9911796707
TMI Blog2025 (3) TMI 795X X X X Extracts X X X X X X X X Extracts X X X X ..... th the Bank and AO has extracted relevant questions and answers as recorded in the said statement in the assessment order. We note that Mr. Anurag Kejriwal has totally denied to have any interest whatsoever in the said entities qua which information was passed on by DDIT (Inv.), Ward-3(3), Kolkata. We are inclined to hold that the assessee is not a beneficiary of the assets abroad as has been noted by the ld. Assessing Officer. The case of the assessee finds support from the decision of the Addl. CIT -vs.- Jatinder Mehra We have a legislation in India called the Banker's Book Evidence Act 1891. The said Act provides for conditions to be satisfied while submitting bank records as evidence in a court of law. Section 4 of Banker's Book Evidence Act 1891 provides that Bank records should be accompanied by a certificate in accordance with section 2(8) and 2A of the Act. A copy of the bank records duly certified as above constitutes a "certified copy". A certified copy, as defined under Section 2(8) of the Act, of any entry of banker's book, shall be admissible prima facie as Evidence. The foreign banks would, under ordinary circumstances, not part with certified copies of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Administration (FTA) under the "India- Switzerland Double Taxation Avoidance Agreement (DTAA) in the light of Exchange of Information clause of the DTAA. (ii) Information received on 7.6.2017 from Ministry of Finance, British Virgin Island, by virtue of the Agreement between the Government of the Republic of India and the Government of The British Virgin Islands (BVI), for Exchange of Information relating to Taxes. (iii) Information received on 26.10.2017 under "Exchange of Information" Article of India-Panama Multilateral Convention on Mutual Administration Assistance in Tax matters. 3. The nature of Information received from SWISS FEDERAL TAX ADMINISTRATION (FTA) was that there were four Bank Accounts with BNP Paribas, Geneva in the name of the following entities a) Krims Investments Inc (KII) Bank A/C.N0.88393-5 b) Biscay Exports Ltd. (BEL) Bank Account No.88500-5 c) Newington Group Trading Ltd.(NGTL) Bank Account No.87503-9 d) Netstar Commercial Ltd. (NCL) Bank Account No.85877-8 3.1. As per information received, the Assessee and his wife Mrs. Uttarra Kejriwal were the beneficiaries of the first 3 bank accounts and the Assessee, his wife and his mother Smt. Tara K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficial owner of the bank account in the name of BEL. Besides the above, according to the AO, International Tax Authority of BVI, the assessee was the beneficial owner of BEL. As per the register of Directors and Shareholders, the assessee was the director of BEL from 01.01.2010 to 07.06.2010. He had controlling interest in the form of power of attorney given by Directorship Management Ltd.(DML), which was the sole director of BEL. DML has given a general Power of Attorney to assessee with individual signature rights. Therefore the Assessee was the beneficial owner of the bank account in the name of BEL. 3.8. In so far as KII is concerned, it was the case of the AO that the Assessee was the beneficial owner of the bank account in the name of KII based on information from Swiss FTA. Besides the above, based on the information obtained from Tax authorities of BVI, the AO was of the view that Assessee was director of KII and copy of consent to act as director of KII was given. Assessee was appointed as President of KII. The Minutes of the first meeting of Board of directors of KII was also provided. An entity by name Prauk Foundation was shareholder of KII since 1.7.2010 and the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich would show the share application money was paid for investment in shares of NCL in the name of the Assessee and his wife. There was a liberalized Scheme of RBI which permitted remittances upto US $ 25000 for business promotion purposes, without approval of RBI. Copy of the RBI circular permitting remittances without permission is at page 183 to 189 of the paper book. The Assessee sent copies of his passport and that of his wife's and mother's passport and KYC documents to enable complete the transactions. Mr.Hui Li promised to arrange for resolution of Board of Directors of NCL in due course, which was a requirement under the laws of BVI. c). Subsequently, the Assessee realized that he would not get exclusive agency for import of iron ore and therefore the Assessee asked for refund of share application money, which was given on 21.4.2008. The same is duly effected in the books of accounts of the Assessee. Page 178 to 182 of the paper book is the confirmation from HDFC Bank regarding share application money having been remitted out of India and its receipt back into India upon refund. At Page 183 of the paper book is the Assessee's share application ledger in NCL which reflec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the name of KII. According to the assessee, the Board resolution cannot be true because on 11.1.2010, the assessee was not in Switzerland as per the endorsements in the passport, copies of which are given at pages 190 to 249 of the assessee's paper book. A summary of assessee's leaving India and coming back to India is placed before the bench. The minutes of the meeting