DCIT Vs Ganpat Singhvi (ITAT Mumbai)
The undisputed facts are that Respondent is an individual residing in Abu Dhabi, UAE since 1976. The Respondent is a Chartered Accountant, working with Al Nasser Holdings as Group Advisor & Director (formerly as Managing Director). During FY 2005-06 (AY 2006-07), the respondent resided in India for a period of 45 days which does not exceed the maximum threshold limit specified in Section 6 of the Income-tax Act, 1961 (‘the Act’) and accordingly, the respondent was non-resident for AY 2006-07. Details of stay in India prior to FY 2005-06 and subsequent to FY 2005-06 has been tabled in the facts above. Since the respondent assessee was a non-resident, as per Section 5(2) of the Act, incomes earned by him outside India were not required to be disclosed or offered to tax in India though he filed the return of income declaring an income of Rs. 178/-. In view of this, the respondent assessee had not shown his foreign income in his return of income. According to the information received by the Gov of India from French Govt under DTTA in exercise of sovereign powers that some Indian residents and national have foreign bank accounts in HSBC Private Bank(Suisse) SA , Geneva. In the case of assessee also, a base note was received from the office of DIT(Inv)-II, Mumbai mentioning that assessee has bank accounts in HSBC Geneva. The respondent assessee had opened a joint account along with his brother in HSBC Geneva in 1998 and had transferred funds since 1998 to this account from his other account in HSBC Abu Dhabi, UAE. The source of the funds transferred from HSBC Abu Dhabi, UAE were stated to be out of the income earned in Abu Dhabi and savings made by the respondent assessee during his stay in Abu Dhabi, UAE as a non-resident Indian since 1976. The funds transferred from HSBC Abu Dhabi according to the respondent assessee to HSBC, Geneva had no source or income accruing or arising from India. The DDIT (Inv.) Unit-III, Mumbai investigated the account with HSBC, Geneva by issuing summons u/s.131 of the Act dated 9.12.2011 and the detailed submissions in reply were made vide letters dated 16.12.2011, 21.12.2011 and 29.12.2011 before the DDIT (Inv.).Thereafter, the assessment was reopened u/s 147 of the Act vide notice u/s 148 of the Act dated 31.10.2014 after recording reasons to believe u/s 148(2) of the Act which were duly supplied to the assessee with notice u/s 148 of the Act. The AO noted in the reasons to believe that information had been received pertaining to respondent assessee having a bank account in HSBC Bank, Geneva bearing number BUP_SIFIC_PER_ID-5090154065 and the peak balance in such account was USD 1,194,388. The AO also supplied a copy of base note received from French Authorities under Indo-French Fiscal Treaty to the respondent assessee. As per base note copy of which is filed at Pg. 185to 189 of the paper book ,there are two accounts with HSBC Geneva. The first account bearing number 5094029263 is in the name of Blueridge Investment Corporation which was incorporated in Liberia having a peak balance of USD 1,184,851 in February 2006 and the other account bearing no 5094495795 was in the joint names of the respondent assessee and his brother Devendra Singhvi having a peak balance of USD 9,537 in November 2005. The respondent assessee filed objections vide letter dated 7.11.2014 to the reopening of the assessment and also submitted copies of letters filed with DDIT (Inv.) Unit-III in response to the summons u/s 131 of the Act. The objections were disposed-off by the Ld. AO vide order dated 12.11.2014. Thereafter the AO issued statutory notices which were duly served upon the assessee calling upon to furnish the bank account statements of HSBC, Geneva and in case the respondent assessee is not in position to submit the same, he was directed to fill up the Consent Waiver Form enclosed with the notice. The AO also supplied the respondent assessee this information as to two accounts namely; one in the name of a Company viz. Blueridge Investment Corporation wherein the respondent assessee was merely a joint signatory being a director of the Company and second was the respondent assessee’s personal account jointly held along with his brother. The assessee replied the AO queries by filing before the AO detailed submissions dated 19.12. 2014 wherein it was stated that one bank account belonged to a company registered in Liberia. Blueridge Investment Corporation (‘the Company’)and he was neither a shareholder nor has any beneficial interest, directly or indirectly, in the Company and only a treasurer and a Director in this Company. He also stated that he was a joint signatory of the bank account of the Company along with other Director and all the transactions in the aforesaid bank account of the Company solely belonged to the Company and not to the respondent assessee. The respondent assessee also filed before AO an affidavit duly sworn in before the Assistant Consular Officer Embassy of India Abu Dhabi a copy of which is filed at Pg. no. 201-202 of the paper book , letter dated 04/12/2014 of Blueridge Investment Corporation at Pg. no. 197 certifying that the company is a Tax resident of Liberia with sole beneficial owner is Mr. Nazar Khan who is an Iraqi National and that the respondent is a treasurer and director of the company and he is neither a shareholder nor having any beneficial interest in the company and he is only a joint signatory of the bank account of the company along with other director.
