9911796707
TMI Blog2020 (7) TMI 504X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -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 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment thus reached finality as such. On 31st October 2014, however, this assessment was reopened by issuance of notice under section 148. The reasons recorded, for so reopening the assessment, are as follows: Reason for re-opening the assessment The case of THARANI RENU TIKAMDAS was centralized with the undersigned vide order u/s 127 of the IT Act- 1961 bearing No. 45/Centralization/CIT-IV/2013-14 dated 20.12.2013. Information has been received in respect of her from the office of DIT(Inv.), Bangalore." The information pertains to her having a bank account with HSBC Bank, Geneva bearing a number BUP_SIFIC_PER_ID-5090178411. From the said bank statement, it is seen that she is having a peak balance of USD 39738122 in the said account during the period 2005-06. The records of this office show that this amount has not been considered by her in her return of income and this income therefore has escaped assessment. This evidence has come into the possession of the undersigned; therefore, I have reason to believe that the income to the extent of at least USD 3,97,38,122 has escaped assessment within the. meaning of para (d) to the Explanation 2 below section 147 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee is a Non-Resident. As per the provisions of section 9(1) of the Income Tax Act 1961, the Non-Resident is chargeable to tax only on income which accrues or arises in India, hence, the income which accrues or arises out of India, the same is not chargeable to tax in the hands of the Assessee. In lieu of the above said facts & circumstances of the case, any income which accrues & arises out of India, which includes the income- deposited in HSBC Bank Geneva is not liable to be taxed in the hands of the Assessee as per the provisions of section 9(1) of the Income Tax Apt 1961. Finally we would like to submit that the assessee has filed its Return of Income for the above mentioned Assessment Year on 29th July 2006, which was enclosed in our letter dated 14/11/2014 as the returned income was below the threshold limit; hence no tax was liable to be paid. Thus, as the information received to you is incorrect (and) there is no reason why the case should be re-opened, hence, we request you to kindly drop the re-opening proceedings & oblige. 6. These objections, however, did not impress the Assessing Officer. He rejected the objections taken by the assessee and proceeded to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the reason for formation of belief must have rational connection with or bearing on formation of belief. Rational connection was said to postulate that there must be direct nexus and live link between material coming to the notice of the Assessing Officer and formation of belief that there is some escapement of income which was taxable in the hands of the assessee. That live link, according to the learned counsel, is missing in the facts of this case. Learned counsel then submits that in any event the assessee did not have a bank account with HSBC, Geneva. What is being referred to in the "base note", on the basis of which the assessment is being reopened, is not in respect of the assessee but admittedly GWU Investments Ltd, as has been factually found, and, in any case, it is not even a bank statement but statement of investment. It is contended that the Assessing Officer was clearly in error in assuming that the base note is in respect of a bank account. Learned counsel further submits that the assessee has categorically stated, on an affidavit,, that (a) the assessee never had any bank account with HSBC Private Bank, Geneva; (b) that the assessee has never been signatory t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in the case of PCIT Vs Manzil Dinesh Kumar Shah (406 ITR 326) wherein it has been held that a completed assessment cannot be reopened only for verification of information received by Assessing Officer from VAT Department relating to purchase alleged to have been made by assessee from hawala dealers. It is also pointed out that SLP against this judgment has been dismissed by Hon'ble Supreme Court in the judgment reported as PCIT Vs Manzil Dinesh Kumar Shah [2019] 101 taxmann.com 259 (SC). Learned counsel then invites our attention to the judgment of Hon'ble Rajasthan High Court, in the case of Mukesh Modi Vs DCIT [(2014) 366 ITR 418 (Raj)], wherein it is said to have been held that reassessment proceedings only to for his AO's own verification and to clear his doubts cannot be sustained in law. Learned counsel then refers to the decision of a coordinate bench of this Tribunal, in the case of Sonal Arpit Doshi Vs ITO (ITA No. 366/Ahd/16; order dated 21st October 2015), wherein it is held that the reassessment proceedings cannot be initiated merely for verification of certain transactions. Learned counsel then refers to the judgment of Hon'ble jurisdictional High Court, in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income has escaped assessment, and when one sees a person, with returned income of ₹ 1,70,800, being beneficial owner of ₹ 196,46,79,146 in a Swiss Bank, there is clearly good reason to believe that income has escaped assessment in the hands of the assessee. Learned Departmental Representative submits that there cannot be any reason for anyone, leave aside an entity of unknown people in a tax haven, leaving such a sum for her as a beneficiary. It is contended that based on the material on record, the Assessing Officer indeed had reasons to believe that the income has escaped assessment. Learned Departmental Representative then takes up these judgments and makes efforts to show how the facts of these cases are materially different from the facts of the case before us. He submits that unless the facts of these judicial precedents are in pari materia with the facts of the case before us, the conclusions arrived at in these cases cannot be straightaway applied to the present case. He submits that here is a case in which cogent and specific information has come to be in possession of the Assessing Officer, about the assessee being linked with Swiss Bank account holding huge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons for reopening the assessment are thus factually incorrect too. Whichever way we look at it, it is submitted, the initiation of reassessment