are certified by Mossack Fonsecca & Co. (BVI) Ltd., who are the Registered Agents of the company KII. The information provided by the Bank at page 255 of the paper book that the Assessee is beneficial owner of the bank account cannot be accepted for the reason that the said document does not have a date and place where it was signed and are unauthenticated copy. The place and date is darkened so that no one could read it. Such a piece of evidence has no evidentiary value. The bank's statement of account for the period from 1.4.2011 to 31.12.2016 is placed at pages no. 256 to 273 of the PB. These documents have no relevance to the assessee when the Assessee has nothing to do with this bank account. In the statement recorded by the AO, the Assessee has denied having any dealings with KII. The Assessee however submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot in Geneva and was in Singapore as would be evident from the endorsement in his passport. To corroborate, the details of date of assessee's departure and arrival from and out of India are placed on records. Therefore, the document is therefore not reliable piece of evidence. It is unauthenticated document and does not speak the truth. Pages 301 to 317 of the paper book is the bank statement of this bank account, which has no relevance to the assessee when the assessee is not the beneficial owner of this bank account. c). Another case made out by the AO was that the assessee and his wife held shares in Prauk Foundation and BEL was formed by Prauk Foundation and purak foundation held shares in BEL and therefore there was indirect ownership of Assessee in BEL. On this allegation, the assessee submitted that Prauk Foundation was a name suggested by Hui Li in the course of discussion of business interest in BVI and the name was accepted by the assessee but ultimately the assessee did not conclude any entity to be set up in BVI and hence the assessee had no occasion to invest any money in Prauk Foundation. Prauk Foundation has no bank account and there is no money trail from Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and has arrived at the Assessee's share of the bank account and worked out "Undisclosed assets of Assessee located outside India" at Rs. 2,42,08,810/- in the order passed under section 10(3) of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 dated 29.04.2020. 5. The aggrieved assessee preferred an appeal before ld CIT(A) however the appeal of the assessee was dismissed after taking into account the contentions and arguments of the assessee. The order of the ld. CIT(Appeals) is extracted as under:- "4.3(a) I have carefully considered the facts of the case and submission of the appellant. This assessment order under the BMA, 2015 is based on information received from the Competent Government Authorities of British Virgin Islands, Panama and Switzerland. Information has been received regarding the companies incorporated abroad which had connection with Mr. Anurag Kejriwal and his wife and mother. Information has also been received regarding foreign bank accounts in the names of the foreign entities where Mr. Anurag Kejriwal along with his wife, Mrs. Uttara Kejriwal are joint beneficial owners. In one of the bank accounts, even his mother, Mrs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds Panama & Switzerland and as Government Authorities they are expected to show due diligence and only when they must be sure about the authenticity of these documents they must have sent these. Further, it is also important to note that appellant had approached same Tax / Law professional firm for incorporating the foreign companies and opening the bank accounts. Now coming to the bank accounts in the names of (1) Krims Investment Inc., (2) Biscay Exports Ltd., (3) Newington Group Trading Ltd and (4) Nedstar Commercial Ltd., the documents / information sent by the Competent Authority of Switzerland i.e. Swiss Federal Tax Administration, FTA reveals that Shri Anurag Kejriwal along with his wife and mother have been the beneficial joint owners in one or more bank accounts. Copies of KYC documents and other documents submitted while opening these bank accounts have also been sent by the Swiss Tax Authorities. Appellant has not been able to refute these facts. Appellant has only made the excuse that his passport may be verified which can establish that he or his family members were not in Switzerland around the time when these bank accounts were opened. It is further submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts. Therefore, it was expected of them to explain the sources of the deposits in these foreign bank accounts. They were also expected to reveal these foreign assets / income in their return of income with effect from AY; 2012-13. However, they have not done so. They should not have missed the opportunity of one time compliance window provided under the BMA, 2015. As they have not complied with the requirements of law, the assets owned by them in the form of deposits in the bank accounts fall under the definition of undisclosed foreign assets / income under BMA, 2015 and such assets/income is liable to be charged to tax as per the provisions of BMA, 2015. 