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2021 (10) TMI 158 - AT - Income TaxBlack money - Liability of the appellant to be assessed under the provisions of BMIT Act 2015 - denial of liability in the jurisdiction of the Assessing Officer to issue notice under black money - scope of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (in short BMIT Act ) - HELD THAT - As in light of the limited scope of an appeal under section 15(l)(b), the Grounds no. 1, 2 and 3 of assessee's appeal which are connected with disposal of objections by the AO in conformity with the rules of natural justice are found to be beyond the scope of an appeal filed under section 15(l)(b) of the BMIT Act and hence, cannot be adjudicated. Consequently, ground no. 1, 2, and 3 of the appeal raised by the assessee are found to be unconnected with determination of assessee's liability, beyond the scope of section 15(l)(b) of the Act and are dismissed. Liability of the assessee to be assessed under the BMIT Act, 2015 - HELD THAT - The ownership of these assets cannot be thrust upon the assessee. Hence, the denial of liability by the assessee at the jurisdictional stage also succeeds on this count too. BM Act provides u/s. 4(2) an exclusion for the assets which have been created out of the income assessed in India - As the settlement commission had rejected the assessee s plea and these matters proceedings are already separately going on.Hence by no stretch of imagination can lead to a conclusion that incomes are not been assessed as the Revenue has not dropped its plea/withdrawn its plea, that these incomes are not exigible to income tax. Once it is so held, these assets cannot again be the subject matter of black money proceedings at this stage, as it will amount to double prejudice to the assessee which is not sustainable in law. Various materials which have been referred by learned CIT(A) in his order rejecting the jurisdictional challenge have not been confronted to the assessee at the time of learned CIT(A) s order dismissing the jurisdictional challenge. We note that this is a very germane point as the principle of natural justice in this regard have been ignored by learned CIT(A). It is evident that the catena of documents which learned CIT(A) has referred are in fact lifted by him from the final order of the Assessing Officer to support his order. These were never confronted to the assessee. In this view of the matter order of CIT(A) suffers from jurisdictional infirmity in as much as it is contrary to the rules of natural justice. Moreover we note that assessee has duly raised a ground before ld CIT-A that there is violation of natural justice inasmuch as assessee s request for a personal hearing in this regard has been rejected by the AO. CIT(A) rejected this by holding that there is no such scope in section 15(1)b.We do not see the basis of such reasoning by Ld CIT(A),when assessee has duly submitted that the documents relied upon have not been confronted to the assessee.Ld CIT(A) in this regard has noted that these documents were not in appeal folder before him and he has simply accepted the AOs report that these documents are referred in AOs final order and the documents have been confronted to the assessee.This is palpable violation of natural justice and ld CIT(A) has fatally erred in rejecting the claim without himself examining the records.This proposition is duly supoerted by Honbe Supreme court decision in the case of Andaman Timber Industries 2015 (10) TMI 442 - SUPREME COURT Assessing Officer has referred to the names of certain bank accounts and Form-A obtained from banks for establishment of beneficial owners identity - As already been noted that in the aid of Swiss AML Act, the Swiss bankers Association has issued a Code of Conduct for Swiss Banks with regard to the exercise of due diligence (CDB Guidelines), wherein model Form A is prescribed for the declaration of identity of the beneficial owners. However, as clarified by the Swiss Federal Tax Administration, vide its letter dated 30.6.2015 it does not have application for matters of taxation. Hence, mention of assessee s name in this Form-A cannot be taken as any proof of assessee s ownership of this asset for tax purpose. These assets were already part of income tax proceedings up to preceding assessment year and that for present Assessment Year the assessee has still time to file income tax return. Hence, it is the claim of the assessee issue of notice is premature. This plea of the assessee has been rejected by the authorities below by holding that there is no such bar in the black money act. Definition of undisclosed asset in the back money act clearly provides that assets created out of income assessed in income tax already shall be excluded. Hence, when the revenue has already assessed these assets under income tax proceedings upto previous Assessment Year and for current assessment year time for filing the return has not expired, assessee s plea that the issue of notice is premature is tenable and accordingly we accept the same. The bar in the ACT is inbuilt inasmuch as it has been provided that assets out of income assessed to income tax shall be excluded from the purview of undisclosed asset in Black Money Act. Hence, it is abundantly clear that as per the scheme of the act, there cannot be a simultaneously proceedings on the same asset/income under Income Tax Act, 1961 as well as Black Money Act. The doctorine of double prejudice does come into play here. Above discussion amply prove that the assessee s challenge before the ld CITA to denial of liability in the jurisdiction of the Assessing Officer to issue notice under black money act deserves to succeed.
Issues Involved:
1. Jurisdictional challenge to the notice issued under section 10(1) of the Black Money Act (BMA). 2. Validity and existence of the offshore trust and the assessee’s role as a beneficiary. 3. Applicability of the Wealth Tax Appellate Tribunal (ITAT) order in the context of BMA. 4. Impact of prior Income Tax proceedings on the current BMA proceedings. 5. Retrospective applicability of the BMA. 6. Definition and interpretation of "beneficial owner" under BMA. 7. Compliance with the principles of natural justice. Issue-Wise Detailed Analysis: 1. Jurisdictional Challenge to the Notice: The assessee challenged the jurisdiction of the notice issued under section 10(1) of the BMA, arguing that the notice was premature since the time for filing the return had not expired. The CIT(A) dismissed this challenge based on the final assessment order without examining the original documents relied upon by the Assessing Officer (AO). The ITAT found this approach unsustainable, emphasizing that jurisdictional issues must be decided based on materials available at the time of issuing the notice, not on subsequent assessment orders. The ITAT also noted that the CIT(A) did not confront the assessee with the documents, violating principles of natural justice. 2. Validity and Existence of the Offshore Trust: The ITAT in wealth tax proceedings had previously determined that the assessee was a beneficiary of an offshore irrevocable discretionary trust settled by his non-resident uncle, Shri Pratap Malpani, and that the assessee was not a contributor to the trust. The CIT(A) dismissed this finding, arguing that the ITAT order was not available when the notice was issued. However, the ITAT held that the CIT(A) should have considered the ITAT's findings, as they were relevant and binding. The ITAT also rejected the Revenue's shifting stance on the trust's validity, invoking the legal maxim of approbate and reprobate. 3. Applicability of the ITAT Order in Wealth Tax Proceedings: The ITAT emphasized that its findings in the wealth tax proceedings, which included the determination that the assessee was not the sole beneficiary and that the trust structure could not be collapsed, were binding and relevant. The ITAT criticized the CIT(A) for not considering these findings and relying instead on the final assessment order, which was not available when the notice was issued. 4. Impact of Prior Income Tax Proceedings: The ITAT noted that the assets in question had been part of prior income tax proceedings, and the assessee had time to file the return for the current assessment year. The ITAT found the issue of the notice premature, as the definition of "undisclosed asset" in the BMA excludes assets created from income already assessed under the Income Tax Act. The ITAT held that simultaneous proceedings under both the Income Tax Act and the BMA would result in double prejudice to the assessee. 5. Retrospective Applicability of the BMA: The ITAT acknowledged the BMA's retrospective applicability, as provided in section 72(c), which deems assets acquired before the Act's commencement to have been acquired in the year the notice is issued. However, the ITAT emphasized that assets already assessed under the Income Tax Act should not be subject to the BMA, to avoid double taxation. 6. Definition and Interpretation of "Beneficial Owner": The ITAT rejected the Revenue's reliance on Form A declarations under Swiss anti-money laundering laws to establish the assessee as the beneficial owner. The ITAT noted that these declarations were for regulatory compliance and not for tax purposes. The ITAT also referred to the CBDT Circular No. 13 of 2015, which clarifies that the definition of "beneficial owner" under the Prevention of Money Laundering Act (PMLA) does not apply to the BMA. 7. Compliance with Principles of Natural Justice: The ITAT found that the CIT(A) violated principles of natural justice by not confronting the assessee with the documents relied upon in the final assessment order. The ITAT emphasized that the CIT(A) should have examined the original documents and provided the assessee an opportunity to respond. The ITAT also noted that the assessee's request for a personal hearing was unjustly denied. Conclusion: The ITAT allowed the assessee's appeal, holding that the jurisdictional challenge to the notice under the BMA was valid. The ITAT emphasized the need for the CIT(A) to consider the ITAT's findings in the wealth tax proceedings and to comply with principles of natural justice. The ITAT also highlighted the inapplicability of Form A declarations for tax purposes and the premature issuance of the notice under the BMA.
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