proceedings are unsustainable in law. We are thus once again urged to quash the reassessment proceedings. Our analysis: 8. As we have given our careful consideration to the rival contentions and the material on record in the light of applicable legal position, we have also taken of the factual matrix of this case. Here is an assessee who files her return of income, disclosing a meagre income of ₹ 1,70,800, giving a Bangalore address and files the income tax return a ward which was meant for resident assessees. Going by the facts placed by the assessee on record, which are also set out in the paper-book, the Bangalore property was sold in the year ended March 2003, but yet income tax return continued to be filed at that address. It is not clear as to what was the basis of filing the income tax return at Bangalore but then let's leave it at that for the time being. The income tax return filed by the assessee, a copy of which is placed before us at page 62 of assessee's paper-book, does not at all tick the status as "non-resident", ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d it will have to be adjudicated as such in the outcome of the assessment proceedings. Nothing, therefore, turns on the facts not on record before the Assessing Officer as on the stage of recording the reasons of reopening the assessment. In any case, when the assessee herself is making an incorrect claim in the income tax return, she cannot claim that because the Assessing Officer believed the claim so made, and took initial steps on that basis, the Assessing Officer was in error in taking that path. Of course, all this does not affect the question of determination of her residential status on merits, but that is not the question as on now. The question is whether the Assessing Officer had reasons to believe income escaping the assessment, or not. It is also important to bear in mind the fact that at the stage of issuance of notice, the Assessing Officer is to only form a prima facie view. Explaining this principle, Hon'ble jurisdictional High Court, in the case of Multi Commodity Exchange of India Ltd Vs DCIT [(2018) 91 taxmann.com 265 (Bom )] [SLP dismissed as reported in (2019) 101 taxmann.com 13 (SC)], has observed that "We find that the power of the Assessing Officer to reope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. The facts of the decision cited on the line of reasoning that cases of non-residents cannot be reopened on the basis of existence of foreign bank account, in any event, are not in pari materia inasmuch as in none of these cases the assessee had filed the income tax return in the status of resident. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterfere in the matter. Challenge to addition of ₹ 196.46 crores to the returned income 12. We now turn to the question as to whether or not the learned CIT(A) was justified in upholding the addition in the hands of the assessee for ₹ 196,46,79,146, being an amount equivalent to US $ 3,97,38,122 at the relevant point of time, held by HSBC Private Bank, Geneva, Switzerland, in the name of Tharani Family Trust, of which the assessee was a beneficiary. The relevant material facts: 13. To adjudicate on this question, facts of the case, in detail, need to be taken note of. The assessee before us is an individual. The assessee had filed her income tax return, on 29th July 2006, disclosing an income of ₹ 1,70,800 for the relevant previous year, but subsequently the investigation wing of the income tax department, as noted in the earlier part of this order, received information that the assessee is having a bank account with HSBC Private Bank (Suisse) SA Geneva. Based on this information, a copy of which is placed before us at pages 3 to 12 of the assessee's paper-book, this case was reopened for fresh assessment on 30th October 2014. When the assessee was confronted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d used to be an underlying company of Tharani Family Trusts for Mrs Renu Tharani was a discretionary beneficiary The HSBC Bank in Geneva may have asked GWU Investments Ltd the proof of identity as well as proof of address of all the beneficiaries. The company may have provided my passport as proof of her identity and proof of address. As the address mentioned in the passport is that of Mumbai, hence the base note showed the account of GWU Investments Ltd along-with my Mumbai address. As the address does not maintain any bank account with HSBC Private Bank (Suisse) SA in Switzerland, the question of explaining any source of deposit does not arise. Without prejudice to above, the HSBC Private Bank (Suisse) SA also confirms the fact, in their letter dated 5th January 2015, that according to their best of knowledge, Tharani Family Trust (GWU Investments Limited) has been terminated and none of the assets deposited with HSC Bank Private Bank (Suisse) SA were distributed to Mrs Renu Tharani 14. A copy of the assessee affidavit dated 12th February 2015 and notarized at China, was also filed before the Assessing Officer. A copy of this affidavit was also placed before us at pages 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation) -1 (1), Room No. 117, Scindia House, Ballard Estate, N. M. Road, Mumbai-400 038 which is neither signed or sealed by the Income Tax Department alleging that the account number BLIP_SIFIC_PER_ID_5090178411 is in the name of GWU INVESTMENTS LTD wherein it is said that I am the beneficial owner or the beneficiary. To this I would like to solemnly affirm that I have not received any amount from the above said company, either as a beneficiary or as a beneficial owner. 8) The bank account stated in the base note belongs to GWU Investments Ltd and does not belong to me. The HSBC Bank in Geneva may have asked from the GWU Investments Ltd the proof of identity & proof of address of all the potential beneficiary's & beneficial owners. The company might have provided my passport as a proof of identity & proof of address. As the address mentioned in my Indian passport is that of Mumbai hence the base note states the same address. 