prpri Assessee not become beneficial Owner because in account opening form name of the Assesse written as beneficial Owner Assessee not become beneficial Owner because in account opening form name of the Assesse written as beneficial Owner

Case Law Details

Case Name : Addl. CIT Vs Jatinder Mehra (ITAT Delhi)
Appeal Number : BMA No. 01/Del/2020
Date of Judgement/Order : 07/07/2021
Related Assessment Year : 2016-17

Addl. CIT Vs Jatinder Mehra (ITAT Delhi)

It is apparent that assessee does not own any share capital in case of Watergate advisors Limited as well as it also does not controls the above company as he does not have any shareholding or management rights in that

With respect to the mention of the name of the assessee in the account opening form as beneficial owner, assessee has relied upon the decision of the coordinate bench in case of Kamal Galani V ACIT in ITA number 138/Mum/2019 dated 10 September 2020 wherein in para number 13 onwards the coordinate bench has held that merely mentioning the name of the assessee in the account opening form which is rebutted by the assessee by filing an affidavit and complete details of the ownership of the bank account, the assessee cannot be held the beneficial owner of such sum. Therefore, such solitary fact cannot lead to addition in the hence of the assessee where there is no other evidence available with respect to the ownership or beneficial ownership over such bank account. In view of this it is apparent that the mere account opening form where the assessee is mentioned as the beneficial owner of the account mentioning is details of his passport as an identification document, does not necessarily, in absence of any other corroborative evidence of the beneficial ownership of the assessee over that for an asset cannot lead to taxability in the hands of the assessee Under the Black Money Act.

In view of above facts, we hold that assessee does not have beneficial ownership of the amount deposited in Watergate advisors Limited, assessee also do not held that asset. The learned CIT – A has also held so giving the detailed reasons as reproduced above. The learned departmental representative could not show us any evidence that assessee is the owner or beneficial owner of the sum lying in the bank account of Watergate advisors Limited. The assessee has given an overwhelming evidence of the fact that money belong to the son of the assessee which were not at all controverted by the learned assessing officer. In view of this we hold that the learned CIT – A is correct in deleting the addition of ₹ 56,647,000/– in the hands of the assessee. Accordingly, we confirm the order of the learned CIT appeal and all the 4 grounds stated in the appeal of the learned assessing officer are dismissed.

FULL TEXT OF THE ITAT JUDGEMENT

1. This appeal is filed  by The Additional Commissioner Of Income Tax, Range – 70, New Delhi (the learned AO) against the order dated 16.09.2020 passed by the Commissioner Of Income Tax (Appeals)–20, New Delhi, [The Ld CIT (A)] for assessment year 2016-17 wherein the appeal filed by the assessee against the assessment   order dated 29th of March 2019 passed u/s 10 (3) of under Black Money (Undisclosed Foreign Income And Assets) And Imposition Of Tax Act, 2015. (In short ‘The Black Money Act’) passed by the learned AO is allowed in favour of the assessee.

2. The learned assessing officer has made an addition of ₹ 5,66,47,000/– which is deleted by the learned CIT – A. Therefore the learned AO is aggrieved and has raised following grounds of appeal:-

BMA No. 01/Del/2020 :

“1. CIT(A) has ignored the findings of the AO formed on the basis of information received under the provisions of ‘exchange of information Article’ of India Singapore Double Taxation avoidance agreement (DTAA), wherein as per the account opening form assessee was the beneficial owner of the account. Details of his passport are mentioned as the identification document in the account.

2. During the assessment proceedings, assessee was categorically asked to submit unequivocal evidence in the form of money belonged to the assessee’s son, Rajneesh Mehra. However, assessee has failed to make compliance in this regard. It is worthwhile to mention that as the account opening form contained the name of the assessee as beneficiary owner, onus lies on the assessee to provide evidence to support his claim that he was not the beneficial owner, thus he was not the beneficial owner, thus assessee failed to discharge his onus.

3. CIT(A) has failed to appreciate that if the intention was to confer all the benefits to Rajneesh Mehra, why was the name of Sh. Rajneesh Mehra not added as beneficial owner rather than that of the assessee. CIT(A) has erred in not considering human probability and circumstantial evidences in the matter while deciding the issue.

4. CIT(A) has ignored the fact that as per return of income for Y. 2010-11 to 2016- 17, the assessee has not declared any foreign asset or account thereon despite the fact that assessee is holding account no. 806694 as beneficiary owner. As per the account opening form and passport details mentioned therein, assessee is holding foreign account in the capacity of beneficial owner and credit entries are reflected in the said bank account. However, assessee has failed to disclose such income in Schedule A & B of FA in his income tax Return. In view of the same, assessee’s undisclosed foreign income attracts the Black Money Act and gets covered in this section 3 & 4 of the Black Money Act. ―

3. Assessee has also filed cross objections in O. No. 26/Del/2021 raising following grounds

“1. That   the   Assessment   Order   dated 29/03/2019 passed by the Ld. Addl. CIT, Range-70, New Delhi Delhi (A.O.) u/s 10(3) of The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (The Black Money Act, 2015) is illegal, invalid and void ab intio and thus it is liable to be quashed at source.

2. That the A.O. has erred in law in computing u/s 5 r.w.s. 4(3) of the Black Money Act, 2015, the “total undisclosed foreign income and asset” at Rs. 12,23,77,070/- in spite of his clear admission that Rs.6,57,30,070/- is the Returned Income u/s 139(1) of the Income Tax Act for the A.Y. 2016-17 which could have never formed part of the total undisclosed foreign income and asset under The Black Money Act, 2015.

3. That the A.O. thus erred in law in assessing u/s 10(3) of The Black Money Act, 2015 the “undisclosed foreign income and asset” at Rs.12,23,77,070/- as against the alleged Rs.5,66,47,000/- being the alleged total undisclosed foreign income and asset found out by him as per his information.

4. That the A.O. further erred in law in determining the total amount payable by the assessee at Rs.2,66,61,977/- by imposing Surcharge, Cess and also Interest u/s 234B of the Income-tax Act, all of which are not applicable to charge of tax u/s 3 of The Black Money Act, 2015.

5. That the A.O. erred in not serving upon the assessee the required Notice of Demand u/s 13 of The Black Money Act, 2015, in the prescribed “Form 1” (as per Rule 5).

