noted that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id amount of Rs. 32,49,375/-. 34.6. Apart from this, an addition of Rs. 9,69,34,026/- made by the AO on account of income earned on investment in OMI was also deleted by ld. CIT (A) by holding that no notional gain was ever credited in the bank account of the assessee. Therefore, the said addition was not found to sustainable and in this way out of Rs. 146,42,44,881/-, substantial additions were deleted by ld. CIT (A) and on the remaining additions, the assessee has preferred the present appeal. 34.7. At the outset, we noticed that additions in the present case were made under the provisions of Black Money (Undisclosed Foreign Income Assets) Imposition of Tax Act, 2015, by holding that assessee has earned income on account of undisclosed credits in the foreign bank accounts and investments made by the assessee outside India. In this regard it has been specifically pleaded by the assessee that the alleged information, admittedly came to the notice of the AO during the course of search proceedings conducted somewhere in the month of July, 2018 i.e. during the financial year 2018-19 which is relevant to assessment year 2019-20. Therefore, taxability, if any, can only be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2018-19 and 2019-20. Even otherwise, as per assessee, after coming to aware of legal compliances i.e. requirement of disclosures, even amended/revised his previous returns for assessment year 2017-18 as well and also made due disclosure about the bank accounts which he is a signatory on behalf of the company and his financial interest in that company. In this regard our attention was drawn specifically to paper book page 303 which is a copy of ITR acknowledgment filed under section 139(5) for assessment year 2017-18 and also at paper book pages 304-329 which is a copy of ITR Form filed by the appellant for the assessment year 2017-18, whereby in schedule FA (pg. 326 327) due disclosure has been made by the appellant in his return. 34.9. Now proceeding further, our attention was also drawn on paper book pages 376-377 which is a copy of revised return filed for the assessment year 2017-18 whereby due disclosure regarding the financial interest and details of signatory to the foreign bank account had been made by the appellant. Apart from this, appellant assessee had also filed copy of chart of dates of return filed original as well as revised which are at paper book page 844. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R of the assessee has preferred to raise the ground no 9 to be dealt prior to the other grounds so raised. Thus, we deal with the ground no. 9 first. GROUND NO. 9 THAT THE LD. CIT(A) ERRED IN NOT RECOGNIZING THAT THE COMPANY VIZ. AGRASEN POLYMERS FZE HAS SEPARATE LEGAL ENTITY AND THAT ALL THE FUNDS / INVESTMENTS ETC. BELONGED TO THE COMPANY ALONE. THEREFORE, THE TAXABILITY LEVIED IN THE HANDS OF THE APPELANTS IS WHOLLY UNJUST, ILLEGAL AND LIABLE TO BE QUASHED OUTRIGHTLY 38. The ld. AR of the assessee submitted that the ld. AO as well as ld. CIT(A) has erred in not recognizing that the company M/s. Agrasen Polymers FZE [ here in after referred as company ] is a separate legal entity. He has also submitted that all the funds / investment belonging to the company only and therefore, fastening the liability on the assessee ignoring this fact is just, illegal and the order passed ignoring this fact is required to annulled at this stage and no cognizance of the other finding be taken by the revenue. The revenue has not decided this important ground and has not addressed this issue as raised by the assessee while passing the order against it. As it is not disputed by the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assumption that they are the rights attributed to the business of individual citizens. 38.1. The ld. AR of the assessee further relying on the definition given in the Income Tax Act, 1961 and for all purposes of the assessment, a company is treated to be a separate person within the meaning of section 2(31) read with 2(17) of the Income Tax Act. In the case of assessee, company invested its own money and resources in the UAE to earn dividends, interest, gains, which cannot be taxed in the hands of the assessee in any manner. The taxability thereof in the hands of the assessee is not in consonance with the Black Money (Undisclosed Foreign Income and Asset) Imposition of Tax Act, 2015. More so when, there is no iota of evidence that any funds belonged to and/or pertained to the assessee in his individual capacity. Nor is there any evidence to show that any income of the assessee was taken abroad, or earned in his individual name and was omitted to be taxed in India. Therefore, the taxability of any amount in the hands of the assessee will be unconstitutional as without bringing any evidence so as to prove that the assessee has directly, or indirectly earned any income. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s Agrasen Polymers FZE where at point 1 (b), the factum of the company being duly registered and undertaking activities of trading Plastic and Nylon raw materials and also the fact that the company has invested its own resources to earn dividend/interest/gains has duly been mentioned. PB 296 is the copy of the Notes to Financial Statements whereby at point no. 4, Investments to the tune of AED 7,457,719 made by the Company are mentioned. PB 297 Copy of the Notes to Financial Statements for year ending 31st December 2015 whereby at point number 6, the bank accounts held by the company in its own name and also that of the two bank accounts held by the manager (Appellant) maintained for making investment and to take benefit of Leverage from banks. PB 297 298 is the copy of the Notes to Financial Statements of M/s Agrasen Polymers FZE whereby at point no. 8 (PB 297) point 12 (PB 298), the Financial Liabilities in the form of Trade and Other Payables to the tune of 9,976,302/- (18.6 Cr INR) is duly mentioned to be belonging to the company. AY 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Copy of Auditors Report, Director s Report the Financial Statements of M/s Agrasen Polymers FZE audited approved by M/s Ramesh Ramu Audit Associates, UAE on 13.05.2018 which was even submitted to the authorities of the Free Trade Zone of Ras Al Khaimah PB 591 is the copy of the Director s Report prepared by the directors of the company. PB592-593 is the independent Auditor s Report prepared by M/s Ramesh Ramu Audit Associates, UAE on 13.05.2018. PB 594 is the copy of Statement of Financial Position of M/s Agrasen Polymers FZE akin to a Balance Sheet. PB 595 is the Copy of the Statement of Comprehensive Income audited by the Auditors M/s Ramesh Ramu Audit Associates on 13.05.2018 whereby the Net Revenue, Expenses, Net Income/Loss is duly mentioned. PB 598 is the copy of notes to Financial Statements of M/s Agrasen Polymers FZE where at point 1 (b), the factum of the company being duly registered and undertaking activities of trading Plastic and Nylon raw materials and also the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /gains has duly been mentioned. PB 722 is the copy of the Notes to Financial Statements whereby at point no. 4, Investments to the tune of AED 3,195,075/- made by the Company are mentioned. PB 723 Copy of the Notes to Financial Statements for year ending 31st December 2018 whereby at point number 6, the bank accounts held by the company in its own name and also that of the two bank accounts held by the manager (Appellant) maintained for making investment and to take benefit of Leverage from banks, in fiduciary capacity on behalf of the company. PB 723 724 is the copy of the Notes to Financial Statements of M/s Agrasen Polymers FZE whereby at point no. 8 (PB 723) point 12 (PB 724), the Financial Liabilities in the form of Trade and Other Payables to the tune of 3,358,200/- is duly mentioned to be belonging to the company. 38.3. The ld. A/R argued that the concept of a separate legal entity has been a time old principle, which rather forms the backbone of legal jurisprudence. For ready reference reliance is placed on the following judicial precedent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in Ireland for one person to have such a variety of roles and still be a different legal entity from the company. LEE V LEE`S AIR FARMING LTD (1961) In this case, Mr. Lee formed his crop spraying business into a limited company in which he was director, shareholder and employee. When he was killed in a flying accident, his widow sought social welfare compensation from the State, arguing that Mr. Lee was a workman under the law. The State argued that Mr. Lee was self-employed and thus not covered by the legislation. The court held that Mr. Lee and the company he had formed were separate entities, and it was possible for Mr. Lee to be employed by Lee`s Air Farming. STATE TRADING CORPORATION OF INDIA LTD. AIR (1963) SC 1811 It was held that as soon as citizens form a company, the rights guaranteed to them by article 19(1)c has been exercised and no restraint has been placed on the right and no infringement of that right is made. Once a company or corporation is formed, the business which is carried on by the such company or corporation is the business of that company or corporation and is not the business of the citizens who get the company or corporation incorp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso situated outside India because of which, the company is a non-resident in India within the meaning of section 6 of the income tax act and none of the assets were liable to be taxed in India. Reference has been made to the CBDT circular dated 23.02.2017 bearing Circular No. 08/2017. Therefore, in no view of the manner taxability arise in the present case proving that the entire edifice of the case is wholly unjust and illegal. 