2019 (9) TMI 806 - AT - Income Tax

Addition u/s 69A - deposits in foreign bank - No English translated version of all the documents relied upon by the revenue in foreign language - HELD THAT - The content of the paper book clearly states that the beneficial owner had deposited the monies into the foreign bank account wherein the assessee s name, along with other brothers, is also included as one of the beneficiaries in the said list. Revenue stated that the background information of Dryade Stiftung mentioning the purpose of starting the said foundation as Estate Planning and source of the deposited assets as Family Money . Bank statement of ABN Amro Bank maintained by Dryade Stiftung which admittedly contained the deposit entry on 17.4.2002 and the closing balance as on such date was USD 4387146.86, which is the subject matter of addition in the impugned assessment to the extent of assessee s share. We find that the entire contents are purported to be in German language as admitted by the ld Special Counsel for the Revenue and he tried to translate the contents reflected therein through his independent research made with the assistance of Google . It is not in dispute that the translated version of those contents were not made available either to the assessee or to the bench at or before the time of hearing. We find that the ld AR had tried to take shelter from the observation of the ld AO that Dryade Stiftung is a Discretionary Trust and that any monies could be sought to be taxed in the hands of the assessee, purported to be beneficiary, only in the event of any actual receipt of money from the said discretionary trust. We find that the ld Special Counsel for the Revenue on the contrary had argued that a Trust is different from Foundation and hence the argument of the ld AR that Dryade Stiftung is a Discretionary Trust cannot be appreciated Admittedly, the contents of various papers as detailed above in German language were produced by the ld AO to the assessee and hence it is the duty of the revenue to furnish the translated version of the said documents to the assessee for his effective rebuttal. We hold that all the relevant facts were not brought on record by both the parties in the instant case. It is just and fair that the English translated version of all the documents relied upon by the revenue need to be given to the assessee by the revenue in order to enable the assessee to understand the contents of the documents furnished by the revenue for his effective rebuttal. Considering the totality of facts and circumstances and the various elaborate averments made by the learned counsels from both the sides, we deem it fit and appropriate, in the interest of justice and fair play, to remand this appeal o the file of the ld AO for de novo adjudication - Appeals of the assessee are allowed for statistical purposes.

Summary

Issues Involved:
1. Validity of reopening of assessment.
2. Justification of addition of ?5,35,23,181/-.
3. Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961.

Detailed Analysis:

1. Validity of Reopening of Assessment:
- The assessee initially challenged the validity of reopening the assessment but later withdrew this challenge. The tribunal dismissed this issue as not pressed.

2. Justification of Addition of ?5,35,23,181/-:
- Background: The assessee, an individual, filed a return of income for AY 2003-04 declaring ?1,53,160/-. The return was processed under Section 143(1). Information was later received that the assessee was a beneficiary in Dryade Stiftung, an entity with LGT Treuhand AG, Liechtenstein, with transactions amounting to USD 4,387,146 during April 2002.
- Assessment Reopening: Based on this information, the assessment was reopened under Section 148. The AO issued notices under Sections 143(2) and 142(1) and a show cause notice regarding the undisclosed income.
- Assessee’s Response: The assessee denied knowledge of the trust and any benefits received. He submitted a letter from Fiduco Treuhand AG confirming no role in the creation or management of Dryade Stiftung and no receipt of benefits.
- AO’s Findings: The AO rejected the explanation, citing documents indicating the assessee as a beneficiary and the origin of assets as "family money." The AO concluded that the deposit represented undisclosed income from the assessee's business activities, allocating 25% of the deposit (?5,35,23,181/-) to the assessee.
- CIT(A)’s Decision: The CIT(A) upheld the AO’s decision, noting the bank documents' genuineness and the correct identification of the assessee. The CIT(A) referenced Section 166, allowing direct assessment of beneficiaries.
- Tribunal’s Observations: The tribunal noted that the AO and CIT(A) did not address the confirmation from Fiduco Treuhand AG. The tribunal emphasized the need for translated documents for a fair rebuttal by the assessee. The tribunal found that relevant facts were not fully brought on record and remanded the case to the AO for de novo adjudication, allowing both parties to present further evidence.

3. Imposition of Penalty under Section 271(1)(c):
- Since the quantum appeal was remanded for de novo adjudication, the penalty appeal was deemed premature and also remanded to the AO.

Conclusion:
- Both appeals were allowed for statistical purposes, with the quantum and penalty issues remanded to the AO for fresh adjudication after considering all relevant evidence and translations.