9911796707
TMI Blog2025 (3) TMI 795X X X X Extracts X X X X X X X X Extracts X X X X ..... d convenience. First of all, we shall take appeal in BMA No.4/Kol/2022 A.Y. 2018-19. BMA No. 4/Kol/2022 A.Y.2018-19 2. Brief facts of the case are that the Assessee in the present case is an individual and a resident under the Act. A company by the name M/S. Anurag Intex (Chem) Pvt. Ltd. (AICPL), is engaged in the business of acting as commission agent/trading in iron ores of which the assessee is one of the director. The assessee derives income in the form of salary from the aforesaid company besides incomes under the head income from other sources like interest income etc. Proceedings under the BMA were commenced against the Assessee by issuing notice u/s. 10(1) of the Act dated 12.01.2018 in the light of the following information received by the Assessing Officer: (i) Information received on 8.5.2017 from Switzerland, Swiss Federal Tax Administration (FTA) under the "India- Switzerland Double Taxation Avoidance Agreement (DTAA) in the light of Exchange of Information clause of the DTAA. (ii) Information received on 7.6.2017 from Ministry of Finance, British Virgin Island, by virtue of the Agreement between the Government of the Republic of India and the Government of The B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts. 3.5. The nature of information received from Competent Authority of Panama, was as follows: a) Prauk Foundation was a foundation. Foundation is a type of entity which the Swiss law allows for the purpose of allocating assets to a particular purpose. Unlike companies, foundations do not have any share capital or shareholders. b) Assessee and his wife are 24% and 76% beneficiaries, respectively of Prauk Foundation. c) KII is the foundation council of Prauk Foundation. 3.6. It is the case of the Assessing Officer that the Assessee was the beneficial owner of the Bank Accounts in the name of NGTL and NCL on the basis of the information obtained from Swiss Federal Tax Administration (Swiss FTA). 3.7. In so far as BEL is concerned, it was the case of the AO that as per information received from Swiss FTA the Assessee was the beneficial owner of the bank account in the name of BEL. Besides the above, according to the AO, International Tax Authority of BVI, the assessee was the beneficial owner of BEL. As per the register of Directors and Shareholders, the assessee was the director of BEL from 01.01.2010 to 07.06.2010. He had controlling interest in the form of power of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already disclosed, there cannot be a charge of "undisclosed assets outside India" of which the assessee is a beneficial owner. b). The assessee was in Geneva from 15-5-2007 to 19.5.2007 where he met one Mr. Hui Li of China, who suggested to purchase the company NCL. Mr.Hui Li was known to the Assessee when he met him in china in 2006 when he had gone on a sales promotion tour to China. At his advise that Assessee's business prospects would improve, if he has a company in BVI and he can get exclusive agency for export of iron ore to china, the Assessee sent US $ 15000 on 8.7.2007 through remittances from HDFC Bank Account in the name of AICPL as share application money for purchse of shares in NCL in the name of the Assessee and his wife. Pge-34 of the paper book is a copy of the share application money ledger account in the books of AICPL which would show the share application money was paid for investment in shares of NCL in the name of the Assessee and his wife. There was a liberalized Scheme of RBI which permitted remittances upto US $ 25000 for business promotion purposes, without approval of RBI. Copy of the RBI circular permitting remittances without permission is at page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account. g). The AO in Paragraph 6.2.1 of his order did not dispute the fact that the Assessee invested US $ 15000 in NCL and that this transaction was recorded in the books of accounts of AICPL through disclosed bank accounts of the Assessee. The fact that the money was received back is also not disputed by the AO. He however concluded that Swiss FTA has mentioned Assessee as beneficiary of the Bank account and therefore the plea of the Assessee cannot be accepted. B.KRIMS INVESTMENTS INC:(KII). a). It is the case of the revenue based on minutes of the Board of Directors meeting held on 11.1.2010 (Page 274 of paper book) that the Assessee was a beneficial owner of the bank account of this company, apart from the information provided by the bank (Page 255 of the paper book) that the Assessee is the beneficial owner of the bank account in the name of KII. According to the assessee, the Board resolution cannot be true because on 11.1.2010, the assessee was not in Switzerland as per the endorsements in the passport, copies of which are given at pages 190 to 249 of the assessee's paper book. A summary of assessee's leaving India and coming back to India is placed before the benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was an intermediary of this company. A company by name Directorship Management Ltd. (DML) was the sole director