4.3(b) In support of his submission, appellant has relied on the decision of Delhi Tribunal dated 07.07.2021 in the case of ACIT, Range-70, New Delhi Vs. Jatinder Mehra (2021) 128 taxmann.com 152. However, perusal of the order shows that appellant's facts are distinguishable from the facts in this case. In this case, information was received from the Competent Authority of Singapore that Shri Jatinder Mehra was beneficial owner of an overseas bank account belonging to a foreign company whose sole shareholder and director wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk account and made additions in his hands. Ld. CIT(A) confirmed the additions. However, when the matter reached ITAT, Mumbai, it was held that the bank account belongs to assessee's brother and this was made clear right from beginning by assessee's brother. To support his contentions, assessee had filed a letter and affidavit from his brother, Dipak Varandmal Galani, who accepted that he is the owner of the bank account and this account was opened by him in his capacity as a non-resident Indian in the year 1998. Under the circumstances, the Hon'ble ITAT has held that AO made a mistake in making additions for amount lying in bank account as unexplained money of the assessee. It is apparent from the facts discussed above that appellant's case is different from that of Mr. Kamal Galani. In appellant's case beneficiaries are only the appellant and his immediate family members. Nobody has come forward to claim the ownership of these accounts. Neither has the appellant mentioned about any other beneficiary for those bank accounts. The documents sent by the Competent Authority of the Switzerland clearly establishes that Mr. Anurag Kejriwal, Mrs. Uttara Kejriwal and Mrs. Tara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to send your reply on or before 08.08.2022 at 11.30 a.m." However, neither anybody attended in-person on the appointed date nor the assessee has filed any reply till date. Hence, it is presumed that assessee does not have anything to say in this matter. In view of the above discussion, the additions made by the AO are upheld in principle and the assessment of undeclared foreign assets/income is enhanced to Rs. 2,52,08,828/-. 5. Grounds of Appeal No(s). 7 : Consequential in nature. 6. In the result, the appeal is dismissed and assessment of undeclared assets/income is enhanced to Rs. 2,52,08,828/-. 6. We have heard the rival contentions and perused the material available on record including the provisions of Black Money Act and other Acts as referred before us during the course of hearing. First of all we would like to briefly discuss the provisions of Black Money Act. The Black Money Undisclosed Foreign Income And Assets) And Imposition Of Tax Act, 2015 is enacted on 26th of May, 2015 by Act number 22 of 2015 and which came into force with effect from first day of April, 2016. The charge of tax is provided Under Section 3 of the Act in respect of total undisclosed foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be stated that provisions of Section 10 (1) of the Act provides that an assessing Officer can issue a notice in the year in which he discovers an undisclosed foreign asset or receives information about an undisclosed foreign asset/income. Provisions of Section 72 (C) which provides that a foreign asset shall be deemed to have been acquired or made in the year in which a notice u/s 10 is issued by the assessing officer and the provisions of this Act apply accordingly where undisclosed foreign asset was acquired or offshore income earned prior to the date of coming into effect of the Act and it is not taxed under the Income Tax Act, still under the black money act, tax at the rate of 30% and penalty at the rate of 90% of the value of the asset can be recovered from such taxpayer. Over and above, the taxpayer may also be liable for prosecution. Provisions of Section 81 of the Act provide that no assessment, notice, summons or other proceedings, made or issued or taken or purported to have been taken made or issued or taken in pursuance of any of the provisions of the Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the proceeding under the Black Money Act, 2015. We have examined the information received from the Swiss FTA and the source of information to the Government providing information is the financial institution/bank. The copies of bank accounts as received from foreign Governments were available at pages no. 164,255, 300 and 318 of the paper book and none of them are certified by the Banks as true copy. We also note that some of the information in the bank statements were darkened/darkened beyond legibility which we failed to understand the motive behind. We note that the ld. Assessing Officer has not carried out any further investigation into the issue but relied on these documents, which were not even certified and authenticated. We note that the assessee has frequently requested the BNP Paribas Bank, Geneva regarding the procedure to be followed in opening the current/business accounts in BNP Paribas Bank, Geneva. However, despite several requests by the assessee, no response was received from the banker. The documents to this effect were placed before us during the hearing. 9. We also note that as per the procedure of the Bank, the physical presence of the assessee is requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted out of India is available at pages 178 to 182 of the paper book. The main argument of the assessee was that since he had not visited abroad during the period when the accounts in the name of these companies were opened in Geneva Bank and therefore, there was every possibility of fraudulently using his and his family members KYC documents to open the bank accounts. The fact has been admitted by the ld. CIT(DR) during the course of hearing that the assessee's passport did not bear any stamp indicating the dates of visit abroad, but the bank accounts were opened by the above said companies using assessee's signature. When the ld CIT(DR) was asked as to how the assessee could open bank accounts without being present there, the ld. DR could not give any cogent reply or explanation. 10. Considering the above facts and circumstances, we are of the view that ld. Assessing Officer has simply relied on the documents received from the foreign Government under DTAA and exchange of information without verifying the authenticity and veracity of these documents. We note that during the course of assessment proceedings, ld. Assessing Officer examined the assessee on oath when he appeared in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Therefore, naturally the first text of having an asset located outside India is satisfied. The second condition whether this bank account as held by the assessee in his own name or not is not satisfied as it is held by the Watergate advisors Ltd a company who shareholder is Mr. Rajneesh Mehra, son of the assessee. Mr. Rajneesh Mehra is also the director of that company. The third condition that now required to be tested is whether the assessee is the beneficial owner in respect of such asset. The term "beneficial owner" is not defined under the black money act. However, the income tax act defines this term with respect to the requirement of the filing of the return of income u/s 139 of the income tax act. The proviso to Section 139 of the income tax act provides that a person, being a resident other than not ordinarily resident in India within the meaning of clause (6) of Section 6, who is not required to furnish a return Under the provisions of Section 139 (1) of the act and who at any time during the previous year holds as a beneficial owner or otherwise, any asset located outside India or has assigning authority in any account located outside India or is a beneficiary o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of love and respect. No settling amount or any other sum was to be contributed by the Assessee in the said Trust. Purpose of the Trust would be the furtherance of education/vocation/technical skills and for the furtherance of research on Hindu scriptures. Total Corpus of the Trust would be USD 250,000, out of which USD 50,000 was to be contributed by Shri Rajneesh Mehra and the balance USD 200,000 was to be raised from friends, associates, and affiliates. Beneficial ownership of the Trust, it was clearly laid out vide Clause V that the Assessee would merely be the Settler and the ultimate beneficiaries of the Trust would be the two sons of the Assessee and their grandsons. The Assessee clearly had no beneficial ownership in the said Trust. Function of the Trust, it was laid out in the said MOA vide Clause IV that the management and control of the Trust and all its earnings solely rested with the Shri Rajneesh Mehra, Further, it was laid out that the Trust would not have any bank account and all sums raised from prospective investors would be deposited directly in a Bank Account which would be opened in the name of a Company which would be set up by Shri Rajneesh Mehra. Thus it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has 'beneficial ownership on these companies/entities. As stated earlier The Black Money Act 2015 does not define the term 'beneficial ownership' and The Income Tax Act 1961 explanation 4 to Section 139 (1) defines the same. However, it is not necessary that to examine the provisions of The Black Money Act only the definition provided Under the Income Tax Act is required to be seen. According to provisions of Section 84 of The Black Money Act, only certain provisions of The Income Tax Act are made applicable to the black money act. This Section does not include the provisions of Section 139 (1) of The Income Tax Act. Therefore, the beneficial ownership is required to be understood with respect to its dictionary meaning and also other provisions of other statute also keeping in mind the nature of the object and purposes of the Black Money Act. 26. In Black's law dictionary the beneficial ownership is defined as 'one recognized in equity as the owner of something because use and title belonged to that person, even though legal title may belong to someone else, esp. one for whom property is held in trust.' 27. Similarly the Webster's dictionary also defines beneficial owner as 'o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs laid down by The Companies' Act it is apparent that there is no any arrangement, contract et cetera between Watergate advisors private limited or Mr. Rajneesh Mehra with the assessee. There is no demonstration by the revenue that assessee exercises any control as a shareholder of Watergate advisors limited over that company. There is no evidence that assessee has received any interest. It is not also demonstrated that assessee exercises any control to appoint directors or control the management or policy decision of that company. This is also adequately narrated by the learned CIT - A. Thus, the test of beneficial ownership as per the criteria laid down Under The Companies' Act 2013 does not satisfy that assessee is a beneficial owner of the bank account owned by Watergate advisors Limited. 33. Another law, which deals with the beneficial ownership, is The Benami Property (Prohibition) Act 1988. Section 2(12) The Benami Property (Prohibition) Act, 1988 defines beneficial owner to mean a person, whether his identity is known or not, for whose benefit the benami property is held by a benamidar. Benami property has been defined to mean any property, which is the subject matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Prevention of Money Laundering (Maintenance of Records) Rules, 2005 provides that : In the case of a company, "the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical persons, has/have a controlling ownership interest or who exercise control through other means. Explanation- For the purpose of this sub-clause 1. "Controlling ownership interest "means ownership of/entitlement to more than 25 per cent of the shares or capital or profits of the company. 2. "Control" shall include the right to appoint majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements 38. Thus the above losses that the primary conditions for a person to be considered as an ultimate beneficial owner under the PMLA, may be summarized as under: (a) Covers an individual (b) Owns a client of the reporting entity, which should be more than 25% of the shares or capital of profits of the company/ 15% in the case of client other than a company (c) Controls a client by virtue of shareholding or management rights or shareholder /voti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rounds stated in the appeal of the learned assessing officer are dismissed. 42. Accordingly appeal of the learned AO in BMA 1/Del/2020 and cross objection of the assessee Co NO. 26/Del/2021 are dismissed 11. We further observe that the information/documents were supplied by the bank which were not even authenticated and how such unauthenticated documents can be relied by the AO to make the addition. The several Benches of Tribunal have commented on such approach and concluded that in such circumstances, there cannot be a finding that the assessee is holding beneficial interest in the foreign assets set out in the information received from foreign government by the Assessing Officer. In the case of Shyam Sunder Vs Jindal Assistant Commissioner of Income-tax, Central Circle-30, New Delhi, reported in [2017] 81 taxmann.com 123 (Delhi - Trib.), the coordinate bench had an occasion to consider the authenticity and reliability of the evidence in the form of information obtained from foreign government in the context of addition u/s. 69 of the Act and it was held that information in the form of bank statement obtained by the AO was not signed and authenticated by the Bank and therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intain. 13. The position would be clear if one peruses the Agreement between the Government of the Republic of India and the Government of The British Virgin Islands (BVI), for Exchange of Information relating to Taxes. Article 5(3) of the said Agreement provides as follows: ARTICLE 5 EXCHANGE OF INFORMATION UPON REQUEST 1 1) ................. 2) ................. 3) - If specifically requested by the competent authority of the Requesting Party, the competent authority of the Requested Party shall provide information under this Article, to the extent allowable under its domestic laws, in the form of depositions of witnesses and authenticated copies of original records. 14. In the absence of authenticated copies of original records, it is for them to corroborate with other evidences whatever information in the form of unauthenticated copies of original records, to establish facts with regard to whether or not the assessee held as a beneficiary assets outside India. 15. The question as to whether the mere fact that the assessee's name is mentioned as beneficiary in a foreign bank account is sufficient to hold that the assessee is beneficial owner of foreign asset, came up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Black Money Act, leading to an addition of Rs. 146.42 Cr in assessee's income. This addition was based on alleged undisclosed credits in foreign bank accounts and investments outside India from Assessment Years (AYs) 2016-17 to 2019-20. The CIT(A), on appeal, deleted additions in part. On further appeal, the Tribunal held that that the UAE-company was a separate legal entity, having its Place of Effective Management (POEM) outside India, and that the taxability of any amount in Agarwal's hands would be unconstitutional and illegal. It was further held that foreign bank accounts and foreign investments were the assets of the foreign company, and Assessee was not the provider of the consideration for these assets. Thus, the Assessee did not fall within the definition of 'beneficial owner'. It further held that in the absence of any evidence indicating that any funds belonged to Assessee in his individual capacity, or that any of his income was taken abroad and not taxed in India, the addition could not be made. 18. In the light of the above discussion and the decisions of various coordinate benches as referred to above, we are inclined to hold that the assessee does ..... X X X X Extracts X X X X X X X X Extracts X X X X
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