9) I personally had a residential property in Bangalore which was sold by, me during the financial year ended 31.3.2003. The sale proceeds of this property were deposited into my account with Syndicate Bank in Bangalore. The question of depositing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Family Trust is open to question and the same remains unexplained. (c) The assessee has an address in India. As per the base note, the address is 1Prabhat, 28B RD Churchgate, Mumbai - 400 020 which is recorded as her legal address. Further, during the years under assessment, she was filing her return of income with ITO, Ward 9(1), Bangalore in which her address is NO. 7, Embassy Erose, Ulsoor Road, Bangalore, Karnataka' and '38/2, Berlie Street, Langford Road, Bangalore. Even though the returned income were not substantial, these facts show that she is having her interests in India. (d) Having interests and assets in India and not producing the details of an account that she ought to know creates a circumstance in which she is holding back the information that is prejudicial to her interests. 13. The assessee relied on the decision of the Hon'ble Supreme Court in the case of Commissioner of Wealth Tax Rajkot Vs. Estate of Late HMM Vikramsinhji of Gondal (Civil Appeal 2312 of 2007). However it must be understood that the main question before the Hon'ble Supreme Court in that case was whether the trusts settled in the UK were in the nature of specific trusts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Mumbai ITAT dismissed this ground of appeal raised by the assesse and held that discretionary trusts are created for the benefit of particular persons and those persons need not necessarily control the affairs of the trust. The bank account of the trust represents unaccounted money of the beneficiaries even though no benefit were transferred to them. 13.1 Considering the facts of the case and the decision of the Hon'ble Mumbai ITAT as cited above it can be concluded that the bank account of the trust represents unaccounted money of the assesse. Considering the fact that the assessee is an Indian having interests and assets in India that no details were given to show the source of money deposited in the HSBC account leads to the circumstances that this unaccounted money is sourced from India. In absence of anything contrary, the only logical conclusion that can be inferred is that that the amounts deposited are unaccounted deposits sourced from India and therefore taxable in India. This presumption is as per the provisions of section 114 of The Indian Evidence Act, 1872 which reads as follows: "Section 114. Court may presume existence of certain facts- The Court may pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... add the credit appearing in the books of account of the assesse if the latter offers and explanation regarding the nature and source of the creditor the explanation offered is not satisfactory. It placed no duty upon him to point to the source from which the money was received by the assessee. 13.4 The Hon'ble Supreme Court in the case of Sumati Dayal Vs. Commissioner of Income Tax (1995) 214 ITR 801 (SC) held that income tax proceedings are civil proceedings and the degree of proof required is to be judged by preponderance of probabilities. The Hon'ble Supreme Court, in the case of CIT v Durga Prasad More [1971] 82 ITR 540 (SC), has held that "the taxing authorities were not required to put on blinkers while looking at the documents produced before them they were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents....The apparent must be considered as real only it is shown that there are reasons to believe that the apparent is not the real and that too taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submission is shifting responsibility on Assessing Officer without furnishing any supplementary and relevant details. Vital facts (at cost of repetition) regarding the entities involved/persons are as under A. Smt. Renu Tharani is the beneficiary of Tharani Family Trust. B. Smt. Renu Tharani is the sole beneficiary C. Tharani Family Trust is the sole beneficiary of GWU Investments Ltd D. Smt. Ren Tharani holds interest in GWU Investments Ltd through Tharani Family Trust E. Income attributable directly or indirectly to GWU Investments Ltd or Tharani Family Trust pertains to Smt. Renu Tharani F. GWU Investments Ltd having address in Cayman Islands has investment managed as Shri Haresh Tharani, son of the appellant. The Assessing Officer has rebutted the submission of the assessee before him. Virtually the same submission on the aspect is reiterated before me. As Assessing Officer has effectively rebutted the same, backed by judicial precedent, I hold that the reasons recorded in rejecting various submissions in the assessment order. The submission before me highlights certain drawbacks in the finding of the Assessing Officer is in order. It can be seen that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying company of the Tharani Family Trust for which Mrs. Renu Tharani was a discretionary beneficiary. To the best of our knowledge, The Tharani Family Trust was terminated and none of the assets deposited with HSBC Private Bank (Suisse) SA were distributed to Mrs. Renu Tharani. This is a private letter. Again in the background of refusal to file consent waiver which can provide Assessing Officer information having backing of law weakens case of appellant also as to why the letter was obtained from Zurich branch is not explained. Thus, when appellant had to opportunity to cooperate with provision of law by filing consent waiver, by with authentic information would have come, the appellant furnishes letters purportedly by HSBC Bank, Geneva to her and HSBC Bank, Zurich to her son Shri Mahesh Tharani. The documents cannot be relied upon as to is merely letters addressed to persons and lacks statutory backing. A document with statutory backing again from foreign source with counters the above letters are discussed in next paragraph. 23. In course of hearing before me additional information received from foreign jurisdiction was provided to assessee. It contained settlement betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bai High Court dated 05.04.2016. This considers many issues involved starting from issue of notice under section 148 on Non- Resident. Assessment of information in similar case received from French authorities on bank account in HSBC, Geneva etc. It also deals with impact of refusal to sign consent waiver. These goes against the assessee. An extract from the order is reproduced below: In the normal course of human conduct if a person has nothing to hide and serious allegations/questions are being raised about the funds a person would make available the documents which would put to rest all questions which seem to arise in the mind of the Authorities. The conduct on the part of the Petitioner and her uncle in not being forthcoming, to our mind leads us to the conclusion that this is not a fit case where we should exercise our extra ordinary writ jurisdiction and/or interfere with the orders passed by the authorities under the Act. If a person has nothing to hide we believe the person would have cooperated in obtaining the Bank Statements. The same is seen in this case. It is more denials and shifting of responsibility to Assessing Officer in place of hard facts were the ones th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and unacceptable. 