of this company. The two directors of DML gave power of attorney to the Assessee to act as sole director of this company. This allegation of the AO is not acceptable because there is no evidence that the Assessee accepted to act as director of BEL on the strength of Power of Attorney allegedly given by directors of DML. Mr.Maurice Taylor is connected with DML. Therefore the Assessee's name has been used by the same group of people without the knowledge of the Assessee. b). At page 300 of the paper book is the information allegedly given by BNP Paribas Bank, that Assessee is beneficial owner of the bank account in the name of BEL. The date of this document is 3.3.2011 and the place is shown as Geneva. On this date the Assessee was not in Geneva and was in Singapore as would be evident from the endorsement in his passport. To corroborate, the details of date of assessee's departure and arrival from and out of India are placed on records. Therefore, the document is therefore not reliable piece of evidence. It is unauthenticated document and does not speak the truth. Pages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was a beneficial owner of the bank account and hence the same has to be treated as Undisclosed asset located outside India of the assessee. c). In Paragraph 6.2.5 of his order, the AO accepts the plea of the Assessee that physical presence of beneficiary is a must for opening bank account in Switzerland of BNP Paribas Bank and that on the dates claimed to be the dates of opening of bank account, the assessee was not present in Switzerland. The AO however was of the view that it is possible that the account would have been opened in a branch of PNP Paribas in India. Over and above that the AO again reiterated the fact that information received from a soverign authority cannot be disregarded and have to be held to have evidentiary value. 4. In paragraph 7 of his order, the AO has culled out the details of the bank account and the balances and has arrived at the Assessee's share of the bank account and worked out "Undisclosed assets of Assessee located outside India" at Rs. 2,42,08,810/- in the order passed under section 10(3) of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 dated 29.04.2020. 5. The aggrieved assessee preferred an appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hip in the two companies. The information sent by the Competent Authority of British Virgin Islands reveals that Shri Anurag Kejriwal along with his family members remained the beneficial owners and shareholder in the companies named Biscay Exports Ltd. and Krims Investment Inc. till their names were struck off from Register in 2013. There is no reason to doubt the information provided by the Competent Authority of British Virgin Islands. Appellant further submits that the documents/information has been received in the form of documents submitted by M/s. Mossack Fonseca & Company Associates, SA. Appellant says that this is a private party and hence questions the authenticity of these documents. However, appellant's objections are not justified because these documents have been received through the Competent Authority of British Virgin Islands Panama & Switzerland and as Government Authorities they are expected to show due diligence and only when they must be sure about the authenticity of these documents they must have sent these. Further, it is also important to note that appellant had approached same Tax / Law professional firm for incorporating the foreign companies and open ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent that Shri Anurag Kejriwai along with his wife Mrs. Uttara Kejriwal and his mother Smt. Tara Kejriwal have been the beneficial owners of the foreign bank accounts. They have not been able to prove the contrary. Although, they have denied being beneficial owners of their foreign bank accounts but the documents sent by the Competent Authority of Switzerland contradicts their claim. As per the established norms regarding the exchange of information between two sovereign Governments, it is expected that the concerned Competent Authority would do necessary verification and satisfy itself about the authenticity of the documents and only then pass on those documents / information to the other Competent Authority. Under the circumstances, it is apparent that Shri Anurag Kejriwal and his family members were beneficial owners of the foreign bank accounts. Therefore, it was expected of them to explain the sources of the deposits in these foreign bank accounts. They were also expected to reveal these foreign assets / income in their return of income with effect from AY; 2012-13. However, they have not done so. They should not have missed the opportunity of one time compliance window provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rother Mr. Dipak Varandmal Galani with the British Bank of the Middle East in the year 1998 and this bank was subsequently taken over by HSBC Bank. Assessee submitted that bank account was opened by his brother and allrights, interest in the said bank account completely belonged to his brother. Assessee's name was included as a