6. That without any prejudice to the above, it is further objected that the A.O. has filed invalid appeal u/s 18(1) of The Black Money Act, 2015 before the Appellate Tribunal inasmuch as the same was required to be filed in prescribed “Form  3”  [see  Rule  7(2)]  as  against  the  “Form 36” under Rule 47(1) of the I.T. Rules so filed by the Ld. A.O. being the Appellant.

7. That the entire proceedings in the case of the assessee carried out under The Black Money Act, 2015, being from the assessment to the appeal before the Tribunal, are all flawed and illegal and being all beyond the provisions of the said Act, the entire proceedings may thus be quashed ab intio.”

4. Brief facts of the case shows that assessee is an individual and is earning salary from Essar Services India Ltd. A search was conducted in case of “Rakesh Agarwal Group” Baroda. Posts  such  inquiries  and  information  obtained  from foreign tax authorities under Double Taxation Avoidance Agreement, six trust companies were found  involved in the transaction.  One trust  “Rajvin Ltd” is settled by the assessee is a revocable trust on 15th of April 2005 with Merrill Lynch bank and trust company (Cayman) Ltd as a settler /trustee. The ultimate beneficiaries of the trust include Shri Rajneesh Mehra, Mr. Vineet Mehra (Sons) and Hans Mehra (Grandson).   The trust deed was revoked on 16/12/2011 and on revocation of the trust funds were sought to be transferred to the bank account of Clariden Leu Ltd, Singapore, account number 806694 held in the name of Watergate advisors Ltd, a company incorporated in British Virgin Island.

5. For assessment year 2016 – 17 assessee has filed his return of income declaring income of ₹ 6,57,30,070/– on 30 July 2016. On receipt of above information from The Additional Director Of Income Tax, Investigation, unit 6 (2), New Delhi on 22/7/2016, an interim report was submitted to the AO for further investigation and to take necessary action Under Black Money (Undisclosed Foreign Income And Assets) And Imposition Of Tax Act, 2015. Consequently notice u/s 10 (1) of the act was issued on 21/11/2016. The assessee submitted on 7/12/2016 that assessee did not have any foreign assets and no foreign sourced income from financial year 2009 – 10 till date. The assessee was asked to submit the trust deed and bank details. In response to that assessee submitted that he does not have the copy of the trust deed and Mr. Rajneesh Mehra, son of assessee, in order to show regard and respect towards the assessee wanted him to be a nominal settler of the trust. It was in deference to his business and Under his instructions and as per his request, assessee has agreed to become the nominal settler without having to invest, contribute or settle any amount as the settlement amount of the trust. Further his Sons and grandson are beneficiaries of the trust, did not have any bank account.

6. The learned assessing officer noted that he has received information under provisions of Exchange Of Information article of India- Singapore Double Taxation Avoidance Agreement that this assessee is the beneficial owner of account number 806694 Clariden Lie Ltd (credit Suisse), Singapore. The bank account shows that on 21 December 2011 credit of US$ 826,161.51, on 30 March 2012 credit of US$ 7712.50 and on 15/10/ 2012 credit of US$ 151.25 amounting in all to US$ 834,025.32 were made.

7. The learned assessing officer issued a show cause notice on 14 June 2018 that why the above sum of US$ 834,025.32 amounting to ₹ 56,647,000 should not be considered as Undisclosed Foreign Income and Assets under the Black Money (Undisclosed Foreign Income and Assets) Act 2015.

8. On 22nd November, 2018, assessee submitted a reply stating that AO has supplied page number 1 to 19 on 14 June 2016 being the account opening form of Watergate advisors Ltd for opening of the bank account in Clariden Lieu Ltd Singapore and stated that

a. None of the above documents bear any of the signature of the assessee and assessee has neither signed the above documents and nor gone to that bank anytime.

b. Watergate advisors Ltd belongs to the son of the assessee Mr. Rajneesh Mehra, who is a non-resident Indian since 1998.

c. He is neither a shareholder nor a director of Watergate advisors Ltd at any point of time.

d. Certificate of incumbency issued by the registered agents M/s Vista BVI Ltd on 12 March 2018 according to that certificate it confirms that Watergate advisors Ltd was incorporated in BVI on 18 March 2011 and his son Shri Rajneesh Mehra is the director and sole shareholder of it.

e. Affidavit dated 17 August 2018 of Mr. Rajneesh Mehra confirming that assessee has not signed any documents relating to the company and nor did assessee received any money on any account from Watergate advisors Mr. Rajneesh Mehra also confirmed that he was the beneficial owner of Watergate advisors Ltd.

In short, assessee raised several contentions and submitted that he is not the owner of the above money but his son is i.e. Mr. Rajneesh Mehra is the owner of the sum. Therefore, assessee contested that he was not required to submit/disclose these assets in schedule FA in the return of income.

9. The learned assessing officer rejected the contentions of the assessee and noted that in assessee‘s return of income for assessment year 2010 – 11 to 2016 – 17, he has not declared foreign assets/income and has not declared any foreign bank account. However, as per the information available with learned AO, assessee is holding foreign account number 806694 and the beneficiary of account is the The account opening form also shows that the beneficiary of account is the assessee. The details of the passport of the assessee are mentioned in the account opening form as identity proof. Thus, AO held that it is evident that the assessee is holding foreign account and the credit entries are reflected in the account statement. Further the assessee has not disclosed income in schedule A and B of FA in his income tax return and therefore the assessee has not disclosed the foreign income/assets and therefore the provisions of the undisclosed foreign income attracts The Black Money Act. He rejected the argument of assessee that assessee is the only nominal settler of the trust without having to invest, contribute, or settle any amount as the settlement amount of the trust and his son Shri Rajneesh Mehra is the beneficiary of the trust. Ld AO was of the view that If the intention is to confer all the benefits to Sri Rajneesh Mehra, the name of the beneficial owner in the bank account should have been of Shri Rajneesh Mehra and not of assessee. He held that documents show that the beneficial owner of the account is only the assessee. He therefore referred to the provisions of Section 3 and 4 of The Black Money Act and satisfied that the assessee has not declared foreign assets/income/accounts of ₹ 56,647,000 Under The Black Money Act and made an addition. He passed an order u/s 10 (3) of the act on 29th of March 2019 determining the total income of the assessee at ₹ 122,377,070/– against the returned income of ₹ 65,730,070/– wherein addition of ₹ 56,647,000/– was made on account of credit appearing in the account of Watergate advisors Ltd in bank account number 806694 with Clariden Leu Ltd Singapore.

