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2020 (7) TMI 504 - AT - Income TaxValidity of reopening of assessment u/s 147 - Income accrued in India - Assessee had shifted to the United States - period of stay in India - amount held by HSBC Private Bank, Geneva, Switzerland, in the name of Tharani Family Trust, of which the assessee was a beneficiary - whether the assessee was a resident in India in this year or not? - HELD THAT - The income tax return filed by the assessee, which was available at the time of recording the reasons for reopening the assessment, did not show the status of non-resident. The recording of reasons cannot thus be faulted. Whatever claim is made subsequently is required to be dealt with in the subsequent proceeding but it will not vitiate the validity of reasons recorded for reopening the assessment. As regards the decisions that reopening cannot be done for mere verifications, the present case is not a case which some general and vague information is received about the assessee, which may or may not lead to an income escaping assessment in the hands of the assessee, and which is thus required to be examined on merits, but of a very specific cogent information regarding a bank account, with complete details that is good enough for holding at least the prima facie view that income has escaped in the assessment in the hands of the assessee. The peak balance in the account, which has subsequently come to the knowledge of the Assessing Officer and on the basis of which reopening is done, is tens of thousand times more than annual income of the assessee. Assessee had shifted to the United States only just seven days before the beginning of the relevant previous year, and it will be too unrealistic an assumption that within these seven days plus the relevant financial year what the assessee could have earned this huge amount of around ₹ 200 crores, which, at the rate at which she did earn in India in the last year, would have taken her more than 11,500 years to earn. Even if one goes by the basis, though the material on record at the time of recording reasons did not at all indicate so, that the assessee was a non-resident in this assessment year, which is, going by the specific submissions of the assessee, was admittedly first year of her non-resident status, it was wholly unrealistic to assume that the money at her disposal in the Swiss Bank account reflected income earned outside India in such a short period of one year. Since the assessee did not disclose the status of non-resident in the income tax return filed by the assessee anyway, and the reasons recorded for reopening the assessment can only be on the basis of material on record or the information coming in the possession of the Assessing Officer- which indicated that the assessee was a resident in the relevant previous year, this aspect of the matter is wholly the sole and decisive factor leading to our conclusion about correctness of the reasons recorded for reopening the assessment. Addition in the hands of the assessee being an amount held by HSBC Private Bank, Geneva, Switzerland, in the name of Tharani Family Trust, of which the assessee was a beneficiary - HELD THAT - No reasonable person can accept the explanation of the assessee. The assessee is not a public personality like Mother Terresa that some unknown person, with complete anonymity, will settle a trust to give her US 4 million, and in any case, Cayman Islands is not known for philanthropists operating from there; if Cayman Islands is known for anything relevant, it is known for an atmosphere conducive to hiding unaccounted wealth and money laundering, and that does not advance the case of the assessee. While we have noted the claim of the assessee that she is a discretionary beneficiary of Tharani Family Trust, that fact does not find mention in the base note. As we have clearly analyzed above, the base note shows that the assessee was beneficial owner or beneficiary of GWU Investments Ltd. We may add that in the remand report filed by the Assessing Officer, there is a reference to some unsigned draft copy of the trust deed having been filed before him but neither this deed is authentic nor is it placed before us in the paper-book. The assessee has not submitted the trust deed or any related papers but merely referred to a somewhat tentative claim made in a letter between one Mahesh Tharani, apparently a relative of the assessee and the HSBC Private Bank (Suisse) SA- an organization with a globally established track record of hoodwinking tax authorities worldwide. It is wholly un-understandable as to how can assessee, on one hand, seek to treat a cleverly worded private letter from HSBC Private Bank (Suisse) SA as gospel truth, and, on the other hand, effectively stall, by declining consent waiver and by stating half truths- even if her statements have an element of truth, the Assessing Officer obtaining direct information from the same organization. There is no meeting ground in this approach. In any case, for the reasons set out above and as evident from the base note, the assessee is beneficial owner of GWU Investments Ltd, Cayman Islands. There is nothing to controvert this fact stated in the base note, and since the assessee has declined consent waiver in this case, the assessee cannot decline correctness of the details obtained from the HSBC Private Bank (Suisse) SA. As regards the question of income which can be brought to tax in the hands of the assessee being a non-resident and certain errors in computations on account of duplicity of entries etc, we have noted that the learned CIT(A) has given certain directions which we have reproduced below paragraph 18 of this order, and neither these directions are challenged nor any infirmities are shown therein. Obviously, therefore, there is no occasion, or even prayer, for interference in the same. We approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. The impugned addition in respect of assessee s account with HSBC Private Bank (Suisse) SA, Geneva, is thus confirmed. - Decided against assessee.