27. This is a case were the decision was to be made by Assessing Officer and the undersigned where information flow for taking decision appellant. It is more not inadequate form side of on producing case decisions, denials and providing alternate Correct decision comes when correct input is presented. The following questions were recurring in course of hearing and stood unanswered. (a) if Renu Tharani denies the ownership or any connection with the account in individual capacity or as a trustee or as a beneficiary in any form, has it been notified to HSBC Geneva? (b) Did she or the trust or any other person or beneficiary report income which accrued or arisen from the account after she came to notice the existence of account at least to Indian IT authorities or authorities in any other tax jurisdiction? (c) What is the status of the account now? Does the asset exist now? If not the appellant, who received the same? (d) Who operates the account now? Who has control over the account? If not the appellant, who has authorised the transactions in the account? None of them could be answered with documentary evidence. These are strong background fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This however is a matter of computation. Upon perusal of the base note it is seen that the entries are styled as if it is normal banking transaction with debit/credit entries titled "Mutual Fund", "Liquid assets", "Stocks", "Structured Products", "Advances and Loans", "Bonds", "Fiduciary Deposits" etc.. Nevertheless it is debit and credit entries. Since a finding is made that the income on the basis of information contained in the base note is assessable under Income Tax Act 1961, correct computation is necessary. The assessing officer can assess only such sums that fit into definition of sections 5(2) r.w 8 r.w 9 r.w 69,69A,69B, as applicable in the case, emanating from the base note. Any other computation will be incorrect. Further, according to appellant there is duplication over months within the year. 32. In view of discussion is para 31, the Assessing Officer is directed to assess only such sums, confining to information in base note and assessable under the provisions of Income Tax Act 1961 and subject to other finding in this order. For this the Assessing Officer may direct assessee to furnish detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is being taxed in respect of the corpus of the trust. Learned counsel thus submits that the impugned additions are, even on merits, wholly devoid of any substance. He, however, submits that all these aspects are wholly academic inasmuch as the reassessment itself is devoid of legally sustainable merits. He nevertheless files a note pointing out errors in the assessment order and the CIT(A)'s order which is reproduced below for ready reference: A. Analysis of the Assessment Order Para & Page no. AO‟s Observations Remarks Pg 1, Para 1 Reopening has been done on the basis of the information received that there are various individuals having Foreign Bank Account in HSBC Pvt. Bank which were not disclosed to Indian Taxation Department. This information cannot be a basis for reopening of Assessment in the case of Non-Resident (i) as there is no prohibition for non-resident to have a foreign bank account. (ii) there is no requirement for non-resident to disclose foreign bank account to Indian Taxation Department. Pg 1, Para 2 In this para it has been stated by the AO that according to the base note received, the assessee is holding an account in HSBC Pvt. Bank. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India. Thus, there was a categorical assertion that source of deposit in the bank account is not from India. Further, after receipt of the assessment order and in order to remove any apprehension the assessee filed another affidavit before the CIT(A) on which remand report was also called by the CIT(A) from the AO. In this affidavit, in para 4 it was categorically stated "4. That I never had any bank account with HSBC Bank, Geneva. 5. That I never been a signatory to any bank account with HSBC Bank, Geneva. 6. That I am neither a Director nor a Shareholder of GWU Investment Ltd. in para 4 the source of deposits made in HSBC Bank in Geneva has no source in India." Pg 8 Internal Para 4 AO has invoked provision of section 9 of the Act by making an allegation that there is nothing to suggest that amount in this account lies outside the purview of section 9 of the Act. This assertion by the AO is legally untenable. Section 9 is a deeming provision and onus is upon the AO to establish that the income falls within the deeming provision. Section 9 is a deeming provision which is applicable in respect of income accruing or arising: % (i) from any business connection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute to the fact that the assessee was not the settler of the trust and the trust was discretionary trust as per the information collected by the AO himself and forming part of the remand report. Pg 8, Bottom Para AO has stated that the account in HSBC Geneva was opened in Para Cayman Island which is a known tax heaven. The observations made by the AO nowhere substantiate the allegation. On the contrary, it supports the case of the assessee. The AO while making these observations lost track of the fact that assessee is a non-resident and income which accrues or arises or which is received or deemed to be received in India is only taxable in India. The AO admits that this account was opened outside India and the company was also out of India. Thus, the same cannot be subjected to tax in India. Pg 9, Para 13.1 AO in this para is making assumption by observing "in view of the facts and circumstances of the case and the discussion as above it can be presumed that source of deposits in the HSBC, Geneva account of the assessee is from India and hence, is taxable in India" This statement by the AO in this para confirms the fact that he does not have any evidence o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e won jackpots at number of times at the Race Course at Hyderabad and Bangalore. Thus, the Court has applied the Principal of Human Probability. If we apply this principle here it is not probable that a person who is a non-resident all alone and has a bank account in Geneva, such deposit would have arisen from income earned from a country i.e. in India with it, he does not have any business connection or any source of income which may indicate that he would have earned such income from India. Thus, the probability of earning income from India in the absence of any source in India is humanly not possible. B. Analysis of the CIT(A) Order CIT (A) order Page 5, Para 11 The CIT(A) has rejected the contention of reopening by stating that information was received from authentic source and at the time of reopening the residential status of the assessee was not known. The CIT(A) has arbitrarily rejected the contention of the assessee without even addressing the issue raised by the assessee was not known. the fact that the status of the assessee is that of non-resident. This status is admitted by the AO in the Assessment Order. The CIT(A) has ignored the aspect that once the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here was no such condition and there was no column in the tax return to disclose foreign assets even by a resident. It was only Finance Act, 2012 which inserted 4th Proviso to section 139(1) and consequent thereto tax returns form were amended providing a schedule for disclosure of foreign assets by resident. This requirement was applicable only for resident as is evident from the instructions attached to the return form whereby it has been stated "a resident having any assets (including financial interest in any entity) located outside India or signing authority in any account located outside India shall fill out schedule FA (Foreign Assets). Pg 8 Para 17 CIT(A) Order CIT(A) has held that undoubtedly the appellant is non-resident and income taxable is governed by section 5(2) r.w.s. 9. The CIT(A) has held that it is impossible to hold that asset/income under consideration does not fall in jurisdiction of Indian Tax Authorities. Assessee is a citizen of Indian and the address provided for the foreign asset is located in India. The findings of the CIT(A) are contrary to the provision of the law and hence, legally untenable. Under the Indian Tax Law, taxability is not on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is placed on the following decisions: I.Shri Harshad Ramaniklal Mehta Versus DCIT in ITA No. 7307/Mum/2011 dated 04.09.2019 It may be relevant to point out that in this case there were four beneficiaries of the trust out of which two were non-resident. The proceeding against two persons were dropped by the AO itself as these two persons were nonresidents and the dispute before the ITAT was with respect to resident only. This fact has been captured in para 9 of the Order which is a Synopsis filed by the Revenue in the course of the hearing before the bench. 2. Deepak B Shah and Kunal N Shah Versus ACIT in ITA NO. 6065/Mum/2014 dated 30.10.2018 3. Shri Dwarka Prasad Agarwal Versus ITO in ITA No. 4591/Mum/2016 dated 05.10.2017 Accordingly, even if the assessee was beneficiary no income can be imputed to her till the time the same is distributed. In the present case, there is no dispute to the fact that the assessee was not the settler of the trust and the trust was discretionary trust as per the information collected by the AO himself and forming part of the remand report. Pg 12 to 13, Para 22 The CIT(A) has held that the assessee has not given the consent waiver form. It is sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e beneficiary of assets/income under the consideration of AO without authorization of appellant. * The CIT(A) again in this para has upheld the order of the AO on the reasoning that assessee is a citizen of India and has provided Indian Address. This CIT(A) has himself admitted that the assessee is not the settler of the trust or Shareholder or Director of GWU Investment Ltd.. It was submitted that in order to remove any apprehension the assessee filed another affidavit before the CIT(A) on which remand report was also called by the CIT(A) from the AO. In this affidavit, in para 4 it was categorically stated "4. That I never had any bank account with HSBC Bank, Geneva. 5. That I never been a signatory to any bank account with HSBC Bank, Geneva. 6. That I am neither a Director nor a Shareholder of GWU investment Ltd. in para 4 the source of deposits made in HSBC Bank in Geneva has no source in India." As discussed hereinabove under the Indian Tax Law income is chargeable to tax on the basis of the residential status and not on the basis of citizenship and the address. Pg 14, Para 27 The CIT(A) has rejected the affidavit filed to rebut the allegation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney at her disposal or for her benefit, but, as a beneficiary, she is expected to know the related facts to which she alone knows. The fact of the Swiss Bank accounts being operated, through conduit companies based in tax havens, is a common knowledge, and, seen in this light, if the assessee has an account for her benefit in a Swiss Bank- whether she operates her directly or through a web of proxies, the natural presumption is that this is her money which she must account for. It is also pointed out that within months of her changing the residential status, this account was opened and the credits were afforded. Where did this money come from? Obviously, in such a short span of time, this kind of huge wealth of several millions of dollars cannot be earned by her abroad, but then if she has shown that kind of earning anywhere to any tax authorities, to that extent, the balance in Swiss account can be treated as explained. He submits that all these technicalities, which are sought to be raised by the learned counsel, are of no use and the judicial precedents, rendered in altogether different context, cannot be used to defend the unaccounted wealth stashed away in assessee's account w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the HSBC Private Bank (Suisse) SA was received by the Government of India. That will also refresh memories, and certain undisputed facts, about the "HSBC Private Bank Geneva scandal" as it is often referred to. In 2006, after a whistle-blower