10. Assessee aggrieved with the order of the learned AO preferred an appeal before the learned CIT – A. Assessee challenged applicability of the black money act as per ground number 2 –5, these grounds were dismissed. As per ground number 6 – 15 assessee challenged the additions on the merits of the case. On the merits The learned CIT – A decided as Under:-

“4.3 Ground  no 6 to  15 related to the merits of the case stating that the said account does not belong to him and that he did not provide any money or received any money from the said account. It is seen from the order of the AO that during the assessment proceedings, the assessing officer had relied upon a bank account ‘opening form’ to observe that the appellant‘s name was mentioned as the beneficial owner of such account and was thus liable to tax for all credits in the said account. It is not disputed that the said account belonged to and was owned by Watergate advisors Ltd i.e. a company incorporated in the British Virgin Islands. It is not disputed that the sole director and shareholder of Watergate advisors Ltd was Sri Rajneesh Mehra, who has been a non-resident since 1996. It is also not disputed that Section 2 (2) of The Black Money Act restricts its application only to a ‘resident’ assessee as defined under sections 6 of The Income Tax Act.

The contention of the appellant has been considered and the order of the AO has been perused. At the outset, it is apparent and undisputed that the said bank account number 806994 was owned and belonged to Watergate advisors Ltd, which was a company, incorporated in the British Virgin Islands. In order to charge the credits appearing in the accounts of such company, it must satisfy the condition for becoming a ‘resident’ as per Section 6 of The Income Tax Act.

The provisions of Section 6 (3) as applicable for assessment year 2016 – 17 state that

(3) A company is said to be resident in India and in the previous year, if –

(i) It is an Indian company, or

(ii) During that year, the control and management of its affairs is situated wholly in

As per the certificate of incumbency available on record, the company is incorporated in British Virgin Islands and thus does not satisfy the provisions of Section 6 (3) (ii) as applicable for assessment year 2016 – 17 mandated the entire management and control of such company to be present in India for it to be considered as an Indian resident. As per the certificate of incumbency available on record, Shri Rajneesh Mehra is the sole director and sole shareholder of the said company. The certificate of incumbency as noted above has not been disputed by the appellant or by the assessing officer. Thus, the management and control of the said company appears to be wholly outside India. The findings of the assessing officer do not indicate that the appellant was wholly and exclusively engaged in the management and control of Watergate advisors Ltd and that Sri Rajneesh Mehra was nowhere involved in the management and control of Watergate advisors Ltd.

It is further noticed that the AO‘s only claim in this regard is the mention of the appellant‘s name as the beneficial owner in the account opening form. Even if, to some extent, the AO‘s claim is to be considered to the extent of the appellant‘s involvement in the management and control of Watergate advisors Ltd, the involvement of Shri Rajneesh Mehra in the management and control of the said company has not been denied. Thus, even if management and control was partly in India and partly outside India, the said company does not qualify as an Indian resident as per provisions of Section 6 (3) of the Income Tax Act. Thus, Watergate advisors Ltd being a foreign company is not liable to tax in India or under the Black Money Act.

Having examined the above, it is necessary to examine the purported beneficial ownership of Said bank account by the appellant. As The Black Money Act does not define ‘beneficial ownership’, reference is drawn from explanation 4 to Section 139 (1) of The Income Tax Act, 1961 which defines a beneficial owner as follows:-

“Explanation  4  –  for  the  purposes  of  this  Section, beneficial owner in respect of an asset means an individual who has provided, directly or indirectly, consideration for the assets for the immediate or future benefit, direct or indirect, of himself or any other person.”

Thus, the underlying nexus for a person to be defined as a ‘beneficial owner’   is the infusion of funds into the said   asset.   In the given case, it is observed that the only external credit arising in the said account was from Rajvin Ltd. The appellant has placed reliance on a Memorandum of Family Arrangement that was submitted before the AO and has not been denied or rejected by the AO. In fact, vide remand report dated 19/11/2019, the AO has confirmed the submission of the said document during the assessment proceedings. The brief constituents of the said Memorandum of Family Arrangement are reproduced below-

  • that it was created by Shri Rajneesh Mehra and signed by his family members
  • that as per the memorandum, a trust was to be created by him for furtherance of education/vocational/technical skills, promoting hygiene and research on Hindu Scriptures
  • that as per the said memorandum, Shri Rajneesh Mehra himself had to contribute a sum of US$ 50,000 and raise the remaining US$ 2 lakhs from like-minded friends, associates and affiliates
  • that the said memorandum clearly mentions that it would incorporate a company and that the management and control of such trust and such underlying company would solely rest with Shri Rajneesh Mehra
  • that the appellant and his wife would not be involved in the functioning, management or control of the trust or the company
  • that Shri Rajneesh Mehra will out of love and respect appoints his father e. the appellant as the nominal settler
  • that neither the appellant being the nominal settler, the beneficiaries or Shri Rajneesh in my himself shall draw any fees, remuneration or benefit from the trust or the company
  • that the creation, management, control, revocation of the trust and the underlying company was solely the responsibility of Shri Rajneesh Mehra
  • that upon revocation , the funds remaining with the company or the trust would not be distributed among the settler or beneficiaries but shall be passed on to any other trust engaged in pursuing similar

The above statement emanates from the Memorandum of Family Arrangement that was also submitted before the AO during the assessment proceedings. A perusal of the assessment order shows that such document has not been denied or rejected by the AO. During the assessment proceedings and before the undersigned, the appellant has stated that he was unaware that his son had named him as the beneficial owner in the account opening form. This also reflects from the fact that the account opening form does not have any signatures of the appellant.

The appellant‘s claim that no investment was made by him also appears to be correct as the credits in the said account came from Rajvin Ltd trust, which is as per the Memorandum of Family Arrangement created solely by Sri Rajneesh Mehra. This also reflects from the certificate of incumbency of Watergate advisors Ltd wherein Shri Rajneesh Mehra is the sole shareholder and director. The appellant‘s claim that he did not receive any funds from Watergate advisors Ltd also appears to be correct as per the confirmation from Matthew G Stock and G S Impex Pte Ltd stating that some business activities/share transactions have been undertaken by them with Shri Rajneesh Mehra in the last 20 years and on such account some US dollar 1,50,000 was still receivable by them from Rajvin limited. These confirmations have also not been denied or rejected by the AO. The appellant has also submitted and relied on an affidavit executed by Shri Rajneesh Mehra confirming the above facts, which was also placed before the AO during the assessment proceedings. The AO has not rejected or denied the contents of the said affidavit.