second account holder out of love and affection. Further, his brother Dipak Varandmal Galani owned up the account and stated that account is opened by him in the year 1998 and his brother's name was included as a mark of respect but his brother didn't have any right in bank account. However, AO insisted that the assessee should produce evidences to prove that he was not the onwer of the fund/assets held in bank account. AO ignored the letter filed by assessee's brother and held the assessee as beneficiary of that bank account and made additions in his hands. Ld. CIT(A) confirmed the additions. However, when the matter reached ITAT, Mumbai, it was held that the bank account belongs to assessee's brother and this was made clear right from beginning by assessee's brother. To support his contentions, assessee had filed a letter and affidavit from his brother ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07 Share of Mr. Anurag Kejriwal Share of Mrs. Uttara Kejriwal Share of Mrs. Tara Kejriwal 88393/1C 293,489.40 1,90,20,167.55 95,10,083.78 95,10,083.78 - 88500/1A 439,523.78 2,84,84,217.62 1,42,42,108.81 1,42,42,108.81 - 87503/1Y 38,103.22 24,69,355.38 12,34,677.69 12,34,677.69 - 85877/1O 10,000.00 6,48,070.00 2,16,023.33 2,16,023.33 2,16,023.33 85877/5Y 274.72 17,803.78 5,934.59 5,934.59 5,934.59 Total 2,52,08,828.00 2,52,08,828 2,21,957.92 It appears that due to oversight, the AO has assessed Rs. 2,42,08,812.96 as undisclosed foreign assets whereas the correct amount should have been Rs. 2,52,08,828/-. Hence, I propose to enhance the assessment and this letter may be considered as notice u/s. 17(3) of the BMA, 2015 to present your case against the proposed enhancement. You are requested to send your reply on or before 08.08.2022 at 11.30 a.m." However, neither anybody attended in-person on the appointed date nor the assessee has filed any reply till date. Hence, it is presumed that assessee does not have anything to say in this matter. In view of the above discussion, the additions made by the AO are upheld in principle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed assets located outside India shall be the previous year when it comes to the notice of the assessing officer. Provisions of Section 10 of the Act deals with the assessment of the undisclosed foreign income and assets and the sum payable by the assessee. There is no provision of charging of any interest over and above the tax at the rate of 30% provided u/s 3 of the Act. Provisions of Section 5 (1) (ii) provides for exclusion of the income already charged to tax under the Income Tax Act from the value of the undisclosed assets located outside India and furnishing of the evidence by the assessee to the satisfaction of the assessing officer. Provisions of Section 4 (3) provide that the income included in the total undisclosed foreign income and assets under this act shall not farm part of the total income under the income tax Act. Thus it can be stated that provisions of Section 10 (1) of the Act provides that an assessing Officer can issue a notice in the year in which he discovers an undisclosed foreign asset or receives information about an undisclosed foreign asset/income. Provisions of Section 72 (C) which provides that a foreign asset shall be deemed to have been acquired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BNP Paribas, Geneva. As per information received, the assessee and his wife Mr. Uttarra Kejriwal were the beneficiaries of the first three bank accounts and the assessee, his wife and his mother Smt. Tara Kejriwal, were the beneficiaries of the fourth bank account. We note that ld. Assessing Officer received KYC documents, statement of accounts from the Bank. We observe from the facts before us that BEL and KII were companies incorporated in BVI and both these companies were stuck off the register on 01.05.2013 and 01.112013 respectively. The assessee was stated to be beneficial owner of BEL and KII and entity Directorship Management Limited (DML) was the sole Director of BEL. 8. Now the issue before us whether the assessee is beneficiary/beneficial owner of the above companies which he has not disclosed in the return of income and is liable for the proceeding under the Black Money Act, 2015. We have examined the information received from the Swiss FTA and the source of information to the Government providing information is the financial institution/bank. The copies of bank accounts as received from foreign Governments were available at pages no. 164,255, 300 and 318 of the paper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed shares in NCL in his name and his wife. It was also argued that there was a liberalized scheme of RBI which permitted remittances upto US $ 25,000, for business promotion purposes, without approval of RBI. It was argued that the assessee sent copies of his passport as well as that of his mother and wife and other KYC documents to enable complete the transactions. Mr. Hui Li promised to arrange for resolution of Board of Directors of NCL in due course, which was a requirement under the laws of BVI. Thereafter the assessee realized that he would not get exclusive agency for export of iron ore and, therefore, asked for refund of share application money, which was given on 21.04.2008 and the same is duly reflected in the books of account of the assessee. Copy of confirmation from the HDFC Bank regarding share application money having been remitted out of India is available at pages 178 to 182 of the paper book. The main argument of the assessee was that since he had not visited abroad during the period when the accounts in the name of these companies were opened in Geneva Bank and therefore, there was every possibility of fraudulently using his and his family members KYC documents t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the above provision it clearly says that there has to be an 'asset located outside India'. It can also be any financial interest of an assessee in any entity. These assets must be held in the name of the assessee. It can also be held by assessee as its beneficial owner. These assets can be charged to tax if assessee has no explanation about the source of investment in such asset or if the assessee provides an explanation which is in the opinion of the assessing officer is unsatisfactory then such asset can be charged to tax in the hands of an assessee Under the provisions of Section 3 of this act. 24. Undoubtedly, in this case there is an asset located outside India. It is in the form of a bank account number 806994 of a company Watergate advisors Ltd with Clariden Leu Ltd (Presently Credit Suisse) wherein $ 834,025.32 has been credited. Therefore, naturally the first text of having an asset located outside India is satisfied. The second condition whether this bank account as held by the assessee in his own name or not is not satisfied as it is held by the Watergate advisors Ltd a company who shareholder is Mr. Rajneesh Mehra, son of the assessee. Mr. Rajneesh Mehra is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fund which are transferred on 21st of December 2011 into the account of Watergate advisors Ltd. Assessee has explained with the help of memorandum of family understanding placed at page number 125 - 129 of the paper book that "Rajvin Ltd. was a Trust formed by the son of the Assessee, Shri Rajneesh Mehra. The said Trust was conceived vide the "Memorandum of Family Arrangement" (MOA) dated 01/11/2003 entered into between the family members of the Assessee, being himself, his wife and his two sons. The said MOA, which was signed by the Assessee as one of the parties, was duly laid out before the ld. A.O. for his perusal. Salient terms of The MOA's provides that Shri Rajneesh Mehra, an NRI, was to form a Trust in any tax free jurisdiction and the father of Sh. Rajneesh Mehra i.e. assessee would be made the nominal settler for the said Trust out of love and respect. No settling amount or any other sum was to be contributed by the Assessee in the said Trust. Purpose of the Trust would be the furtherance of education/vocation/technical skills and for the furtherance of research on Hindu scriptures. Total Corpus of the Trust would be USD 250,000, out of which USD 50,000 was to be cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears and that he had business relationship with Mr. Rajneesh Mehra and wherein he invested a total of about 9,50,000 USD in his Company "Rajvin Ltd." between the years 2005 to 2008. He also stated that out of the said investments so made, a total sum of USD 8,18,580 was received back on 30/03/2012 from Rajneesh Mehra, out of which USD 3,18,580 was received from the bank account No.806694 of Watergate Advisors Limited (WAL) and the balance USD 500,000 was received in the form of certain securities. Thus from the above statement it was demonstrated that there is no involvement of the assessee either in Rajvin Limited or in Watergate advisor private limited in providing any fund directly or indirectly in any of the above entities. 25. However, as the entity involved where the money is found credited, it needs to be examined whether the assessee has 'beneficial ownership on these companies/entities. As stated earlier The Black Money Act 2015 does not define the term 'beneficial ownership' and The Income Tax Act 1961 explanation 4 to Section 139 (1) defines the same. However, it is not necessary that to examine the provisions of The Black Money Act only the definition provided Under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare; or (ii) receive or participate in any dividend or other distribution in respect of such share.] 30. Section 2 (27) of The Companies Act says that (27) "control" shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner 31. From the above the criteria to be considered for an individual to be considered as a beneficial owner where such person either by himself or in conjunction with others holds the a) Specified beneficial interest; b) has the right to exercise or exercises significant influence or control. 32. Testing the case before us on the above parameters laid down by The Companies' Act it is apparent that there is no any arrangement, contract et cetera between Watergate advisors private limited or Mr. Rajneesh Mehra with the assessee. There is no demonstration by the revenue that assessee exercises any control as a shareholder of Watergate advisors limited over that company. There is no evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltimate effective control over a juridical person". 36. Testing the above facts with respect to this law, here there is no evidence that the consideration has been provided by the assessee of the sum deposited in the bank account of Watergate advisors Limited. Contrary to that assessee has shown that above funds have been transferred from Rajvin Limited, which is owned and controlled by the son of the assessee. Similar to the provisions of the Companies act here also it is not demonstrated that assessee enjoys and exercises any control the Watergate advisors Limited or the owner of the Watergate advisors Limited. 37. It is also required to be tested the test of beneficial ownership in the context of Prevention Of Money Laundering Act where reference is made to the ultimate ownership or control of the entity. Provisions of Rule 9(3) of The Prevention of Money Laundering (Maintenance of Records) Rules, 2005 provides that : In the case of a company, "the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical persons, has/have a controlling ownership interest or who exercise control through other means. Explanation- For th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ack Money Act. 41. In view of above facts, we hold that assessee does not have beneficial ownership of the amount deposited in Watergate advisors Limited, assessee also do not held that asset. The learned CIT - A has also held so giving the detailed reasons as reproduced above. The learned departmental representative could not show us any evidence that assessee is the owner or beneficial owner of the sum lying in the bank account of Watergate advisors Limited. The assessee has given an overwhelming evidence of the fact that money belong to the son of the assessee which were not at all controverted by the learned assessing officer. In view of this we hold that the learned CIT - A is correct in deleting the addition of Rs. 56,647,000/- in the hands of the assessee. Accordingly, we confirm the order of the learned CIT appeal and all the 4 grounds stated in the appeal of the learned assessing officer are dismissed. 42. Accordingly appeal of the learned AO in BMA 1/Del/2020 and cross objection of the assessee Co NO. 26/Del/2021 are dismissed 11. We further observe that the information/documents were supplied by the bank which were not even authenticated and how such unauthenticated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... records, which might be submitted under DTAA. We have a legislation in India called the Banker's Book Evidence Act 1891. The said Act provides for conditions to be satisfied while submitting bank records as evidence in a court of law. Section 4 of Banker's Book Evidence Act 1891 provides that Bank records should be accompanied by a certificate in accordance with section 2(8) and 2A of the Act. A copy of the bank records duly certified as above constitutes a "certified copy". A certified copy, as defined under Section 2(8) of the Act, of any entry of banker's book, shall be admissible prima facie as Evidence. The foreign banks would, under ordinary circumstances, not part with certified copies of bank statements, as that would violate the contract of secrecy with their customers of details of bank accounts, which they have to maintain. 13. The position would be clear if one peruses the Agreement between the Government of the Republic of India and the Government of The British Virgin Islands (BVI), for Exchange of Information relating to Taxes. Article 5(3) of the said Agreement provides as follows: ARTICLE 5 EXCHANGE OF INFORMATION UPON REQUEST 1 1) ................ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y academic in the present case because it has been categorically held that what is taxed, in the impugned assessments, is not the value of the undisclosed asset but undisclosed foreign income. Whatever be the connotations of 'beneficial owner' under the BMA, conclusions thus remain intact. Therefore the ratio laid down in the case of Jatinder Mehra (supra) remains intact. 17. In the case of Krishna Das Agarwal Vs. DDIT/ADIT(Inv) [2023] 150 taxmann.com 290 (Jaipur - Trib.), the ITAT Jaipur Bench has explained the law with regard to the approach to be adopted when the bank account is in the name of a corporate entity. The Assessee was a member of a group that incorporated a UAE-based company, Agrasen Polymers FZE. Following a search operation at Assessee's premises in July 2018, the Revenue made an assessment under Section 10(3) of the Black Money Act, leading to an addition of Rs. 146.42 Cr in assessee's income. This addition was based on alleged undisclosed credits in foreign bank accounts and investments outside India from Assessment Years (AYs) 2016-17 to 2019-20. The CIT(A), on appeal, deleted additions in part. On further appeal, the Tribunal held that that the UAE-com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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