named Herve Falciani, an employee of HSBC Private Bank (Suisse) SA, Geneva, walked out with information on thousands of accounts, involving wealth hidden from taxmen, the bank came under the glare of multiple regulators for helping wealthy individuals hide millions. The employee fled to France, and in June 2011, the French government had shared the data on Swiss bank accounts with countries such as India, the US, UK, Canada and Australia". That's how Government of India got the information about a large number of cases and this HSBC Bank scandal, involving unaccounted monies stashed away in Swiss Bank accounts, was also subject matter of Special Investigation Team set up under the chairmanship of former Supreme Court judge, Hon'ble Justice M B Shah. The following BBC report about Herve Falciani, former HSBC Geneva employee, can perhaps throw some more light on the backdrop: Revelations that HSBC, one of the world's largest banks, helped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o sell on to third parties. Herve Falciani transferred to HSBC Private Bank (Suisse) in 2006, having joined the company in his native Monaco six years earlier He denies any romantic connection between the pair, and says Ms Mikhael's involvement came about after men claiming to be agents of the Israeli intelligence agency Mossad instructed him to visit Lebanese banks and inform them of security breaches at HSBC Private Bank in order to dissuade clients from using clandestine money to fund terrorist activity. The pair set up meetings with four Lebanese bank managers, and while Herve Falciani used a pseudonym, Georgina Mikhael used her real name, and was promptly put under surveillance by Swiss authorities. She was subsequently questioned by police and gave Mr Falciani up, precipitating his arrest and flight from the country. Upon arrival in France, he downloaded confidential data on HSBC Private Bank accounts from remote servers and passed on five disks to French authorities, who could not send him back to Switzerland because of laws preventing the extradition of French citizens. 'Speak the truth' The French government, through then-Finance Minister Chris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t;unearthing black money is an important issue" for them. Experts estimate that Indians hold $500bn (£297bn) in overseas tax havens. In June, India set up a special task force to find "black money", in one of the first decisions taken by the new Prime Minister, Narendra Modi. In October, the government gave a list of 627 names of Indians suspected of concealing wealth kept in HSBC from income tax authorities to the Supreme Court. The top court forwarded the list to the special investigation team (SIT) which is inquiring into the issue of illegal funds. On Monday, The Indian Express newspaper revealed the names of 1,195 Indians who held bank accounts with a total balance of $4bn in Switzerland with HSBC between 2006 and 2007. The list includes names of some politicians and powerful businessmen. Mr Jaitley said on Monday that all names will be investigated, but he also cautioned that some accounts might be legitimate. "Some new names have been revealed whose veracity would be checked by authorities," he said. The Indian names are part of a global list of account holders in HSBC's Swiss private banking arm and their balances for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ldberg of the Department of Justice's Tax Division. "Banks, asset managers and other financial firms enable such crimes - and we will hold these institutions to account, right along with the taxpayers that use them to facilitate and disguise illegal activities." "Financial institutions that conspire with U.S. accountholders to hide income in undeclared bank accounts abroad, to avoid being held accountable for tax obligations and augment corporate profit, face substantial criminal and civil penalties for their illicit conduct," said U. S. Attorney Fajardo Orshan for the Southern District of Florida. "In this case, HSBC Switzerland will pay a total civil and criminal fine of more than $192 million, to include a civil forfeiture of $71.8 million, for proceeds illegally derived from their conduct. We remain committed to the investigation and prosecution of individuals who evade their taxes and the financial institutions that assist them in doing so." "Taxpayers and financial institutions each have the most basic responsibilities to pay taxes and report suspicious activity regarding financial transactions. When financial institutions devise a massive tax evasion scheme and actually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation to the Tax Division, and extensively cooperated in a series of investigations and prosecutions, as well as implemented remedial measures to protect against the use of its services for tax evasion in the future. According to court documents filed as part of the DPA, the bank assisted U.S. clients in concealing their offshore assets and income from U.S. taxing authorities. To conceal its clients' assets and income from the IRS, HSBC Switzerland employed a variety of methods, including relying on Swiss bank secrecy to prevent disclosure to U.S. authorities, using code-name and numbered accounts and hold-mail agreements, and maintaining accounts in the names of nominee entities established in tax haven jurisdictions, such as the British Virgin Islands, Liechtenstein, and Panama, that concealed the client's beneficial ownership of the accounts. In an effort to attract new U.S. clients, and maintain existing relationships with U.S. clients, HSBC Switzerland bankers took trips to the United States. Between 2005 and 2007, at least four HSBC Switzerland bankers traveled to the United States to meet at least 25 different clients. One banker also attended Design Miami, a major an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anage complex family wealth scenarios. They help to protect your family business and manage your wealth privately and independently, whilst providing continuity, preserving capital and helping family members enjoy financial benefits across generations. Our trusts and other solutions are designed to suit your particular needs and ambitions, giving you a global structure for managing your wealth. Choosing a trustee Determining who will administer your structure is as important as your succession plan and the decision to create the structure itself. Trustees ultimately accept personal responsibility and legal liability for the financial welfare of the trust fund, so selecting a responsible trustee to protect, manage and distribute the assets is a key decision that will have lasting implications. It is essential to have a trustee with professional legal knowledge and financial expertise, as the set up may involve generations of work, detailed record-keeping and co-ordination with lawyers, accountants and other advisers. Trusts and other structures involve complex management, in addition to often challenging financial and investment decisions. Basics of a trust A trust is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his stage, take note of the fact that the assessee had, in response to a specific request from the Assessing Officer, declined to sign 'consent waiver' so as to enable the income tax department to obtain all the necessary details from the HSBC Private Bank (Suisse) SA, Geneva. This aspect of the matter is clear from the extracts from the assessee's submissions dated 25th February 2015 filed by the Assessing Officer, a copy of which is placed at pages 47 (@ p 48) onwards in the paper-book filed by the assessee, as follows: ……..we would like to submit that the letter from HSBC Private Bank dated 5th January 2015 categorically states that the assessee does not have any account in HSBC Private Bank (Suisse) SA in Switzerland, hence question of providing you with CD of HSBC Bank account statement does not arise. Also, the question of signing the consent waiver does not arise as the assessee does not have any account in HSBC Private Bank (Suisse) SA…………. [Emphasis, by underlining, supplied by us now] 30. The net effect of not signing the consent waiver form is that the Assessing Officer is deprived of the opportunity to seek relevant informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, and thus deeper probe by the income tax department have been successfully scuttled. C: Hon'ble Bombay High Court on the assessee's declining such consent waivers: 34. While on this aspect of the matter, it may also be useful to refer to a judgment of Hon'ble jurisdictional High Court on materially similar facts, wherein Their Lordships has disapproved and deprecated the conduct of the assessee in not signing the consent waiver form, in the judgment reported as Soignee R Kothari Vs DCIT [(2016) 386 ITR 466 (Bom)]. That was also a case in which the assessee, originally a resident in India, had migrated to the USA. The information by way of a 'base note' was received from the French Government, under the DTAA mechanism- as in this case, about existence of her bank account with the same bank, i.e. HSBC Private Bank (Suisse) SA, Geneva. In this case, around US $ 45 million were found to in the said bank account around the same time i.e. 2006, and assessee was one of the beneficiaries therein. It was in this backdrop that the assessment was sought to be reopened which was challenged in the writ petition before Hon'ble Bombay High Court. During the course of hearing of the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt and only after we expressed our final view that we are dismissing the Petition, an attempt is made to withdraw the petition. This cannot be permitted". That was a case in which even after the assessee was willing to sign a modified consent waiver form, Their Lordship disapproved the conduct of the assessee in no uncertain terms. Here is a case, in which the assessee has declined to sign the consent waiver form outright, and taken a stand that the question of signing the consent waiver form does not arise. Neither such a conduct can be appreciated, nor anyone with such a conduct merits any leniency. 35. On the one hand thus, the assessee has not cooperated with the income tax authorities in obtaining the relevant information from HSBC Private Bank (Suisse) SA, Geneva, or rather obstructed the flow of full, complete and correct information from the said bank by not waiving her rights to protect privacy for transactions with the bank, and, on the other hand, the assessee has complained that the income tax authorities have not been able to find relevant information. Obviously, these things cannot go together. D: Justification for adverse inferences when consent waivers are decli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naissance (date of birth) : 10-05-1934 Sexe (sex) : F Lieu de naissance (place of birth) : Hyderabad/ Pakistan Adresses de la personne physique (Addresses of the natural person) Mrs Renu Tikamdas Tharani 1, Prabhat, 28, B Road, Churchgate Mumbai 400 020 (Legal address) Profils client lies a la personne (Customer profiles linked to the person) Nom du profil client (customer profile name): GWU Investments Limited Code profil client (customer profile code): 5091414771 Date création du proifil (creation date of profile): 26-07-2004 Date de clôture du profil (closure date of profile): non référence (no reference) Statut de profil (profile status): Actif (Active) nature de profil (profile nature): Nominatif (nominative, or nominal) Type de client (Profile type); société domiciliée (domiciled company) Lien personne/ profil client (Person / customer profile link): Beneficial owner Détails du lien (link details); BENEFICIAL OWNERSHIP/ BENEFICIARY Info Signatures (Signature Information): non référence (no reference) Correspondance (Correspondence): envoy&eacu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nerships", as very mildly put in a peer review report- as stated in Rahul Navin's "Information Exchange and Tax Transparency: Tackling Global Tax Evasion and Avoidance" (ISBN-10: 9350358891). 41. It must also be a coincidence, coincidence if it could be, that the process of covering the tracks did not stop with closure of the HSBC account. It is a further coincidence that even the GWU Investments Limited, after the disclosure in respect of account, was closed as its name is struck off from the records of Registrar of Companies, Cayman Islands. As a Cayman Islands Government notification, available in public domain at http://www.gov.ky/portal/pls/portal/docs/1/11574085.PDF, shows at page 45 of 102, GWU Investments Limited no longer exists in the records of the Government of Cayman Islands. 42. Interestingly, however, even this trust stands terminated and nothing is now known about the trust. We have noted that the assessee has taken a plea that she has nothing to do with the funds in the HSBC Private Bank (Suisse) SA account, as she was only a beneficiary of the Tharani Family Settlement Trust. The assessee is at least, by her own admission, a beneficiary of the trust but she is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson? 43. Let us also not lose sight of the fact, as we have noted earlier, that HSBC Private Bank even today publicly offers assistance, in trust structures, whereby you, as the settlor, transfer the legal ownership of your assets (which then become the trust assets) to the trustee, who manages and holds the assets for the benefit of the beneficiaries, and the beneficiaries may include you and your family". It is also proudly stated on the bank website itself that their "team is based across the globe and includes……….trust specialists, whose skills and experience form the basis of the service we provide". We have also seen as to how the HSBC Private Bank (Suisse) SA has been indicted by several Governments worldwide and how it has even confessed to be being involved in money laundering. 44. The assessee states that she is neither a shareholder nor a director in GWU Investments Ltd. That's not even in dispute. GWU Investments Ltd is a Cayman Islands entity, and it needs no special knowledge to know that, more as a rule rather than as an exception, the Cayman Island entities are owned by nominees of the beneficial owners. The operations carried out by these e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e considered real until it is shown that there are reasons to believe that the apparent is not the real party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents". As a final fact finding authority, this Tribunal cannot be superficial in its assessment of genuineness of a transaction, and our call is to be taken not only in the light of the face value of the documents sighted by the assessee but also in the light of all the surrounding circumstances, preponderance of human probabilities and groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an in his dissenting opinion. In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winning from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rejected unreasonably and that the finding that the said amounts are income of the appellant from other sources is not based on evidence". 45. Viewed in the light of factual backdrop of the case, and in the light of the above legal position, 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. This is a jurisdiction which has double the number of companies than resident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does is, as can be seen from the extracts from consent waiver form format reproduced earlier, is that it waiver assessee's rights, if any, under the data protection and banking secrecy laws. The plea of the assessee, as noted earlier, is fit, if at all it is fit for anything, only to be rejected. It is only elementary that direct evidence of illegal transactions of the assessee, as indicated by Hon'ble Supreme Court in the case of Sumati Dayal (supra), "would be rarely available" as such transactions "take place in secret", and therefore, simply on the ground that such direct evidence is not brought on record by the revenue authorities, the assessee cannot go scot free. As observed by Hon'ble Supreme Court in the said case, "it is upon the alleger to prove that it is so, ignores the reality". When we follow the path, as laid down by Hon'ble Supreme Court in the case of Sumati Dayal (supra), by "considering surrounding circumstances and applying the test of human probabilities" and donot take "a superficial approach to the problem", the inescapable conclusion is that the explanation of the assessee is only fit to be rejected. In the present case, there is even direct evidence availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t this letter, addressed to one Mahesh Tharani, states is "As per the request of director, we hereby confirm that, GWU Investments Ltd was holder of the account 1414771. According to our records GWU Investments Ltd. Used to be an underlying company of the Tharani Family Trust for which Mrs. Renu Tharani was a discretionary beneficiary. To the best of our knowledge, The Tharani Family Trust was terminated and none of the assets deposited with HSBC Private Bank (Suisse) SA were distributed to Mrs. Renu Tharani". It is not clear as to how is the director, and of which company; if Mahesh Tharani was a director of GWU Investments Ltd, when he could share this letter, he could have as well shared the information. If he is not the director, he would have at least known the director because director requested the Bank to provide this information to Tharani. Nothing is clear, nor does the assessee throw any light on the same. Be that as it may, this letter does not show deny, nor show any material to controvert, what is stated in the base note i.e. GWU Investments Ltd and the assessee are linked as beneficial owner. There is no dispute that account was in the nominal name of GSW Investments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , right from the HSBC account being closed after the information contained in the base note coming out and to the underlying company being removed from the name of Register of Companies in Cayman Island, right from assessee living in complete denial about any knowledge about a HSBC Private Bank (Suisse) SA account in her name to her lack of information about the company which is holding US $ 4 million for her, and, despite assessee being purportedly so clean in her affairs, her thwarting any efforts of the income tax department to get at the truth by declining to sign the consent waiver form. 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this case. 48. 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. 49. As we part with the matter, we have a couple of observations to make. The first observation is that we must add that though the hearing in this case was concluded on 28th January 2020, in view of Covid-19 lockdown in Mumbai city- which is, for all practical purposes, still continuing, with limited functionality of our office, the order is being pronouncement today on 16th July 2020. However, in the light of a coordinate bench decision in the case of DCIT Vs JSW Limited, and vice versa [(2020) 116 taxmann.com 565 (Mum)], the period of lockdown is to be excluded in computation of 90 days period. As further noted in the said order, Hon'ble Bombay High Court has observed that "while c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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