Therefore, in light of the above discussion, as the definition of ‘beneficial owner’ requires a nexus of consideration being provided to acquire an asset, the mere mention of the appellant‘s name out of  love  and  respect  is  insufficient  to  classify  him  as  a ‘beneficial owner‘ of the bank account of Watergate advisors Ltd for the purposes of Black Money Act. Moreover, the primary ownership of the said bank account by Watergate advisors Ltd and the existence of Shri Rajneesh Mehra as the sole director and the shareholder has not been denied by the assessing officer. In the absence of such a denial and in the existence of the name of Rajneesh Mehra as the sole director and shareholder of Watergate advisors Ltd, the ownership of the bank account clearly rests with the company. The AO has not brought on record any evidence  to show that the appellant owned Watergate advisors Ltd was solely responsible for its management and control. It is well known that a company belongs to its shareholders and is run by the directors. The underlying test of ownership is that in the event of liquidation of the company, the assets and liabilities rest with the shareholders. In the given case, such ownership of bank account of Watergate advisors Ltd and of   Rajvin Ltd clearly rests with Mr. Rajneesh Mehra and has not been denied by the AO. There is no other evidence brought on record by the assessing officer to reject the ownership by Shri Rajneesh Mehra.

In the light of the above, the appellant‘s contention that the underlying bank account number 806994 held in Clariden Leu Ltd belonged to Watergate advisors Ltd and did not belong to the appellant is found to be correct. Thus, the additions of ₹ 57,445,180/– equivalent to US dollar 8,34,025.32 being the credits in the said account made in the hands of the appellant are hereby deleted.  These grounds of appeal stands allowed.”

11. Thus, the learned assessing officer is aggrieved with the order of the learned CIT – A and preferred this appeal against this order before us on 14/12/2020 whereas the order of the learned CIT – A was communicated to The Principal Commissioner Of Income Tax, Delhi – 15, New Delhi on 1/10/2020. The learned AO filed an appeal in form No. 36 [ As per the Income tax Rules 1962 ] along with the authorization of the Ld CIT, Delhi – 15 New Delhi. The assessee has also filed a cross objection in form No. 4 according to rule 7 (2) of Black Money and Imposition of Tax Rules, 2015.

12. The learned senior departmental representative vehemently supported the order of the learned assessing officer and submitted that

a. name of the assessee is clearly reflected in the column of beneficiary owner of account in the account opening form,

b. Details of his passport is mentioned as the identification document in the account and therefore the contention of the assessee cannot be accepted that he has not signed any document and account is not maintained by him.

c. Though the learned assessing officer has not denied that son of the assessee Mr. Rajneesh Mehra is doing some business activities in Rajvin Ltd in last 20 years but it does not prove that account number 806694 is not maintained by the assessee and the owner of the account is Mr. Rajneesh Mehra.

d. Return of the assessee does not show the disclosure of the above account.

e. Account number 806694 is held in the name of Watergate advisors Ltd and Jatinder Mehra, but assessee is the beneficial owner of that account, if the assessee was merely a nominal settler of the trust, then the name of the beneficial owner on the bank account should not have been shown of the assessee.

f. Definition of undisclosed asset located outside India as per Section 2 (11) of Black Money (Undisclosed Foreign Income And Assets) And Imposition Of Tax Act, 2015 means any asset, which is including a financial interest in any entity located outside India held by the assessee in his name or in respect of which he is a beneficial owner and he has no explanation about the source of such investment or the explanation given by him is not satisfactory, in the opinion of the assessing officer, then such income is required to be taxed according to the provisions of the law. Therefore, she submitted that as the assessee is the beneficial owner of the bank account, which is in the name of Watergate advisors Ltd, the learned assessing officer has correctly charged the above sum to the tax in accordance with the provisions of the act.

g. Order of the learned CIT – A in view of the findings of the learned assessing officer, unsustainable and deserves to be set-aside.

13. Coming to CO and Appeal of Ld AO , The learned authorised representative first challenged the assessment order on the ground that it suffers from invalidity for following reasons:-

i. At the outset, before going on the merits of the case of the Assessee, it is the first and foremost contention of the Assessee, as raised in the Cross Objection filed by the Assessee vide Grounds 1 to 5, that the very Assessment Order dated 29/03/2019 passed by the Ld. A.O. u/s 10(3) of The Black Money Act, 2015 is illegal, invalid and void ab intio in as much as the Ld. A.O. in computing u/s 5 r.w.s. 4(3) of the Black Money Act, 2015, the ―total undisclosed foreign income and asset” at Rs.12,23,77,070/- included in it 6,57,30,070/- which was the Returned Income u/s 139(1) of the Act of the Assessee for the A.Y.2016-17 which could have never formed part of the total undisclosed foreign income and asset under the Black Money Act, 2015. The Ld. A.O. accordingly, based on such erroneous and invalid computation of the assessed total undisclosed foreign income at Rs.12,23,77,070/-, raised the erroneous demand payable at Rs.2,66,61,977/- by imposing tax on the said amount and also by imposing Surcharge, Cess and also interest u/s 234B of the I.T. Act, all of which are not applicable to charge of tax u/s 3 of the Black Money Act, 2015. Thus, on jurisdiction, it is contention of the Assessee that the Assessment Order and the subsequent Demand both being invalid being beyond the provisions of the Black Money Act, 2015 may accordingly be quashed at source.

ii. A.O. after determining the alleged undeclared foreign assets/account of Rs. 5,74,45,180/-, he went on to recompute and assess u/s 5 r.w.s 10(3) of the Black Money Act, the total income of the Assessee as under:

Returned Income (as filed u/s 139(1) of the IT Act)                                          : Rs.6,57,30,030/-

Add: undisclosed foreign asset (under Black Money Act)                                 : Rs.5,66,47,000/-

Assessed Income                                                                                                          Rs.12,23,77,070/-

Based on the above, the Ld. A.O. computed the total amount payable by the Assessee at Rs. 2,66,61,977/- by imposing tax on the said total income of Rs. 12,23,77,070/-Surcharge, Cess and interest u/s 234B of the Income Tax Act, on the said total sum, all of which are not applicable to charge of tax u/s 3 of the Black Money Act, 2015.

iii. Action of the Ld. A.O. in the case of the Assessee whereby in his assessment u/s 10(3) of the Black Money Act, he has included the income returned under the income tax act, is grossly ultra vires the Act and thus the Assessment Order dated 29/03/2019 is void ab initio and thus liable to be quased.

iv. Ld. A.O. imposed tax on addition as well as returned income and by imposing Surcharge, Cess and interest u/s 234B of the I.T. Act, not all of which are applicable to charge of tax u/s 3 of the Black Money Act, 2015. According to section 3 of the Black Money Act it clearly lays down that under the Black Money Act the charge of tax shall be 30% of the total undisclosed foreign asset and income. There is no surcharge, cess and any interest to be levied on the same.

v. On jurisdictional grounds, it is the contention of the Assessee that the Assessment Order passed u/s 10(3) of the Black Money Act, 2015, and the subsequent Demand Notice both being invalid and being beyond the provisions of the Black Money Act, 2015 should accordingly be quashed at source.

vi. He further objected that the Ld. A.O. has filed invalid appeal u/s 18(1) of the Black Money Act before the Appellate Tribunal in as much as the same was required to be filed in prescribed ―Form 3‖ (see Rule 7(2)) as against the ―Form 36‖ under Rule 47(1) of the IT Rules so filed by the A.O. being the Appellant.

14. On the merits of the addition, he submitted that on the facts and circumstances of the case, the assessee does not have any foreign income or assets and therefore no addition can be made. He submitted that :-

i. The bank account number 806694 is solely in the name of a foreign company Watergate advisors Ltd who sole shareholder and director as the son of the assessee Shri Rajneesh Mehra a non-resident Assessee has not at all invested or contributed any sum in the bank account. He referred to page number 174 – 191 of the paper book wherein the details of the bank account is placed.

ii. He also referred to the certificate of Incumbency dated 12 March 2018 wherein Shri Rajneesh Mehra is shown to be the sole shareholder and director of the Watergate advisors He submitted that in case of a company only the shows shareholder could only be the contributor as well as the beneficiary of that account.

iii. That mention of the beneficial owner as the assessee in the above bank account in column number 3 of the account opening form placed at page number 183 of the paper book out of the gratitude in respect the assessee is named as beneficial owner by his son. He referred to the affidavit of the son of the assessee for this purpose.

iv. The Account Opening Form is nowhere signed by the Assessee.

v. He referred to the provisions of Section 2 (11) of the black money act where undisclosed assets located outside India is defined and submitted that on the facts and circumstances of the case the assessee is not a beneficial owner, he referred to the order of the learned and CIT appeal, wherein the assessee has also disclosed the source of such investment in such bank account even otherwise and his explanation is not found to be incorrect by the assessing officer and still the AO has taxed the above amount in the hence of the assessee Under the black money act. He vehemently denied that assessee has provided the sources of the funds directly or indirectly for the immediate or future benefit of the assessee or any other He submitted that the source of the funds has been correctly explained by the learned and CIT – A which has not been disputed by the AO is not emanating from the assessee. He submitted that on 21/12/2011 credit of US dollars 8,26,161.57 emanated from Rajvin Ltd trust has been accepted by the assessee which has been also explained by the submitting the confirmation that the source of the fund emanating in Rajvin Ltd is on account of business transactions and therefore the source of the fund in the bank account of Watergate advisors Ltd is fully explained.

vi. He also referred to the memorandum of family arrangement submitted before the assessing officer as well as before the learned CIT – A placed at page number 125 to 129 of the paper book which clearly shows that Rajvin limited is created by son of the assessee and assessee has not provided any funds in the trust. He also referred to the various clauses of the memorandum as well as the fund flow emanating from that Rajvin trust.

vii. He also referred to the copy of the confirmation of G S Impex Pte Ltd, Singapore listed page number 124 of the paper book wherein it is evident that Sri Rajneesh Mehra was carrying on business and investment in Rajvin Ltd is emanating from Rajneesh He also referred to the confirmation of Mr Matthew G stock who confirmed that he had a business relationship with Mr Rajneesh Mehra and he invested US$ 950,000 in Raja been between 2005 – 2008. This conformation also speaks about the details of the repayment of the above sum. He therefore submitted that all the funds in RajVin Ltd has emanated from Mr Rajneesh Mehra, the bank account owned by Rajneesh Mehra, the beneficiary is Mr Rajneesh Mehra. In addition, assessee has no concern with those funds as well as those accounts.

viii. That The AO has nowhere at any point disputed that Watergate Advisors Limited, a company fully owned by Shri Rajneesh Mehra was the account holder of the impugned Bank Account.

ix. That Ld. A.O. has simply disregarded all the evidences without providing any basis for the The Ld. A.O. has not brought on record any evidence to show that the bank account was not owned by Shri Rajneesh Mehra and that the Assessee had any beneficial interest in the same. The ld. A.O. simply went on to make additions in the hands of the Assessee on pure suspicious and surmises.

x. He further relied on the decision of the coordinate bench in ITA 138/Mum/2019 to 142/Mum/2019 in the case of Kamal Galani Vs. ACIT dated 10/09/2020 wherein the issue is on the similar facts decided in favour of the assessee.

xi. Thus in view of all the facts of the Assessee and in the light of the judicial decision as relied upon above, it therefore stands to be the case of the Assesee that, based on all the evidences duly furnished by the Assessee and accepted in totality by the A.O. without any rebuttal, it is the fact of the Assessee that the Bank A/c No. 806694 was in the name of and clearly belonged the Company WAL of which the sole shareholder thus the sole owner was Shri Rajneesh Thus, the Assessee can under no circumstances be held to the owner of the said Bank Account.

xii. He submitted that it is a settled legal principle that taxation would arise either on account of contribution of assets or funds or on receipt of any distribution or benefit from such trust/structures/entities. In absence of either contribution of receipt on income that would be no implication for merely being named is a beneficiary in a bank account as all that a beneficiary of such an account has is a hope that the distribution will be made in his favour at the time of resolution. For this proposition, he relied on the decision of the honourable Supreme Court in case of Commissioner of wealth tax versus estate of HMM Vikramsinhji of (2014) 225 taxman 166 (SC).

xiii. He further submitted that the provisions of the black money act has come into effect and is applicable from 1 July 2015 and therefore the money which is deposited in the bank account of Watergate advisors Ltd in financial year 2011 – 12 – 13 cannot be taxed when there was no act. He submitted that challenge to the applicability of the black money act retrospectively is pending before the honourable Supreme Court and therefore it cannot be

15. Therefore he requested that the above addition made by the learned assessing officer is incorrect and correctly deleted by the learned CIT – A. Thus he submitted that the order of the learned assessing officer suffers from serious the validity as well as the appeal filed is not in order, learned DR could not find any infirmity in the order of the learned and CIT – A, the order of the AO deserves to be quashed and the order of the learned and CIT – A should be applied.

16. We have carefully considered rival contentions and perused orders of lower Controversy in this case is that, based on the facts of the case of the Assessee and the allegations of the Ld. A.O., sole issue under appeal is regarding the Account Opening form of the Foreign Account A/c No. 806694 maintained in the ―Clariden Leu Ltd. Bank‖ (Presently Credit Suisse) belonging to ‘Watergate Advisors Ltd.’ (WAL), a foreign company incorporated in the British Virgin Islands (BVI). Undisputedly sole Director and Shareholder of that company is Shri Rajneesh Mehra, being the NRI son of the Assessee. It is also a fact that assessee is named as the ‘beneficial owner‖ and the passport details of the Assessee was mentioned in account opening form of that account. It was on this sole allegation Therefore,   ld AO held at para 7.2, page 12 of his Order that the Assessee could not disprove that the name of the Assessee was reflected in the column of beneficiary owner of the account and could not prove that his son, Shri Rajneesh Mehra was the sole owner of the account.   Hence, ld. A.O. held that the Assessee was the only beneficiary of the account, and by not disclosing such foreign asset in his Income Tax Return, assessee is covered by the Provision of The Black Money Act, 2015. So total credits as appearing in bank account no. 806694 maintained in the ‘Clariden Leu Ltd. Bank’ (Presently Credit Suisse) belonging to ‘Watergate Advisors Ltd.’ (WAL), being USD 8,34,025.32 amounting to Rs.5,66,47,000 (1 USD = 67.92 @rate as on Dec 2016) was held to be the Black Money of the Assessee and order was passed. The learned CIT – A deleted the addition holding that the assessee is not the beneficial owner of the bank account and further the source of the fund in that bank account is emanating from Rajvin Limited trust in which the business receipts are credited belonging to the business dealings of son of the assessee Mr. Rajneesh Mehra . The bank account of Rajvin Ltd is also opened by the son of the assessee; the assessee has not provided any contribution/investment in the bank account of the Rajvin Ltd or Watergate advisors Ltd. He also considered the remand report of the learned assessing officer as well as the memorandum of family understanding, affidavits of the son of the assessee, information of two different parties. Therefore, the addition came to be deleted.

17. 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 income and assets of the previous year of the assessee at the rate of 30% of undisclosed income and assets to be charged on its value in the previous year in which such assets comes to the notice of the assessing officer. U/s 2 (2) assessee is defined to mean a person being a resident other than NOR in India as defined in clause (6) of Section 6 of the income tax act. U/s 2 (12) undisclosed foreign income and assets is defined to mean the total amount of undisclosed income of an assessee from a source located outside India and the value of an undisclosed asset located outside India referred to in Section 4 and computer in the manner laid down in Section 5 of the act. U/s 2 (11) undisclosed asset located outside India means an asset including any financial interest in any entity located outside India held by the assessee in his name or in respect of which he is a beneficial owner and he has no explanation about the source of investment in such a set or the explanation given by him is in the opinion of the assessing officer unsatisfactory. Section 4 deals with the scope of total undisclosed foreign income and assets and Section 5 deals with the computation of total undisclosed foreign income and asset. Thus on careful look at Section 3 of the act it provides that irrespective of the year of investment, the undisclosed asset located outside India shall be charged to tax on its value in the previous year in which such asset comes to the notice of the assessing officer. Therefore, the year of chargeability of such undisclosed assets located outside India shall be the previous year when it comes to the notice of the assessing officer. Provisions of Section 10 of the act deals with the assessment of the undisclosed foreign income and assets and the sum payable by the assessee. There is no provision of charging of any interest over and above the tax at the rate of 30% provided u/s 3 of the act. Provisions of Section 5 (1) (ii) provides for exclusion of the income already charged to tax Under the income tax act from the value of the undisclosed assets located outside India and furnishing of the evidence by the assessee to the satisfaction of the assessing officer. Provisions of Section 4 (3) provide that the income included in the total undisclosed foreign income and assets under this act shall not farm part of the total income under the income tax act. Thus it 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. Wherein 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 assessment, notice, summons or other proceedings, if such assessment, notice, summons or other proceedings is in substance and effect in conformity with or according to the intent and purposes of this act.

18. coming to the jurisdictional aspects raised by the assessee in the cross objection stating that the

a. learned assessing officer has made an addition to the regular income of the assessee of the alleged foreign assets and thereafter framed assessment order computing the total income of the assessee including the returned income of the assessee as per the income tax act, as per ground number 2 of the CO

b. charging of interest u/s 234B, surcharge and cess thereon etc as per ground number 4 of the CO

c. issue of demand notice along with interest charged not served on the assessee in the required format in form number 1 u/s 13 of the black money at 2015

Would all not make any difference to the validity of the assessment made in view of the provisions of Section 81 of the act. In view of this, we dismiss ground number 2, 4 and 5 of the cross objection of the assessee.

19. Coming to the ground number 6 of the cross objection where the learned assessing officer has filed the appeal in form number 36 as prescribed Under the Income Tax Rules 1962 instead of in form number 3 as prescribed Under rule 7 (1) of The Black Money (Undisclosed Foreign Income And Assets) And Imposition Of Tax Rules, 2015. The assessee has challenged that appeal filed by the assessee is an invalid appeal u/s 18 (1) of the Black Money Act 2015. We have carefully perused form number 3 as per rule 7 (1) of that rules.   We find that almost all the columns of this form are similar to the columns prescribed in form number 36 of IT Rules 962. Even the notes to the form are also similar and manner of verification is same. The only defect is that learned AO has to file appeal in form number 3 of   respective rule of The Black Money Act but instead of that, it has been filed in form number 36 as per Income tax Rules 1962. However looking to the substance of the matter, we do not find any difference in the requisite information required by both these forms. Therefore, we do not find any merit in ground number 6 of the CO. At the time of hearing, the learned AR himself withdrew this ground and therefore it is dismissed.

20. Ground number 1, 3 and 7 are general in nature, these grounds support the other issues raised in the CO with respect to the invalidity of the appeal filed by the learned AO, no specific arguments were advanced on these three grounds, and therefore those are dismissed.

21. Now coming to the appeal of the ld AO, facts of the bank account shows that The Bank Account A/c N 806694 maintained in the ‘Clariden Leu Ltd. Bank’ (Presently Credit Suisse) is in the name of the foreign company ‘Watergate Advisors Ltd.‘ (WAL), whose sole shareholder and director is the son of the Assessee, Shri Rajneesh Mehra, who has been stated to be a non resident since 1998. The Bank Account Opening Form enclosed at pages 174-191 of the paper book, reveals at page 176 that the account stood in the sole name of the Company ‘Watergate Advisors Limited.’  Assessee has submitted a certificate of incumbency dated 12/03/2018 issued by the registered agent of WAL which was also submitted before the A.O., shows that the company WAL was incorporated in BVI on 18/03/2011 and that Shri Rajneesh Mehra was the sole shareholder and director of the said Company. Thus according to this certificate the ownership of the account rests exclusively with Shri Rajneesh Mehra as in case of liquidation or winding up of a company, all its assets and liabilities are distributed amongst its shareholders only. However, it is also stated by the assessee that Shri Rajneesh Mehra being the sole owner of the bank account, out of love and respect, mentioned the name of the Assessee, Jatinder Mehra, as the ―Beneficial Owner‖ at column 4.3 of the Form, which is placed at page 183 of the paper book. The claim of the assessee is that Shri Jatinder Mehra, appellant/respondent being the father of the Assessee, out of gratitude and respect was merely named as the Beneficial Owner. For this proposition assessee submitted affidavit of shri Rajneesh Mehra dated 17/08/2018, wherein he clearly confirmed that the name of the Assessee, his father, was shown as the nominal beneficial owner in the Form out of respect and that the Assessee never received any money on account of the company WAL and that the Assessee did not ever sign any documents relating to the Company including the said Account Opening Form of the bank account of the company.

22. In view of these facts it is necessary to determine that Under what circumstances the undisclosed asset located outside India can be taxed in the hence of the assessee Under The Black Money (Undisclosed Foreign Income And Assets) And Imposition Of Tax Act 2015. Section 2 (11) defines undisclosed assets located outside India as Under:-

(11) “undisclosed asset located outside India‖ means an asset (including financial interest in any entity) located outside India, held by the assessee in his name or in respect of which he is a beneficial owner, and he has no explanation about the source of investment in such asset or the explanation given by him is in the opinion of the assessing officer unsatisfactory

23. On careful analysis of the above provision it clearly says that there has to be an ‘asset located outside India’. It can also be any financial interest of an assessee in any entity. These assets must be held in the name of the assessee. It can also be held by assessee as its beneficial owner. These assets can be charged to tax if assessee has no explanation about the source of investment in such asset or if the assessee provides an explanation which is in the opinion of the assessing officer is unsatisfactory then such asset can be charged to tax in the hands of an assessee Under the provisions of Section 3 of this act.

24. Undoubtedly, in this case there is an asset located outside India. It is in the form of a bank account number 806994 of a company Watergate advisors Ltd with Clariden Leu Ltd (Presently Credit Suisse) wherein $ 834,025.32 has been 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 of any asset located outside India, shall furnish the return of income verified and in prescribed manner. Thus, the income tax act casts a burden on specified assesse, if he holds as a beneficial owner any asset located outside India or has assigning authority in any account located outside India to file his return of income. The explanation 4 of that Section provides that for the purpose of this Section beneficial owner in respect of an asset means an individual who has provided, directly or indirectly, consideration for the asset for the immediate or future benefit, direct or indirect, of himself or any other person. Therefore, to identify a beneficial owner of an asset, the said person should have nexus, direct or indirect to the source of the asset and he must have provided funds for the said asset. Thus, in order to identify a beneficial owner, one must verify the source of the asset.   Now on perusal of said Bank Statement reveals as per the show cause notice that the total credits in the account was as under:

Date Credit (USD) Balance (USD) Particulars
21/12/2011 8,26,161.57 8,26,161.57 From ‗Rajvin  Ltd.‘ –Trust
30/03/2012 7,712.50 3,18,580.07 From Interest
25/10/2012 151.25 0 Deposited      for                      closing account
Total 8,34,025.32

Thus, it is seen that the credit to the said bank account and thus the source of the said account, was by way transfer made from the Trust Company ―Rajvin Ltd.‖.  Therefore now it is imperative to examine that where from Rajvin Limited has received the fund which are transferred on 21st of December 2011 into the account of Watergate advisors Ltd. Assessee has explained with the help of memorandum of family understanding placed at page number 125 – 129 of the paper book that ―Rajvin Ltd‘ was a Trust formed by the son of the Assessee, Shri Rajneesh Mehra. The said Trust was conceived vide the ―Memorandum of Family Arrangement‖ (MOA) dated 01/11/2003 entered into between the family members of the Assessee, being himself, his wife and his two sons. The said MOA, which was signed by the Assessee as one of the parties, was duly laid out before the ld. A.O. for his perusal.   Salient terms of The MOA‘s provides that Shri Rajneesh Mehra, an NRI, was to form a Trust in any tax free jurisdiction and the father of Sh. Rajneesh Mehra i.e. assessee would be made the nominal settler for the said Trust out 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 was provided that the control of the trust would be with Shri Rajneesh Mehra and revocation of such trust was also at the sole discretion of Shri Rajneesh Mehra was provided. Company formed in accordance therewith was ―Watergate Advisors Limited‖;  it  was  laid  out  that  such  company  being  formed  by  Shri  Rajneesh Mehra would solely be run by the Shri Rajneesh Mehra directly or indirectly. The Bank Account (here now being the A/C No. 806694) to be opened in the name of the Company would directly receive all the Trust funds and all sums raised would be invested by the Company on the directions of Shri Rajneesh Mehra. Further, it was provided that assessee and his wife would expressed not be involved in any of the affairs, day to day functioning and the management and control of the Company. At the time of revocation of the trust, the funds would not be distributed between the settler or any of the beneficiaries but would pass on to any other trust carrying on similar objects. With respect to the credits in the account were also explained and stated that those were all on account of business transactions of the Rajvin Trust. This was also demonstrated by submitting Confirmation of GS Impex Pte Ltd, Singapore, which shows that confirming party had business relation with Mr. Rajneesh Mehra and it had invested a total of USD 2,00,000 in Rajvin Ltd and out of the said sum, a total of USD 1,50,000 was yet due from Rajvin Ltd. assessee also submitted a confirmation of Mathew G Stock, a UK Resident, which shows that for the past 20 years and that he had business relationship with Mr. Rajneesh Mehra and wherein he invested a total of about 9,50,000 USD in his Company ―Rajvin Ltd.‖ between the years 2005 to 2008. He also stated that out of the said investments so made, a total sum of USD 8,18,580 was received back on 30/03/2012 from Rajneesh Mehra, out of which USD 3,18,580 was received from the bank account No.806694 of Watergate Advisors Limited (WAL) and the balance USD 500,000 was received in the form of certain securities. Thus from the above statement it was demonstrated that there is no involvement of the assessee either in Rajvin Limited or in Watergate advisor private limited in providing any fund directly or indirectly in any of the above entities.

25. However, as the entity involved where the money is found credited, it needs to be examined whether the assessee 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 “one who is entitled to receive the income of an estate without its title, custody or contro”

28. The beneficial ownership concept is also dealt with extensively in the corporate laws such as The Companies Act and various circulars issued by SEBI. The Companies ‘ Act 2013 prescribes maintenance of a register of beneficial Section 90(1) of The Companies Act 2013 states that :-

90.(1) Every individual, who acting alone or together, or through one or more persons or trust, including a trust and persons resident outside India, holds beneficial interests, of not less than twenty-five per cent or such other percentage as may be prescribed, in shares of a company or the right to exercise, or the actual exercising of significant influence or control as defined in clause (27) of section 2, over the company (herein referred to as “significant beneficial owner”), shall make a declaration to the company, specifying the nature of his interest and other particulars, in such manner and within such period of acquisition of the beneficial interest or rights and any change thereof, as may be prescribed:

29. “Beneficial interest” has been defined under section 89(10) of the Companies Act as follows

(10) For the purposes of this section and section 90, beneficial interest in a share includes, directly or indirectly, through any contract, arrangement or otherwise, the right or entitlement of a person alone or together with any other person to—

(i) exercise or cause to be exercised any or all of the rights attached to such share; or

(ii) receive or participate in any dividend or other distribution in respect of such ]

30. Section 2 (27) of The Companies Act says that

(27) “control” shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner

31. From the above the criteria to be considered for an individual to be considered as a beneficial owner where such person either by himself or in conjunction with others holds the

a) Specified beneficial interest;

b) has the right to exercise or exercises significant influence or

32. Testing the case before us on the above parameters 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 a benami transaction and also includes the proceeds from such Further, a “benami transaction” (subject to exceptions provided therein) means,

(A) a transaction or an arrangement—

(a) where a property is transferred to, or is held by, a person, and the consideration for such property has been provided, or paid by, another person; and

(b) the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration, with specified exceptions

(B) a transaction or an arrangement in respect of a property carried out or made in a fictitious name; or

(C) a transaction or an arrangement in respect of a property where the owner of the property is not aware of, or, denies knowledge of, such ownership;

(D) a transaction or an arrangement in respect of a property where the person providing the consideration is not traceable or is fictitious

34. Considering the definition of beneficial owner read with benami transaction, the primary conditions for a person to be considered as a beneficial owner under the Benami Act, may be summarized as under:

(a) Could cover ‘any person’

(b) The consideration has been provided by such person other than the person holding/owning the property and such other person also hold the

(c) Property of any kind

35. ‘Beneficial owner’ has been defined as “an individual who ultimately owns or controls a client of a reporting entity or the person on whose behalf a transaction is being conducted and includes a person who exercises ultimate effective control over a juridical person”.

36. Testing the above facts with respect to this law, here there is no evidence that the consideration has been provided by the assessee of the sum deposited in the bank account of Watergate advisors Limited. Contrary to that assessee has shown that above funds have been transferred from Rajvin Limited, which is owned and controlled by the son of the assessee. Similar to the provisions of the Companies act here also it is not demonstrated that assessee enjoys and exercises any control the Watergate advisors Limited or the owner of the Watergate advisors Limited.

37. It is also required to be tested the test of beneficial ownership in the context of Prevention Of Money Laundering Act where reference is made to the ultimate ownership or control of the entity. Provisions of Rule 9(3) of The 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 /voting agreements

(d) Shares in a company or interest in an entity other than a corporate

39. Testing the transactions before us it is apparent that assessee does not own any share capital in case of Watergate advisors Limited as well as it also does not controls the above company as he does not have any shareholding or management rights in that

40. With respect to the mention of the name of the assessee in the account opening form as beneficial owner, assessee has relied upon the decision of the coordinate bench in case of Kamal Galani V ACIT in ITA number 138/Mum/2019 dated 10 September 2020 wherein in para number 13 onwards the coordinate bench has held that merely mentioning the name of the assessee in the account opening form which is rebutted by the assessee by filing an affidavit and complete details of the ownership of the bank account, the assessee cannot be held the beneficial owner of such sum. Therefore, such solitary fact cannot lead to addition in the hence of the assessee where there is no other evidence available with respect to the ownership or beneficial ownership over such bank account. In view of this it is apparent that the mere account opening form where the assessee is mentioned as the beneficial owner of the account mentioning is details of his passport as an identification document, does not necessarily, in absence of any other corroborative evidence of the beneficial ownership of the assessee over that for an asset cannot lead to taxability in the hands of the assessee Under the Black Money Act.

41. In view of above facts, we hold that assessee does not have beneficial ownership of the amount deposited in Watergate advisors Limited, assessee also do not held that asset. The learned CIT – A has also held so giving the detailed reasons as reproduced above. The learned departmental representative could not show us any evidence that assessee is the owner or beneficial owner of the sum lying in the bank account of Watergate advisors Limited. The assessee has given an overwhelming evidence of the fact that money belong to the son of the assessee which were not at all controverted by the learned assessing officer. In view of this we hold that the learned CIT – A is correct in deleting the addition of ₹ 56,647,000/– in the hands of the assessee. Accordingly, we confirm the order of the learned CIT appeal and all the 4 grounds 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 26/Del/2021 are dismissed.

Order pronounced in the open court on 07/07/2021

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