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TMI Blog2024 (2) TMI 828X X X X Extracts X X X X X X X X Extracts X X X X ..... ibutions to the trusts, including initial contribution was made by his son. HELD THAT:- We do not find any merits in the findings of the Assessing Officer for the simply reasons that, except CRS information, the Assessing Officer does not have any other evidence to allege that the assessee has made contribution to the above trusts. The Assessing Officer neither having the bank statement of the assessee to allege that the assessee has made outward remittance of funds, nor proved that the assessee is deriving any income from above trusts outside India. Although, initial contribution of 3,500 GBP towards corpus of the trust was shown to have paid by the assessee as a Settlor, but the assessee has proved that even said contribution was made by his son, a citizen of USA. The allegation of the Assessing Officer and CIT(A) that, because the assessee is a settlor of the trust, he remains principal beneficiary is totally incorrect and devoid of merits, more particularly in the context when other trustee are managing the affairs of the trust and also beneficial owners of trust properties. For account balance in the Windsor Trust represented as an immovable property in London has been explain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rust. In the present case, the Assessing Officer except CRS information in Insight portal, does not have any other evidence to prove his allegation that the assessee is invested in the trusts. Therefore, we are of the considered view, that the Assessing Officer is erred in making additions towards account balance in the Dalham Trust as unexplained investment in foreign asset/income of the appellant u/s. 10(3) of Black Money (Undisclosed Foreign Income and Asset) and Imposition of Tax Act, 2015. Non-disclosure of foreign asset/income in income tax returns filed by the assessee - As in our considered view, when assessee does not have any investment in foreign asset or does not earn any income from foreign asset, then the question of disclosure in ITR does not arise and thus, on that basis no adverse inference can be taken against the assessee. AO is completely erred in making additions towards account balance in the name of the Windsor Trust and Dalham Trust, in the hands of the assessee as undisclosed foreign income/asset u/s. 10(3) of Black Money (Undisclosed Foreign Income and Asset) and Imposition of Tax Act, 2015. CIT(A), without appreciating relevant facts simply sustained addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is a resident senior citizen aged about 100 years and his son Shri. Balaji Ramamoorthy, residing abroad and is a citizen of United States of America. As per the CSR information in Insight portal, the Department has received information on account balance of 23,34,127.67 GBP (Rs. 24,09,00,431/-) in Windsor Trust and 2,38,856.2 GBP (Rs. 2,00,23,778/-) in Dalham Trust account relating to the appellant. On the basis of the above information, the Assessing Officer issued notice u/s. 10(1) of Black Money (Undisclosed Foreign Income and Asset) and Imposition of Tax Act, 2015, on 03.10.2018, and the assessee was asked to furnish bank statements relating to the above investment and also explain the source of funds for making investment in above trusts. In response to show cause notice, the assessee submitted that the Windsor Trust and the Dalham Trust were formed by him as a Settlor and also as the First Beneficiary in 2003. But, all contributions to the trusts, including initial contribution was made by his son Shri. Balaji Ramamoorthy. The assessee had also replied vide letter dated 22.02.2021 that, he has received inward remittance of Rs. 25,97,25,044/- from his son Shri. Balaji Ramam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umber GGO04793 ADRO6332in Guernsey. The remittances and the bank statements reflect the transfer of fundsfrom ShriBalajiRamamoorthy to the assessee himself and his subsequentremittances to various family members which he claimed were gifts. 16 By the assessee's submissions dated 15/03/2021, the assesse was claimingthat these remittances to his family members are the only outward remittances madeby him and that he had neither made any investment nor having any aggregateaccount balance in either The Windsor Trust or The Dalham Trust. 17 But as per the receipt of information by this office, it is clear that the assessee has invested Rs 24,09,00,431 in The Windsor Trust under the account number GGO04789 ADRO6332 in Guernsey and Rs2,00,23,778 in The Dalham Trust under the account number GG004793 ADR06332-in Guernsey. And as per the assessee's own submissions dated 24/12/2018 he had stated that, The Windsor Trust and The Dalham Trust were formed by him as the Settlor and as the first beneficiary in 2003. Hence the, relation between, the assessee and the including his investments in them. 18 The assessee's submission about the various foreign remittances made by him to his fam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he show-cause notice that the bank accounts of The Windsor Trust mentioned in the notice is wrong and also that The Dalham Trust does not have any bank account. This objection stated by the assessee is considered but it is incorrect because nowhere in the notice it has been specified that the Account numbers are Bank accounts. It has been clearly stated that the accounts in both the Trusts are only Accounts(The Windsor Trust under the account number GG004789 ADRO6332 in Guernsey and The Dalham Trust underthe account number GG004793_ ADR06332 in Guernsey) and not Bank accounts. It has to be also noted that sufficient opportunities were provided to the assesse to explain the source of the investments in the Trusts as reminders were given to the assessee granting sufficient time on 04/09/2020, 25/09/2020, 10/02/2021 but the assessee has not been able to explain the source of the foreign investments. 21 Hence it can be concluded that Shri Narayanaswamy Ramamoorthy has not disclosed the said investments. Shri Narayanaswamy Ramamoorthy not disclosed the account bearing Account number GG004789_ADRO6332 in The Windsor Trust in Guernsey or disclosed the account bearing Account number GGO047 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of appellate proceedings, the CIT(A) furnished additional evidences filed by the assessee to the Assessing Officer for his comments. The Assessing Officer submitted his remand report dated 22.03.2023 and commented upon additional evidences filed by the assessee and also negated all arguments of the assessee with regard to investment in two trusts. A copy of remand report was given to the assessee for his comments. The assessee has filed a rejoinder in response to remand report of the Assessing Officer and argued that, he has not made any contribution to the trust and thus, the question of making assessment towards investment in trust in the hands of the assessee does not arise. The assessee had also negated observations of the Assessing Officer with regard to the beneficial ownership of the trust, a personal guarantee given by the assessee for availing loan from bank and argued that the trustees, being professional service providers, cannot be included in the loan structure. There are multiple beneficiaries and none of them are sure whether they may receive benefit of the trust during the life time. In this background, for securing the repayment of the facility, the bank alw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of the assessee and sustained additions made by the Assessing Officer towards investment in undisclosed foreign assets. The relevant findings of the ld. CIT(A) are as under: 9.1 The admitted facts are: 9.1.1 As per the CRS information in Insight portal (an automated exchange of Financial Information between Jurisdictions showing general reporting requirement) the department has received information on account balance of 23,34,127.67 GBP (Rs.24,09,00,431) in Windsor Trust account and 2,38,856.2 GBP (Rs.2,00,23,778) in Dalham Trust account relating to the appellant. 9.1.2 On the basis of the above available facts, the AO issued notice u/ s 10(1) of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 to the assessee on 03.10.2018 where the assessee was asked to furnish bank statements relating to the above. 9.1.3 The assessee had replied in a letter dated 24/12/2018. On 05/02/2021, the assessee was again issued with a reminder for details. On 22/02/2021, the assessee furnished certain details. Further on 15/03/2021, the assessee made additional submissions. The assessee was given a show-cause notice by the AO, which was replied by the assessee on 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Trust fund to the Principal Beneficiary - the settlor- Shri. Narayanaswamy Ramamoorthyfor life. Clause 3 in the Windsor Trust Settlement deed: Clause 3 Principal Trust for Beneficiaries (Life Interest/Success;ye Life Interest] The Trustee shall hold the Trust Fund during the Trust Period upo trust. 3.1 to pay the income of the trust fund to the principal beneficiary(as defined in Part 1 of Schedule 4) for life ( the Life interest ) and subject to that 3.2 to pay the income of the Trust fund to the successive Principal Beneficiary (as defined part II of Schedule 4) for life ( the successive Life interst ) 9.1.11 With reference to the Windsor Trust, the Settlement Deed has been entered between the assessee Shri. Ramamoorthy Narayanaswamy (as the settlor) and BGL Reads trust company Limited of Gurensey, Channel Islands(Trustees) on 10th April 2003 wherein the property as per schedule 3 of the deed which is 3,500 pounds sterling has been transferred by Narayanaswamy Ramamoorthy in favour of BGL Reads trust company Limited. This clarifies that Shri. Narayaswamy Ramamoorthy has been instrumental in the creation of Windsor Trust who possesses even the powers of revocation. 9.1.12 Simil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tements and details for the period from 2003 to 2006 at any stage. 9.1.20 Assessee has kept all along silent in every stage of proceedings on the details of repayment of 2 million pounds sterling loan claimed to have been taken for the purchase of the property, details of interest payments, source for such payments, wherefrom the payments emerging, etc. 9.1.21 Both the trusts are family trusts formed by the assessee, asses see is in the know and complete control of all the facts and yet, the assessee chose not to divulge all the facts. 9.1.22 After the remand proceedings, the assessee produced a copy of confirmation letter provided by ShriBalajiRamamoorthy (non- resident and son of the assessee) in this regard confirming that the entire contribution to the Winsor Trust is from him and his associated entity. But, bank account details of neither the son nor the associated entity furnished at any stage of the proceedings before the AO or the CIT(A). The name of the associated entity was also not disclosed. Assessee's son has not explained his own source with necessary proof of his bank account statements. Wherefrom the source of funds for the non-resident son emerging has not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d an interest in the trust c. The Person ought to have contributed in some way to the trust. Even going by this, the assessee is clearly the beneficial owner. By the Power of Revocation, the assessee is vested with absolute control over the Trusts. The Revocation Clause in the trust deeds actually make the trustees subservient to the Settlor Principal beneficiary. As per clause 13 of the Trust Deeds read with Schedule 5, the Settlor is the Appointer and he can appoint any person as Trustee. The management trust companies appointed as trustees are basically for managing the day-to-day activities of the Trusts and they do not have power by Deed to override the Settler by any means. Assessee kept silent again on the fees paid to these trust management companies and source for the same. Thus, (a) above gets totally satisfied. Para 9.1.10 above is clear about the interest of the assessee in the trusts and thus, (b) above also gets satisfied. Assessee settled the Trusts with initial contribution of 3,500 pounds sterling each for the Trusts; the assessee is not furnishing the bank account statement of the assessee for the period relating to 2003; on the other hand, it is claimed that his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the trust for both trusts, but fact remains that the entire affairs of the trust was managed by his son Shri. Balaji Ramamoorthy. The assessee was named as settlor for both trusts out of love and affection for his father. This is fortified by the fact that the assessee neither remitted any amount to both trusts nor received any funds from the trusts. In fact, the assessee has received inward remittance from his son Shri. Balaji Ramamoorthy, and made outward remittance to various beneficiaries as gift during the financial year 2015-16 relevant to assessment year 2016-17. Except this, there is no evidence with the Assessing Officer to allege that the assessee has made contribution to both the trusts. The Assessing Officer on the basis of information received from CRS portal, made a bold allegation that the investment in both the trusts is made by the assessee and it is taxable under Black Money (Undisclosed Foreign Income and Asset) and Imposition of Tax Act, 2015, even though, the assessee filed various evidences to prove that the source for investment in the Windsor Trust is loan borrowed from bank in United Kingdom and for the Dalham Trust, all contributions is from his son. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted to the funds of the Windsor Trust, which is contrary to the settle position of law. The Ld. Counsel for the assessee, further submitted that since the assessee has explained that he has nothing to do with investment in both trusts, except as a Settlor and further his son has explained source for contribution in both trusts, the question of making additions in the hands of the assessee under Black Money (Undisclosed Foreign Income and Asset) and Imposition of Tax Act, 2015, does not arise merely for the reason that, the assessee has not disclosed investment in foreign assets in the return of income filed for the relevant assessment year, even though, the assessee makes it very clear that said investment is not made by the assessee. The ld. CIT(A) without considering relevant facts simply sustained additions made by the Assessing Officer. 10. The ld. DR, Shri. Nilay Baran Som, CIT, submitted that as per CRS information in Insight portal, the department has received information on account balance of two trusts. The Assessing Officer and ld.CIT(A) brought out clear facts to the effect that, the assessee is the main person who created trusts as Settlor with the initial contribution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32 in Guernsey, where the aggregate account balance was to an extent of Rs. 24,09,00,431/-. The department had also received information on account balance of Dalham Trust under account no. GG004793_ADR06332 in Guernsey with an aggregate account balance to an extent of Rs. 2,00,23,778/-. Admittedly, the appellant is a Settlor for Windsor Trust and Dalham Trust. In fact, the appellant being a Settlor of the trust has formed two trusts in the year 2003 with initial corpus of 3,500 GBP each in both the trusts. It is also an admitted fact that the assessee has not disclosed any foreign assets or income with reference to above two trusts in his return of income filed for the impugned assessment year. The Assessing Officer, has made additions towards balance in accounts on both trusts under Black Money (Undisclosed Foreign Income and Asset) and Imposition of Tax Act, 2015, on the ground that although the assessee being the beneficial owner of both the trusts, but he has failed to explain source for investment in both the trusts. The Assessing Officer and CIT(A) have discussed the issue at length in light of the trust deed of both the trusts, the day-today management and affairs of the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the assessee has made outward remittance of funds, nor proved that the assessee is deriving any income from above trusts outside India. Although, initial contribution of 3,500 GBP towards corpus of the trust was shown to have paid by the assessee as a Settlor, but the assessee has proved that even said contribution was made by his son Shri. Balaji Ramamoorthy, a citizen of USA. The allegation of the Assessing Officer and CIT(A) that, because the assessee is a settlor of the trust, he remains principal beneficiary is totally incorrect and devoid of merits, more particularly in the context when other trustee are managing the affairs of the trust and also beneficial owners of trust properties. 13. Further, the value of investment in Windsor Trust is about Rs. 24,09,00,431/-, which represents the value of an immovable property at Flat no. 01/10, Eaton Gate, London The source for said investment was explained out of 2 million GBP loan availed from EFC Private Bank. The financial statement of the Windsor Trust disclosed value of property with a corresponding loan liability from bank. This is further fortified by loan sanction letter of EFC Private Bank. Therefore, from the above i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment in said trust is taxable in the hands of the assessee, whereas, the Enforcement Directorate, Chennai Zonal Office, has stated that the investment in Windsor Trust has been explained out of loan borrowed from the bank and the assessee has not made any contribution to the Windsor Trust. We also referring to the decision of ITAT, Amritsar Bench in the case of Joginder Singh Chatha vs ITO in ITA No. 54 102/2019 dated 23.06.2022, where the Tribunal held that when the account was opened by a person as beneficial owner and the other person i.e, the assessee was named as Settlor out of love and affection, no tax can be levied towards value of account in the name of said person, unless the Assessing Officer prove with corroborative evidence that the assessee being an owner of alleged bank account and he has made any contribution to the funds of the trust. 15. Coming back to the investment in Dalham Trust under account no. GG004793_ADR06332. There is no dispute with regard to the aggregate account balance to the extent of Rs. 2,00,23,778/-. Shri.Balaji Ramamoorthy, son of the appellant has owned up and explained source for investment in the trust. Further, the Assessing Officer on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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