Issues Involved:
1. Validity of reassessment proceedings. 2. Justification of the addition of ?196,46,79,146 to the returned income. Detailed Analysis: 1. Validity of Reassessment Proceedings: Relevant Material Facts: The reassessment proceedings were initiated based on information received from the DIT(Inv.), Bangalore, indicating that the assessee had a bank account with HSBC Bank, Geneva, with a peak balance of USD 3,97,38,122 during the period 2005-06. The assessee, an elderly lady, had filed her income tax return on 29th July 2006, disclosing a returned income of ?1,70,800. The case was centralized with the present Assessing Officer by an order dated 20th December 2013 under section 127 of the Income Tax Act. The assessment was reopened on 31st October 2014 by issuing a notice under section 148. Submissions of the Parties: The assessee contended that being a non-resident, she was not required to disclose her foreign bank accounts or report any income outside India unless covered by specific deeming fiction, which was not the case here. She also claimed that she did not have a bank account with HSBC, Geneva, and that the information received was erroneous. The Department argued that the reopening was justified based on credible information about the assessee's foreign bank account, which was not disclosed in her return of income. Our Analysis: The Tribunal noted that the assessee had filed her income tax return as a resident and not as a non-resident. The base note from HSBC Private Bank, Geneva, showed the assessee as the beneficial owner of the account with a peak balance of USD 3,97,38,122. The Tribunal held that the Assessing Officer had valid reasons to believe that income had escaped assessment, justifying the reopening of the assessment. Conclusion: The Tribunal confirmed the validity of the reassessment proceedings, noting that the Assessing Officer had a prima facie reason to believe that income had escaped assessment based on credible information received. 2. Justification of the Addition of ?196,46,79,146: Relevant Material Facts: The addition was made based on the information that the assessee was the beneficial owner of an account with HSBC Private Bank, Geneva, holding a peak balance of USD 3,97,38,122. The assessee denied owning the account and claimed that she was only a discretionary beneficiary of the Tharani Family Trust, which held the account through GWU Investments Ltd. The assessee provided letters from HSBC Private Bank stating that she was not the holder or beneficial owner of any account with them. Submissions of the Parties: The assessee argued that as a non-resident, she was not liable to tax on income accruing or arising outside India. She also contended that as a discretionary beneficiary, she was not liable to tax until she received any distribution from the trust. The Department argued that the assessee was the beneficial owner of the account, and the funds represented unaccounted income sourced from India. Our Analysis: The Tribunal noted that the base note from HSBC Private Bank, Geneva, clearly showed the assessee as the beneficial owner of the account. The assessee's refusal to sign the consent waiver form to obtain detailed information from the bank was seen as an attempt to obstruct the investigation. The Tribunal held that the assessee's explanation was not credible and that the addition was justified based on the information available. Conclusion: The Tribunal confirmed the addition of ?196,46,79,146, holding that the assessee was the beneficial owner of the account with HSBC Private Bank, Geneva, and that the funds represented unaccounted income sourced from India. Outcome of the Appeal: The appeal was dismissed, and the reassessment proceedings and the addition of ?196,46,79,146 were upheld.
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