The respondent assessee also filed before the AO the credit advices received from HSBC Geneva in respect of Funds transferred to his account from HSBC Abu Dhabi. Finally, the assessment was framed u/s 143(3) r.w.s. 147 of the Act vide order dated 25.03.2015 by making an addition of Rs. 5,30,92,953/- to the income of the assessee equal to peak balance in both the bank accounts. Ld CIT(A) after admitting the additional evidences and after considering remand report of the AOI on the additional evidences held that in order to assess the asset/bank account held by a third party in the hands of the respondent assessee the department has to prove that the assessee has direct beneficial interest in the asset/bank account held by third party (i.e. Blueridge Investment Corporation). The ld CIT(A) observed that the department has failed to bring any evidences on record to show that the respondent is having any beneficial interest in the company i.e. Blueridge Investment Corporation or the bank account held by the company with HSBC Geneva. On the contrary the respondent filed three independent/third party evidences to show that he has no beneficial interest either direct or indirect in the company namely Blueridge Investment Corporation with HSBC Geneva. The assessee filed the following evidences:
iv. Letter dated 04/12/2014 of Blueridge Investment Corporation addressed to the Income Tax Department (Pg 205)
v. Letters dated 22/04/2015 and 10/02/2016 of HSBC Geneva addressed to the Company Secretary of Blueridge Investment Corporation (Pg 257-258)
vi. Letter dated 22/04/2015 of Blueridge Investment Corporation addressed to the Income Tax Department enclosing the certificate of election and incumbency of directors and officers by the LISCR Trust Company, the appointed registered agent of Blueridge Investment Corporation duly apostilled/notorized by Special Agents of Liberia Maritime Authority (Pg 259-268).
As regards the other account bearing no 5094495795 was in the joint names of the respondent assesse and his brother Devendra Singhvi having a peak balance of USD 9,537 in November 2005, the ld AR submitted that the respondent assessee had opened a joint account along with his brother in HSBC Geneva in 1998 and had transferred funds since 1998 to this account from his other account in HSBC Abu Dhabi, UAE. The source of the funds transferred from HSBC Abu Dhabi, UAE were stated to be out of the income earned in Abu Dhabi and savings made by the respondent assessee during his stay in Abu Dhabi, UAE as a non-resident Indian since 1976.After considering the facts of the case are in full agreement with the conclusion drawn by the ld CIT(A) that the assessee is not beneficial owner of the bank account held by Blueridge Investment Corporation with HSBC Geneva. Similarly, as regards the joint account of the assessee with his brother in HSBC Geneva , the ld CIT(A) recorded a finding on the basis of evidences that money was transferred in the bank account out of the income earned in Abu Dhabi and savings made by the respondent assessee during his stay in Abu Dhabi, UAE as a non-resident Indian since 1976. Considering all these facts, we are inclined to uphold the order of ld CIT(A) by dismissing the appeal of the revenue.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the revenue is directed against the order of learned Commissioner of Income-tax(Appeals)-58 dated 13.11.2018 and pertains to Assessment Year 2007-08.
2. Grounds of appeal read as under:-
1. “On facts and in circumstances of the case, the Id. CIT(A) has erred in deleting the deposits amounting to Rs. 1,32,72,864/- in HSBC, Geneva standing in the name of Blueridge Investment Corporation, where the assessee is a joint signatory to the bank account.”
2. “On facts and in circumstances of the case, the Ld. CIT(A) has erred in not appreciating the submission made by the assessee on 24.10.2017 in page 3, that he had not provided any specific service or made any specific contribution to Blueridge Investment Corporation and still was made a joint signatory to the HSBC, Geneva account, thereby indicating nexus and control over the funds by the assessee.”
3. “On facts and in circumstances of the case, the Ld. CIT(A) has erred in not calling for the “Contractual Documentation”, under Rule 46A(4),that has been referred to by HSBC, Geneva, whereby, one Iraqi national has been stated as the Sole Beneficiary of Blueridge Investment Corporation.”
3. Brief facts of the case are that in this case in assessment order, AO observed regarding information received by Government of India from the French Government under DTAA in exercise of its sovereign powers that some Indian nationals and residents have Foreign Bank Accounts in HSBC Private Bank (Suisse) SA, Geneva which were undisclosed to the Indian Taxation Department. That this information was received in the form of a document (herein after referred to as “Base Note”) wherein various details of account holders such as Name, Date of Birth, Place of Birth, Sex, Residential Address, Profession, Nationality along with the date of opening of the bank account in HSBC Private Bank (Suisse) SA, Geneva and balance in certain years etc are mentioned.