38.8. Therefore, considering the facts and circumstances discussed above and various evidences produced by the assessee and respectfully following the case laws cited by the assessee, we are of the view that the non-resident foreign company M/s. Agrasen Polymers FZE based at UAE is a separate legal entity and all the funds/investments etc. belong to the company and no tax liability can be fastened on the assessee. Thus we allow this ground No. 9 of the assessee. GROUND NO. 14 THE ASSESSEE MADE DUE DISCLOSURES AS ALLOWABLE IN LAW, THAT TOO PRIOR TO THE ISSUANCE OF NOTICES UNDER THE BLACK MONEY (UFIA) IMPOSITION OF TAX ACT, 2015, PROVING THAT THE ENTIRE CASE IS BASED ON A PRE-CONCEIVED NOTION. 39. At the outset, the ld. A/R drawn our attention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort, assessee furnished the relevant documents as under : PB 303 is the copy of the ITR Acknowledgement of the ITR filed u/s 139(5) for AY 2017-18. PB 304-329 is the copy of the ITR Form filed by the Appellant for A.Y. 2017-18, whereby in schedule FA (Pg. 326, 327), due disclosure has been made by the Appellant in his return. PB 376 377 is the copy of the revised return filed for A.Y. 2017 18 whereby due disclosures regarding the Financial Interest Signing Authority had been made by the Appellant. PB 844 is the copy of chart of dates of return filed original and revised. The ld. A/R submitted that even if the Appellant wouldn t have taken above-mentioned steps, even then penalty / assessment / addition in the hands of the Appellant cannot be made solely because of mere non-disclosure. In this regard reliance is placed on the order of the ITAT Mumbai in the case of ACIT vs. Leena Gandhi Tiwari (2022) 96 ITR(T) 384 (Mumbai-Trib)[29.03.2022] as under: 4. We have heard the learned Departmental Representative, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, or not made, in the income tax return. So far as disclosure of an undisclosed foreign asset in the income return is concerned, it is relevant only for the purpose of penalty under section 43 and for no other purpose in the BMA. The position so far as undisclosed foreign income is concerned, the position is quite different inasmuch the definition of undisclosed foreign income is concerned, it is materially different- as provided under section 4(1)(a) and (b) of the BMA, but then right now we are not concerned with that aspect of the matter. The observations that we make in this order here, therefore, may not have any bearings, in view of the peculiarities of that definition of the 'undisclosed foreign income, particularly with reference to 'filing' of the return within the statutory time frame provided under the ITA and for a variety of reasons that we need not elaborate at this stage. Suffice to say that, in the present case, we are concerned with the nondisclosure of an undisclosed foreign asset, i.e. a foreign bank account, in the income tax return filed under section 139(1), and our observations, even with respect to discussions on possibility of one possible appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; and secondly that returns of income filed pursuant to notice under section 153-A (1)(a) would be construed to be returns under section 139. The use of non obstante clause in sub-section (1) of section 153-A i.e., use of the expression notwithstanding is indicative of the legislative intent that provisions of section 153-A(1) would have overriding effect over the provisions contained in sections 139, 147, 148, 149, 151 and 153 . It was in this backdrop that Their Lordships of Hon'ble jurisdictional High Court held that the original return which had been filed loses its originality and the subsequent return filed under section 153A of the said Act (which is in consequence to the search action under section 132) takes the place of the original return. In such a case, the return of income filed under section 153A(1) of the said Act, would be construed to be one filed under section 139(1) of the Act and the provisions of the said Act shall apply to the same accordingly . Viewed thus, it could possibly be said that the income tax return filed on 21st April 2018 under section 153A is the income tax return that obliterates the original income tax return filed under section 139(1), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 139(1) of the Act and the provisions of the said Act (Income-tax Act, 1961) will apply to the same accordingly On a conceptual note, there can be situations in which the opportunity to file the return under section 153A can indeed work to the advantage of the assessee, as apparently in this case, and even fresh claims may be made which have, as in the case of JSW Ltd (supra), meeting the judicial approval. Whatever be the consequence of this legal position, such conceptual notions, cannot negate the binding effect of the law laid down by the Hon'ble jurisdictional High Court. We may, however, add that the present discussion hereinbefore is in the light of the applicability of section 43 of the BMA, and the observations made by us must be construed only in this limited context. As regards such a non-disclosure for the earlier assessment years, which is what the learned Assessing Officer has harped upon vehemently in the impugned order, those were the assessment years that pertain to the period prior to the BMA coming into force, and, nothing, therefore, turns on those lapses, even if any, so far as the application of the provisions of section 43 of the BMA is concerned. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inherent discretion by the Assessing Officer, we find some guidance from Hon'ble Supreme Court's judgment in the case of Hindustan Steel (supra), which, inter alia, observes that ..penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. The penalty will not also be imposed merely because it is lawful to do so. Whether a penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose a penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute . Essentially, therefore, the overall conduct of the assessee, and materiality of the lapse as also its being in the nature of a technical or venial breach of law, is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of her late mothers choice, and a charity which has earned the prestigious Noble Peace Prize in 1999 for its humanitarian work. The degree of reverence for the feelings of the parents, as unambiguously shown by the mother, is undisputed. With this kind of detachment, and truly dealing with this as trust money in letter and in spirit, her belief that she was not required to disclose it as 'her' bank account, cannot be said to be lacking bona fides. While the amount held in the said account is donated to the charity, the entire tax liabilities in respect of the same have been paid by the legal representative of Dr Pramila Gandhi, and the matter has attained finality as such. It is also important to bear in mind the fact that the uncontroverted stand of the assessee is that the assessee, as also her husband, were signatories because Dr Pramila Gandhi was having health issues and was not in a position to travel. It was more of being a signatory for the operation of the bank account, rather than holding the bank account even in a fiduciary capacity, and, as such, the assessee's belief that she was not required to disclose this bank account cannot be said to be lacking bona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount, for an ulterior motive, from the tax authorities, and, in any case, admittedly the money does not belong to the assessee- as is the position accepted by the Assessing Officer himself. Viewed thus, on merits of assessee's conduct, it was not a fit case for the imposition of impugned penalty. It is also not a case of siphoning of unaccounted Indian wealth to the undisclosed foreign bank accounts, prevention of which was the noble cause for which the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 was enacted immediately upon the present Government coming to the power. Such well-intended stringent legislation as the BMA, enacted for the larger causes of public good and to check tax evaders, cannot be so interpreted as to cause undue hardship to the citizenry for such harmless technical or venial breaches of the law. Francis Bacon, in his classic essay 'Of Judicature' (The Works of Francis Bacon, Volume 1 (1984), has said that Judges must beware of hard constructions, and strained inferences, for there is no worse torture than the torture of laws: especially in case of laws penal, they ought to have care that that which was meant f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the persons who were signatories to the bank account, did not put that money to any use so much so that ultimately that money was donated to a charity of global repute. The assessee and her husband were signatories to the said bank account because, as is the uncontroverted stand of the assessee, the actual owner, late Dr Pramila Gandhi had health issues and she was not in a position to travel to Zurich when formalities in respect pf the account inherited by her were to be completed. The subsequent developments spanning over several decades unambiguously corroborate this stand of the assessee. When we objectively see all these factors in totality, the inescapable impression is that the assessee is certainly not from the category of persons who were sought to be checked by this piece of legislation. To use it in a case in which a person has not reported a bank account, which is a lawful inheritance from her father and which contains a small amount that is eventually donated by her to a medical charity of global repute, will surely be inappropriate- more so when the assessee has an explanation which the Assessing Officer himself has accepted. The path of idol worshipping the law, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f different reasons, we see no need to deal with the correctness of the path traversed by the learned CIT(A). As we part with the matter, we may take note of the useful flow of intelligence inputs, under the automatic exchange of information framework, about undisclosed assets abroad, and express satisfaction with the fact that the good work being done by the Government in this regard is yielding tangible results. Whereas the information obtained in this case clearly did not pertain to the kind of cases the tax administration is focussing to unearth, the fact remains that there is considerable progress in that direction- something which certainly seemed too optimistic a goal in not too distant a past. 39.2. We have considered the submissions of the ld. A/R supporting that due disclosure has been made by the assessee in the ITR filed, by furnishing the documents regarding financial interest (in fiduciary capacity) and signing authority. Taking into consideration the above position, we are of the view that the additions of transactions in the hands of the appellant which solely belong to the non-resident foreign company cannot be added in the hands of the Appellant. This ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence to Income Tax Act, 1961, wherein the said term has been defined in Explanation to Section 139(1) of the Income Tax Act, 1961. Explanation 4.-For the purposes of this section beneficial owner in respect of an asset means an individual who has provided, directly or indirectly, consideration for the asset for the immediate or future benefit, direct or indirect, of himself or any other person. That in the present case, the assets, i.e., the foreign bank accounts and foreign investments, were solely the assets of the foreign company and consideration for the said assets, i.e., the money flew from the bank account of the Foreign Company itself. The Foreign company deposited or made investments out of its own funds in the bank accounts in question. Before us, revenue does not bring any evidences expressly showing that the assessee has provided directly or indirectly, any consideration for the assets of the company. In fact revenue has not doubted the contention of the assessee that even the initial investment is not sourced by the assessee. Thus, the Appellant clearly does not fall in the ambit of the term beneficial owner as he is not the provider of the consideration o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the funds/investments etc. belong to the company and no tax liability can be fastened on the assessee, therefore, taking a consistent view of the matter, we are of the view that assessee appellant clearly does not fall in the ambit of the term beneficial owner as he is not the provider of the consideration of the asset. Thus we allow this ground No. 10 of the assessee. GROUND NO. 3 DIVIDEND OF RS. 2,34,26,056/- PERTAINS TO THE COMPANY AND DOES NOT BELONG OR BENEFIT THE APPELLANT THEREFORE CANNOT BE TAXED IN THE HANDS OF THE APPELLANT 41. As regards this ground, the ld. A/R of the assessee submitted that out of total credit taxed, a sum of Rs. 2,34,26,056/- pertains to the company. The AO and the ld. CIT (A) has not given specific finding even though the proof related to the dividend earned placed on record. The ld. A/R submitted that the non-resident foreign company viz. M/s. Agrasen Polymers FZE had made investments which are duly disclosed in its financial statements as under :- PB 296 is the copy of the Financial Statement of M/s Agrasen Polymers FZE for the period ending on 31st December 2015 audited approved M/s Ramesh Ramu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are of the view that the dividend of Rs. 2,34,26,056/- pertained to the non-resident company, cannot be taxed in the hands of the assessee. This ground No. 3 of the assessee is allowed. GROUND NO. 4 THE AMOUNT OF RS. 16,76,574/- PERTAINS TO THE INTEREST EARNED BY THE NON-RESIDENT COMPANY ALONE AND CANNOT BE TAXED IN THE HANDS OF THE APPELLANT 42. The ld. A/R of the assessee submitted that this amount formed part of total credits. The AO and the ld. CIT (A) has not given specific finding in this regard. The ld. A/R submitted that the interest earned from the bank has been credited in the bank account held by the non-resident company or on behalf of the company, can only be income of the company. The ld. A/R submitted that the non-resident foreign company viz. M/s. Agrasen Polymers FZE had earned the interest and the same has been duly disclosed in its financial statements as under :- PB 436 is the copy of the Financial Statement of M/s Agrasen Polymers FZE for the period ending on 31st December 2016 audited approved by M/s Ramesh Ramu Audit Associates, wherein the interest income has been disclosed. PB 601 is the copy of the Financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of withdrawals after meeting expense of M/s Agrasen Polymers FZE was categorically provided. (See PB 755) Pg. .. Synopsis is the Reconciliation chart extracted from the bank statement is being provided here for the sake of convenience The ld. AR of the assessee also submitted that the deposits and withdrawals pertain and belong to the company, M/s Agrasen Polymers FZE and not to the assessee even on that count the addition is not sustainable. 43.1. The contention of the assessee on this issue is examined by us. In Annexure 10 at page 775 the assessee submitted summary of cash deposits out of cash withdrawal after meeting the expenses. The assessee tried to reconcile the same with the total withdrawal versus the cash deposit. In this regard, the assessee has also furnished Synopsis of Reconciliation Chart extracted from the bank statement in support of its claim. These factual facts have not been controverted by revenue by placing any submission on the issue. Thus taking into consideration the facts and circumstances of the case and the corroborative evidences furnished by the assessee, we are of the view that the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sen Polimers FZE and it amounts to Rs. 19,68,01,923/-. As this amount forms part of total credit of Rs. 136,73,10,855/- same is not expressly discussed by the ld. AO and even the ld. CIT(A) has also not recorded his findings qua this issue. The ld. AR of the assessee submitted that at the time of opening the bank account of the non-resident foreign company viz. M/s. Agrasen Polymers FZE Rs. 18,56,28,608/- [ AED 10487493 at APB 236-237] were credited to account no. ending with 2010 and Rs. 1,11,73,315/- [ AED 4,99,460/- + 77,123/- APB 496 ] were transferred in the account number ending with 2026 in the year 2017. The ld. AR of the assessee further submitted that the company has taken some loan from their own sources, which was credited in the bank account of the company. The same was informed to the ld. CIT(A) which is evident from the report at APB 882 and there is no finding of the ld. CIT(A) on this issue. He further submitted that liability is out of the purview of the Black Money Act, 2015 proceedings and since the same is duly found recorded in the books of the firm the same is required to be excluded as loan cannot be classified as an asset or income. For this contention the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 802 5. 08.08.2018 175290 750,000 802 6. 29.08.2018 175291 1,550,000 802 7. 05.09.2018 175292 1,150,000 802 TOTAL 6,025,000 Thus, this amount, firstly and undisputedly was a loan (liability), which was taken by the non-resident foreign company and has been repaid back by the company alone. This unequivocally proves that the same did not belong or even pertain to the Appellant. It clearly belonged to the company and that too as a liability, therefore, by no stretch of imagination can be taxed in the hands of the Appellant. Secondly, even if it is presumed to be belonging to the Appellant, even then, it is a loan, viz. falling in the nature of a liability and not income or asset, in any manner. Therefore, the addition of Rs. 19,68,01,923/- is wholly illegal and liable to be quashed. 45.1. We have elaborately heard the parties on the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the search operation. CIT vs. Naresh Kumar Agarwal in ITTA No. 112 of 2003 dated 09.09.2014 wherein it has been held as under :- The circumstances under which a statement is recorded from an assessee, in the course of search and seizure, are not difficult to imagine. He is virtually put under pressure and is denied of access to external advice or opportunity to think independently. A battalion of officers, who hardly feel any limits on their power, pounce upon the assessee, as though he is a hardcore criminal. The nature of steps, taken during the course of search are sometimes frightening. Locks are broken, seats of sofas are mercilessly cut and opened. Every possible item is forcibly dissected. Even the pillows are not spared and their acts are backed by the powers of an investigating officer under Section 94 of Cr.P.C by operation of sub-section (13) of Section 132 of the Act. The objective may be genuine, and the exercise may be legal. However, the freedom of a citizen that transcends, even the Constitution cannot be treated as non- existent ..This, in turn, is referable to a time-tested right of an individual which is recognised under Artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submissions made before the lower authorities submitted that once the ld. CIT(A) has accepted the inter transfer of money itself establish the money of the firm and not of the assessee, the addition sustained by the ld. CIT(A) is required to be deleted based on those arguments. Considering our decision in respect of ground no. 9, supra, we allow the ground of the assessee in terms of our observation made in ground no. 9, the ground no. 7 is allowed. 48. Accordingly, we have disposed off all the 16 grounds of the assessee and in terms of these observations the appeal of assessee in BMA 01/JP/2022 stands allowed. 49. Coming to the appeal of the revenue, in BMA No. 02/JP/2022, the revenue has taken following grounds of the appeal: 1. The learned CIT Appeal has erred in law and on facts in granting relief to the taxpayer. 2. The learned CIT Appeal has erred in law and on facts in granting relief to the taxpayer (i) by scaling down the addition of Rupees 136.73 crores by Rupees 103.64 crores (ii) by deleting the addition of Rupees 9,01,93,937/- as double addition (iii) by deleting the addition of Rs 32,49,375/- holding the same to be contra entry (iv) by de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed asset located outside India as per Section 2 (11) of Black Money (Undisclosed Foreign Income And Assets) And Imposition Of Tax Act, 2015 means any asset, which is including a financial interest in any entity located outside India held by the assessee in his name or in respect of which he is a beneficial owner and he has no explanation about the source of such investment or the explanation given by him is not satisfactory, in the opinion of the assessing officer, then such income is required to be taxed according to the provisions of the law. Therefore, the assessee is the beneficial owner of the firm M/s. Agrasen Polymers FZE where is he owns 100 % stake in the company the learned assessing officer has correctly charged the above sum to the tax in accordance with the provisions of the BMA. i) Since, the ld. CIT(A) has given the relief without obtaining the details of the credit entry in the bank account, the order of the assessing officer should be sustained and that of the order of the ld. CIT(A) be set aside. Based on the above observations, the ld. D/R fervidly claimed that the order of the assessing officer should sustain. 51. Against the grounds taken by the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) whereby the claims of the Appellant were substantially accepted, however, additions to the tune of Rs. 23,74,26,443/- were sustained. H. For ready reference, the breakup of the additions so made, and the corresponding decision of the Ld. CIT(A) is tabulated as under: Sr. No. Particulars Addition made by AO Additions sustained by the CIT(A) Amount Deleted by the CIT(A) 1. Addition made on account of the credits in the following Bank Accounts of M/s Agrasen Polymers FZE and the accounts held by the Appellant in fiduciary capacity for the company during F.Y. 2015 16 and F.Y. 2018 19 INR 136,73,10,8555 INR 23,74,26,4433 INR 1,12,98,84,4122 AE47027122600185054 2017 Appellant Fiduciary Capacity AE41027122600185054 2028 Appellant Fiduciary Capacity AE92027116120182210 2010 Company AE61027116137182210 2026 Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the LD. Assessing Officer has verified the facts of the case and double additions have been made, such addition may kindly be deleted. (PB 878). 1.1.3. It is to be noted that the Ld. Assessing Officer preferring his appeal, himself had admitted, after due verification, that the said amount have been added doubly, which is evident from the remand report (PB 871). Therefore, the Ld. Assessing Officer / the Income Tax Department cannot blow-hot and cold at the same time. 1.1.4. Further, it is submitted that due evidences were submitted before the Ld. Assessing Officer as well as the Ld. CIT(A) and only thereafter the relief was granted. PB 97-160 Is the copy of reply dated 08.04.2021, whereby due explanation was given regarding the double additions (156-160) PB 767-770 Is the reconciled chart which shows a bird eye view of the double additions. Therefore, there remains no justifiable, legal basis to delete the rightful relief granted by the Ld. CIT(A). 1.2. Rs. 9,01,93,937/- IS A NOTIONAL ADDITION AS NO SUCH AMOUNT EXISTED. 1.2.1. That the said addition has not been dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letion of the said amount be upheld. 1.3. Rs. 32,49,375/- IS A CONTRA ENTRY ANY ADDITION THEREOF WOULD TANTAMOUNT TO A DOUBLE ADDITION WHICH IS WHOLLY ILLEGAL 1.3.1. That a telex transfer of USD 50000 was made on 18.05.2016 from bank account no. ending with 2028. However, due to some banking issue the same got cancelled and USD 49975 were credited in the account on the same date. It is similar to our banking transaction when the cheque gets bounced and the amount debited gets credited again in the account. It was similar transaction wherein there were both debit and credit entries and no new amount was credited. This again transaction was again done on 24/05/2016 wherein 50000 USD were transferred through telex. We therefore state that the amount of USD 49975 equaling to Rs. 32,46,375/- is the amount credited due to a contra entry, which had already been taken into account. Thus, adding the same amounts to Double Addition. 1.3.2. The Ld. Assessing Officer while making the addition had added this contra entry which is incorrect as the original credits has already been added and the cancellation of telex amount, resulting into refund of Rs. 32,49,375/- could not have been ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g with 20239 was an internal suspense account of the bank. PB 869 875 is the copy of the Remand Report dated 13.07.2022, wherein it is mentioned that the Ld. AO has verified the facts and that the FAB bank account no. ending with 2039 is an internal investment suspense account of the bank and which is used by the operations credit teams of the bank. (PB 871 - 872). PB 876 - 884 is the copy of the reply dated 18.07.2022, filed by the assessee before the ld. CIT(A) wherein the assessee has prayed that since the LD. AO has verified the facts and that the FAB bank account no. ending with 2039 is an internal investment suspense account of the bank and which is used by the operations credit teams of the bank, such addition may kindly be deleted. (PB 878 879). In light of the submissions made above, it is prayed that the Departmental appeals be dismissed, and the order of the Ld. CIT(A) be upheld. 52. The ld. A/R of the assessee in addition to the above written submission submitted that the assessee has only submitted the chart and reconciliation based on the information already on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and a chart explaining the contentions about the transfer entry between inter bank account, maturity / redemption of the investment/ FDRs. These evidences were mere representation of the evidences already on record the objection taken by the ld. AO in the remand report is of technical and not commented about the evidences that which are the additional evidences and why the same cannot be considered. Basically, he has not controverted the evidences submitted in the form of the chart and a reconciliation statement. The objections of the ld. AO to these evidences are thus general in nature and we do not find any error or mistake of the ld. CIT(A) in accepting and in fact considering the principles of natural justices these evidences are important on the contentions so raised and revenue has not objected to these chart and reconciliation so submitted by the assessee in the appellate proceeding before CIT(A) and therefore, we do not see any merits in this ground of appeal taken by the revenue and in terms of these observations the ground no. 3 raised by the revenue is dismissed. 55. The ground no. 4 raised by the revenue is that the power granted to ld. CIT(A) is in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the mutual fund at various countries didn't belong to the assessee but the same is related to M/s Agrasen Polymers FZE is not found acceptable in view of the fact that complete details of aforesaid company were neither submitted by the appellant during the assessment proceedings nor before me by contending the same to be a separate legal entity. The fact remains that the appellant has clearly admitted during the course of search proceedings that M/s Agrasen Polymers FZE had remained to be a mere paper company without conducting any actual business. It is observed that the appellant has not been able to explain the source of funds lying in his own bank account or in the bank account of the company either before the AO or before me in the appellate proceedings. I find that the appellant has failed to provide any material evidence for corroborating his contention that the funds lying in the foreign bank accounts of M/s Agrasen Polymers FZE are disclosed and accounted one. Infact the appellant has failed to provide any evidence that M/s Agrasen Polymers FZE was ever engaged in performing any actual business or fund generating activities. It is evident that the appellant had income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ically admitted that the contention of the assessee appears to be correct with regard to double addition as verified above. (xvil) Thus on perusal of the remand report of the AO wherein, on verification of the bank account statements of the appellant, he has categorically admitted that the amount of Rs. 103.64 Crores is purely a double addition made in the hands of the appellant due to inter-bank transfers, redemptions of FDRs and investments, therefore the addition of Rs. 103.64 Crores is not sustainable and is accordingly deleted. Addition of Rs. 9,01,93,937/- The ld. CIT(A) has also granted relief of Rs. 9,01,93,937/- being the amount of leverage granted by the bank. The relevant finding of the ld. CIT(A) on this issue is reiterated here in below : (xix) I have considered the submissions of the appellant, copy of remand report proceedings as well as the rejoinder comments to the report furnished by the Ld. AR of the appellant. I find that the contention of the appellant is correct as the amount of Rs. 9,01,93,937/- is the leverage facility provided by the bank. The same has also been confirmed in the email sent by the bank. Further the AO in the remand report has al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of leverage facility provided by the bank of USD 8,70,000/- has not been done by the appellant but the same has been done by the bank which has been confirmed in the Email written by the bank. Similarly notional gain of USD 620834/- cannot be added in the hands of the appellant as this is not actual gain received by the appellant but it is the increased value of investments as on 01.04.2021. Such notional gain has not been credited in the bank account of the appellant therefore no such addition can be made on assumption basis. The AO in the remand report also has clearly mentioned that it is the leverage facility provided by FAB bank and also it is notional gain on investments of USD. I, therefore, find that the addition of Rs. 9,69,34,026/- is not sustainable and is accordingly deleted. The grounds of appeal no. 5 4 are accordingly treated as allowed. We find no infirmity in the findings of the ld. CIT (A), we thus dismiss Ground no 4 of the revenue. 56. Now we take up ground No. 2 of the revenue s appeal the granting relief of the following amount granted by the ld. CIT(A) : (i) by scaling down the addition of Rupees 136.73 crores by Rupees 103.64 crores (ii) b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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