2018 (1) TMI 1650 - HC - Income Tax

Appeal admitted on substantial question of law - Reopening of assessment - Assessment of trust - whether impugned order of the Tribunal is bad in law being perverse and violative of principles of natural justice as the impugned order (i) wrongly/erroneously records and considers vital facts of the case (ii) does not adjudicate/consider the main arguments/claim/submission of the Appellant (iii) does not consider and give findings on a single case law cited and relied upon by the Appellant (iv) relies on information without disclosing the same to the Appellant under the guise of confidential information and (v) relies on additional evidence relied by the Revenue and uses the same against the Appellant in violation of Rule 18 and Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963? Whether in law and on the facts and circumstances of the case, reopening is bad in law as the Assessing Officer did not deal with the objections raised by the Appellant with respect to reopening of assessment? Whether in law and on the facts and circumstances of the case, the Tribunal erred in confirming the addition without appreciating that (i) the Revenue did not supply any evidence to show that the entire balance in Ambrunova Trust was deposited in assessment year 2002-03 itself (ii) the source of information was not authentic and the documents supplied were not authenticated, and thus the entire addition was made on surmises and conjecture, presumptions and the onus cast on the Revenue was not discharged in the light of the law laid down by the Hon'ble Supreme Court in CWT Vs. Estate of Late HMM Vikramsinhji of Gondal 2014 (5) TMI 286 - SUPREME COURT ? Whether in law and on the facts and circumstances of the case, income of discretionary trust can be taxed in the hands of the beneficiary only when the income of the trust is distributed and received by the beneficiary? Whether in law and on the facts and circumstances of the case, as the alleged trust and trustees are non resident and the income of the trust if any at all, is received outside India the same cannot be taxed in India as per Section 5(2) read with Section 6(4) of the Act?

Summary

Issues Involved:
1. Substantial questions of law raised in the appeal for Assessment Year 2002-03.

Analysis:

Issue 1: Impugned order of the Tribunal
The appellant raised concerns regarding the legality and fairness of the Tribunal's order. The substantial question of law revolved around whether the Tribunal's order was flawed and violated principles of natural justice. The appellant argued that the order wrongly considered vital facts, failed to address main arguments, ignored cited case law, relied on undisclosed information, and used additional evidence against the appellant in contravention of relevant rules.

Issue 2: Validity of reopening assessment
The appellant contested the validity of reopening the assessment, arguing that the Assessing Officer lacked sufficient grounds to believe that the appellant's income had escaped assessment. The appellant highlighted that the trust in question was discretionary, suggesting that income should be assessed at the trust level rather than the beneficiary level. Additionally, the lack of evidence showing benefits received by the appellant from the trust and the absence of proof regarding investments or deposits in the trust were emphasized.

Issue 3: Objections to reopening assessment
The appellant contended that the Assessing Officer failed to address the objections raised against the reopening of the assessment. This raised concerns about the procedural fairness and compliance with due process in the assessment process.

Issue 4: Confirmation of addition by the Tribunal
The appellant challenged the Tribunal's decision to confirm the addition of a specific amount, arguing that the revenue did not provide sufficient evidence to support the addition. The appellant claimed that the addition was based on speculation and assumptions, without meeting the burden of proof required by law, as established in relevant case law.

Issue 5: Taxation of income from discretionary trust
The question arose whether income from a discretionary trust could be taxed in the hands of the beneficiary only when the income was distributed and received by the beneficiary. This issue delved into the complexities of taxing income from discretionary trusts and the conditions under which such income could be attributed to beneficiaries.

Issue 6: Taxation of non-resident trust income
The appellant raised concerns about the taxation of income from a non-resident trust, arguing that if the trust and trustees were non-resident and the income was received outside India, it should not be subject to taxation in India. The appellant cited specific sections of the Income Tax Act to support this argument.

The judgment directed the registry to provide a copy of the order to the Tribunal for reference in the ongoing appeal proceedings. The respondent's counsel waived service, and the case was scheduled to be heard alongside other related matters.