That in the case of the assessee also, a Base Note was received from the office of the DIT(Inv)-II, Mumbai, according to this, the assessee, Ganpat Singhvi is holding an account in HSBC Pvt. Bank Geneva bearing BUP code: 5090154065. That as per the base note, the date of creation of the account was 24.7.1998. That the peak amount mentioned in the base note is USD 300494.55 in AY 207-08.That from the base note, it is seen that there are two accounts in HSBC, Geneva with which the assessee is associated with – the first account is in the name of Blueridge Investment Corporation in which the peak balance is USD 300494.55 in AY 2007-08, the second account is an account in which he is an Account Holder – 1 (Account Holder -2 being his brother Devendra Singhvi) in which no amount is reflected for AY 2007-08.
4. Notice was issued to the assessee in this regard as under:-
1. Provide a copy of the passport from the date of opening the account in HSBC, Geneva till date including all the pages thereof.
2. The base note of your HSBC, Geneva Account shows that you have an address in India. Kindly provide an explanation to this.
3. Mention the source of deposits made in the HSBC, Geneva. Also state whether the amounts reflected in the base note have any source in India.
4. Mention the address given by you to HSBC, Geneva when you opened the account and thereafter in case there is a change in your address.
5. In case your answer to the above questions are in the negative, provide your statement in an affidavit duly signed and notarized and sent it to the office of the undersigned.
5. The AO noted the response of the assessee as under:-
(a) He is residing in the UAE for the last 35 years. (Copy of passport have been submitted)
(b) The base note of HSBC, Geneva account shows his address in India for the reason that a copy of his passport was given by HSBC, Abu Dhabi to HSBC, Geneva for opening of the bank account. The account opening documentation requires a permanent address in India, which was taken from the passport.
(c) The source of deposit made in HSBC, Geneva was out of the funds transferred from HSBC, Abu Dhabi. He further confirms that the same do not have any source in India.
(d) The HSBC, Geneva account was opened through HSBC, Abu Dhabi in which his address is stated as P.O. Box 46611, Abu Dhabi, UAE which is the same as that of the Abu Dhabi account.
Also, the assessee submitted that the address as mentioned in the base note as Singh Pole, Jodhpur is a house where his mother and brother are staying.
6. However, AO was not satisfied, he summarized the assessees response as under:-
“In reply to this, die assesses in his submission dt. 4.3.15 received on 9.3.15 stated that he is a non-resident u/s 6 of the Act. He contends that as per Section 5 of the Act the income that accrues or arises outside India does not form part of his total income as per the Act and that the transactions with HSBC, Geneva are not covered by the provisions of Sec. 9 of the Act as they are made out of the funds transferred from HSBC, Abu Dhabi.
With regard to the account in the name of Blue Ridge Investment Corporation, the assessee submitted that the Corporation being a foreign company has no obligation to provide any information about the company to Indian tax authorities. Also, it is stated that he is just a joint – signatory to the bank account and he cannot operate it on his own. He submitted that he is under no obligation to provide the information about the company.
Further, no evidence was produced to show the source of deposit made in the other account in HSBC, Geneva jointly held by him and his brother. He confirmed the statement made by his brother that the money transferred from HSBC, Abu Dhabi to HSBC, Geneva was his (the assessee’s) money.”
7. AO rejected the assessees submissions by observing as under:-
“(a) The assessee is a joint-signatory to the account held in the name of Blueridge Investment Corporation. He is also the Treasurer and Director of the entity. He was asked to produce the source of deposits made in the account but no submission was made on this regard and nothing is mentioned by him with regard to whether any amount is sourced from India; the letter dt 4.12.14 of the entity as well as the affidavit of the assessee dt.2,2.14 is silent on this. On the other hand, considering the position he occupies in the said entity, he must be aware of both the credits and debits made in the account The assessee chose not to produce the bank account or the source of deposits made in the account.
(b) To substantiate the letter dt. 4.12.14 of Blueridge Investment Corporation, no material evidence in the form of certificate of registration of the company, its financials etc are brought on record to prove the statements made in the said letter. Also, the source of deposits made in the account held in the name of this entity is not-given. Also/ no details of the Iraqi national, Mr. Nazar Khan is given. It is a mere self-serving letter without any documentary evidence wherein the onus of the ownership of the account is being shifted to another person without any evidence to support it,
(c) With regard to the account in the name of the assessee and his brother, the assessee stated in his affidavit that the amount in HSBC, Geneva was transferred from HSBC, Abu Dhabi and that it is his money that was transferred. The assessee chose not to produce any bank account details in order to support the claim that he made.
(d) With regard to the both the accounts held in the name of Blueridge Investment Corporation and that of the assessee and his brother, it must be noted that the assessee is an Indian citizen; he has immovable and movable properties in India and the base note of the HSBC, Geneva account also clearly mentions an address in India, fact, he has used his Indian passport to open the accounts in HSBC, Geneva. He has been filing his return of income in India. During the assessment proceedings, notice u/s 133(6) of the Act was issued to both NSDL and CDSL in order to find out the demat accounts held by the assessee as well as the shares held by him. In response, NSDL vide their letter dt. 18.3.15 has reported the following demat accounts in the name of the assessee:
