Case Law Details

Case Name : Yashovardhan Birla Vs CIT (ITAT Mumbai)
Appeal Number : SA No. 61/Mum/2021
Date of Judgement/Order : 03/09/2021
Related Assessment Year : 2016-17

Yashovardhan Birla Vs CIT (ITAT Mumbai)

The Income Tax Appellate Tribunal (ITAT), Mumbai bench, in its order has examined the definition of ‘undisclosed asset’ in the Black Money (Undisclosed Foreign Income and Assets) and Impositions of Tax Act (BML Act) and held that the assets which constitute part of income tax proceedings and have been assessed in such proceedings, then such assets/income shall excluded under the definition of ‘undisclosed income’. The learned Tribunal also held that the doctrine of double prejudice will rescue such assessee who have been subjected to simultaneous proceedings for same assets/income under the two legislations, i.e. Income Tax Act and BML Act.

The judgment was delivered in an appeal preferred against the order of CIT (Appeal) in the case titled as Yashovardhan Birla v. CIT (A)[1], wherein the learned Tribunal allowed the appeal primarily on account of the statutory bar in simultaneous proceedings under the IT Act (wealth tax assessment) and BML Act and also, violation of principles of natural justice, as duly supported by the Hon’ble Supreme Court in Andaman Timber Industries v. CCE[2], as the CIT (A) overlooked the submissions of the present appellant. Further the Tribunal observed that the CIT (A) erred in ignoring the findings of ITAT’s earlier judgement with regard to the same assets and the bank account, under the Wealth Tax Assessment proceedings, wherein it was held that the trust in question was set up the relative and the assessee is not the sole beneficiary of the trust nor the substantial owners of the assets, reliance was placed on the decision of the Hon’ble Supreme Court in CIT v. Estate of HMM Vikramsinhji of Gondal[3]. Also, the offshore bank accounts are not of the assessee, even though for the purposes of anti-money laundering he has been declared as beneficial owner. Thereby shifting from the judgment of the earlier observations of the learned Tribunal as it would violated the principle of approbate and reprobate, as held in case of Suzuki Parasrampuria Suitings Ltd. v. Official Liquidator of Mahendra Petrochemical Ltd.[4]. In light of the above reasoning, the appeal was allowed.

The decision of the learned ITAT shall be a rescue to assessees who have been subject to multiple proceedings under the two aforesaid legislations for the same assets/income, causing violation of doctrine of double prejudice.

Indian currency 500 rupee notes lying on ground with Black Money written using wooden blocks

FULL TEXT OF THE ORDER OF ITAT MUMBAI

This appeal under the Black Money Act is directed against the order of learned Commissioner of Income Tax (Appeals) [in short learned CIT(A)] dated 26.4.2021 pertaining to assessment year (A.Y.) 2016-17.

2. Grounds of appeal read as under :-

1. That, in the facts and circumstances of the case and in law, the Assessing Officer (“AO”) and the Commissioner (Appeals) [collectively, hereinafter referred to as “Lower Authorities”] erred in law, in rejecting the jurisdictional challenge of the Appellant, and in acting inconsistent from and disregarding the binding ruling of the Income Tax Appellate Tribunal (“Tribunal”) in the wealth tax proceedings of the Appellant for AY’s 2007-08 to 2013-14, wherein vide order dated 24 December 2020 (bearing Wealth Tax Appeal Nos. 2 to 8/Mum/2020), it has been held as under:

a) That the Appellant was nominated as one of several beneficiaries of an offshore irrevocable discretionary trust, settled in the year 1989 by the Appellant’s non-resident late maternal uncle Shri PratapMalpani, governed by the laws of Guernsey (“Malpani Trust”).

b) That the Appellant was not a contributor to the Malpani Trust structure.

c) That the Appellant is not liable to be construed as sole beneficiary of the Malpani Trust.

d) That the Revenue cannot collapse the offshore trust structure i.e., corporate veil cannot be lifted, since offshoreentities are independent entities are taxable in their respective jurisdictions.

e) That the Appellant was not the ‘substantial owner’ of assets held by Kinetic Holdings Ltd.

f) That bank accounts in foreign jurisdictions pertaining to offshore entities of the offshore trust could not be treated as bank accounts of Appellant even though for compliances by the offshore trustees in relation to local anti-money laundering laws, the Appellant (in capacity as one of several beneficiaries of the offshore trust) was declared as beneficial owner thereof for the limited purpose of fulfilling compliances (since principally, a trustee has no right to declare itself as ‘beneficial owner).

Further, the Hon’ble Tribunal exercises judicial functions, and it is well settled that it has all the powers of a Court. Hence, any proceeding before the Tribunal shall be deemed to be judicial proceedings. Thus, the facts as mentioned above, as accepted in the wealth tax proceedings, ought to be considered in the given case. Refusal to follow the binding order of the Tribunal in the wealth tax proceedings, would lead to serious prejudice to the Appellant and judicial impropriety. The law of judicial discipline ought to be followed in all circumstances.

The Hon’ble Tribunal has in the Wealth tax proceedings referred above, already extensively deliberated upon and decided the core issues which have a direct bearing on the BMA proceedings. Thus, the impugned order is at best capable of being classified as a case of mere change of opinion; hence, the assessment is bad in law. Reliance is also placed on the legal principle of rule of consistency’ and Article 141 of the Constitution of India.

2. That the order dated 17 January 2019 passed by the AO under section 10(1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (“BMA”), which has merged into the order dated 26 April 2021 passed by the Commissioner (Appeals) suffers from patent ex facie errors, is bad in law, and is liable to be quashed, in that no new information whatsoever was received by the AO after the enactment of the BMA; on the contrary, the purported assets which are the subject-matter of the ostensible BMA proceedings have been the subject-matter of Income-tax Act, 1961 proceedings against the Appellant for AYs 1998-99 to 2014-15, and as such the jurisdictional threshold requirement itself is not fulfilled.Further, the material information/documents relied upon or referred to in previous AYs, have continued to remain the same. These facts have been duly considered by Revenue in the Income-tax Act proceedings, and also examined and confirmed by this Hon’ble Tribunal in the Wealth Tax Proceedings of the Assessee/Appellant.

3. That, in the facts and circumstances of the case and in law, the Lower Authorities erred in invoking the provisions of BMA (reserving the Appellant’s position as to constitutionality thereof) overlooking that the alleged foreign assets and/or income purported to be brought to tax in the hands of the Appellant were not sourced from India, and die legal ownership whereof was vested in the offshore discretionary trust(s) and/or corporate entities within the framework of such offshore discretionary trust(s); as such precluding authority in law to seek to bring to tax in the hands of the Appellant such foreign assets and/or income, whose ‘situs’ was not India, and which remained amenable to tax strictly in their offshore jurisdictions.

4. That, the Revenue has failed to appreciate the distinction between “undisclosed” and “part disclosure”. The Appellant prays that based on the facts and information available with the Lower Authorities, the question of any jurisdiction based on such facts having been duly undisclosed does not arise and hence the CIT(A) order ought to be quashed along with all consequential action thereto.

5. That the purported invocation of the provisions of section 4 of BMA proceeds on the fatal error that the Appellant is the sole beneficial owner of the assets and/or income held under the offshore trust structure, which this Hon’ble Tribunal has, in the wealth tax proceedings of the Appellant, concluded in its order and judgment dated 24 December 2020, that “From the above chart of beneficiaries, it is clear that the assessee is not the only beneficiary, it consists of other beneficiaries, who are direct lineal descendants of LMte Shri Pratap Malpani, Late Ashokvardhan Birla and spouses of their respective descendants. In any case, it could be seen that a charitable organisation is also one of the beneficiary together with assessee and aforesaid individuals. Hence, even if aforesaid individuals other than assessee do not survive, still assessee alone is not the sole beneficiary. It is the duty of the existing trustee to distribute the income and benefits among all the beneficiaries including charitable institution.. 39. Even though, in the KYC compliance, the assessee is mentioned as the beneficiary, it does not alter the fact that assessee is one of the beneficiary, and it is fact on record that assessee is not the only beneficiary. Therefore, we have to consider the actual legal ownership rather than deemed ownership which is without any evidence on record, to show that assessee has the legal ownership on bank account and other assets held by Trust.” (as set forth in paragraphs 24 and 39 of the Tribunal order). That, in any event, in the absence of lawful applicability of principles of lifting of ‘corporate veil’ to offshore trust assets in relation to which the Appellant had not received any distribution and had ceased to be a ‘beneficiary’, there was no scope for any purported foreign assets and/or income in the legal ownership of the offshore discretionary trust(s) being brought to tax in the hands of the Appellant under BMA, or at all, as a matter of Indian law.

6. That, the Commissioner (Appeals) had no liberty, in law, to reject the instrument of trust and/or other duly notarised and apostilled documents pertaining to the offshore discretionary trust structure, which had been relied upon by the Revenue in proceedings before the Hon’ble Income Tax Settlement Commission, and in particular, were the subject-matter of a letter dated 28 August 2017, wherein it was concluded by Revenue that “As to the submissions of the assessee that formation of Avit Investment Ltd./Kinetic Holdings Ltd. and related entities/structures by Pratap Malpani took place in the early and mid-1980 ‘s is concerned, the same is not disputed at present but this information needs to be thoroughly and independently enquired and investigated into; as such, the Revenue had no power to approbate and reprobate, including through purporting to contend that certain instruments of migrated trust (including Bird International Foundation) were unavailable with Revenue, despite these very instruments coming to be furnished to the Appellant as part of the FT&TR documents provided inspection of to the Appellant, and therefore available on the files of the Revenue.

7. That the Commissioner (Appeals) has erred, in law, in purporting to rely upon certain documents produced by the AO which are unsigned, unstamped and have no record of formal receipt by the concerned FT&TR division, and hence cannot be considered as valid evidence under the provisions of Indian Evidence Act, 1872.

8. That the Lower Authorities have erred in overlooking the duly apostilled/notarized documents received from the relevant foreign parties, prior to the BMA Act coming into force, which represent the factual position with regard to the offshore discretionary trust in which the assessee is only one of the named beneficiaries and not the sole beneficiary.

9. That, the Commissioner (Appeals) has erred in overlooking the declaration made in the Appellant’s return of income filed for assessment year 2015-16, wherein the Appellant’s cessation as beneficiary of the Malpani Trust has been disclosed, which was bound to be construed with the duly apostilled Source of Wealth document executed by the current trustees of the Malpani Trust, which unequivocally confirms cessation of the Appellant as beneficiary of the Malpani Trust (since migrated to The Banyan Trust), which migration of trust has been affirmed by this Hon’ble Tribunal in paragraph 29 of its order dated 24 December 2020, in recording that “The trust still will continue with the new trustees. The properties attached to the trust will continue to be the properties of the trust. It is wrong to presume that the properties governed by the trustee will be considered as the properties of the individual beneficiary who exercises the appointment of trustees. In the given case, no doubt the assessee is vested with the power to appoint or remove the trustees, does not change the status of the trust and its independent functioning

10. That, the Lower Authorities have erred in ignoring the fact that Schedule FA has undergone changes between 2012 to 2016 with limitations on the number of characters that can be filled while uploading the details in Schedule FA of the ITR. Consideration of such limitation as non-disclosure of foreign assets by the Lower Authorities, is bad in law.

11. That, the Commissioner (Appeals) has grossly erred in failing to appreciate that the beneficial ownership status in Anti-Money Laundering Know Your Customer (‘KYC’) compliance form of foreign entities which required any one trust beneficiary’s name from among the various beneficiaries of the trust structure to be set forth, was incapable of equating the Appellant as ultimate or sole beneficial owner of the assets of an offshore discretionary trust structure. In fact, the conclusive apostilled opinion of foreign lawyers Reichlin Hess dated 11 January 2016 on this issue, has been erroneously overlooked by the Commissioner (Appeals). The Hon’ble Tribunal has duly considered the factual position in its order under the Wealth Tax Proceedings.

12. That the Lower Authorities have erred in concluding that the provisions of BMA were applicable to the Appellant in circumstances by disregarding the fact that the trust structure had not effected any distribution to the beneficiaries, and as such no income was capable of being brought to tax in the hands of the Appellant. These facts had inter alia been corroborated by certificates of the original and the easting Guernsey trustees, i.e. Michael Collins on 7 March 2016, and Confiance Limited, Guernsey on 15 and 24 March 2016, which -was not disputed by the Revenue.

13. The Lower Authorities misplaced reliance upon retracted statements of Shri G L Lath and failure to consider that Shri G L Lath’s statements constituted ‘hearsay evidence’ which had no standing in law, and similarly, reliance upon purported statement of Ms. Nita Shivdasani without grant of opportunity for cross-examination, thus violated quintessential principles of natural justice; which has led to egregious legal errors, in effect, nullifying scope for Revenue to rely thereupon. The Hon’ble Tribunal has duly considered the factual position in its order under the Wealth Tax Proceedings

14. That the Lower Authorities erred in concluding that the Appellant has not made full and true disclosure of foreign asset(s) and/or income disregarding the specific finding of this Hon’ble Tribunal in the Appellant’s own wealth tax proceedings that “we notice that there was no obligation on the part of assesses to declare the wealth/assets in the ‘ROI’ up to AY 2012­-13. The declaration of details of foreign bank account and trust were mandated only from AY 2013-14”. Further, the Appellant had duly disclosed in ‘Schedule FA of the returns of income’ filed on 13 January 2016 for AY 2014-15 and on 26 August 2016 for AY 2015-16, interest as beneficiary in the Banyan Trust with corollary offshore companies/trusts/entities there under. That the Lower Authorities has erred in ignoring the very crucial aspect that the Schedule FA has undergone changes between 2012 to 2016 with limitations of the 125 characters that can be written while uploading the details in Schedule FA of the ITR This limitation has been construed by the Lower Authorities as non-disclosure of the foreign assets.

15. That the Lower Authorities erred in applying the provisions of the BMA to the Appellant overlooking that Writ Petition No.862 of 2018 is pending adjudication in the Hon’ble Bombay High Court, which has a direct bearing on assessment qua the right of a beneficiary of an offshore irrevocable trust, and in any event, the findings of the Hon’ble Income Tax Settlement Commission (“ITSC”) were superseded by the later order dated 24 December 2020 of the Hon’ble Tribunal.

16. That the Lower Authorities have laid misplaced reliance upon the Order of the Income Tax Settlement Commission (ITSC) by ignoring the position taken by the Revenue vide letter of Pr. CIT-2 dated 28th August, 2017 confirming the factual position about the offshore entities held under the discretionary trust structure.

17. That, in the facts and circumstances of the case, and in law, the Impugned order of the Commissioner (Appeals) has been made without affording an opportunity for in-person personal hearing, despite having been sought by the Appellant. The Appellant has merely been provided an opportunity to discuss the case telephonically, wherein such a matter could not have been explained in detail. Thus, the above is contrary to the principles of natural justice, and liable to quashed in limine.

18. The Appellant prays that until the disposal of this appeal or such time, a stay be granted against the implications arising from the proceedings before the CIT(A) filed u/s. 15(l)(a) that may result in quantification of the amount of tax payable, against the order passed u/s. 10(3) of the Act. The same could lead to multiplicity of proceedings, with the possibility of such proceedings becoming meaningless if ultimately the order passed by the Lower Authorities is found to be invalid on grounds of jurisdiction; and undue hardship to the Appellant if the apparent unlawful and unrealistic demand arising on account of non-appreciation of entire facts of the case and consequential settled legal position, is made to be recovered. This in turn would not be in consonance with the powers of the Tribunal to ensure that the fruits of success in such appeals are not rendered meaningless or nugatory.

19. Your Honour may consider that such order of jurisdiction relying upon misplaced facts, available with the authorities prior to the BMA coming into force and continuing thereafter, and which have already been considered and accepted by the Tribunal in other proceedings (based on identical facts and circumstances), is an inappropriate use of the facts to one’s advantage leading to serious prejudice to the Appellant. Hence, it is submitted that jurisdiction under BMA on the basis of such facts be considered bad in law, and accordingly the order of CIT(A) alongwith consequential implications of the application of such jurisdiction and its related assessments be quashed thereto.”

3. Brief facts of the case are that the assessee-Shri Yashovardhan Birla is an Indian national and tax-resident of India. He was served a notice under section 10(1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (in short ‘BMIT Act’) dated 22.11.2017. The said notices read as under :-

NOTICE U/S 10(1) OF THE BLACK MONEY (UNDISCLOSED FOREIGN INCOME
AND ASSETS) AND IMPOSITION OF TAX ACT, 2015

To,
Shri Yashovardhan Birla,
ft Floor, Dalmal House,
Nariman Point,
Mumbai – 21

Sir,

In connection with the assessment for the assessment year 2016-17 under the Blaclz Money (Undisclosed Foreign Income and Asset) and Imposition of Tax Act , 2015 you are required to you are required to

(a) produce or cause to be produced before me at my office at Room No. 1911, Air India Building, Nariman Point, Mumbai 21 on 05.12.2017 at 11.30 am  all such details/documents/evidences as specified in the annexure attached to this notice, as this office is in possession of information of your undisclosed foreign income and asset during the previous year 2015-16 after 1.t July 2015 relevant to the Atteessment Year 2016-17.

(b) Furnish in writing, duly signed and verified in the prescribed manner information called for as per annexure attached.

(ANU RISHNA AGGARWAL)
Add Commissioner of Income Tax,
Central Range-4,Mumbai.

Enclosed : Annexure Page 1 to Page 8

ANNEXURE

1. It has come to the notice of this office from the information received under the DTAA treaty with Switzerland that you are the beneficial owner of the undisclosed Bank Account No. 1282411 with Credit Suisse held in the name of Mokopane Limited. The document pasted below clearly states that you are the ultimate owner of the assets deposited.

Annexture

In view of the above facts, you are requested to furnish a copy of the complete bank statement of the above account since the opening of the above account till date or the date of closure, achiever is earlier alongwith explanation of all the deposits/credits appearing in the said account.

CERTIFIED TRUE COPY

2. It has come to the notice of this office from the information received under the DTA with Switzerland that you are the beneficial owner of the undisclosed Bank Account no. 1367551 with Credit Suisse held in the name of Kinetic Holdings Limited as is evident from the document scanned and pasted below.

Account

In view of the above facts, you are requested to furnish a copy of the complete bank statement of the above account since the opening of the above account till date or till the date of closure, however is earlier along with explanation of all the deposits/credits appearing in the said account.

3. It has come to the notice of this office from the information received under the DTAA treaty with Switzerland that you are the beneficial owner of the undisclosed Bank Account no. 40639 in Credit Suisse held in the name of Sorwood Development SA. The  document scanned and pasted below proves this facts.

Sorwood Development

In view of the above facts, you are requested to furnish a copy of the complete bank statement of the above account since the opening of the above account till date or till the date of closure, however is earlier along with explanation of all the deposits/credits appearing in the said account.

4. It has come to the notice of this office from the information received under the DTAA treaty with Switzerland that you are the beneficial owner of the undisclosed Bank Account no. 0835-722484 in Credit Suisse held in the name of Alea Management Limited as is evident from the document scanned and pasted below.

Management

In view of the above facts, you are requested to furnish a copy of the complete bank statement of the above account since the opening of the above account till date or till the date of closure, whichever is earlier along with explanation of all the deposits/credits appearing in the said account.

5. It has come to the notice of this office from the information received under the DTAA treaty with Switzerland that you are the beneficial owner of the undisclosed Bank Account no- 1510428 in Credit Suisse held in the name of Alea Management Limited as is evident from the document scanned and pasted below.

Alea Management

In view of the above facts, you are requested to furnish a copy of the complete bank ment of the above account since the opening of the above account till date or till the date of whichever is earlier alongwith explanation of all the deposits/credits appearing in the said account.

6. It has come to the notice of this office front the information received under the DTAA treaty you are the beneficial owner of the undisclosed Bank Account no. 1494489 in Credit Suisse held in the name of Anrid LLC. The document scanned and pasted below proves this fact.

Anrid LLC

In view of the above facts, you are requested to furnish a copy of the complete bank ment of the above account since the opening of the above account till date or till the date of whichever is earlier alongwith explanation of all the deposits/credits appearing in the said account.

7. It has come to the notice of this office from the information received under the DTAA treaty with Singapore that you are the beneficial owner of the following bank accounts as is evident from the documents scanned and pasted below.

DTAA

It is found from the Income Tax Return that only the foreign bank accounts with account Nos. 1321400, 91312600 and 91321300 were disclosed in schedule FA of the returns on income and the remaining six accounts are not disclosed.

In view of the above facts, you are requested to furnish a copy of the complete bank state 5th the following accounts since the opening of the accounts till date or till the date of closure_ whichever is earlier alongwith explanation of all the deposits/credits appearing in the said account

Sr.No. Account Holders Name Account No. Bank
1 Mokopane Limited 125042 Credit Suisse AG
2 Kinetic Holdings Limited 125114 Credit Suisse AG
3 Alea Management Limited 125132 Credit Suisse AG
4 Mokopane Limited 91320000 Barclays Bank
5 Confiance Limited 91318600 Barclays Bank
6 Kinetic Holdings Limited 91403800 Barclays Bank

8. It has come to the notice of this office from information received under DTAA treaty with Switzerland that you are the beneficial owner in the following offshore entities. You are, therefore, required to furnish the details of all the other bank accounts of the following entities alongwith a copy of bank statement since the opening of the bank accounts till date or date of closure whichever is earlier :

Sr. No. Name of the Offshore Entity Bank A/c No. Opening date Closing date Name of bank/ Branch/ Address
i. Mokopane Limited
ii. Kinetic Holdings Limited
iii. Sorwood         Development SA
iv. Alea Management Ltd.
v. Anrid LLC
vi. Confiance Ltd as Trustee of The Banyan Trust

9. You are required to furnish details of any inter-account transfers made by you and also furnish proof of the same in all the above mentioned bank accounts so that credit for the same can be given to you while computing your income under this Act.

10. It is seen from the details that come-of the bank accounts have been closed by you. Please furnish details as to where the balance funds were transferred and how these were utilized for correct computation of your income under this Act.

11. It has come to the notice of this office that you own an undisclosed immovable property having address , ” B”, 8 Lees Palace, London WI which has not been declared in the FA schedule of your Income Tax Returns. You are required to state the total value of the said property as on 01.07.2015. Please furnish the details of any other income earned from the above referred immovable property, in the nature of rent,

4. The assessee made a jurisdictional challenge against the said notice issued by the Assessing Officer under section 10(1) of BMIT Act. The Assessing Officer vide order dated 17.01.2019 rejected the said objection. The order rejecting the jurisdictional challenge read as under :-

“Shri Yashovardhan Birla
1st Floor, Dalamal House,
Nariman Point
Mumbai-400 021

Sir,

Sub: Assessment proceedings u/s 10(1) of the Black Money Act, 2015-rejection of jurisdictional challenge-Regarding.

Ref: Your letters dated. 5.12.2017 & 18.12.2017

*****

Please refer to the above.

1. The applicant in his letters dated. 5.12.2017 & 18.12.2017, filed through v his Authorised Representative, has raised certain jurisdictional issues against the issue of notice u/s 10(1) of the Black Money Act, 2015. These claims are neither factually nor legally tenable. The jurisdictional objections raised are dealt with as under:

2. The applicant in his letter dated. 5.12.2017 has stated that he was searched u/s 132 of the IT Act, 1961 (IT Act) on 7/14th January 2014 and consequent to search action, notices u/s 153A/148 of the IT Act were issued to him for the AY 2008-09 to 2014-15 and 1998-99 to 2007-08 respectively. He has further stated that he has challenged the order of Hon’ble income Tax Settlement Commission (ITSC) u/s 245D dated 27th September, 2017 before the Hon’ble Bombay High Court and the same is pending. Having said so, it was requested to keep the notice u/s 10(1) in abeyance. The claims of the assessee are perused and they are dealt with as under:-

3. The assessee has simply stated certain case specific facts and requested for keeping the notice issued u/s 10(1) of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA, 2015) in abeyance. It is to be noted that the WP filed by the applicant against the order of the hon’ble ITSC dated. 29th September, 2017 is under Income Tax Act, 1961 but the notice issued to the assessee u/s 10 (1) is related to the Black Money, 2015. These two things are quite different and can never be clubbed as scheme of taxation is completely different. Further, the AY for which WP filed is different (AY 1998-1999 to 2014-15) from the AY for which notice u/s 10 (1) of BMA, 2015 (AY 2016-17) issued. Hence, the claims of the assessee and his request to keep the notice u/s 10(1) in abeyance is emanating from his lack of awareness of the scheme and purpose of bring BMA, 2015.

4. In his letter dated 18.12.2017, the assessee further raised some more objections. They are discussed and dealt, with as below.

4.1. It was averred that notice u/s 10(1) of BMA, 2015 issued to assessee is ex-facie prematxire, but failed to give any reasoning why it was premature. It is a valid notice for cogent reasons communicated to the assessee along with the notice u/s 10(1) under the BMA, 2015.

4.2. The assessee is of the opinion that chapter XIX-A of the IT Act bars the Department to institute proceedings under BMA, 2015, as he has a right to settle the matter with the ITSC and if such settlement is done, there is no scope for pursuit of proceedings under BMA, 2015. It is also averred that issue of notice u/s 10(1) of BMA, pending the settlement process would aggravate the disputes and tantamount to abuse of process.

It is to be noted that the cause of action and basis on which notice issued u/s 10(1) of the BMA is different from the issue before the Hon’ble ITSC. The claims of the assessee are unfounded and emanating from the ignorance of scope of undisclosed foreign asset and income under BMA, 2015,

4.3. In this context, the attention of the assessee is invited to the subsection 3 of section 4 (charging section under BMA, 2015) and clause (ii) to the section 5 (Computation of income under BMA, 2015). Section 4 (3) states that “The income included in the total undisclosed foreign income and asset under this Act shall not form pan. of the total income under the Income-tax Act.”

It means that the undisclosed foreign income and asset which assessed under BMA, 2018 would not become income under Income-Tax Act, 1961, but not vice-a-versa.

4.4. Section 5 of the Black Money Act, 2015 which describes the computation of total undisclosed foreign income and asset under BMA, 2015 is reproduced as under.

“Section 5 (1): In computing the total undisclosed foreign income and asset of any previous year of an assessee,-

a) No deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee, whether or not it is allowable in accordance with the provisions of the Income-tax Act; (ii) any income, – a. which has been assessed to tax for any assessment year under the Income-tax Act prior to the assessment year to which this Act applies; or

b. which is assessable or has been assessed to tax for any assessment year under this Act, shall be reduced from the value of the undisclosed asset located outside India, if, the assessee furnishes evidence to the satisfaction of the Assessing Officer that the asset has been acquired from the income which has been assessed or is assessable, as the case may be, to tax”.

4.5. On perusal of the clause (ii) to the section 5, it is very clear that: where the assessments related to foreign asset and income have been covered under the Income-Tax Act and such income only to be reduced from the income assessed under BMA, 2015, but not vice-a-versa. In other words, undisclosed foreign asset and income have to be assessed under Black Money Act only from the AY 2016-17. It is to be noted that this act came into force w.e.f 1st July, 2015 and hence the first year of assessment under BMA is AY 2016-17. In cases where foreign income or assets were assessed under Income Tax Act, 1961, before the application of the BMA, 2015, the assessee can seek reduction to the extent assessed under IT Act, 1961 from the total income assessed under BMA, 2015. But the reverse is not possible,

4.6. In the assessee’s case, the foreign assets and income were considered and assessed under Income Tax Act vide assessment orders u/s 143(3) r.w.s.l53A for A.Y.s 98-99 to 2014-15 made on 30.03.2016 and served on the assessee on 31.3.2016. These assessment orders for A.Y.s 98-99 to 2014-15 were quashed by the Hon’ble High Court of Bombay in its order dated. 10.08.2016 on the ground that assessee has filed an application before the Hon’ble 1TSC for the years under consideration. Thus, practically no assessment under Income-Tax Act related to the undisclosed foreign asset and income has been made under IT Act. Thus, in the assessee’s case, notice u/s 10(1) of BMA has rightly been issued and undisclosed foreign income and asset has to be assessed under the BMA, 2015. It is to be noted that no facility of settling income with the ITSC is available under the BMA, 2015.

5. The assessee in his letter dated.18 December, 2017, has claimed that he neither holds beneficial ownership nor a beneficiary of foreign asset or income. It is interesting to note that, on one-hand, he is claiming that he is settling the undisclosed foreign income with ITSC and on the other hand claiming that he is not even beneficial owner. This is self-contradictory and self-serving. Even otherwise, if the facts are such that, according to him, he has not a beneficial owner of any undisclosed foreign asset and income, he has an opportunity to prove his case before the Addl. C1T, Central Range-4, being the AO under BMA, 2015.

6. The assessee is of the opinion that he has acquired the beneficial ownership by way of inheritance and therefore not liable to be taxed under BMA, 2015. No such exemption has been granted under the BMA, 2015.

7. In view of the above, all the claims of the assessee are unfounded. Hence, the jurisdictional challenge raised by the assessee has been redressed and his request to withdraw notice u/s 10(1) of the BMA, 2015 in abeyance is herewith rejected. He is once again requested to submit the details called for and co­operate in concluding the assessment of undisclosed foreign asset and income (UFAI) for the AY 2016-17.”

5. Against that order the assessee filed appeal before learned CIT(A). As the assessment proceedings were continuing without disposal of the said appeal the assessee filed write petition before Hon’ble Bombay High Court. Hon’ble Bombay High Court passed an order in the said Write Petition (L) No. 7887 of 2021 dated 30.3.2021, which read as under :-

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION

WRIT PETITION (L) NO.7887 OF 2021

Yashovardhan Birla                                              ….           Petitioner.
v/s.
The Addl. Commissioner of Income Tax
Range 4(1) & Others,                                           ….            Respondents.

M/s Fereshte Sethna with Mr. Munir Merchant, Mrunal Parekh, Mr. Chirag Naik, Mr. Hasmukh Ravaria, Ms Vaijayanti Sharma i/b. MZM Legal, for the Petitioner.

Mr. Anil C. Singh, ASG with Mr. Sham Waive, for the Respondents.

CORAM: SUNIL P. DESHMUKH
ABHAY AHUJA, JJ.

DATE : 30th MARCH, 2021.

Petitioner in the present Writ Petition seeks mandamus to have infrastructural facility in place for disposal of appeal preferred by the Petitioner on jurisdictional issue against the order dated 17th January, 2019. The same has been pending. It is submitted on behalf of the Petitioner, requests for its disposal have not been responded to.

2 Learned ASG on behalf of the Respondent submits that it is not a case that no infrastructure facility is available and the matter could have been properly prosecuted by the Petitioner.

Content

6. In the meanwhile the Assessing Officer has passed an order under BMIT Act making assessment vide order dated 31.3.2021. Thereafter learned CIT(A) passed an order dated 26.4.2021 disposing of assessee’s appeal regarding jurisdictional challenge to issue of notice under section 10(1) of BMIT Act. In the said order learned CIT(A) noticed the following grounds raised by the assessee :-

1. That, in the facts and circumstances of the case, and in law, the order dated 17 January 2019 (Impugned Order), passed by the Additional Commissioner of Income Tax, Central Range 4, Mumbai (Adjudicating Authority), under section 10(1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA), is bad in law.

2. That, in the facts and circumstances of the case, and in law, the Impugned Order of the Adjudicating Authority is based on mis-appreciation of facts, incorrect findings, myriad conjectures, surmises, overlooks relevant considerations, takes into account irrelevant considerations, and, is perverse and bad in law, and therefore liable to be set aside.

3. That, in the facts and circumstances of the case, and in law, the Impugned Order of the Adjudicating Authority has been made without affording a personal hearing, despite having been sought by the Appellant, and as such contrary to the principles of natural justice, and thus liable to be quashed in limine.

4. That, in the facts and circumstances of the case, and in law, the Adjudicating Authority has erred in issuing a notice under section 10(1) of the BMA on 22 November 2017, without appreciating that the starting point under the BMA is a return of income filed for the relevant assessment year under the Income-tax Act, 1961, whereas it was available to the Appellant to file a return of income for the relevant assessment year until 31 March 2018, i.e. well beyond the date of the purported notice under section 10(1) served upon the Appellant, and as such the notice issued to the Appellant was premature and bad in law.

5. That, in the facts and circumstances of the case, and in law, the Adjudicating Authority has erred in invoking the provisions of section 4 of the BMA against the Appellant, disregarding that section 4 applies in case of undisclosed foreign asset and/or income, overlooking that in a preceding year when the Appellant did in fact have a beneficial interest in a foreign discretionary trust structure, such a disclosure of beneficial interest, albeit not an ‘asset’, was validly made under the aegis of the Income-tax Act, 1961.

6. That, in the facts and circumstances of the case and in law, after appreciating that the assessment years in contention in the pending writ petition, viz. AY 1998-99 to 2014-15, were distinct from the assessment year in relation to which the notice under BMA was issued, viz. AY 2016­-17 are different, the Adjudicating Authority nevertheless proceeded to ‘cherry picking’, in order to return a finding of jurisdiction, without any supporting factual basis, and overlooking cessation of the Appellant’s beneficial interest in the foreign discretionary trust, with effect from is 15 July 2014.

7. That, in the facts and circumstances of the case, and in law, the Adjudicating Authority erred in concluding that the Appellant has undisclosed foreign income and/or assets during the relevant assessment year, overlooking the Appellant’s denial in this regard, and relying upon pending proceedings concerning Chapter XIX-A, which was neither contradictory nor self-serving.

8. That, in the facts and circumstances of the case, and in law, the Adjudicating Authority erred in concluding that notice under section 10(1) of BMA was properly issued to the Appellant in view of practically no assessment in relation to foreign income and/or assets under the Income-tax Act, 1961, overlooking that the outcome of Chapter XIX-A proceedings will determine the scope for assessment of the Appellant in relation to beneficial interest held in foreign income and/or assets under the discretionary trust structure wherein the Appellant ceased to have interest with effect from 15 July 2014.

9. That, in the facts and circumstances of the case, and in law, the Adjudicating Authority erred in concluding that the Appellant is of the opinion that he has acquired beneficial ownership by way of inheritance which is not exempt under BMA, whereas it is the case of the Appellant that the source of the corpus of the foreign discretionary trust structure was not the Appellant, but rather the Appellant’s maternal uncle, who settled upon trust his income earned outside India, and as such analogous to a case of ‘inheritance’, albeit until distribution of trust corpus or income no tax exigibility arose in the hands of the Appellant. The Appellant craves leave to add, modify, alter or delete the afore-stated grounds of appeal.

The appellant craves leave to add, modify, alter or delete the aforestated grounds of appeal.”

7. Learned CIT(A) referred to the provisions of section 15(1)(b) of the BMIT Act as under :-

15. Appeals to the Commissioner (Appeals).— (1) Any person,—

(a) objecting to the amount of tax on undisclosed foreign income and asset for which he is assessed by the Assessing Officer; or

(b) denying his liability to be assessed under this Act; or

(c) objecting to any penalty imposed by the Assessing Officer; or

(e) objecting to an order of rectification having the effect of enhancing the assessment or reducing the refund; or

(e) objecting to an order refusing to allow the claim made by the assessee for a rectification under section 12, may appeal to the Commissioner (Appeals)

8. Referring to the above section learned CIT(A) noted that under section assessee is not allowed to raise any other ground relating to the assessment as these are appealable under remaining limbs of the sub-section. Thereafter learned CIT(A) observed that the assessee has taken nine grounds of appeal spanning various issues related to the letter of the AO disposing off the jurisdictional objection raised by the assessee before him. That in his view, Section 15(l)(b) of the Act is very specific and is strictly limited to the determination of the liability of the appellant to be assessed under the provisions of BMIT Act 2015 based on the facts and circumstances existing in the case of the assessee. No other adjudication can be made under these provisions. In light of the limited scope of an appeal under section 15(l)(b), the Grounds no. 1, 2 and 3 of assessee’s appeal which are connected with disposal of objections by the AO in conformity with the rules of natural justice are found to be beyond the scope of an appeal filed under section 15(l)(b) of the BMIT Act and hence, cannot be adjudicated. Consequently, ground no. 1, 2, and 3 of the appeal raised by the assessee are found to be unconnected with determination of assessee’s liability, beyond the scope of section 15(l)(b) of the Act and are dismissed.

9. Thereafter learned CIT(A) held that ground Nos. 4 to 9 are on the issue of the liability of the assessee to be assessed under the BMIT Act, 2015. That these grounds of appeals are clubbed together and are taken up for adjudication together. Thereafter, he reproduced the assessee’s submission in this regard. In the said submission of the assessee reproduced by learned CIT(A), it was inter alia noted that the Income Tax Appellate Tribunal in Wealth Tax Act, 1957 have conclusively adjudicated that the assessee have held limited interest in the offshore discretionary trusts, as only one of several beneficiaries of such trust structures with no distribution by the trustees ever made to the assessee, no scope lay for any declaration to have been made by the assessee within the ambit of Chapter VI of the BM Act. Assessee’s quotation from the Wealth Tax order dated 24.12.2020 was reproduced as under :-

“29. In our considered view, a private discretionary trust is created and few trustees were appointed to look after the trusts property. There is an enabling Clause for continuity of the trustees. In case of incapacity or other exigencies, certain trustees have to be appointed or replaced. … The trust still -will continue with the new trustees. The properties attached to the trust will continue to be the properties of the trust. It is wrong to presume that the properties governed by the  trustee will be considered as the properties of the individual beneficiary who exercises the appointment of trustees. In the given case, no doubt the assesses is  vested with the power to appoint or remove the trustees, does not change the status of the trust and its independent functioning.”

“32. In conclusion, it clearly indicates that the offshore assets held ly the offshore trust, which is irrevocable discretional trust in which assessee is one of the beneficiary, who happens to be bestowed with right to appoint /re­appoint the trustees, it does not inherit the right or control over the trust. As per the declaration of the trust, the trust remains an independent entity and taxable entity outside India. The entities controlled by the trust are independent taxable entities outside India. Therefore, assessee can only be a beneficiary and remain a beneficiary.”

10. Submission also included that the appellant is pursuing income tax proceedings under which notice have been issued and assessment made for A.Ys.2008-09 to 2013-14, A.Ys. 1998-99 to 2007-08 & A.Y. 2014-15. It was submitted that Revenue continues to pursue the right to assess to tax the assessee for the offshore trust assets under Income Tax Act these must stand excluded from the remit of BMA (this submission is advanced without prejudice to the primary contention that there is no scope to bring to tax in India in the hands of the assessee either the corpus or income of the offshore Malpani Trust). It was also pointed out that in a detailed submission dated 18.12.2017 on the limited issue of jurisdictional objections it was inter alia pointed out that the BMA had no application to the assessee’s case emphasizing that the show-cause notice issued was premature as the assessee had time until 31.3.2018 to file a return of income for A.Y. 2016-17 under section 139(4) of the I.T. Act. The said submission reproduced has following conclusion :-

“The jurisdictional facts mandatory for invocation of BMA are absent. None of the three genres of income in relation to the acquisition of offshore assets and/or income exist, viz. (a) undisclosed income of the Appellant chargeable to tax, or (b) partly out of disclosed income, or (c) exempt income. The foreign assets and/ or income constitute the corpus and/or income of an irrevocable discretionary offshore trust structure admittedly established in 1989 by the non-resident maternal uncle of the Appellant Late Shri Pratap Malpani, whereof the Appellant is neither settlor nor trustee, and has no absolute right, tide or interest either in the corpus or income of the Trust, but at best merely a hope that the trustee will exercise a discretion in favor of the Appellant, which too came to an end on 14 July 2014, when the Appellant ceased to be a beneficiary of the Trust, and as such and otherwise there is no foreign asset or income of the Appellant from unexplained sources amenable to BMA.

The Appellant respectfully seeks a right of personal hearing. The above reply is filed in pursuance of a limited opportunity for presentation of its written submissions, within barely seventy-two hours from the time of the notice, and all rights are reserved, accordingly.”

11. Learned CIT(A) thereafter noted alongwith submission dated 16.4.2021 the assessee has enclosed certain documents which was as under :-

“(i) Annexure A-l of 22 pages purported to be a trust deed

(ii) Annexure A-2 of 5 pages purported to be summary of share capital of Kinetic Holdings as on 1.1.1986, 1.1.1987, 1.1.1988, 1.1.1989 and 1.1.1990.

(iii) Annexure A-3 being a Letter written by the PCIT (Central)-2 to the Secretary, ITSC dated 28.8.2017

(iv) Annexure A-4 being a general letter from one M B Collins dated 7th March 2016

(v) Annexure A-5 being a letter on the letter head of ‘Confiance Limited’ addressed to Yashovardhan Birla clarifying certain issues.”

12. Learned CIT(A) thereafter noted that the assessee’s counsel has filed further explanatory comments which was reproduced as under :-

a) The appellant has been conclusively adjudicated by the final fact-finding authority under the Wealth Tax Act, 1957 to have held limited interest in the offshore irrevocable discretionary trust(s), as only one of several beneficiaries of such trust structures, with no distribution by the trustees ever made to the Appellant and which is duly disclosed by the Appellant in the Schedule FA of the Income Tax Return for AY 2014-15 & 2015-16. Copy of Schedule FA for AY 2014-15 & AY 2015-16 is enclosed in Annexure 1.

b) Letter dated 28 August 2017 of Pr. Commissioner of Income Tax (Central)-2 issued to Income Tax Settlement Commission (ITSC) concedes trusts created by Pratap Malpani. Further, it is conclusively established that the equity interests in Kinetic Holdings Limited belonged to (Late) Pratap Malpani. It follows that it is not in dispute that the (Late) Pratap Malpani appointed Albany Trustee Company Limited as trustee of the offshore ‘corpus’ settled upon trust by him. Moreover, it confirms that there is no documentary material on record to show that Appellant had unaccounted money, or money that has escaped tax or money that was remitted through illegal channels. Copy of Letter dated 28.08.2017 of Pr. CIT (Central)-2 is enclosed in Annexure 2.

c) The Appellant relies on the findings recorded by the Hon’ble Tribunal in wealth tax proceedings of the Appellant, wherein it has been conclusively held, in para 30 of its order, that “The case of the revenue is not that the investments were moved from India by the settlor or any beneficiaries… It is fact on record that there are no investments, which were made by the assessee or the investments were moved from India.” Copy of Wealth Tax order for AY 2008-09 to AY 2013-14 is enclosed in Annexure 3.

d) Assets and/or income which the AO purports to bring to tax under BMA already form part of income tax proceedings. The entities referred in the Notice u/s. 10(1) of the BMA is already a part of the erstwhile Income Tax Assessment Orders which was quashed by the Hon’ble Bombay High Courts. The said income tax orders were passed by the AO and hence the AO had complete knowledge of the foreign assets being purportedly assessed under the provisions of Income Tax. Copy of the Income Tax Assessment Order u/s 153A r.w.s. 143(3) for AY 2013-14 is enclosed in Annexure 4.

e) Further, an apostilled certificate from M/s. Confiance Limited being the Trustee of the Banyan Trust was submitted to the Income Tax Authorities during the Income Tax Assessment Proceedings which states that the entities referred in the notice u/s 10(1) of the BMA are forming part of the trust structure where the Appellant being one of the beneficiaries. A Copy of Certificate dated 15.03.2016 is enclosed in Annexure 5.

f) Appellant was nominated on 7 September 1989, then aged 22 years, as beneficiary of offshore irrevocable discretionary trust established by Pratap Malpani (Malpani Trust) and ceased to be a beneficiary beyond 14 July 2014. A Copy of source of Wealth Timeline document duly apostilled is enclosed in Annexure 6.”

13. After having noted grounds of appeal and assessee’s submission, learned CIT(A) proceeded to adjudicate the issue.

14. Firstly he rejected the assessee’s reliance upon the ITAT, Mumbai decision in assessee’s own case in WTA No. 02 to 08/Mum/2020 vide order dated 24.12.2020 by holding that it was not in existence at the time of issue of notice under section 10(1) of the Act by the Assessing Officer. That the documents not in existence at the time of issue of notice, cannot be taken as evidence while deciding the issue. After having held so, learned CIT(A) further proceeded to distinguish the ITAT decision and also at the same time held that the same was not in existence at the time of issue of notice. He noted that provisions of BM Act are admittedly harsher and address the issue of beneficial ownership/beneficiary irrespective of the ownership shown in relevant docuemnts. That hence, any decision under Wealth Tax Act where the concept of ‘beneficial ownership’ or mere ‘beneficiary’ is not there, cannot be imported to decide the issues in BM Act. Thereafter learned CIT(A) observed that since  the appeal papers did not contain the documents/information which had been  before the Assessing Officer at the time of issue of notice under section 10(1) of the Act, it was found necessary to call for details of such documents from the  Assessing Officer. He noted that it was also informed by the assessee that the  assessment order under section 10(3) of the BMIT Act had been passed by the  Assessing Officer on 31.3.2021. He noted that the Assessing Officer has  intimated that the details of various documents/information available with the  Assessing Officer and which have been relied upon for issue of notice under section 10(1) of the Act have been elaborated in detail in the assessment order passed by the Assessing Officer. He noted that these documents have already been shared with the assessee and are in the knowledge of the assessee. He  observed various documents/information quoted by the Assessing Officer will  be referred to in his decision at appropriate places. That in this connection, it is to be noted that Hon’ble Bombay High Court in the order in Writ Petition No.921 of 2021 dated 30.3.2021 had ordered learned CIT(A) to pass an order on the jurisdictional challenge to the notice and it has directed that the assessment proceedings was to go on. But the fact here is that assessment proceedings were duly completed before disposal of the appeal of Jurisdictional challenge by learned CIT(A) and learned CIT(A) has referred to the assessment orders which were directed by Hon’ble High Court to be carried on. Now learned CIT(A) held that information before the Assessing Officer at the time of issue of notice under section 10(1) of the Act has been elaborately reproduced by the Assessing Officer in his order dated 31.3.2021 and the same is summarised as below.

15. Thereafter learned CIT(A) quoted from the assessment order.

“8. The information before the AO at the time of issue of notice u/s 10(1) of the BMIT Act has been elaborated by the assessing officer in his order dated 31.3.2021 and is summarized as below:

8.1 The AO has noted existence of a hank account with MSEC Geneva wherein the appellant was linked with another entity NEBDA Trust, the appellant being a beneficiary of this account. While the assesses signed a consent waiver so as to enable the Department to seek desired information from HSBC Geneva, subsequent search led to documents which indicated that the assessee had written a letter to HSBC directly claiming that the consent waiver had been obtained by the Department through coercion and that such waiver was not to be implemented. This led to the Bank not sharing any worthwhile information with the Department. This was contrary to the fact the assessee could obtain a letter from the same bank by writing a letter to the Bank and obtaining a reply on the same day. This could happen only if the assessee had a close association with the Bank as against his denial of any relationship. The AO notes that the close associate of the assessee has confirmed in his statement that the assessee closed the accounts with HSBC in 2011 and got amounts in the bank account transferred to Barclays , indicating his beneficial ownership of this account.

8.2 Details obtained under Exchange of Information under the Treaty arrangement established existence of offshore entitles in which the assessee was the sole beneficiary / beneficial owner of the assets in these entities. These accounts are:

LIST OF BANK ACCOUNTS IN SINGAPORE

Bank Branch A/c no Name of Account
Credit Suisse AG Singapore 125042 Mokopane Ltd
Credit Suisse AG Singapore 125114 Kinetic Holdings Ltd
Credit Suisse AG Singapore 125132 Alea Management Limited
Barclays Bank PLC Singapore 91321400 Vashovardhan BIrla & Shloka Birla
Barclays Bank PLC Singapore 91312600 Vashovardhan Birla & Avanti Birla
Barclays Bank PLC Singapore 91321300 Vashovardhan Birla & Vedant Birla
Barclays Bank PLC Singapore 91320000 Mokopane Ltd
Barclays Bank PLC Singapore 91318600 Confiance Limited as Trustee of The Banyan Trust
Barclays Bank PLC Singapore 91403600 Kinetic Holdings Ltd.

LIST OF BANK ACCOUNTS IN SWITZERLAND

BANK BRANCH A/CNO NAME OF ACCOUNT
CREDIT SUISSEAG SWITZERLAND 1367551 KINETIC HOLDINGS LIMITED
CREDIT SUISSEAG SWITZERLAND 1494489 ANDRID LLC
CREDIT SUISSEAG SWITZERLAND 722484 ALEA MANAGEMENT
HSBC BANK/CREDIT SUISSE BANK SWITZERLAND 15415185 ALEA MANAGEMENT
HSBC BANK/CREDIT SUISSE BANK SWITZERLAND 16893838 ALEA MANAGEMENT
HSBC BANK/CREDIT SUISSE BANK SWITZERLAND 14030212 ALEA MANAGEMENT
M5BC BANK/CREDIT SUISSE BANK SWITZERLAND 16893870 ALEA MANAGEMENT
HSBC BANK/CREDIT SUISSE BANK SWITZERLAND 17330390 ALEA MANAGEMENT
HSBC BANK/CREDJT SUISSE BANK SWITZERLAND 13518394 ALEA MANAGEMENT
H56C BANK/CREDIT SUISSE BANK SWITZERLAND 13710082 ALEA MANAGEMENT
HSBC BANKCREDIT SUISSE BANK SWITZERLAND 18031442 ALEA MANAGEMENT
HSBC BANKCREDIT SUISSE BANK SWITZERLAND 18033450 ALEA MANAGEMENT
CREDIT SUISSE AG SWITZERLAND SAFE KEEPING A/C 1282411­35-2 MOKOPANE LIMITED
CREDIT SUISSE AG SWITZERLAND SAFE KEEPING A/C 1282411­35-3 MOKOPANE LIMITED
CREDIT SUISSE AG SWITZERLAND 1282411 MOKOPANE LIMITED
CREDIT SUISSE AG SWITZERLAND 40639 SORWOOD DEVELOPMENT SA

The AO was in possession of information that the assessee was a beneficial owner of amounts in bank accounts of these entities:

1. Alea Management

2. Kinetic Holdings Limited

3. Makopane Limited

4. Andrid LLC

5. Sorwood Development SA

6. Confiance Limited as Trustee of the Banyan trust

8.3 The AO has referred to the search action u/s 132 carried out in the case of the assesses and his group on 7.1.2014. Various electronic data and documentary evidences led to information about existence of offshore entities, bank accounts and investments therein which had close proximity with the appellant. Post-search, documents were collected from various countries under EOI agreements leading to detection of undisclosed offshore accounts / investments in the name of companies, LLPs, Trusts and Foundations in which the assessee was clearly identified by these banks/institutions as beneficial owner / Asset contributor. The AO noted that an elaborate structure was put-up by the assessee with front entities whose bank accounts were effectively controlled by the assessee and intermediate and back end entities to mask the ownership of the front end entities. The front end companies listed by the AO are:

Offshore

 

The layers or intermediate companies are companies which provide web of intricate layering by functioning as subscribers, directors, authorized signatories, settlers, trustees, protectors etc. of the front entities. Such entities were identified by the AO as below:

SN Name of the Layering Entitles Service Provider
(i) Credit Suisse Trust CREDIT SUISSE
GROUP
(ii) Manex Ltd
(iii) Blue Sea Administration Ltd
(iv) One Sun Limited
(v) Snow Fall Limited
(vi) Verduro Associated Ltd
(vii) EFG Reads Trust Company Limited Jersey
(viii) HSBC Guyerzeller Trust AG HSBC GROUP
(ix) Codivo Management AG
(x) First Corporate Director Inc
(xi) Corhold Ltd.
(xii) GZ Trust Corporation
(xiii) Confiance Limited CONFIANCE
GROUP
(xiv) Consec Ltd.
(xv) CCD Alpha Ltd.
(xvi) CCD Beta Ltd.
(xvii) CN Alpha Ltd.
(xviii) CN Beta Ltd.
(xix) Manwell Investment Properties Ltd., BVI
(xx) City Management Limited OTHERS
(xxi) Warrant Securities Ltd
(xxii) Nelson Management Ltd
(xxiii) ETC Management Services Ltd
(xxiv) Island Nominees Ltd
(xxv) Continental Nominees Ltd
(xxvi) Argonaut: (Guernsey) Ltd
(xxvii) Pennymore Investment Corporation Int

8.4 The AO identified various private foundations and trusts under which offshore properties were being managed. Critical aspects of such Trusts have been elaborated by the AO as below:

1. THE BIRD INTERNATIONAL FOUNDATION, PANAMA

It is formed as a Foundation of Private Interest under Law 25 of 1995 of Republic of Panama in which the assessee Shri Yashovardhan Birla is declared as the Beneficiary. Founder of The Bird International Foundation is named as Alcogal Corporate Services SA, represented by its directors Andres Maximino Sanchez and Nyrna De Navarreo.

As per the First Schedule to the Regulations of the Foundation adopted on 15.10.2010, the “Initial Foundation Fund” (Patrimony) is declared as USD 10,000. The Second Schedule identifies the “Beneficiaries” as the son of Mr. and Mrs. Ashok Vardhan Birla:

Yashovardhan Birla and his family and descendants The Third Schedule Identifies the Protectors as Mr. Andrew Hart and Mr, Geffrey Spencer.

The AO notes that the Foundation was set up only to act as a front for the assessee to hold assets/investments through other fiduciaries and front companies. The Foundation was in existence for about 1 year from 17.09.2010 to 02.11.2011. As per the letter dated 20.04.2012 from Confiarcce Ltd to Credit Suisse AG, Singapore in connection with Mokopane Ltd, it is confirmed that they are the trustees of The Banyan Trust and that the settlor of the Trust is mentioned as The Bird international Foundation which has been dissolved on 02.11.2011. It is further confirmed that the asset contributor of the Trust is Mokopane Ltd which is corroborated by the funds transfer from the accounts of Mokopane Ltd.

As per further letter dated 24.04.2012 addressed to Credit Suisse AG, Singapore in connection with Mokopane Ltd, it is confirmed by Confiance Ltd that the asset contributor of the Trust 4s Shri Yashouardhan Birla and Beneficiary of the Trust is also Shri Yashovardhan Birla.

It is also seen that in the name of The Banyan Trust, there is an account with Credit Bank, Singapore with account number 91513600, being held by Confiance Ltd as the Trustee. !n the name of The Banyan Trust Capital Account, there is an account with Royal Bank of Scotland International bearing account number 56450634.

2. NEBDA TRUST REG.

As per the information received from the French authorities in the year 2011, the assessee had a Client Profile on the records of HSBC, Geneva. This profile with BUP ID 5090181710 was created on 10.02.2005 and assigned personal ID 140826 and Personal No. 181710. Assessee’s profile was further linked to one NEBDA TRUST REG, which had BUP ED 5090281709. No further details have been received in this regard from the bank.

3. NEBOLA TRUST REG., LECHTENSTEIN

Nebola Trust Reg. is registered in Liechtenstein. The date of entry in the Register of Liechtenstein is reported as 02.06.1998 and it was cancelled on 20.03.2012. The present status is shown as in liquidation. No further details about the formation of the Trust, the settlor, corpus fund, terms and conditions, beneficiaries and trustees, details of assets and investments held by the Trust and its bank accounts etc., are known. Nebola Trust Reg. is shown as the shareholder of one of the front companies, Kinetic Holdings Limited as on 01.01.2001 onwards and up to 21.11.2011 as per the Annual Returns filed with the Companies Registry of Jersey Financial Services Cornmission. The entire issued share capital comprising of 100 shares of USD 1 each of Kinetic Holdings Limited are held m the name of Nebola Trust during this period.

As per the financial reports of Kinetic Holdings for the period ended 17.01.2012, sum of USD 9,306,269.54 has been shown as Loan brought forward as on 31.12.2010 from Nebola Trust. This loan is reported as unsecured, interest free and has unspecified repayment date. The entire loan of USD 9,106,169.54 given to Kinetic Holdings Limited by Nebola Trust has been assigned to The Bird International Foundation during 2011 and is then waived by the Bird international Foundation.

ft is evident that before dosing the Nebola Trust on 20.03 2012, at least part of the funds held by it was transferred to Kinetic Moldings Limited through The Bird International Foundation as seen from the above entries. The liquidation fees for Nebola Trust Reg. have been paid from the account of another front company of the assesses, revealing the nexus of all these entities.

4. THE BANYAN TRUST* (PANAMA)

The Banyan Trust* (Panama) is mentioned In the documents available on the bank records which show that the trust was created by The Bird International Foundation with the assessee as the sole beneficiary. Thereafter, through other fiduciaries, the shares of front entities including Mokopane Limited, Manwelf investments Ltd, Alea Management Limited, Magenta Properties Ltd etc., were brought under the direct control of the Foundation through The Banyan Trust from the year 2010-11 onwards.

As per the bank documents of Alea Management Ltd and Mokopane Ltd, the beneficial owner of the assets in their name is identified as the assesses through a trust which Was created by The Bird International Foundation on 04-05.2011 as the “Settlor” arid the Trust was registered in Panama, Address of this Trust is the same as the Foundation, at 53rd East Street, Marbella, MMC Building, 2nd Floor, Panama, However, copy of Trust Deed has not been provided in the bank documents. As admitted by Ms. Nita Shivdasani, who was assisting the assessee in opening accounts in Barclays Bank, Singapore in the names of front entities including Mokopane Ltd whose assets were held indirectly for the assesses? as the ultimate beneficial owner, the Trust Deed was not produced to the Bank.

As per letter dated 13.08.2011 from Mokopane Ltd to Credit Suisse Bank, Singapore, it is reported that the Trustee of The Banyan Trust is HSBC Guyerzeller Trust Company AG. This is in turn confirmed by the letter dated 23.08.2011 written by HSBC Guyerzeller Trust Company AG to Credit Suisse AG, Singapore in connection with Mokopane Ltd declaring therein that the settler of the trust is The Bird International Foundation and that the beneficiaries are Shrl Yashovardhan Birla and his family and that protectors are Andrew Hart and Geoffrey Spencer.

5. THE BANYAN TRUST (GUERNSEY)

It is seen that the assessee had changed the service provided from HSBC to CCS Trustee Group/ Confiance Group of Guernsey in the year 2011-12 and the layering entities which acted as shareholders and directors of the front companies were also changed accordingly from HSBC group entities to CCS Trustee/ Confiance Group entities.

After this, in the bank records, the name of the Trust is mentioned specifically as The Banyan Trust (Guernsey), These details are reaffirmed in the letter of Confiance Limited dated 24.02.2012 addressed to Credit Suisse Bank, Singapore, wherein The Bird International Foundation, Panama is reported as the “Settlor” of The Banyan Trust (Guernsey]. Confiance Limited is reported as the trustee and Consec Ltd, the secretary. David Bell and Andrew Hart are named as the Protectors of the Trust.

Since The Bird International Foundation itself was formed 3.7.09.2010 only, the date of creation Of The Banyan Trust (Guernsy) could be sometime after that date only. After the creation of The Bird International Foundation, the Trust in Panama (though not identified but referred to as The Banyan Trust, (Panama) and The Banyan Trust (Guernsey) under its fold, the other front companies, namely, Alea Management Limited, Mokopane Limited, Manweel Investment Properties Limited, Kinetic Holdings Limited, Herritor Investments Ltd and Magenta Property investment Limited UAE were brought under the holding of the Foundation, This is confirmed by the declaration of beneficial holding available on the documents of account no.12504-2 duly attested by Ms.Shilpa Chowdhary, RM of the Bank.

6. THE LP PROPERTIES TRUST

The existence of this trust was revealed in the assessee’s written submissions to the department during the course of assessment proceedings on 18.03.2016 for the first time. According to a letter purportedly addressed by Confiance Limited to the assessee Shri. Yashovardhan Birla, this trust was set up on 28.03.2014 and the “Settlor” is mentioned as The Banyan Trust No further details as to the incorporation documents, corpus fund, terms and conditions of the trust, trustees etc. are furnished.

8.5 It is noted that detailed inquiries have been conducted and information has been gathered from offshore tax jurisdictions to ascertain the source of funds and investment of the front entities and to establish the beneficial owners / beneficiaries of accounts owned by these entitles. The details of the front entities, bank accounts and assets held by them and the beneficial owner / beneficiary as per the records of the banks have been outlined by the AO while dealing with the information available with him. The various front entities, the bank accounts / assets held by them and evidences of the appellant being a beneficial owner of such assets is discussed by the AO and summarized as below:

1. KINETIC HOLDINGS LIMITED

The company was incorporated in Jersey on 23.09.1985. The company has since been re-domiciled and registered in Guernsey on 12.11.2013. At the time of incorporation, the beneficial owner is stated as Shri Pratap Malpani of Singapore. Till 01.01.1990, the shares were shown in the name of Shri Pratap Malparsi (60 shares) and two other fiduciary companies, Nelson Management Services Ltd and ETC Management Services (Isle Of Man) Ltd (20 shares each). Shri Pratap Malparsi was still holding 60 shares in Kinetic Holdings Ltd in his own name till date of his untimely demise on 14.02.1990. Regarding the assets or properties held if any, in the name of Kinetic Holdings Ltd as on 01.01.1990, there is no information. After the demise of Late Pratap Malpani, the shares of Kinetic Holdings Limited were reportedly transferred to three fiduciaries of Albany Trustee Group, namely, Pennymore Investment Corporation Inc. Island Nominees Ltd and Continental Nominees Ltd and continued to be in their names till 01.01.1999. Thus, it is evident that the Albany Trustee Group came to hold the shares of Kinetic Holdings Limited after the demise of 3hrt. Pratap Malpani only. The actual descendants of Shri Malparo have alleged that they were made to sign some share transfer documents.

As on 01.01.2000, entire shares comprising of 100 shares of USD 1 each were shown in the name of Nebola Trust Reg., Liechtenstein for the first time and continued to be in the Trust’s name till 21.01.2011. The service providers were Credit Suisse Trust during this period. From the declarations filed to the banks during this period by Blue Sea Administration Ltd and Manex Ltd, the fiduciary companies of Credit Suisse Group, as the directors of Kinetic Holding Ltd, it is noted that the assessee, Shri Vashovardhan Birla is the beneficial owner of the shares held In the name of Nebola Trust Reg.

On 21.01.2011, the shares were transferred to Corhold Limited, a fiduciary company of H5BC Group, as nominee of The Bird international Foundation, which had by then been created with the assessee as the sole Beneficial Owner. This is also corroborated by the Foundation documents and declarations filed before the bank. Thereafter, the service providers were changed to CCS Group / Confiance Group and Manwell Investment Properties Ltd, BV1, one of the fiduciaries of the new service provider held the shares from 08.10.2012 as nominee of Mokopane Ltd, another front company in which the assessee is the beneficial owner through the new trust structure brought in place namely The Banyan Trust (Guernsey), On 12.11.2013, the company Kinetic Holdings Ltd was re-domiciled to Guernsey.

Regarding the details of investments and assets including properties, if any, held by Kinetic Holdings Ltd, the only information available is the financial reports for the period 01.01.2011 to 17.01.2012 which was received from the Jersey authorities. It is seen that the source of funds in the hands of Kinetic Holdings Ltd included basically the following [as per Book Value) as on 17.01.2012:

(A) Share Capital USD 100.00

(B) Accumulated Profit of earlier years till 31.12. 2010 USD 111,208. 67

(C) Profit for the current year

(i) Excess of expenditure over property income USD   (-) 20,595.18

(ii) Gain on sale of Fixed assets USD 568,895.66

(iii) Gain on Currency Exchange USD 320,142.00

(D) Loan from shareholders waived  USD 7,170,002.61

The funds were found invested in the following assets as on 17.01.2012:

(A) PROPERTIES;

(i) 17, Cairnhill Circle, Helio Residences, Singapore USD 4,533,980.97

(ii) 56, Cairnhill Circle, Singapore

(iii) Flat C-8, Lees Place, London USD 3,839,102.38

(B) INVESTMENT IN COMPANIES

(i) AAL (PTE) LTD, Singapore (524,999 shares) USD 524,999.00

(ii) Lee Place Property Ltd, London (1 share) USD 1.55

(C) AGENTS ACCOUNT  USD 18,892.58

(D) CASH AND DEPOSITS  USD 65,282.63

The Financial statements reveal that Kinetic Holding Limited had very little accumulated profits till 31.12.2010, USD 111,208.67 as per the data, The issued and paid to capital is USD 100. But loan of USD 9,106,369.54 received from Nebola Trust Reg., the sole shareholder, was outstanding in the books of Kinetic Holdings Ltd as on 3112.2010. This loan is stated to be interest free and unsecured without any specific time frame of repayment. During the period 01.01.2011 to 17.01.2012, this loan has been assigned by Nebola Trust Reg,, Liechtenstein in favour of The Bird International Foundation, Panama having far Birla as beneficial owner.

Since from 21.01.2011 the shareholding of Kinetic Holdings Limited had changed hands from Nebola Trust Reg., Liechtenstein to Corhold Limited as nominee of The Bird International Foundation Panama, it is evident that this assignment of loan given by Nebola Trust to Kinetic Holdings Ltd in favour of The Bird International Trust was done with a view to consolidate the holding structure of which the assessee is the sole beneficiary/ beneficial owner. Subsequently, Nebola Trust Reg., Liechtenstein was liquidated on 20.03.2012.

In addition to this assigned loan of USD 9,106,369,54 from Nebola Trust Reg,, Liechtenstein, further sums were given as loan by The Bird International Foundation, Panama also and was repaid in part by Kinetic Holdings on various dates after which, the balance loan amount of USD 7,170,002.61 was waived by The Bird International Foundation and has been taken to the accumulated profits of Kinetic Holdings Limited.

The AO notes that in his statements, the assessee admitted that he had invested in a company Herritor Investment Ltd under LR5 scheme of RBI from 2007 to 2011. Details of remittances made through LRS furnished by the assessee showed that a sum of USD 400,000 and GBP 89,210 has been remitted from FY. 2007-08 to FY 2010-11 through his CA No. 00960200001427 with UCO Bank, Church Gate Reclamation Branch, Mumbai. Further details about Herritor Investment Ltd have not been, furnished by the assessee so far. However, from the declarations filed with the banks and the structure of holding, it emerges that Herritor Investment Ltd is also indirectly held by the aseessee as the sole beneficiary Sum of USD 635,568.54 was reported as loan from Herrltor Investments Ltd in the financial statement of Kinetic Holdings limited which is much more than the remittance claimed by to have been made by the assessee under LRS.

As per the asset details furnished in the financial statements as on 17.01.2012, Kinetic Holdings Ltd has three properties, two at Singapore and one at London. Out of the two properties m Singapore, the one at No.56, Cairnhill Circle, Singapore appears to have been sold during the years since no value is assigned in the balance sheet. It is also seen that gain from sale of fixed assets is also shown as USD 568,895.66 in the Income & Expenditure statement.

The details of purchase of the other property at No.17, Cairnhill Circle, Singapore are not known. However, perusal of account number 125114 of Kinetic Holdings Ltd with Credit Suisse, Singapore shows that payments have been made to Khattarwong, apparently a law firm of Singapore towards maintenance fee and installment regarding property no.17 at Cairnhill Circle, Singapore during the year 2010-11.

Regarding the property at Flat C-8, Lees Place, London, the assessee had denied that he had any knowledge about it. However, Shri G. L. Lath, his wealth manager had clearly stated in his statement that the property at OS was acquired: through some trust. The entity Lees Place Properties Ltd is a company fn which Kinetic Holdings Ltd and another entity Purewell Investments Ltd have one share each, out of the total issued capital of 4 shares. The remaining shares are held by nominee directors. Kinetic Holdings Limited is shown as a director in Lees Place Properties Ltd and C-S is shown as the address of Kinetic Holdings Ltd in its statutory return filings. This address Flat C-8, Lees Palace, London is found mentioned as the address of Herritor Investments Ltd also as per data available on the public domain. The delivery challan produced by !he assessee himself during the course of income-tax assessment proceedings shows that vehicle, was purchased for his son who is studying at UK, also showing Flat C-3, Lees Palace, London as the address for delivery.

In account no. 125114 with Credit Suisse, Singapore in the name of Kinetic Holdings Limited, periodical payments have been found to have been made to Olander Property Service Ltd. towards property expenses for Fiat C-8. These evidences establish that the property at C-8, Lees Paiace, London was very much in the knowledge of the assessee and is reportedly being used by his son who is studying at UK.

The fact that the assessee Shri Yashovardhan Birla is the ultimate beneficiary of Kinetic Holdings Limited is borne out by the documents exchanged between the service providers and the banks in connection with the opening of accounts as well. As proof of identity of the beneficial owner, copies of passport of the assessee, duly attested by the service providers and in some instances by Shri Bharat Ankaraju, the Advisor of the assessee were obtained by the banks and are part of the documents received by the Department from the off-shore tax authorities.

Letter of HSBC to IFG Trust (Jersey) Ltd dated 07.03.2011, enclosing therewith the duly attested copy of passport of the assessee not oniy brings out the fact that Shri Yashovardhan Birla is the beneficial owner of Kinetic Limited but also proves his long standing banking relationship with HSBC.

Kinetic Holdings Limited was found to be having the following bank accounts. The documentary evidences establishing the identity of the assessee as the sole beneficial owner of the assets held in these accounts and the transactions found entered therein are discussed in detail by the AO in his order and are summarized below for the sake of brevity.

i. KINETIC A/C NO. 0835-1367551-0 WTH CREDIT SUISSE BANK, ZURICH

Though the account was in existence since 0701.2008, information of bank account statement and deposits for the period 01.04.2011 to 11.01.2012 only has been furnished by Credit Suisse Bank, Zurich citing treaty provisions. No details in respect of earlier years have been furnished yet. Except for small debits and credits on account of earlier transaction settlements and payment of fees, there are no substantial transactions during this limited period. This account was closed on 11.01.2012.

As per Form A for Establishment of the Beneficial Owner’s identity, Shri Yashovardha.n

Birla has been declared as the beneficial owner of the assets held under this account in the name of Kinetic Holdings Limited.

ii. KINETIC-A/C NO. 10-125114-01780 WITH CREDIT SUISSE BANK, SINGAPORE

The account was opened on 21.02.2008. At that time, Credit Suisse Trust was the service provider and one of its companies Glue Seas Administration Ltd was acting as the Director/ secretary of Kinetic Holdings Ltd and hence acting as authorized signatory of the bank account. The authorized signatories have been authenticated by Shri. Bharat Ankaraju, assessee’s advisor who has been issued Limited Power of Attorney to operate this account. This account has since been dosed on 28.02.2012 and the balance has been transferred to account no. 32257120 in the name of Brian Hams S Co maintained with the private bankers of UK, namely C Hoare & Co, London. This further establishes the fact that the assesses is having such fiduciary arrangements with persons other Than the regular bankers Elke law firms etc.. The details o! which have not been revealed till date.

In the documents filed with the Bank, the assesses Shri Yashovardhan Birla has been identified as the Beneficial Owner of all assets / deposits In the said bank account.

Perusal of the credit / debit notes, copies of which were part of the information received shows that substantial payments have been received from / transferred to certain other entities of the assesses including Alea Management Ltd and Herrilor Investments Ltd, in the account of Kinetic Holdings Ltd, Some investments have been found made in another company AAL (S) Pte Ltd on various dates from out of funds received by Kinetic Holdings Ltd from an undisclosed account.

Among the entities from which, money is received by Kinetic Holdings Ltd is A/c, No.41322005831 with standard Chartered Bank, Hongkong in the name of Int’l Commercial Agencies / Syed Abdul Kader Ahmed and the nature of payment is stated as B/O. SUNMOON. The total sum received in FY. 2007-08 is USD 499,913.38 on various dates.

It is also seen that vide letter dated 19.06.2012 addressed to Credit Suisse, Singapore, the account was requested to be closed and after converting the balance into pound sterling, the balance was directed to be transferred to the account of UK based lawyers Brian Harris & Co, a/c.no.32257120 with C Hoars & Co, London, one of the leading private banker of UK. The account has been confirmed as closed on 28.06.2012.

(iii) KINETIC – ACCOUNT NO.91403800 WITH BARCLAYS BANK, SINGAPORE

Account No.91403800 with Barclays Bank, Singapore in the name of Kinetic Holdings Limited v/as opened on 17.04.2013 with Confiance Limited as the Service Provider. MsVay Osborn, an employee of Confiance Ltd was listed as the contact person and one of the authorized signatories in the bank documents. Manwell Investments Properties Limited is shown as the shareholder and the Beneficial Owner is recorded as a Trust, registered on 04.05.2011 in Panama bearing no.43377 which was reportedly set up by The Bird International Foundation. This is one of the accounts which was directly handled by Ms. Nita Shivdasani in her capacity as a director of Barclays Bank, Singapore at the time of its opening and it is seen that the Risk Disclosure statement which forms part of bank documents has been signed by her. As admitted by Ms. Nita Shivdasani, the account of Mokopane Ltd and also Kinetic Holdings Ltd with Barclays Bank, Singapore were opened during her time as an employee of the bank and that no trust deed was produced. It emerges that the account has been opened accordingly without obtaining the mandatory proof of Beneficial Ownership of the assets to be held in this account. As per the bank statements furnished, there are no substantial transactions found during the relevant period. This account has since been closed and the balance transferred to Kinetic Holdings Ltd’s a/c.56474312 with RBS, Guernsey.

(iv) KINETIC-ACCOUNT NO.56474312 WITH ROYAL BANK OF SCOTLAND, GUERNSEY

The existence of this account is revealed from the letter dated 25.04.2014 written by Kinetic Holdings Ltd to Barclays Bank, Singapore requesting to close the account Mo.91403800 with them and to transfer the remaining balance to A/c. No.56474312 in the name of Kinetic Holdings Ltd with Royal Bank of Scotland, Guernsey. No further information is available about this account as on date.

(v) KINETIC -A/C No.33257120 OF BRIAN HARRIS & CO WITHC HOARS & CO, LONDON

As mentioned supra, the presence of an account in the name of Brian Harris & Co with private bankers C Hoars & Co, London is established from the letter of Kinetic Holdings Ltd addressed to Credit Suisse, Singapore. Further details of beneficial ownership of this account and the investments /assets held thereunder are not yet known.

2. ALEA MANAGEMENT LTD

Alea Management Ltd was incorporated under the laws of The Common wealth of The Bahamas on 14.09.2006 as an International Business Company.

Ms. Sharon Sueess was identified by Shri. G. L. Lath as the person who is looking after the Accounts of the front entities in Singapore which are held by Mr, Yashovardhan Birla and the Telephone numbers +41442042809 arid +41442042828 mentioned by him, were found to match with the details given in the bank documents as well. The Service Providers were changed later on to HSBC Trust and Cordico Ltd became the authorized signatory on 20.01.2011. Documents forming part of the bank records such as declarations in Form A and the attendant details including copies of passport of the assesses and the holding structure as furnished by the authored signatories to the banks in respect of the accounts in the name of Alea Management Limited etc., clearly established the identity of the beneficial ownership of the assets/investments held therein beyond doubt.

The following bank accounts were found to exist In the name of Alea Management Limited whtch have been discussed by the AO elaborately and are summarized below:

(i) ALEA – ACCOUNT No. 0835-722484-9 WITH CREDIT SUISSE BANK, ZURICH

Though this account was opened way back on 07.08.2007, the details of transactions / assets for the period from 2007 to 2011 have not been furnished by the Bank citing treaty restrictions. As a result, the details for a very small period of about 4 months alone have been shared through the treaty arrangements.

However, as this limited period data would show, substantial sums have been routed through this account and safe proceeds of securities have also been found credited in large sums. The transactions also show that there are fund transfers from the account of Alea Management Ltd to other front entities of the assessee like Capital Wizard Limited and Mokopane Ltd.

As per Form A, which is a document within the meaning of Article 110 of Swiss Penal Code, fifed by Manex Limited, the authorized signatory of Ales Management Ltd. the Beneficial Owner of the assets held in the name of Alea Management Limited is identified as the assessee, Shrl Yashouardhan Birla. Another direct link to the assessee was found in the form of Power of Administration issued to Shri Bharath Ankaraju, assessee’s advisor for purposes of managing the investment portfolio of Alea Management Ltd.

(ii) ALEA –ACCOUNT NO. 125132 WITH CRFOITSUISSE. SINGAPORE

As per documents an the records of the Bank, Limited Power of Attorney dated 1E.06.20G7 was granted to Shri. Bharat Ankaraju as Administrator on behaEf of the assesses. The copy of incorporation documents were provided by Credit Suisse Trust Ltd vide its letter dated 08.08^2007 to Shri BhaitAnkaraju, so as to facilitate the opening of an account for A[ea Management Ltd with Credit 5uisse Bank at Singapore. Thereafter, account no.l2S132 was opened with Credit Suisse Bank, Singapore in 2007.

It is further seen that in add it ion to thJs existing account no,l25132, a new account has also been opened with Credit Suisse Bank, Singapore as can be seen from the letter of Alea Management Ltd dated 04.07.2011 addressed to Credit Suisse AG, Singapore regarding the new account proposed to be opened in the name of Alea Management Ltd.

It is confirmed therein that the beneficial ownership of the new account is Mr. Yashouardhan Birla, being the beneficial owner of the Bird International Foundation, This account no.125132 was dosed subsequently onll.ll.Z012 and the balance / all assets were transferred to Alea Management Ltd HSBC A/C13518394. The summarv of transactions during the relevant period indicates that there were numerous sub accounts and voluminous transactions were carried out over therein during the relevant period:

There was a Safe Keeping Account also with the Credit Suisse Bank and among the securities which were thus held by the bank in Alea Management Ltd’s safe keeping account included 250000 shares of 9% Kaupthing Bank 2007 Parp, which was renounced by the company on 03. 11.2011 in favour of the bank.

Further contemporaneous record of Client note maintained by Credit Suisse Bank regarding Alea Management Ltds account, duly confirmed by the Relationship Manager (RW) of the Bank, gives a detailed account of the interactions that the bank officers / relationship managers had with the assessee, Shti Vashovardhan Birla in person at his office in Nariman Point, Mumbai and his intention to shift to HSBC.

(iii) Account No. 1510428 with Credit Suisse, Geneva

It is in the name of Alea Management Ltd was opened on 11.01.2011 in which, the Beneficial Owner as pet Form A is declared as Shri Yashovardhan Birla. Account is under this client code.

(iv) A/c. 13518394 – ALEA-

A summary of this account has been provided by the AO at Table 15 (page 116) of his order

(v) ALEA – OTHER ACCOUNTS

From the information received from offshore banks so far, it is seen that the sub accounts of Alea Management Ltd indifferent currencies have substantial transactions therein, some of which included inter-account transfer to other entitles like Mokopane Ltd also. The AO reproduced these transactions at Table- 17 on page 117 of his order.

Alea Management Ltd has an account with Barclays Bank, Singapore in which the Beneficial Owner is once again confirmed as Yashovardhan Birta, F 3355431 as per Form A signed on 07.08.2007 by Manex Ltd. Details of transactions through Alea Management Ltd’s account No. 1510428 with Credit Suisse, Singapore and Royal Bank of Scotland, are also not yet known.

3. MOKOPANE LTD

Mokopane Limited was incorporated in the British Virgin Islands on 15.06.2010 under Company No. 158993? by HSBC International Trustee (BVI) Limited, with registered office at Woodbourne Hall, PO Box 916, Road Town, Tortola, BVI.

As observed in the case of other front entities like Kinetic Holdings Ltd and Alea Management Ltd, in the case of Mokopane Ltd also, there were multiple accounts with different banks and locations spread across different countries. The documents filed with the banks once again bring to the fore that the sole beneficial owner is the assessee Shri Yashovardhan Birla only and the Power of Administration has been granted to Shri Bharat Ankaraju to deal with the accounts, There are payments to Confiance Ltd as the Shareholder which again establishes the fact that there are accounts in the names of the Intermediate layer entities also which are held for the beneficial ownership of the assessee.

Since Confiance Ltd is the Trustee of The Banyan Trust, which in turn is having the assessee as its sole beneficiary, all these accounts, irrespective of The fact whether they are held in the name of the front entities themselves or others like the Layer entities in this case, the sole beneficial owner of all such assets held there under is the assessee, Shn Yashovardhan Bfrla himself, as can be seen from the documents. In his order, the AO has discussed the evidences and Investments in these accounts in detail and the findings are summarized as under.

(i) MOKOPANE – ACCOUNT No.0835-1282411 WITH CREDIT SUISSE, ZURICH

The information about this account is made available from 01.04.2011 only. This account has since been closed on 16.07.2013 and transferred to Account No. 9132000 with Barclays Bank, Singapore in the name of Mokopane Ltd. Documents filed in connection with this account shows that the beneficial owner is the assessee, Shri Yashovardhan Birla.

Though the details of pre 2011 period is not known, the available information shows that substantial transactions have been carried out through this account with Credit Suisse, Zurich in the name of Mokopane Ltd, including dealing in securities.

(iii) MOKOPANE-A/C No. 125042-01-780 WITH CREDIT SUISSE, SINGAPORE

The account No. 125042-01-780 was opened on 16.08.2011. Regarding the Beneficial Ownership, there are five correspondences from the authorized signatories over a period. All of them invariably declare that the assessee Shri Vashovardhan Birla is the sole beneficial owner of the asset held under account No. 125042-01-780 with Credit Suisse in the name of Mokopane Ltd. The first letter dated 19.08.2011 mentions The Banyan Trust as the Beneficiary, The second letter dated 23.08.2011 mentions that the beneficiary of The Banyan Trust is the assesses, Shri Yashovardhan Birla. The third letter dated 23.08.2011 mentions the beneficiary of The Bird International Foundation as the assessee, Shri Yashovardhan Birla and his family The fourth letter dated 20.04.2012 from Confiance Ltd first states that the Asset Contributor of The Banyan Trust is Mokopane Ltd. The fifth Letter dated 24.09.2012 from Confiance Ltd further reveals that the assessee is not only the sole beneficial owner of the assets but is also the contributor of the assets of The Banyan Trust.

As per Form A, filed under Article 3 of CDS, which is a document as defined In Article 110 of Swiss Penal Code, Shri Yashovardhan Birla is identified as the Beneficial Owner of the assets held in the name of Mokopane Ltd.

(iv) MOKOPANE-ACCOUNT NO. 91320000 WITH BARCLAYS BANK, SINGAPORE

The account with Barclays Bank was opened on 26.03.2012. Declaration of Trust regarding Mokopane Ltd by CN Alpha Ltd addressed to Barclays Wealth, Singapore dated 25.04.2013 – shares of Mokopane Ltd held as nominee and Trustee for Confiance Limited as Trustee of The Banyan Trust as per Declaration of Trust dated 06.02.2012.

The correspondences in the file of Barclays Bank reveal that there are other accounts also in the name of Mokopane Ltd, The Banyan Trust, The Banyan Trust Capital Account and The Bird International Foundation. Substantial sum has. been transferred to Capital Wizard Ltd and The Banyan Trust Capital Fund. It Is also seen that money have been transferred for the credit of A/c. No. 88022936 of Capital Wizard Ltd’s account with Coutts & Co, Hong Kong, a private banker.

(iv) MOKOPANE- ACCOUNT NO.050038915

The only information available on date about the account is the Debit Note issued by Credit Suisse, Singapore to Mokopane Ltd intimating funds transfer from Mokopane Ltd’s A/c. no. 125042­01-780 to this account no. 050038915 No further details are available as on date about this account.

(v) MOKOPANE- ACCOUNT NO.56448176 WITH ROYAL BANK OF SCOTLAND

The correspondences found in A/c.N0.91320000 of Mokopane Ltd with Barclays Bank, Singapore contains information on the account opened with RBS International in the name of Mokoparie Ltd which also shows that substantial funds have been transferred to this new account with RB5, Further details about this account not ascertained as on date.

MOKOPANE -ACCOUNT WITH HSBC, LUXEMBOURG

The correspondence dated 12.09.2011 from Credit Suisse; Singapore indicated that Mokopane Ltd also has an Account with HSBC Bank, Luxembourg. Further details of this account are not yet ascertained.

The AO claims that the documents in the case of Mokopane Ltd are clinching on the issue of the identity of the person who has been contributing to the assets of the entity. Though the entity’s ownership was structured in such a way to present it as a case of a private trust, in fact, the entire structure starting from The Bird International Foundation to The Banyan Trust and then to the layering entitles was only a camouflage to cover the trail of funds and the real owner of such assets. However, the letters of Confiance Ltd above establishes beyond doubt that the assessce. Shri Vaahovardhan Birla himself was the asset contributor through this carefully woven holding structure.

4. SORWOOD DEVELOPMENT SA

Sorwood Development SA was incorporated on 25.05.1998 as an International Business Company In the British Virgin Islands. Sorwood Development 5.A opened an account on 15.11.2001 with Credit Suisse Bank, Zurich, bearing the business relationship number 0835-40639-1, which has since been dosed on 25.07.2012.

As per the documents filed with the Bank, the assessee Shri Yashovardhan Birfa is mentioned as the Legal Owner of the assets held under this business relationship in Form A, which is a mandatory document as per Article 3 under VSB Agreement on the Swiss bank’s code of conduct with regard to the exercise of due diligence, referred to as CDB.

This declaration is duly supported by other official documents of identification including the copy of passport issued in the name of the assessee, bearing NO.FB355431 on 28.03.2005. These documents establish beyond doubt that the assessee is the legal and beneficial owner of the assets, which were found invested under the name of Sorwood Development S.A with Credit Suisse, Zurich and that these entities were in fact only a front for holding the investments of the assessee in their fiduciary capacity.

The KVC documents state that the Origin of Assets deposited on 15.11.2001, has come from the business activities of The assessee and not from any legacy as claimed by the assessee. Regarding the expected account movement, it mentions as restructuring of the trust set up on 04.2010/01.2011.

The passport copy of the assessee arid that of Shri Bharat Ankaraju has been found furnished to the bank which fact was admitted by the assessee’s wealth manager Shri G. L Lath also.

As per the copies of letters addressed to the bank by Sorwood Development SA, it is seen that the bank had been issued a standing instruction to debit this account towards the credit card bills of Shri Yashovardhan Birla up to USD 50,000 per month and in fact the credit card bilk of the assessee had been found to have been debited to the account.

The liquidation fee for Alea Management Limited, another entity connected to the assessee, has also been paid from the account of Sorwood Development S,A which reinforces the nexus of Sorwood with the other entities of the assessee.

There are written Instructions to the bank, which is supported further by the confidential client notes, to transfer assets of Sarwood Development S.A. which held by the bank, to the newly opened account No.0835-1282441-3 in the name of Mokopane Limited, an entity of which the assessee is the beneficial owner.

There are remittances made from the account of Sorwood Development to Herritor Investments Limited, with narration “Dividend to the shareholder”. This clearly established the fact that the shares of Sorwood Development were being held by Herritor Investments Limited, which in turn was beneficially owned by the assessee.

The account was closed on 25.07.2012 and the balance was transferred to Herritor Investments Limited – account no.41171925 held with HSBC Private Bank (UK) Ltd, London.

5. ANRID LLC, DELAWARE, USA

Anrid LLC is a limited liability company formed under the Delaware Limited Liability Company Act on 01.10.2007. Anrid LLC was having an account with Credit Suisse, Zurich bearing relationship number 0835-1494489-2. As per Form A filed under Article 3 of CBD by the company, Shri Yashovardhan Birla is the sole beneficial owner of the assets held under this account.

As per the KYC document, the Origin of assets deposited is mentioned as from “savings accumulated over the last couple of years” and the expected movement in the account is stated to be part of export revenues.

All assets in the account of Anrid were transferred to Alea Management Limited account no. 13518394 with HSBC Private Bank (Suisse) 5A, Geneva on 29.08.2011 at the request of Credit Suisse Trust AG.

6. MANWELL INVESTMENT PROPERTIES LIMITED

Manwell Investment Properties Limited was incorporated as a limited liability company on 26.07.2012 under the BVJ Business Companies Art, 2004 and registered at no. 1725776 with maximum authorised shares of 50,000 with par value of USD 1 each. The first Registered Agent is CCS Trustees Limited and registered office is at 263, Main Street, PO box 2196, Road Town, Tortola, BVI. The company’s issued share capital comprises of 2 shares of USD 1 each and is fully owned by Mokopane Limited. The directors of Manwelf Investment Properties Limited are CCD Alpha Limited and CCD Beta Limited both incorporated in Guernsey. Consec Limited is the secretary of Manwell Investment Properties Limited. The entire share capital of Kinetic Holdings Limited, comprising of 100 shares of USD 3 each were transferred to Manwell Investment Properties Limited vide Certificate No.13 on 08.10.2012, No further information on the accounts and assets held by the entity are known as on date.

7. HERRITOR INVESTMENTS LTD

This is the only entity which the assesses had admitted to have invested money through Liberalized Remittance Scheme (LRS) in his statement before JDIT(lnv) on 16.12.2011 in connection with the enquiry into offshore HSBC accounts. Though the assessee had claimed that certain amounts had been invested through LRS from FY.2007-08 to 2011-12, no further details about the nature of investment made, incorporation details of the company and its business operations were revealed in full, During the course of assessment proceedings, it has been claimed by the assesses that the entire sum invested in Herritor Investments Ltd has since been returned to him in the year 2012. However, the assessee has failed to provide any details or evidence of such receipt of money back from Herritor Investments Ltd.

As per the information available on the public domain, Herritor Investments Ltd is reportedly a LJK based company and the address is shown as Flat C-8, Lees Palace, London which is the same property found listed in the Balance Sheet of Kinetic Holdings Limited. This address is shared by Kinetic Holdings Ltd also and both are listed as Directors of a company Lees Palace Properties Ltd, UK. Both companies are shown to be holding 1 share each in Lees Palace Properties Ltd This address of Lees Palace is also found mentioned m the letter addressed to Credit Suisse requesting to hand over the contents of the overseas safe deposit locker of the assesses in the year 2011.

The documents received in connection with the other offshore entities of the assesses reveals that there is a very close nexus between Herritor Investments Ltd and other front entities like Alea Management Ltd, Kinetic Holdings Ltd, Sorwood Development SA and Mokopane Ltd, to list a few. Substantial sums have been transferred from one entity to the other, like in the case of Kinetic Holdings Ltd, loan has been given by Herritor investments Ltd which is much more than the investment admittedly made by the assessee.

As per client notes in the case of Alea Management Ltd, it is clearly stated that Heiritor Investment Ltd has the same Beneficial Owner as the former and that sums have been transferred to the latter. As on date, no further information has been received in connection with this entity from the offshore banks.

8. MAGENTA PROPERTIES INVESTMENTS LTD

Magenta Properties Investments Ltd is mentioned in the Structure of Holding chart filed by the various offshore entities with the banks wherein it is mentioned as a UAE company incorporated on 10,03.2013 bearing Registration No.157735. This entity was referred to him by Shri Brijesh Thakkar, also as the one through which the assesses was looking to invest In a property, for which he was paid consultation fee.

9. MAGENTA PROPERTIES LTD

The mention of this entity, Magenta Properties Ltd is found in the details of unauthenticated financial statements of Mokopane Ltd filed by the assessee for the first time in his submission dated 18.03.2016 under loans. No further information or documents are submitted by the assessee in this regard so far.

10. CAPITAL WIZARD LTD

The entity Capital Wizard Ltd is found repeatedly mentioned in the documents furnished by the banks in the case of other offshore entities of the assessee. Substantial sums were found to have been transferred from the offshore entities like Alea Management Ltd and Mokopane Ltd to Capital Wizard Ltd with the remarks as loan repayment to the shareholder, dividend to the shareholder etc., which established the nexus of this entity with the assessee.

From the remittance details of other entities, it rsseen that Capital Wizard Ltd is having A/c. No, 88022936 with Coutts & Co, Hong Kong and A/c. No.,400-922932 with JP Morgan Chase Bank Ltd. No further details are furnished so far about the incorporation details and structure of holding of the entity.

11. FELT E LEARING

This entity was revealed for the first time by the assessee in his written submissions dated 18.03.2016. According to the letter, the shares are held by The Banyan Trust. However, no information regarding the incorporation details, capital and net assets of this entity has been submitted till date.

12. AAA (S) PTE LTD

In the financial statement of Kinetic Holdings Ltd as on 17.01.2012, investment ins AAA (S) Pte Ltd is shown. No further details regarding the incorporation and holding structure are revealed tit] now, about this entity.

13. AVIT INVESTMENTS LTD

According to the submission of Shri. G. L. Lath, part of the holding in an Indonesian company PT South Asia Pacific Viscose Ltd was made in the name of Avit Investments Ltd through the Credit Suisse AG as the front during the lifetime of Shri Ashokvardhan Birla. It was further submitted that the stakes were sold in FV 2007-08 and the proceeds have been credited to offshore Trusts / accounts set up by the assessee. This was denied by the assessee and no further details have been submitted by the banks concerned.

Subsequently, it has been claimed that the original trust which was claimed to have been setup by his Late father and Late Pratap Malpani, was holding the shares of Kinetic Holdings ltd and that Avit Investments Ltd was held by Kinetic Holdings Ltd. However, except this admission of investment in Avit Investments Ltd, no information or evidence has been furnished. The submission of undisclosed offshore investment in PT South Asia Viscose through Credit Suisse AG in the name of Avit Investments Ltd made by Shri G.L Lath is corroborated by assessee’s own admission. However, the AO notes that the very existence of such a discretionary trust extent of corpus therein, identity of the settlor, terms and conditions therein nave not been substantiated tin date. The claim of flow of funds from such a trust is also not supported with any documents.

14. EPICORP SOFTWARE INC

In the client notes, a draft email in connection with the buy back offer involving the shares of a company Epicorp Software Inc is referred to. Though no further details are available so far, information on public domain shows that the company has since been shifted to the same address as that of Anrid LLC at Delaware, which prima facie reveals the proximate connection of this entity to the assessee and his offshore entities.

15. ZEUS

The name of Zeus finds mention in the credit and debit notes furnished by the banks in the case of offshore entities like Alea Management Ltd and Mokopane Ltd, It is seen that on 11.11.2011, 500 shares of Zeus Private Equity 2 ICC Ltd were transferred from Alea Management Ltd (Client No.125132) to Mokopane Ltd. On 09.01.2013, USD 1,116,500 was credited to the account of Mokopane from Zeus Global Infrastructure Partners.

Though the assessee has denied any knowledge about this entity or the nature of receipts involved, the documents available indicate that the offshore entities are having significant connect on to this entity

16. STRIPE 10 IP

An investment in the name of Stripe 10 LP has been confirmed by the $mail trail found in Ms. Nita Shivdasani’s mail account. Though it is admitted as correct by the assessee, it Is claimed that there is no new infusion of funds into this investment but no further information & furnished.

17. KHATTAR WONG

Khattar Wong is a Singapore based law farm which figures frequently in the bank statements of Kinetic Holdings Ltd as discussed earlier.

There are remittances to and from this entity over a period of time and the amounts involved are quite substantial. Certain payments have been clearly mentioned as towards property at Singapore. There are references to Client A/c also. The exact nature of these transactions and the details, of the client a/c mentioned therein are not yet known,

18. THE BANYAN TRUST

Substantial sums have been found transferred to Banyan Trust from other offshore front entities of the assesses as discussed in the earlier. The Banyan Trust has an account with Credit Suisse Bank, Singapore with account number 91513600, by Confjance Ltd as the Trustee. In the name of The Banyan Trust Capital Account, there is an account with Royal Bank of Scotland Internal tonal bearing account number 56450534.

Substantial sums have been found transferred to Banyan Trust from other offshore Front entities of the assesses In the name of The Banyan Trust Capital Account, there is an account with Royal Bank of Scotland International bearing account number 56450634 having considerable

39. OTHER ENTITIES

From the bank account statements of the assesses, transfer of substantial sums to a few hitherto unknown entities like B/O. SUNMOON, HOMES, Powerdesk International, etc. is also noticed for which no further details are available in this office.

8.6 While dealing with the above bank accounts, the AO has noted that a beneficial owner Is recognized as the ultimate owner of the deposited assets under Swiss Law and understanding of the Banks. The AO has noted that the menaing of “Beneficial Owner” is also explained in the declaration filed with the banks as “the natural person who ultimately owns (directly /indirectly) and / or controls the account holder and or the person on whose behalf the transaction is being conducted. It also refers to those persons who exercise ultimate control over a legal person and / Of arrangement.” It further clarifies that “the beneficial owner does not necessarily have to be granted power of attorney or signatory authority for the bonking relationship contemplated thereunder”.

8.7 The examination of close aides handling sensitive affairs of the assessee led to clear admission by these employees that they had managed the assets of these foreign entities at the behest of the assessee. One of the persons having extensive knowledge is Shri G L Lath who acted as a wealth manager to the assessee and it has come out of his statements that:

i His statement u/s 132(4} contains critical details about offshore entities, their bank accounts crested for the benefit of the assessee and control of the assessee on these funds/assets and has been referred to by the AO.

ii He received instructions from Mr. Birla which was conveyed by him to bank authorities outside India through a separate mobile number. In addition, Mr Birla used to give direct instructions to various banks like Barclays Bank Pic Singapore, UBS and Credit Suisse AG etc.

iii. That all the offshore entities, namely The Banyan Trust Mokopane Ltd, Alea Management Ltd and others were entities created for the beneficial ownership of the assessee.

iv. That the assessee has number of bank accounts abroad, with different banks, including H5BC, Credit Suisse Bank, Barclays Bank and UB5 either in his name or In the name of these entities, of which he is the beneficial owner.

v. That except three bank accounts with Barclays Bank, Singapore, ail other offshore hank accounts are undisclosed.

vi. That approximately USD 40-50 million was lying in the undisclosed offshore account? of the assessee as on December, 2012.

vii. That the assessee has two flats at London. First one situated at C-8, Lees Palate, London, which was purchased during Late Ashokvardhan Birla’s time and the second Flat at B-S, Lees Palace, London, which was purchased out of remittances from India through LRS by the assessee probably in the name of a company, which is 100% owned by the assessee, which has an account in H5BC London.

viii. That after the demise of Shri Ashokvardhan Birla, assessee’s father, in the year 1990, a trust was formed in the year 1992 by the assessee and one Shri D. K. Agarwal, who was authorised to manage it. That the credit lying in the accounts of assessee’s father Late Ashokvardhan Birla was transferred to this Trust created in 1992.

ix. That there was some undisclosed investment in an Austrian company (read, PT South Pacific Asia Viscose Ltd) held in the name of Credit Suisse AG (read, Avit Investments Ltd) which was sold in the FV .2007-08 and the proceeds from undisclosed stake sate was credited to Credit Suisse AG’s account and was routed to some of these trusts.

x. He confirmed and corroborated! the statement given by Ms Nita Shivdasani. In a subsequent statement, he submitted that he had been pressurized by the assesses to retract his earlier statement. He accepted that varacity of his earlier statement.

xi. He accepted that he had met Mr Andrews, London [whose phone number was also available in the assessee’s mobile) and that he assisted in closing assessee’s bank accounts in HSBC and transfer of such funds to other accounts.

8.8 The other close aide who has, through documents seized from her computer, email correspondence and admission in the statements, provided irrefutable proof that it was the assessee who was in actual control of all the funds being managed in these accounts was Ms Nita Shivdasani. Ms Shivdasani was earlier an employee with Barclays Bank, Singapore and had assisted the assessee in opening some of the offshore accounts of the assesses while she was with the Sank. Later, she joined the team of the assesses managing his wealth. It has come out of the documents found with her and her statement recorded during search / post search/ assessment inquiries that:

i. She was in touch with trustees of various structures including Mokcopane Ltd. for managing the assessee’s affairs.

ii. Deleted emails recovered from her laptop revealed assessee’s control over bank accounts belong to Mokopane Limited as well as bank account containing investments by Stripe 10LP. From the bank statement of Ocean Vista Point Limited A/c No. 20600226787 it is found on 30.11.2007, there is a fund transfer amounting to USD 2,55,000 to Yashovardhan Birla’s personal account at UBS AG, Zurich with a narration “Capital call Stripe 10 LP” which clearly establishes the link of the assessee with Stripe 10 LP. Further it also gives credence to the statement of Ms. Nita Shivdasanr.

iii. Ms. Shivdasani has admitted that the appellant had asked her to contact Mr Andrews in London for deletion of his name from some documents for a short period of time.”

16. After quoting from the aforesaid order learned CIT(A) observed that the assessee was beneficial owner of various assets/companies/bank accounts owned by the front entities and that such information was not provided in the return of income filed by the assessee, the Assessing Officer proceeded to issue notice under section 10(1) of the BMIT Act on 22.11.2017. Thereafter he noticed that the assessee has challenged the issue of notice under section 10(1) and has denied his liability to be assessed under section 10(3) of the Act raising various issues. Learned CIT(A) thereafter rejected the assessee’s contention that the assessee has time to file return of income for the relevant assessment year until 31.3.2018. learned CIT(A) held that there was fetters on the Assessing Officer placed by section 10(1) of the Act specifying the time frame in which the notice is to be issued either with reference to filing of income tax return or with reference to the BMIT Act. He noted that the section does not even specify that such notice should only be issued after the return of income under Income Tax Act has been filed. Referring to the provisions of section 10(1) of the Act, he noted that the issue of notice under section 10(1) of the Act, the only requirement is coming of any information to the notice of the Assessing Officer. Thereafter he referred to the definition of ‘undisclosed asset located outside India’ as per section 2(10) of the Act. He observed that the information available with the Assessing Officer has been elaborately discussed above and he noted that there were sufficient assets outside the country of which the assessee has been found to be a beneficial owner. Thereafter he referred to the scope of total undisclosed income and assets as per section 4 of the Act. Referring to the above he held that in the above definition of scope, only the determination of income element has been linked with the return of income filed by the assessee in proceedings going on under Income Tax Act. That it has no reference to the issue of notice u/s 10(1) of the Act for which mere presence of sufficient information with the AO under BMIT Act is sufficient. That further, as clause (c) above would indicate, the ‘value of undisclosed assets’ is not linked with the return of income, the implication being that if the such information about such assets comes to the knowledge of the AO, he is free to issue notice under the BMIT Act and such notice would not have a relation with the return under Income Tax Act. That the present proceedings are predominantly related to existence of assets for which the appellant has been found to be a beneficial owner. That as such, no fetters are placed by the above definition on the AO in treating the assets as undisclosed and proceeding to issue the notice. That the information about the various foreign assets beneficially owned by the assessee as enumerated by the AO provide enough information in possession of the AO to issue the notice under section 10(1) of the Income Tax Act.

17. Thereafter he distinguished the decisions relied upon by the assessee in this regard. Thereafter, he rejected the assessee’s contention that the A.O. should have waited till 31.03.2018 for issue of notice as such notice as the right of the assessee to file a belated return was available till that period. That in respect of ‘undisclosed assets’ coming to the knowledge of the A.O., there is no reference in BM Act, to any return of income under the Income Tax Act. He held that the decision in the case of Mannalal Barti [1978] 114 ITR 329 (Cal) and R P Dwivedi [2006] 99 TTJ 794 (Agra)and Godrej & Boyce Manufacturing Co. [1989] 44 ELT 3 (Bom), whereon different facts he held that the BM Act, does not prescribe any fixed or relevant date for issue of notice u/s. 10(1) and hence, the above decision does not apply to the facts of the present case. Hence, he dismissed ground no. 4 raised by the assessee.

18. Thereafter, the ld. CIT(A) referred to the assessee’s claim that source of corpus of the foreign discretionary trust was not the assessee but rather the assessee’s maternal uncle who settled upon trust his income earned outside India and that the assessee ceased to be beneficiary beyond 14.07.2014. In this regard, the ld. CIT(A) referred to the trust deed submitted and found that the document is unauthenticated and is signed by two unnamed directors. Thereafter, he referred to the assessee’s submissions showing summary of share capital and shares of Kinetic Holdings Limited and the declaration signed by one M B Collins purported to be a director of Albany Trustee Company and a letter from Confiance dated 24.03.2016 and addressed to the assessee for the clarification that Mr. Birla may have been mentioned as beneficial owner or beneficiary in some of the bank accounts opened by them and that in the trust deed the assessee and his family were in the class of discretionary beneficiaries during their transteeship. He also referred to the assessee’s reliance in the case of Malaysian International Trading Corporation vs. Mega Safe Deposit Vaults (P.) Ltd. [2006] 68 SCL 52 (Bom) to claim that where no evidence is adduced regarding foreign law, the presumption is that it is the same as Indian Law on the point in consideration. He noted that the assessee has now proceeded to argue his case as if the Trust was framed under the Indian Trust Laws. He observed that the assessee has elaborately submitted the rights and duties of the Settlor with reference to appointment of trustees and control over assets. That it is claimed that migration of trust assets does not alter the irrevocable nature of the trust settlement, rather the discretion merely becomes vested with new or additional trustees. That as per the assessee, the trust assets at AT 351 (above trust) are migrated by trustees to Nibola Trust (Liechtenstein) in 1998 with Credit Suise Limited as Trustee, in 2010 the trust assets are migrated to Bird International Foundation (Panama) with HSBC as trustee, in 2011, the trust assets are migrated to Banyan Trust (Guernsey) with Confiance Limited as trustees. It is claimed that such migration is not distribution.

19. However, the ld. CIT(A) held that the trust deed enclosed by the assessee has not been filed with any authority in Guernsey Island and is absolutely unauthenticated and does not contain signature of Mr. Pratap Malpani at any place can and, hence, it cannot be accepted as credible evidence. He further held that the current discussion is with respect to various assets existing after 2001 and that this trust is ceased to exist in 1998 and, hence, the assessee must produce authentic current records/deeds of existing trust to argue his case. That the assessee cannot be permitted to build his case on a non-existing case while refusing to provide the documents of the existing trusts/bank accounts which are only in his possession. He further distinguished the decision of the Malaysian International Trading (supra) by observing that it was not a case where unauthenticated documents, claimed to pertain to a tax heaven is involved. The assessee was operating through Tax Heavens which are known for their secrecy laws and liberal financial structures inviting wealthy persons and wealth managers all over the world. The onus was on the assessee to produce correct document and correct interpretations to support his case. Hence, he held that any reliance on the old Trust and its provisions is infructuous and irrelevant.

20. The ld. CIT(A) further noted that Shri Pratap Malpani met with an air accident and died along with the father of the assessee in 1990. That subsequent structures referred by the assessee has been created subsequent to his death. That if Mr. Malpani was the settler of the first trust, the person handling the affairs of the subsequent trusts and transfer of such assets to such trusts, if correct, has not been identified. That trust deed of subsequent trusts have not been provided. That in absence of any document relating to Nebola Trust, Bird International Foundation and Banyan Trust which are trusts existing at the relevant point of time, the irrelevant discussion made by the assessee in respect of a trust which ceased to exist in 1998 is found infructuous and not worthy of discussion. That clauses in the old Trust Deed cannot be used to elaborate on the provisions of some other trust for which the Trust deed is not available.

21. Thereafter, the ld. CIT(A) proceeded to elaborate upon the trusts created in tax heaven countries, etc. In this regard, he referred to the ITAT decision in the case of Renu Thadani [2020] 117 com 804 (Mum-Trib.). He elaborately referred from the said decisions running into several pages. He noted that in the above order, the ITAT has given primacy to the documents with the bank which mention the assessee as ‘beneficial owner’ rather than the contents of the various structures cited by the assessee. That in the above decision, the assessee’s conduct in declining to sign a consent waiver was observed adversely by the ITAT. He referred extensively to the ITAT order. Thereafter, he held that in the present case, the assessee has tried to mislead the department in a planned way. That each and every bank having bank accounts identified by the A.O. has confirmed that the assessee is the ‘beneficial owner/contributor of assets’ of these accounts. He further referred that sufficient evidence has been unearthed during search action indicating that while the assessee has given a consent waiver. The result has been lack of co-operation from HSBC, Geneva Bank. That evidence has also come in the form of Ms. Nina Shivdasani that she was directed to contact persons outside the country in order to erase certain evidences of ownership of assets. Thus, he held that in view of the above decision, the onus was on the assessee to produce all evidence with respect to source of evidence which have found in the various bank account whereas the assessee has been cited by the bank as beneficiary owner. Thereafter, he held that it is found relevant to discuss the letter issued by Confiance on this issue. He noted that M/s. Confiance is a paid service provider appointed by the assessee. That merely because the letter has notorised, the authenticity of the letter does not increase. That the contents of the letter written by M/s. Confiance is found to be patently false in light of the contemporaneous documentation supplied to the Income Tax Department by the banks where the accounts exist. That corresponece has been liberally received from all banks from where responses have been received. That the A.O. has referred to five contemporaneous letters including atleast one letter dated 24.09.2012 from Confiance itself categorically mentioning that the assessee is not only the sole beneficial owner of the assets but is also the contributor of the assets of The Banyan Trust. He further held that M/s. Confiance was found to have supplied other supporting evidences. That how can the assessee recuse himself as he was the sole beneficiary/asset owner of the bank accounts at the first place? Who are the other beneficiaries? Thereafter the ld. CIT(A) held that the assessee cannot place reliance on the earlier trust (even if accepted as true). Thereafter, the ld. CIT(A) reiterated the proceedings under BMIT Income Tax Act, 1961 as asset and income specific. That there was onus cast on the assessee to explain the source of the individual assets and income as identified by the A.O., wherein the documents have been found indicating that the assessee was the beneficial owner of such assets. That since the assessee has been cited as a beneficial owner and not the discretionary beneficiary of these assets, there was no question of waiting till distribution of trust corpus to treat these as assessee’s income as assets. He further held that summary of share capital of shares in the case of Kinetic Holdings filed by the assessee does not offer any assistance in identifying assets of the company and source of finance in acquisition of such assets, if beneficially owned. He observed that it is noted that the A.O. has enough direct evidences in form of bank documents and bank fillings indicating the assessee to be beneficial owner of such bank accounts and funds therein. He further held that without prejudice with this, the assessee has failed to produce any document to support the source of funds in the various bank accounts identified by the A.O. and reproduced in his order. That the assessee’s claim was also not accepted because the assessee was a discretionary beneficiary in the Bird International Foundation and Banyan Trust, the schedule of Bird International Foundation reproduced by the A.O. at page 58 of his order shows only Yashovardhan Birla and his descendants as beneficiaries. These are contemporaneous documents shared by the Competent Authorities of these countries. Thereafter, the ld. CIT(A) held that the only evidence filed by the assessee in support of his contention of his being a discretionary benefit is an unauthenticated copy of a purported declaration of trust by one Albany Trustee Company Limited regarding the corpus fund of the impugned trust. That the corpus of funds in this declaration is hundred shares of USD 1 each of Kinetic Holding Ltd. to competent authorities indicates that the shares of Kinetic Holding Ltd. continued to be in the name of Shri Pratap Malpani during his lifetime and no such shares were never transferred to Albany Trustee Company Limited. That in this declaration, the sons of Late Pratap Malpani are mentioned as the named beneficiaries but their names do not figure in the subsequent trust structure of the offshore entities which has only the assessee as its sole beneficiary. That this is probably the reason for the assessee refraining from filing the trust deeds and associated documents of other trust. That during search, it has been confirmed that the sons of late Pratap Malpani did not execute any renunciations of their rights Under the circumstances, the attempt made by the assessee to correlate his trusts to this declaration fail and cannot be accepted. These documents also demonstrate the incorrect claim made that the corpus fund of the Banyan trust is the result of resettlements from prior trust structures namely AT 351, Nebola, etc. originally set up by his maternal uncle Shri Pratap Malpani and that the assessee is merely a beneficiary of a discretionary trust structure. That it is clear that the subsequent Trusts have been constituted by the assessee solely for his own benefit and hence his name appears as beneficial owner in all the connected bank accounts.

22. Thereafter, he rejected the assessee’s claim that there is no documentary evidence on record to show that the assessee has unaccounted money or money that has escaped tax or money that was remitted through illegal channels. He held that BMIT Act does not put any such onus on the assessee before the issue of notice u/s.10(1). The only requirement is existence of information and nothing else. In this regard, he referred to the decision of Independent Media (P) Ltd. 210 Taxmann 14 (Delhi) (2012)

23. Thereafter, he referred to the assessee’s claim (on a without prejudice basis) that he was served with invalid notices under the Act, wherein authorities proceeded to endeavor to bring to tax the same assets and/or income which are now being assessed by the A.O. under BMIT Act. He noted that the Revenue authorities continues to pursue the right to assess to tax the assessee for offhosre trust assets under the Act. Hence, this must be excluded from the ambit of BMIT Act. He distinguished the decision referred by the assessee in this case and held that in absence of any specific bar on proceedings under BMIT Act in such circumstances, the action of the A.O. in issuig notice u/s.10(1) of the Act cannot be faulted.

24. Thereafter, he held that BMIT Act mandates assessment of undisclosed income/assets in the hands of beneficial owners/beneficiaries irrespective of ownership of paper. Referring to this, he held that in light of the discussion held earlier, the documents filed by the assessee at Annexure I, II, IV and V do not held the assessee. He again referred to the assessee’s ground that the A.O. could not have issued a notice u/s.10(1) for the A.Y. 2016-17 as the assessee ceased to have an interest in the discretionary trust with effect from 15.07.2014. He held that similar issue has been raised by the assessee at ground no.6 as well. Referring to the earlier observation, he rejected this ground also. He held that while the issuing notice u/s.10(1), the A.O. has pointed out various entities and their bank account as well as documents evidencing that he was a beneficial owner of such accounts. That the assessee cannot rebut all these documents merely through these two letters which are unsupported by any document. Thereafter, the ld. CIT(A) referred to the A.O.’s summary of the information available with him at the time of initiating the proceedings under the BMIT Act and he reproduced the same. Referring to the A.O.’s order, the ld. CIT(A) held that it was incumbent upon the assessee to rebut the A.O.’s claim with respect to each and every asset separately.

25. The ld. CIT(A) further held that the A.O. had sufficient prima facie evidence that the assessee was the sole beneficial owner of assets in these bank accounts. That these documents cannot be rebutted merely by a general declaration obtained by the assessee. That credible evidence are not there. That the assessee has renounced his beneficiary status in these assets. He further rejected the assessee’s claim that adjudicating authority could not have invoked the provisions of section 4 of the BMA against the assessee as section 4 applies in case of undisclosed foreign assets/income and in a preceding year, when the assessee in fact have a beneficial interest in a foreign discretionary trust structure, such a disclosure of beneficial interest, aleit not an ‘asset’, was validly made under the aegis of Income Tax Income Tax Act, 1961, 1961. The assessee has submitted the schedule FA for A.Y. 2014-15 in support of its claim. The ld. CIT(A) rejected this submission. He held that none of the assets (bank accounts) wherein the A.O. has significant information with reference to the beneficial interest in such accounts are found to be disclosed in this schedule.

26. The ld. CIT(A) further referred to the assessee’s contention that the A.O. incorrectly concluded that the assessee has undisclosed foreign income and/or assets during the relevant assessment income, overlooking the assessee’s denial in this regard and relying upon the pending proceedings concerning Chapter XIX-A which was neither contradictory nor self serving. The ld. CIT(A) noted that the assessee is claiming that the assets under reference are being assessed parallel under the I.T. Act and hence, assessment of these assets under the BMIT Act is invalid. The ld. CIT(A) further noted that it has been claimed that the Revenue is proceeding substantively in reliance upon the order dated 27th September, 2017 of the Hon’ble ITSC under section 2450(4) of the Income Tax Act 1961. That it is also claimed that the findings of the ITSC have been considered and rejected by the Hon’ble Tribunal in a later dated order (the copy of the order has been filed before me but has not been admitted as an evidence), it is claimed that the analysis and conclusion of the ITSC currently remain sub judice in a pending writ petition before Hon’ble Bombay High Court and that if the appellant were to succeed in the challenge, there is a clear prospect of a conclusive settlement being achieved in relation to the tax assessment and section 2451 will operate to bar reopening under any law including EMIT Act.

27. That the assessee has also contended that the Principal Commissioner of Income Tax (Central) – 2, Mumbai was aware of all the assets under discussion as clear from his letter dated 28.8.2017 addressed to the Secretary, Settlement Commission. Once he was aware of these assets under the Income Tax Proceedings; a separate notice u/s 10(1) of the EMIT Act could not have been issued.

28. That the submission made by the assessee has been examined. That there appears no provision in the BM Act which prohibits initiation or continuance of proceedings under the BM Act if assessment proceedings in other years are continuing under Income Tax Act. Hence, the proceedings continuing under the I T Act cannot operate as a bar on initiation of proceedings under the BM Act. That the assessee’s argument that there is a possibility of the Settlement Commission settling the case finally (in case the Bombay High Court decision is in appellant’s favour) is well taken. If the case is finally settled, natural consequences will follow as far as other Acts are concerned. However, the proceedings under these Acts cannot be stopped merely under such a presumption.

29. That the case of the assessee is that since search action took place on 7.1.2014 and notices under section 153A of Income Tax Act were issued, all particulars concerning foreign income and assets were confronted to the assessee. The appellant, in any case, ceased to hold the status of beneficiary of the offshore discretionary trust beyond 14.7.2014 to the knowledge of Indian Revenue Authority. Thus, prior to coming into force of the Act, the foreign income and assets alleged to be held outside India by the Appellant were not only within the full knowledge of the Indian Revenue Authority but were also subject matter of impugned proceedings under the IT Act thus precluding scope for declaration of any form whatsoever and / or disclosure by the assessee.

30. That the argument that the assessee could not disclose the assets in the window provided under the BMIT Act because of the search action appears flawed. That the BMST Act had specific provisions that such persons could not avail of the declaration window. Once the Act itself did not permit such declaration, the assessee cannot claim grievance in this regard unless he challenges the vires of the relevant provision. Further, the fact that these assets had come to the notice of Investigation Unit or the Income Tax Authority prior to coming in force of the Act has no impact on the power and functions of the Authority under BM Act. The scope of assets contemplated under BM Act is clear from the Board’s Circular No. 13 of 2015.

31. The ld. CIT(A) concluded that there was no estoppels against continuing both the Acts and the grounds raised by the assessee is found not tenable. Thereafter, the ld. CIT(A) distinguished some of the decisions referred by the assessee and finally concluded as under:

10. In light of elaborate discussion with respect to the various grounds raised by the assessee, the claim of the assessee that he is not liable to be assessed under BMIT Act is not found acceptable. The grounds of appeal no. 4 to 9 raised by the assessee in his appeal in this regard are not found tenable and are dismissed. In light of the various facts which have already noted above, it is held under section 15(l)(b) rws 17 of the BMIT Act that the assessee is liable to be assessed under the Act and the notice under section 10(1) of the Act has been validly issued by the A.O.

32. Against the above order, the assessee is in appeal before us.

33. We have heard both the counsel and perused the records. Both the parties have been extensively heard. They made respective rejoinders as well.

34. Final summary of assessee’s submissions are summarized as under:

1. The present appeal, instituted under section 18 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA), challenges the jurisdictional order dated 26 April 2021 passed by the Commissioner (Appeals)- Range 51, Mumbai under section 15(1)(6) of BMA (Impugned Order).

MATERIAL FACTS

2. In September 1989, an irrevocable discretionary trust came to be settled under the laws of Guernsey, by non-resident maternal uncle (Late) Sit Pratap Malpani (Trust).

3. The Appellant came to be nominated as member of a class of beneficiaries under the Trust.

4. At the time, the Appellant was enrolled at University, aged 22, with no source of income of his own.

5. The Instrument of Trust (PB Vold @ Pages 1-22) appointed corporate trustees Albany Trustee Company Limited, of Guernsey (Albany). Mr. Michael.Collins, director of Albany duly executed the Instrument. of Trust along with a eo-director of Albany, on 7 September 1989.

6. The Instrument of Trust records that assets settled upon trust (in 1989) were the shareholding interests held in Kinetic Holdings Ltd, jersey (Kinetic), incorporated in the year 1985 (at the time, the Appellant was aged 18 years), which in turn held shares in Avit Investments Ltd, Turks & Caicos Islands (Avis), incorporated in the year 1981 (at the time, the Appellant was aged 13 years) (PB Vol.5 @ Pages 2303-2304).

7. Widest powers are conferred under the Instrument of Trust upon the corporate trustees to make investments in immovable properties, securities, incorporate corporate vehicles, permit use of immovable properties by beneficiaries on terms to be agreed, etc. Through this progenitor instrument, the trustees in the exercise, of their powers and discretion, migrated trust assets into new trust structures. Thus, the original AT-351 Trust was migrated by Albany to Nebola Trust (Liechtenstein) in 1998, with Credit Suisse Limited as trustee; onwards by Credit Suisse to Bird International Foundation (Panama) in 2010 with HSBC Guyerzeller Limited as trustee; and finally, to Banyan Trust (Guernsey) in 2011 with Confiance Limited as trustee, whose trusteeship services have since been taken over. by Praxis Trustees Limited, Guernsey (information published on the world wide web, i.e. in public domain) A fair, reasonable, harmonious interpretation of the progenitor Instrument of Trust (PB Vol.,. @ pg. 1-22), including recitals, clauses 1 to 7 read with 9.1; 10, 11.1, 8.4,• 13, 15 and First Schedule (Parts I & II), Second Schedule, clauses 2(20) to (23), 8(1), 8(7) & 11, establishes an irrevocable discretionary trust was established, with transmigratory powers, duties and responsibilities. The duration of the Trust Period set forth in clause 2(1) (b) of the Instrument of Trust stipulates the ‘trust’ must remain intact for: (i) eighty years from the date of the declaration of trust; (ii) death of the last survivor of the descendants of King George the Fifth of England; or, (iii) such earlier date as the trustees may in writing declare to be the date of expiration. The last of the three eventualities mandates a trigger either simultaneously with or following ‘distribution’, except where a. migration of trust • assets occurs in consonance with powers reserved to the trustees under clause 8(3) and 8(4) of the Instrument of Trust.

8. (Late)’ Shri Pratap Malpani died on 14 February 1990, simultaneously (in an airplane crash) with his wife Smt. Vibha Malpani, Shri Ashokvardhan Birla – father of the Appellant, Smt. Sunanda Birla- mother of the Appellant and Smt. Sujata Mehta- sister of the Appellant.

COMPLIANCE WITH 2012 AMENDMENTS TO INCOME-TAX ACT RE:  FOREIGN ASSETS & LATER REVISIONS OF SCHEDULE FA

9. In AY 2012-13, a fifth proviso to s.139(1) of the Income-tax Act, 1961 (IT Act) was introduced, with corollary modification to the prescribed form for returns of income, introducing Schedule FA for declaration of ‘foreign assets’ and foreign income.

10. During AY 2012-13, Schedule.FA was restricted to declaration of: (1) FA-(A) Foreign Assets – Details of Foreign Bank Accounts; (2) FA-(B) Foreign Assets- Details of financial interest in any entity, (3) FA-(C) Foreign Assets- Details of immovable property, (4)’FA-(D) Foreign Assets-Details of any other asset, (5) FA-(E) Foreign Assets- Details of account(s) in which signing authority, not included in FA(A)• to FA(D). By virtue of the Appellant establishing foreign bank accounts under the Liberalized Remittance Scheme notified by the Reserve Bank of India, the Appellant made requisite disclosures, in Schedule FA. Extract of the Appellant’s Schedule FA for AY 2012-13 is at Pg. 4 of the Application filed on 23 June 2021.

11. In AY 2013-14, Schedule FA was extended, through introduction of Schedule FA-(F) to encompass “Details of trusts created under the laws of a country outside India, in which you axe a trustee”. By virtue of the Appellant not being a trustee (a position not disputed by Revenue), Schedule FA-(F) had no application to the Appellant. Extract of the Appellant’s Schedule FA for AY 2013-14 is at Pg. 6 of the Application filed on 23 June 2021.

12. In AY 2014-15, Schedule FA-(F) was widened to encompass “Details of trusts created under the laws of a country outside India, in which you are a’ trustee, beneficiary or settlor”. Thus, for the first time, `beneficiary’ status in an offshore trust became liable to declaration in Schedule FA. Accorclingly, in AY 2014-15, independently of foreign assets acquired under the Liberalized’ Remittance Scheme duly declared in Schedule PA, the Appellant duly declared (within the constraints Of limitation of characters in the online form); in the return of income filed under s.139 IT Act, in Schedule FA-(F), that he was among nominated beneficiaries of The Banyan Trust, which along with all companies, trusts and entities thereunder, formed part of the offshore discretionary trust settled by (Late) Shri Pratap Malpani, with its address at Elizabeth House, St. Peter Port, Guernsey GY 11EW, United Kingdom, under the trusteeship of Confiance Limited, Guernsey. The Settlor of The Banyan Trust was disclosed as Bird International Foundation, Albany Trustee Company Limited, Pollet House, St. Peter Port, Guernsey, United Kingdom, reflecting trust migration by the trustee’s. (PB Vol.5 @ Pages 2298-2299).

CESSATION RE: MEMBER OF CLASS OF BENEFICIARIES OF TRUST

13. Upon the Appellant ceasing to lica member of the class of beneficiaries of the Trust in July 2014 (PB Vol.5 @ Page 2306), the obligation of the Appellant to declare his status in relation to the Trust cantle to an end. In the return filed by the Appellant for AY 2015-16, it was specifically declared that Appellant was beneficiary of “The Banyan Trust & All Companies/That/Entities, thereunder {Discretionary Trust) Upto 14,07.2014.” Extract of the Appellant’s Schedule FA for AY 2015-16 is at PB Vo1.5, Pages 2300-2302.

14. In AY 2016-17, the Appellant’s Schedule FA continued to declare foreign bank accounts and an immovable property purchased through LRS in Oman. Extract of Appellant’s Schedule FA for AY 2016-17 is at PB [email protected] Pages 523-537.

FOREIGN ASSETS ACQUIRED FROM INCOME CHARGEABLE TO TAX IN INDIA, WHICH HAS ESCAPED ASSESSMENT FOR REASONS ATTRIBUTABLE TO TAX EVASION, WITHIN THE FRAMEWORK OF BMA

15. On 26 May 2015, the BMA was enacted, rendering exigible to declaration under s.59 BMA undisclosed foreign assets and/or income “acquired from income chargeable to tax under the Income-tax Act for any assessment year prior to the assessment year beginning on 1″ day of April 2016”.

16. BMA came into force with effect from 01 July 2015.

17. Assets acquired from income on which tax has been evaded in India by the declarant and/or assessee are within the purview of the BMA. Foreign assets acquired from exempt income; do not fall within the purview of BMA.

SHOW CAUSE NOTICE PROCEEDINGS

18. Vide Show Cause Notice dated 22 November 2017 (PB Vold @ Page 510-518), the Additional Commissioner of Income Tax, Central Range — 4, Mumbai (Assessing Officer , “AO”) called upon the Appellant under section 10 of BMA, to produce documents / evidences / information pertaining to allegedly undisclosed foreign income and/or assets of the Appellant during the previous year 2015-2016 after 1 July 2015, relevant to AY 2016­2017, principally relying upon ‘Form A’ declarations made in relation to foreign bank accounts of corporate vehicles within the Trust structure.

JURISDICTIONAL OBJECTIONS

19.The Appellant’s jurisdictional objections to invocation of BMA have been founded. principally around the statutory scheme of the BMA, which seeks to lay a charge of tax upon foreign assets or income “acquired from income chargeable to tax under the Income-tax Act, 1961” (s.59 BMA), in effect, rendering exigible to tax under BMA foreign .assets or income created from tax evasion in India, i.e. income which has escaped assessment in India, irrespective of whether such foreign assets or income stand in the name of the assessee or in the name of another person. In the present case, it is not in dispute that there is the foreign assets or income in contention are not standing in the name of the Appellant. It is the case of the Appellant that the foreign assets and income in contention form trust Wealth settled in 1989 by a non-resident maternal uncle, whose income was not chargeable to tax in India, and whose Estate was in fact probated. in Singapore (ITSC order, PB Vol.’, Pg. 379 records the fact that the Estate was probated in Singapore). The core jurisdictional objections of the Appellant are summarized, below:

19.1 Absence of ‘jurisdictional fact’ under BMA, in view of the Appellant not having made any contribution to the corpus or income of the Trust:

19.1.1  The fundamental jurisdictional pre-requisite for initiating proceedings under BMA is that the foreign asset or income shall have.been acquired from income chargeable to tax under the Income-tal Act; 1961 which haS escaped assessment for reasons attributable inter alia to tax evasion. Accordingly, it is imperative for the AO to establish prima facie, on the basis of cogent ‘information’, that such person againSt whom proceedings are initiated. under BMA has contributed to that foreign asset from out of income that was chargeable to tax in India but which has escaped assessment for reasons of tax evasion, and accordingly that such person is either the `beneficial owner’ or ‘beneficiary’ of such asset or income on account of a clear nexus with Such asset Or income, in order to be rendered amenable to BMA. FAQ #31 in. the binding CBDT Circular No.13 of 2015 dated 6 July 2015 stipulates, in express terms, that contribution/consideration is key to establish. ‘beneficial ownership’: “THERE MAY BE A CASE WHERE A PERSON IS LISTED AS A BENEFICIARY IN A FOREIGN ASSET, HOWEVER, IF HE HAS  PROVIDED CONSIDERATION ‘FOR THE ASSET, DIRECTLY OR INDIRECTLY, HE. WILL BE COVERED UNDER THE DEFINITION OF BENEFICIAL OWNER FOR THE PURPOSES OF THE ACT” (bold, eapitalked, underlined emphasis, ours); in effect, therefore, absent contribution or • consideration for the foreign asset or income, a person will not be liable to he treated as `beneficial owner’•of such asset or income.

19.1.2 BMA is liable to be construed haimoniously with the law of trusts, and accordingly expressly recognizes the distinction between legal ownership, trust ownership and beneficial ownership,, through incorporating inter alia Chapter 1.7V of the IT Act, via s.70 BMA.

19.1.3 The unequivocally admitted position of the Revenue, recorded in WT Act proceedings of the Appellant, to the effect that “the case of the Revenue is not that the investments were moved from India by the setdor or any beneficiaries” (PB Vol.5, pg. 2015, para 30), precludes Revenue from contending otherwise, in BMA proceedings, on settled principles of ‘approbate and reprobate’, and it must follow therefore, that the assets and income of the Trust do not have their `source’ in or ‘contribution’ from India, and as such cannot be alleged (for purposes of BMA, or otherwise) to have been acquired from income chargeable to tax in India.

19.1.4 The concession made by the Revenue in the WT Act proceedings, as recently as December 2020, in relation to contribution to the Trust not having emanated from India, establishes conclusively there is no evidence available with the Revenue to the contrary, and therefore, plainly as a corollary that there was no ‘information’ available with the AO to justify initiation of proceedings under BMA.

19.1.5 It is not available for the Revenue contend inconsistently that there has been no movement of investments from India either by the senior or beneficiaries (including the Appellant) for purposes of WT Art proceeding % hut that a rem-verse posidon is available in the BMA proceedings. The facts simply cannot be altered depending on the statute under invocation by the Revenue. Either there was a movement of funds from India, or there was not. When Revenue concedes no movement of investments occurred from India, no enquiry under BMA can be justified, much less pursued.

19.2 Absence of ‘jurisdictional fact’ under BMA, in circumstances where the Appellant not being the recipient of income/distribution from the Trust, duly certified by the trustees inter alia in the ‘source of trust wealth’ certification issued by the trustees in June 2017, remained undisputed by the Revenue in the WT Act proceedings of the Appellant. The fact that there has been no distribution by the Trust(s) to the Appellant is independently supported by certificates of both the original and the existing trustees and remains uncontroverted by the Revenue. Albany’s director- Michael Collins, on 7 March 2016 (refer PB Vol.1, Pg. 54), independently corroborated by certificate of Confiance Limited, Guernsey dated 24 March 2016 (refer PB Vol.’, Pg. 72-74), conclusively establishes that no ‘distribution’ has been made directly to the Appellant.

19.3 Absence of ‘jurisdictional fact’ under BMA, in circumstances where it was not in dispute that the Appellant was• neither shareholder nor director of any corporate vehicle(s) Within the Trust structure. op the settled legal principle that a ‘company is distinct from • its shareholders’, as held in Calcutta Tramways Co. Ltd. v. CWT [1972] 86 ITR 133 (SC), there is no statutory sanction under BMA for the Indian Reyenue• to lift ox pierce corporate veils of foreign conipanieS to treat, aSsciS uf: fiolvizesideili corporate endues, all of which form part of the Trust, as belonging to the Appellant, so as to render the Appellant exigible to BMA;

19.4 Express incorporation, through section 70 of BMA, of the provisions of Chapter XV IT Act, thereby encompassing section 164 of the IT Act, in relation to charge of .tax where share of beneficiaries is indeterminate or unknown, contains the framework for taxation of discretionary trusts in India. Thus, Chapter XV, coupled with the position, in law declared by the Hon’ble Supreme Court under Article 141 of the Constitution. of India as to matters of discretionary trusts and rights (if any). of a beneficiary of a discretionary trust, enunciated in the leading judgment of the Hon’ble Supreme Court in Comthissioner of Wealth Tax v. Estate of HMM Vikramsirihji of Gonda]. [2015 5 SCC 666]: “A discretionary trust is one which gives a beneficiary no right to any part of the income of the trust property, but vests in the trustees a discretionag power to pay him, or apply for his benefit, such part-of the income ‘as they think fit. The trustees must exercise their discretion as and when the income becomes available, but if they fail to distribute in due time, the power is not extinguished so that they can distribute later. They have no power to bind themselves for the future. The beneficiary thus has no more than- a hope that the discretion will be exercised In his favour.” (Judgment Compilation- Master Tab 1), delivered in wealth tax proceedings, precluding taxability in the hands of the Appellant under IT Act until distribution of Trust income, but no liability whatsoever under BMA.

19.5 Settled position of law in relation to a beneficiary of a discretionary trust merely having a right to have the trust administered, laid down in CWT v Mrs. 0 M M Kinnison-[1986] 4 SCC 1987 (Judgment Compilation- Master Tab 3) read with Gartside v IRC LR [1968] SC 553 (Judgment Compilation- Master Tab 2)

19.6 Distinction recognized, in the law of trusts, between trust ownership and beneficial ownership, by. the Indian Trusts. Act,..1882, accorded due recognition in the realm. of taxation. This Hon’ble Tribunal in. Yastnin Properties (P) Ltd v. ACIT [1993] 46 ITD 331 (Bombay) held: When a trust is created the ownership over the property is split into two: (.0 the legal ownership which is acquired by and rests with the trustee: and (b) the beneficial ownership which is acquired by the beneficiary by virtue of transfer under the trust and which is enjoyed by him, It is veg. important and curious instance of dual ownership which allows the separation of power of management and the rights of enjoyment. The former is owned by the trustee and is a matter of form and nominal and the latter is owned by the beneficiary and is a matter of substance and reality. It is by fiction of law that the trustee is treated as the fill owner of the property against third person but as between the trustees and beneficiaries, the preperg belong to the latter and not to the former. The trust ownership and beneficial. ownership Are separate and independent of each other in their destination and disposition both. Either of the two may be transferred or encumbered without affecting the other in any way:”

19.7 Limitations of corporate trustees, in matters of regulatory compliances, in particular the fact that trustees/fiduciaries are ineligible to declare themselves as ‘beneficial owners’. In HSBC Bank (Mauritius) Ltd. v. DCIT (Int. Tax) [2019] 78 taxmann.com 174 (Mum Trill), this Hon’ble Tribunal held that an intermediary, i.e., a bank, nominee, an agent or a fiduciary with narrow powers will not be ‘beneficial owner. In effect, beneficiaries of trusts must per force be declared as beneficiaries of assets or income notwithStanding the beneficiary being a member of a class of beneficiaries of a discretionary trust.

19.8. Regulatory compliances under laws that may warrant declarations of beneficial ownership in relation to beneficiaries of discretionary trusts cannot have the effect of vesting trust assets or income in such beneficiaries. Thus, declarations pertaining strictly to Anti-Money Laundering laws, would have no bearing on matters of taxation of such beneficiaries.

19.9 Binding interpretation by the Swiss Federal Tax Administration dated 30 June 2015, inter alia to the effect that Form A compliances had no beating on matters of taxation, issued to the Indian Competent Authority (PB Vol.1 @ Page 33-36).

19.10 Limitations inherent in Tax Information Exchange Agreements rendering information-sharing restricted to the individual or entity in relation to which the information request is initiated, in turn precludes transmission of information beyond the remit of the information request. Therefore, Form A produced by the Swiss Federal Tax Administration solely relating to the Appellant cannot result in a reasonable inference that the Appellant is the sole person in respect of whom a Form A was filed-up by the trustees (with the relevant banks, in compliance with SwisS anti-money laundering laws). In fact, the source of trust Wealth certification of June 2017 distinctly sets forth that other beneficiaries of the Trust are all non-residents, and it would be in order therefore ‘to proceed on the reasonable premise that Form N8 exist beyond those on which the Appellant’s name appears;

19.11 Expert opinion of Swiss (foreign) lawyers Reichlin Hess dated 11 January 2016 in relation to requirements of Swiss anti-money laundering laws to declare any one or more beneficiary (ies) of a trust as ‘beneficial owner’ for limited purposes of anti-money laundering compliances bearing no nexus with taxation (PB Vol.1 @ Page 37-53) which remains uncontroverted by the Revenue both in the IT and WT proceedings of the Appellant.

19.12 Distinct recognition by the CBDT of a “variance” between ‘beneficial ownership’ under BMA from that under Prevention of Money Laundering (Maintenance Of Records) Rules, 2005, clarified in FAQ #31 by CBDT Circular No.13 of 2015 dated 6 July 2015, in recognition of the fact that the remit of anti-money laundering compliances . is the aim of verifying and validating no money laundering antecedents.

19.13 Principal Commissioner of Income Tax (Central) – 2, after taking into consideration the certificate as to ‘source of trust wealth’ dated 27 June 2017 issued by Confiance Limited (PB Vol.5 @ Page 2303-2307), conceding in letter of 28 August 2017 that “As to the submission of the assessee that formation of Avit Investment Ltd! Kinetic Holdings Ltd and related entities/structures by P atap Malpani, took place in the early and mid-1980’s is concerned, the same is not disputed at present…” (PB Vol.1 @ Page 308-311);

19.14 Assertion of the Revenue in the IT Act and WT Act proceedings regarding exercise of power of appointment and removal of trustees rendering the Appellant as the brainchild of-and in control of the Trust, tantamount to admission of existence of and Instrument of Trust.

19.15 Trust laws granting statutory recognition to migration of trust assets and income into hands of new trustees, inter alia recognized in Indian law, under section 75 of the Indian Trusts Act, 1882, whereby migrated trust assets are not liable to be treated as `distribution’ of assets until paid over into the hands of a beneficiary of the trust.

DISPOSAL OF JURISDICTIONAL CHALLENGE BY AO

20. In response to the Appellant’s threshold jurisdictional objection dated 5 December 2017, the Assessing Officer by a cryptic order dated 17 January 2019 rejected the jurisdictional challenge of the Appellant (Appeal Paper Book).

APPEAL INITIATED AGAINST JURISDICTIONAL DETERMINATION OF AO

21. The Appellant, accordingly, exercised a statutory right of appeal available under s. 15(1)(6) of BMA, on 20 February 2019, before the Commissioner (Appeals).

22. During the pendency of the BMA appeal before the Commissioner (Appeals), the pending wealth tax reassessment proceedings of the Appellant for AYs 2007-08 to 2013-14 under s.17 of the Wealth Tax Act, 1957 (WT Act) came up for adjudication before this Hon’ble Tribunal. In the wealth tax reassessment proceedings, Wealth Tax Appeal Nos. 2 to 8/Mum/2020, the Department of Revenue was asserted exigibility in the hands of the Appellant, of cash balances standing to the credit of offshore Trust vehicles, on the premise that the Appellant was the beneficial owner of the offshore Trust assets.

WEALTH TAX PROCEEDINGS ADJUDICATION BY THIS H’BLE TRIBUNAL

23. By its order dated 24 December 2020, this Hon’ble Tribunal in the Appellant’s s.17 WT Act proceedings (PB Vol.5 @ Page 1946-2028), after duly examining the contention of the Revenue that assets of the Trust constituted the wealth of the Appellant, held:

23.1 the Appellant was nominated as one of several beneficiaries of ..an an offshore irrevocable discretionary trust, settled in the year 1989 by the Appellant’s non­+resident late maternal uncle Shri Pratap Malpani, governed by the laws of Guernsey (PB Vol.5, pg. 2010, para 23)

23.2 the Appellant was not a contributor to the Trust structure (PB Vol.5, pg. 2015, para 30).

23.3 the Appellant is not liable to be construed as sole beneficiary of the Trust (PB Vol.5, pg. 2011, para. 24).

23.4 the Revenue cannot collapse the offshore trust structure i.e., corporate veil cannot be lifted, since offshore entities are independent . entities taxable in their respective jurisdictions (PB. Vol.5, pg. 2016, para 32).

23.5 the Appellant was not the ‘substantial owner’ of assets settled upon Trust held through Kinetic Holdings Ltd. (PB Vol.5, pg. 2011, para 25)

23.6 bank accounts in foreign jurisdictions pertaining to offshore entities could not be treated as bank accounts of Appellant even though for anti-money laundering purposes the Appellant had been declared ‘beneficial owner’ (PB Vol.5, pg. 2019, para. 37).

23.7 the case of the Revenue is not that the investments were moved from India by the settlor or any beneficiaries … It is a fact on record that there are no investments, which were made by the assessee or the investments were moved from India (PB Vo1.5, pg. 2015, para 30).

DELAY IN DISPOSAL OF APPEAL ON JURISDICTIONAL CHALLENGE

24. Arising from the Commissioner .(Appeals) declining ability to ‘schedule a hearing on the section 15(1)(b) BMA appeal citing. lack Of infrastructure and faced with the AO simultaneously progressing the BMA assessment proceedings, the Appellant instituted Writ Petition No.921 of 2021 (Lodging No.7887 of 2021) in the Hon’ble Bombay High Court, seeking, inter cilia that requisite infrastructure be put into place by the CBDT to enable the taking up of the Appellant’s section 15(1)(b) BMA appeal.

BOMBAY HIGH COURT DIRECTS DISPOSAL OF JURISDICTIONAL APPEAL

25. By its order dated 30 March 2021, the Hon’ble Bombay High Court (PB Vol.5 @ Page 2029­2030) directed time-bound disposal of the section 15(1)(b) BMA appeal by the Commissioner (Appeals), simultaneously directing that the result in the BMA assessment proceedings would abide by the outcome of the Appellant’s jurisdictional challenge.

BMA ASSESSMENT PROCEEDINGS• COMPLETED, ORDER IN ABEYANCE

26. The AO completed the BMA assessment ptoceedings on 31 March 2021 under section 10(3) (PB Vol.5 @ Page 2031-2269), with the order liable to remain in abeyance pending the jurisdictional adjudication by the Commissioner (Appeals). On 31. March 2021, penalty proceedings under sections 41 and 43 of the BMA were initiated by the AO.

IMPUGNED ORDER OF COMMISSIONER (APPEALS), BMA

27. On 26 April 2021, the Impugned Order came to bepassed overlooking conclusive binding findings of fact by this Hon’ble Tribunal in the Appellant’s WT Act proceedings and transgressing the limited framework of the SCN dated 22 November 2017, basing jurisdictional conclusions through substantive extrapolation of the assessment order, observing inter cilia that:

27.1 the Appellant had failed to disclose complete details relating to alleged foreign income and/or alleged foreign assets in the Income Tax Returns (paragraph 9.4.2, 9.4.3, 9.4.4),

27.2 the claim of the Appellant as to the discretionary trust has ‘not been proved since the Appellant had not furnished any credible legally tenable evidence to identify the Settlor or the original terms of the Trust (paragraph .9.2.4),

27.3 that the Appellant had not produced documentay evidence or other material to demonstrate the manner in which the corpus fund was settled or resettled from one trust structure to another trust structure and even the trust deeds in relation to resettled corpus (para

27.4 the Appellant is the sole beneficiary/beneficial owner and contributor of the assets / investments being held in the name of offshore Trusts/ entities (para 9.2.16), 27.5 the Appellant had put into place and managed an intricate web of entities hidden behind the corporate veil i.e., a structure for his exclusive benefit, thereby being the ultimate sole beneficiary = this was language lifted by the Commissioner (Appeals) directly from the assessment order pan 5.14,25 (para. 9,2.6),

27.6 the Appellant is the real owner of assets / investments / bank balances based on Form A declarations of Beneficial Owner under Swiss Penal Code- this was language lifted by the Commissioner (Appeals) directly from the assessment order para 5.16.8 (para 8.5(2)(i) @ Pg.62, 8.5(3)(1) @ Pg.65, 9.3.4(x)),

27.7 the. Appellant had made efforts to conceal facts through instructing HSBC, Geneva not to part with details about his accounts to the Indian Authorities, revoking a Consent Waiver letter issued by the Appellant to FISBC,•Geneva (para 9.2.13),

27.8 the Appellant did not avail the benefit of one-time compliance window by filing a declaration under section 59 of BMA, disclosing his undisclosed foreign income and/or assets (para. 9.5.6),

27.9. die Appellant had not .submitted explanation with respect to the source of the credit entries in the bank accounts located outside India in the name of foreign entities of which Appellant was alleged to be the ultimate beneficial owner and/or the details of alleged immovable properties of the Appellant located outside India: this was language lifted by the Commissioner (Appeals) directly from the assessment order para 13.1 (para 9.3.5).

FLAWS IN APPROACH ADOPTED BY COMMISSIONER (APPEALS)

28. The Commissioner (Appeals) was not entitled to overlook the decision of this Hon’ble Tribunal in WT Act proceedings, in view of the settled position in law that it shall be treated as relevant evidence, as also on grounds of consistency in matters of findings of. fact rendered by a final fact-finding authority, coupled with matters of judicial discipline: CIT v. Ralson Industries Ltd. (2007) 2 SCC 326 — Para 9; Lokesh Chandrappa v. ITO (Karnataka High Court order dated 25 July 2019 in Writ Petition No. 4349/2018) — Para 6; Bhopal Sugar Industries v. ITO, Bhopal [AIR 196.1 SC 182] — Para 10. The failure of the Commissioner (Appeals) to consider relevant `evidence’ viz. the order of the Hon’ble Tribunal in wealth tax proceedings, vitiates the basis of jurisdiction under BMA, and on this ground alone, the impugned notice dated 22 November 2017 issued by AO and the impugned order of the Commissioner (Appeals) must fail.

29. Significantly, in para 6.5 of the Impugned Order it is recognized by the Commissioner (Appeals), that the ITAT order is liable to be treated as a normal evidence produced by the assessee at the time of appellate proceedings, however, the CommissiOner (Appeals) proceeds on the basis that since this evidence was not in existence at the time of decision taken by the AO to issue notice under section 10(1) of the BMA, it cannot be admitted as fresh evidence. Despite which, the Commissioner (Appeals) conveniently examined and lifted vast sections of the assessment order dated 31.03.2021 passed by AO [Refer PB Vol.5, Pg. 2031 to• 2269], which was also not in existence at the time of issuance of notice under section 10(1) of the BMA, and in fact was issued subsequent to the ITAT. WT order, betraying arbitrariness, caprice and indiscipline, which is not liable to be treated lightly.

PRESENT APPEAL INSTITUTED ON JURISDICTIONAL DETERMINATION

30. The present appeal No. 1/BMA/2021 was instituted on 17 May 2021.

31. Following the issuance of notice of hearing by the AO on 27 May 2021 in relation to the `stay’ application of the Appellant in relation to the assessment order, the Appellant instituted Stay Application No. 61 /Mum/2021 on 28 May 2021, which carne to be granted at a hearing held on 4 June 2021.

GRANT OF STAY BY THIS HON’BLE TRIBUNAL

32. Despite grant of an order of ‘stay’ by this Hon’ble Tribunal on 4 June 2021, the AO declined to take cognisance of the order made on 4 June 2021. Heightened belligerence on the part of the. Revenue was apparent from the Commissioner (Appeals) failing to take into consideration this Hontle Tribunal’s order dated 24 December 2020 in the Appellant’s WI” proceedings despite its direct bearing on issues in contention in the BMA proceedings with identical facts having been adjudicated upon therein, and similarly the AO overlooked this Hon’ble Tribunal’s order dated 24 December 2020. The AO also disregarded the order of `stay’ passed by this Hon’ble Tribunal. Following an unqualified apology proffered by the Revenue on 23 June 2021, the AO withdrew his order dated 16 June 2021 against the Appellant.

SINE QUA NON- TO ESTABLISH JURISDICTIONAL FACT

33. The BMA framework mandates Revenue must establish the quintessential ‘jurisdictional fact’ in other to sustain proceedings. The ‘jurisdictional fact’, in BMA proceedings, is that the ‘source’ of undisclosed foreign asset and/or income was chargeable to tax under the Income-tax Act. This requirement for determination of a jurisdictional fact as a precursor to assessment proceedings, manifested in s.15(1)(b) BMA is a salutary and material departure from erstwhile Revenue statutes, which had led to a plethora of judgments on the issue of jurisdictional fact’ being a sine qua non for maintainability of proceedings, including the leading judgments in the cases of:

33.1 Raza Textiles v ITO [1973] 1 SCC 633, wherein it was held “It is incomprehensible to think that a quasi judicial authority like the Income-tax Officer can erroneously decide ajurisdictional fact and thereafter proceed to impose a levy on a citizen. In our opinion, the Appellate Bench is wholly wrong in opining that the Income-tax Officer can “decide either way”.

33.2 Union of India v Tarachand Gupta &. Bros. [1971] 1 SCC 486, wherein it was held “A determination, which takes into consideration factors which the officer has no right to take into account, is no determination”.

33.3 Shri M L Sethi vR P Kaput [1972] 2 SCC 427, wherein it was held “The word jurisdiction” is a verbal coat, of many colours. Jurisdiction originally seems to have had the meaning which Lord Reid ascribed to it in Anisminic Ltd. v. Foreign Compensation Commission [(1969) 2 AC 147] , namely, the entitlement 5`o enter upon the enquiry in question”. If there was an entitlement to enter upon an enquig, into the question, then any subsequent error could only be regarded as an error within the jurisdiction: The best known formulation of this theory is that made by Lord Darman in R.v. Bolton [(1841) 1 ,QB 66] , He said that the question of jurisdiction is determinable at the commencement, not at the conclusion of the enquiry. “

33.4 Snit Shrisht Dhawan v Shaw Bros. [1992] 1 SCC 534, wherein it was held “What, then, is an error in respect of jurisdictional fact? A jurisdictional fact is one on existence or non-existence of which depends assumption or refusal to airtime jurisdiction by a court, tribunal or an authority. In Black’s Legal Dictionary it is explained as a fact which must exist before a court can properly assume jurisdiction of a particular case. Mistake of fact in relation to jurisdiction is an error ofjurisdictional fact. No statutory authority or tribunal can assume jurisdiction in respect of subject matter which the statute does not confer on it and if-by deciding erroneously the fact on which jurisdiction depends the court or tribunal exercises the jurisdiction then the order is vitiated. Error of jurisdictionallact renders the order ultra vices and bad. [Wade, Administrative Lawj”

33.5 Arun Kumar V Union of India [2007] 1 SCC 732, wherein it was held ‘A “jurisdictional fact” is a fact which must exist before a Court, Tribunal or an Authority assumes jurisdiction over a particular matter. Affirisdictional fact is one on existence or non-existence of which depends jurisdiction of a court, a Tribunal or an authority. It is the fact upon which an administrative agency’s power to act depends. If the jurisdictional fact does not exist, the court, authority or officer cannot act. If a Court or authority wrongly assumes the existence of such fiat, the order can be questioned by a writ of certiorari.” … “The existence of jurisdictional fact is thus sine qua non or condition precedent for the exercise of power by a court of limited jurisdiction.” … “If the jurisdictional fact exists, the authori°, can proceed with the case and take an appropriate decision in accordance with law. Once the authority has jurisdiction in the matter on existence of jurisdictional fact, it can decide the fact in issue’ or cacljudicatog faci.”

33.6 Carona Ltd v Parvathy Swaminathan & Sons, [2007] 8 SCC 559 wherein it was held `It is thus dear that for assumption ofjurisdiction by a court or a ttibunal, existence offfirisdictional fact is a condition precedent”.

33.7 Ramesh Chandra Shukla v Vikram Cement & Ots. [2008] 14 SCC 58 wherein it was held “A jurisdictional fact” is one on the existence of which depends the jurisdiction of a court, tribunal or an authority. If the jurisdictional fact does not exist, the court or tribunal cannot act. If an inferior court or tribunal wmngly assumes the existence of such fact, a writ of certiorari lies. The underlying principle is that by erroneously assuming existence ofjurisdictional fact, a subordinate court or an inferior tribunal cannot confer upon itsellffirisdiction which it othenvise does not possess.”

34. In view of the position of Revenue, recorded in WT Act proceedings by this Hon’ble Tribunal, that “the case of the Revenue is not that the investments were moved from India by the settlor or any beneficiaries … It is a fact on record that there are no investments, which were made by the assessee or the investments were moved from India” (para 30 of the Order dated 24 December 2020), no scope remains for the Revenue to fulfil the ‘jurisdictional fact, for purposes of invoking BMA, i.e. contribution by the Appellant from income that was exigible to tax in India, but has escaped assessment under the Income-tax Act, 1961.

35. The position. that this Hon’ble Tribunal is the final fact-fmding authority is well. settled, in Ganapathy & Co. v. CIT (2016) 11 SCC 274. No new information or documentation has come to the hands of the Revenue between 24 December 2020 and the hearings that concluded in. August 2021 in the BMA proceedings before this Hon’ble Tribunal, and none has been produced/confronted to the Appellant by the Revenue. In the circumstances, conclusive and binding findings of fact, rendered by the final fact-finding authority, i.e. this Hon’ble Tribunal, on the basis of distinct concessions made by the Revenue, in the course of WT Act proceedings, must preclude the Revenue from re-inventing or re-engineering matters or engaging in surmise or conjecture for purposes of BMA proceedings.

36. Thus, where the progenitor Instrument of Trust is an undisputed irrevocable discretionary trust, not disputed by the Revenue in the WT Act proceedings, there is no scope to allege that its’ validity can be put into contention in BMA proceedings.

APPLICATION OF PRINCIPLES OF APPROBATE AND REPROBATE

37. Principles of approbate and reprobate apply with full force’ and effect. The salutary observations of the Hon’ble Supreme Court in the case. of Suzuki Parasrampuria Suitings Pvt. Ltd.. v. Official Liquidator of Mahendra Petrochemicals Limited (In Liquidation) & (2018) 10 SCC 707 on the doctrine of approbate and reprobate, to the effect that ‘A litigant can take different stands at different tines but cannot take contradictory stands in the same case. A. party cannot be permitted to approbate and reprobate on the same facts and take inconsistent shifting stands.”: arid which in turn relies on the case of Amar Singh v. Union of India, (2011) 7 SCC 69; para 50, to conclude that litigation is not a “game of chess”, hold the field. To similar effect are judgments in Joint Action Committee of Air Line Pilots’ Assn. of India v. DG of Civil Aviation (2011) 5 SCC 435 wherein it was held “The doctrine of election is based on the rule of estoppel—the principle that one cannot approbate and reprobate inheres in it. The doctrine of estoppel by election is one of the’species of estoppels in pais (or equitable estoppel), which is a rule in equity. By that law,,a person may be precluded by his actions ,or conduct or silence when it is his duty to speak, from asserting a tight which he otherwise would have had. Taking inconsistent pleas by a party makes its conduct far from satisfactory. Further, the parties should not blow hot and cold by taking inconsistent stands and prolong proceedings unnecessarily.” Also, in Mumbai International Airport (P) Ltd. v. Golden Chariot Airport (2010) 10 SCC 422, the Supreme Court cited with approval the judgment of Ashutosh Mookerjee, J. speaking for the Division Bendh of the Calcutta High • Court in Dwijendra Narain Roy v. Joges Chandra De [AIR 1924 Cal 600] , wherein it was held that “it is an elementary rule that a party litigant cannot be permitted to assume inconsistent positions in court, to play fast and loose, to blow hot and cold, to approbate and reprobate to the detriment of his opponent.” This Hon’ble Tribunal has,. in the case of Vijay L. Bhawe v. ACIT [2017] 81 taxmann.com 138 (Mumbai – Trib.) held that ‘It is well accepted position of law that in the income tax proceedings theory of approbation and reprobation is not applicable. The revenue authorities are not expected to blow hot and cold together. The AO appears to have followed the rule of !’head I win tail you lose”, whereas the revenue authorities are expected to work in fair and transparent manner:”

DOCTRINE OF FAIR PLAY IN ADJUDICATION

38. The doctrine of fair play in adjudication also proscribes the Revenue from acting arbitrarily, inconsistently and capriciously. In K.L. Tripathi v. State Bank of India (1984) 1 SCC 43, it was held ‘The basic concept is fait; play in action administrative, judicial or quasi judicial. The concept °flair play in action must depend upon the particular lis, ifthere be any, between the parties.” Similarly, , in State of Orissa v. Binapani Dei (1967) 2 SCR 625 it was held `An order by the State to the prejudice of a person in. derogation of his vested rights may be made only in accordance with the basic rules of justice and fairplay”

STATUTORY FRAMEWORK OF BMA

30. The framework of s.2(11) BMA defines an “undisclosed asset located outside India” to be an asset located outside India held either directly in the assessee’s own name, or in respect of which the assessee is a beneficial owner.

40. An assessee is, upon receipt of a s.10 BMA notice, based on information available to the Assessing Officer (AO), bound to provide an explanation to the AC).

41. Where no explanation is available from the assessee, or the assessee’s explanation is unsatisfactory in the opinion of the AO, s.2(11) read with 8.10 BMA, stipulates that BMA must take its course, i.e., assessment will be followed by a notice of demand under s.13 BMA.

42. The charge of tax is laid under s.3 BMA, on the total undisclosed foreign income and asset of the previous year, with penalties under Chapter IV, s.41 to s.45 and offences/prosecutions under Chapter V, s.49 to s.53 & s.56.

43. Under s.4. BMA the scope of total undisclosed foreign assets and income extends to income from a source located outside India, not disclosed in the return of income furnished within the time specified in Explanation 2 to sub-section (1) of s.139 IT Act; or under sub­sections (4) or (5) of the IT Act, or where no return has been furnished, and to the value of an undisclosed asset located outside India.

44. Under s.4(3) BMA, income included in the total undisclosed foreign income and asset under this Act shall not form part of the total income under the Income-tax Act:

45. Where the undisclosed foreign asset located outside India is not standing in the name of the assessee, s.14 BMA enables, direct assessment and recovery of tax or other sum of money payable from the beneficial owner, i.e., the “person on whose behalf or for whose benefit” the undisclosed income from a source located outside India .is receivable or undisclosed asset located outside India is held.

46. A window for tax compliance was available under s.59 BMA, with corollary charge of tax under s.60 BMA and penalty under s.61 BMA, in return for immunity qua BMA, with corollary protections under s.67 BMA as to inadmissibility -of declaration to prosecutions under certain statutes and s.69 BMA as to wealth tax.

47. Chapter VI BMA, including s.59 BMA, is unavailable to persons falling under s.71 BMA, including where s.153C IT Act and/or s.148 IT Act proceedings are pending.

BENEFICIAL OWNERSHIP UNDER BMA

48. The BMA expressly bears inextricable interlink with the IT Act, apparent inter alia from s.59 BMA, s.4 BMA and s.40, 42, 43, 49, 50 BMA, all of which distinctly refer to returns of income under s.139 of the IT Act.

49. The stipulation in s.2(15) BMA that “all other words and expressions used herein but not defined and defined in the Income-tax Act shall have the meanings respectively assigned to them in that Act”, warrant that regard must be had to definitions.of `beneficial owner’ and/or `beneficiary’ available in the IT Act, i.e., s.139(1) Explanations 4 & 5.

50. In fact, as set forth above, the fifth proviso to s.139(1) IT Act, introduced with effect from 1 April 2012, simultaneously with revising the form. for ‘return of income’ under s.139 IT Act to include Schedule FA, imposes a statutory obligation to file a return of income by a person who holds any asset (including any financial interest in any entity) located outside India as a ‘beneficial owner’ and/or ‘beneficiary’. Introduction of Schedule FA was plainly the precursor to the introduction of BMA, including a declaratory regime in s.59 BMA.

51. Examining thus, the definition of a ‘beneficial owner’, within the meaning of s.139(1) Expin.4 IT Act:_ “an individual who has provided, directly or indirectly, consideration for the asset for the immediate or future benefit, directly or indirectly, of himself or any other person”, applied to the fact matrix, and examined particularly in light of the case of the Revenue in the WT Act proceedings, the Revenue is not entitled to assert that the Appellant is ‘beneficial owner’ or `beneficiary’ of the assets or income of the Trust.

52. As set forth in the foregoing, the Revenue has failed to establish the ‘jurisdictional fact’, in the BMA proceedings, i.e. that the Appellant has either provided, whether directly or indirectly, any consideration for the assets of the Trust, in order that the Appellant may obtain future benefit, whether directly or indirectly, for himself or any other person; on the contrary, with the Revenue conceding in the WT Act proceedings that the Appellant has not provided consideration for the assets of the Trust, the Revenue cannot assert to the contrary in BMA proceedings.

53. A ‘beneficiary’ in relation to an.asset/income under s.139(1) Expin.5 IT Act is “an individual . who derives benefit from the asset during the previous year and the consideration fir such asset has been provided by an person other than such beneficiag.” Again, the conclusions of the final fact-finding authority in the WT Act proceedings, i.e., this. Hon’ble Tribunal, are that the Appellant was not the sole beneficiary of the Trust, which coupled with the lack of dispute by the Revenue that the Appellant ceased to be a member of the class of beneficiaries in July 2014, precludes scope for the Appellant to be treated as ‘beneficiary’ for BMA purposes. On the date when BMA entered force, the Appellant was not a member of the class of beneficiaries of the Trust, and as such the BMA can have no application.

54. In the absence of ‘beneficial ownership’ of the Appellant in the assets and income of. the Trust for purposes of WT Act (as concluded by this Hon’ble Tribunal), there is no scope to allege that the Appellant has ‘beneficial ownership’ and/or is a ‘beneficiary’ in relation to the assets or income of the Trust for purposes of BMA.

55. The absence of a definition of ‘beneficial ownership’ or ‘beneficiary’ in the WT Act does not further the case of the Revenue, for it cannot be reasonably contended by the Revenue that `beneficial ownership’ under the WT Act is distinct from that under the IT Act or the BMA.

56. Equally, the absence of definitions of ‘beneficial ownership’ or ‘beneficiary’ in the BMA cannot take the case of the Revenue any further, in circumstances where BMA is materially linked with disclosures under s.139(1) IT Act and imports definitions of IT Act via s.2(15) BMA.

57. The case asserted by the Revenue that ‘beneficial ownership’ and/or ‘beneficiary’ definitions in Explanation 4 .3c. 5 of s.139(1) have no application to BMA is inconsistent with CBDT FAQ no. 31 in. the binding CBDT Circular No. 13 of 2015 dated 6 July 2015 which makes express reference to Explanation 4 and 5 of section 139 of the IT Act, in relation to matters of ‘beneficial ownership and ‘beneficiary’ in relation, to foreign asset and income, and reproduces verbatim those definitions stating these apply “for the purpose of the Act”, i.e. BMA, leaving no scope for Revenue to argue to the contrary. .

58. Absent any statutorily drawn distinction or deeming fiction to demarcate the concept of `beneficial ownership’ and/or ‘beneficiary’ under these three statutes, i.e. IT Act, WT Act and BMA, it is reasonable for the definitions under the IT Act contained in Explanations 4 & 5 to s.139(1) to be treated as applicable equally to both the WT Act and BMA, and indeed, legislative intent is liable to be construed, absent statutory mandate to the contrary.

59. Thus, when this Hon’ble Tribunal concludes, in proceedings under the WI Act, that the Appellant is not a ‘beneficial owner’ of foreign assets or income of the Trust, there can be no scope to hold that the Appellant is a ‘beneficial owner’ of these very same foreign assets or income of the Trust for the purposes of BMA. It would amount to an utter travesty of justice if the Appellant were held to be not a ‘beneficial owner’ for purposes of WT Act, but a ‘beneficial owner’ for purposes of the BMA, or even vice versa.

60. Since the compendious language of the IT Act, concerning ‘beneficial ownership’ and/or `beneficiary’, is liable to be imported into the BMA through s.2(15), there does not arise any warrant for examination of any other statutory definitions in relation to ‘beneficial ownership’ or ‘beneficiary’, notwithstanding examination of all such other statutory definitions by the Delhi Bench of the Income Tax Appellate Tribunal in its recent order dated 7 July 2021 in the case of Jatinder Mehra (BMA No.1/De1/2020)- [@Tab 10, ‘Beneficial Ownership’ Compilation].

61. Even where regard were had to statutory definitions of ‘beneficial ownership’ under the (Indian) Prohibition of Benami Property Transactions Act, 1988, or the (Indian) Prevention of Money Laundering Act, 2002 (1M14), or the (Indian) Companies Act, 2013, the mandatory pre-requisite that remains to establish ‘source’ or ‘contribution’ of funds traceable to such person, for ‘beneficial ownership’ and/or a ‘beneficiary’, albeit each statute must bear its distinct nuances, in consonance with the legislative framework of the relevant statute.

62. Thus, under the Prohibition of Benami Property Transactions Act, 1988, a.`beneficial owner’ is defined in s.2(12) as “a person, whether his identity is known or not, for whose benefit the benami property is held by a beriamidarP, which is liable to be read with s.2(9) which contemplates inter alia “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/or where “the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration” and/or transactions in fictitious names. Emphasis must be had to the use of ‘consideration provided or paid’, pointing ultimately to ‘source’. or ‘contribution’, since that is the determinant for benand property, with the statute ultimately premised on confiscation of benami property. Significantly, Revenue has not advocated, in the present case, that the definition of :beneficial ownership’ under the Prohibition of Benami Property Transactions Act, 1988 has any bearing on issues arising under BMA.

63. Under PMLA, a ‘beneficial owner’ is defined in s.2(1)(fa) to mean “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.” While this statute aims to provide legal redress in relation to money laundering, given the economic threat it imposes upon the fmancial systems of countries, and has been enacted. in aid of international initiatives, including the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, the Basle Statement of Principles 1989, the Financial Action Task Foree established in 1989, thereby ensuring power of confiscation in relation to money laundering, financing of terrorism, etc., ultimately, the emphasis of PMLA is on that person who exercises a right of ‘ownership’ of such monies, with control inherently linked to ownership. Again, therefore, PMLA creates a direct or indirect link ultimately with the ‘source’ or ‘contribution’. Significantly, it is not the case of the Revenue, in the present proceedings, that the definition of ‘beneficial ownership’ under PMLA has any bearing on issues that arise under BMA.

64. The (Indian) Companies Act, 2013, stipulates a framework for disclosure of beneficial ownership, attendant with recently introduced Significant Beneficial Ownership Rules, 2018. Section 89(10) defining “Beneficial interest” in a share that therefore “includes, directly or indirectly, through any cantina, arrangement or othenbise, the tight or entitlement of a person alone, or together with any other person to— (I) exercise or cause to be exercised any or all of he rights attached to such share; or (ii) receive or participate in any dividend or other distribution in respect of such share.” Again, the Companies Act, 2013 framework is analogous to a global framework increasingly pursuing the narrowing down to ultimate ownership rights, i.e., ‘source’, in an attempt to ensure that corporate vehicles are not used as an instrumentality for money laundering activities, tax evasion, etc. Significantly, the Revenue concession cm the WT Act proceedings) that neither the senior (Late Pratap 1VIalpani) nor the beneficiaries, including the Appellant, have not contributed to or invested in the shareholding of the corporate entities within the Trust, precludes scope for the Appellant to have any interest in the shareholding or any rights associated with shareholding, much less ‘beneficial interest’ therein. In any event, the Revenue has not advocated, in the present case, that the definition of ‘beneficial interest’ under Companies Act, 2013; must have any bearing on interpretation under BMA.

65. The Hon’ble Income Tax Appellate Tribunal, Delhi Bench in ACT v. Shri Jatinder Mehra (order dated 7 July 2021 in BMA No. 01/Del/2020), relying inter cilia upon the ruling of this Hon’ble Tribunal in the matter of Kamal Galassni v. ACIT (order dated 10 September 2020 in ITA Nos.138-142/Mum/2019), has examined the scope and framework under BMA of ‘beneficial owner’. With respect, the Appellant submits that on the issue of ‘beneficial ownership’. and ‘beneficiary’, the definitions in IT Act, s.139(1), Explanations 4 & 5, must determine scope for the Appellant to be treated as beneficial owner or beneficiary for purposes of BMA:

AMBIT OF FORM A UNDER SWISS ANTI-MONEY LAUNDERING LAWS

66. The SCN disregards the binding CBDT circular No. 13 of 2015 dated 6 July 2015 (@ CBDT Circulars- Tab 5), which in FAQ 31, clarifies that PMLA declaration’s — bound to be treated as analogous to Swiss anti-money laundering declarations – cannot be reckoned for determining ‘beneficial ownership’ or ‘beneficiary’. In effect, therefore, it was not available to the AO. to premise the SCN in reliance upon Form A. In light of the well-settled position that CBDT Circulars are binding2 upon the Revenue, the SCN is inconsistent with the binding CBDT Circular, which by itself is fatally erroneous, and thus vitiates the ScN.

67. In purporting to premise the SCN under BMA prirnarily.on Form A’s, it is overlooked that these compliances under Articles 3 and 4 of the Swiss Federal Act on Combating Money Laundering in the Financial Sector, 1997 (Swiss AML) merely mandated a financial intermediary to conduct due diligence by obtaining a written declaration from the customer, in this case, a trust.

68. In fact, in aid of Swiss AML Act, the Swiss Bankers Association has issued a Code of Conduct for Swiss Banks with regard to the exercise of due diligence (CDB Guidelines), wherein model Form A is prescribed for the declaration of identity of the beneficial owner, however, as clarified by the Swiss Federal Tax Administration, vide its letter dated 30 June 2015 (Volt page 33-36), it does not have application to matters of taxation.

69. The Swiss AML Act is, in any event, pad materia with the (Indian) Prevention of Money Laundering Act, 2002 (PMLA), both constituting parallel statutory anti-money laundering ieglines aimed to redress concealed or disguised origin and ownership of proceeds from criminal activity, including drug trafficking, public corruption, terrorism, fraud, human trafficking and otganizd crime activities.

70. In the absence of evidence adduced regarding Swiss AML, the presumption in law is that it is the same as Indian law on the point in consideration: Malaysian Intl Trading Corpn v. Mega Safe Deposit Vaults (P) Ltd. (2006) 68 SCL 52 (Born) — Tab 5 of the Judgments Compilation.

71. Declarations of ‘beneficial ownership’ in ‘Form A’, made fora distinct purpose, i.e., AML compliances, cannot be arbitrarily used to rewrite tax laws and/or the law of trusts, and cannot be relied upon to convert a beneficiary of a discretionary trust into a beneficial owner of the assets of such trust.

72. Independently, the Appellant has relied upon the apostilled foreign law expert opinion of renowned Swiss law firm Reichlin Hess dated 11 January 2016 (PB Vol. 1, Pg. 37 to 53), which also certifies that Swiss AML compliances have no beating on matters of taxation. The Revenue having hitherto had the benefit of this foreign law expert opinion in both the IT Act and in the WT Act proceedings, has elected not to contest its correctness, nor led any evidence to the contrary, thus rendering it liable to be treated as unassailable. As a corollary, it must follow that the Revenue concedes that AML compliances are not determinative of matters of taxation.

73. The CBDT clarification, in this regard, vide Circular No.13 of 2015 dated 6 July 2015, in FAQ No. 31 specifically puts it beyond the realm of any doubt that the definition of “beneficial owner” would be “at variance with the determination of beneficial ownership provided under Rule 9(3) of the PMLA (Maintenance of Records) Rules, 2005″

74. Thus, it is apparent that ‘beneficial owner’ for purposes of PMLA and for BMA are “at variance”, and therefore, there is no scope to import the position of a beneficial owner under PMLA into BMA. The relevant FAQ is reproduced: “Question No. 31: A person is a beneficiary in a foreign asset Is he eligible for declaration under section 59 of the rt? Answer: As far as ownership it concerned, as per section 2(11) of the Ad “undisclosed asset located outside India” means an asset held by the person in his name or in remect of which he is a beneficial owner. The definition of “beneficial owner” and ‘beneficiag” is provided in Explanation 4 and Explanation 5 to section 139(1) of the Income-tax Act, respectively (which is at variance with the determination of beneficial ownership provided under Rule 9(3) of the PMLA (Maintenance of Records) Rules, 2005). Therefore, for the purpose of the Act “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.  Further, “beneficiary” in respect of an asset means an individual who derives benefit from the asset during the previous year and the consideration for such asset has been provided by any person other than such beneficiary. Therefore, as per the Act the beneficial owner is eligible for declaration under section 59 of the Act. THERE MAY BE A CASE WHERE A PERSON IS LISTED AS A BENEFICIARY IN A FOREIGN ASSET. HOWEVER, IF HE HAS PROVIDED CONSIDERATION FOR THE ASSET, DIRECTLY OR INDIRECTLY, HE WILL BE COVERED  UNDER THE DEFINITION OF BENEFICIAL OWNER FOR THE PURPOSES  OF THE ACT.”  <<capitalized underlined emphasis, ours>>

75. While Rule 9(3) of Prevention of Money Laundering (Maintenance of Records) Rules, 2005, dealing with matters of customer due diligence in case of a company, stipulates that the beneficial owner is determined to be the natural person(s), who, whether acting alone or together, or through one or more juridical person, has a controlling ownership interest or who exercises control through other means, while in the case•of a trust, the identification of beneficial owner(s) shall include identification of the author of the trust, the trustee, the beneficiaries with fifteen per cent or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership. Since a corporate trustee would be precluded from claiming beneficial ownership of the corpus, it must follow that one or more beneficiaries of a discretionaiy trust may be liable to be declared as ‘beneficial owner’ for R.9(3) compliance purposes.

76. In matters of trust structures, a trustee is. proscribed from claiming beneficial ownership of assets comprising the trust and must therefore put forth the name of one or more beneficiaries, depending on regulatory stipulations, including forms, protocols, legal obligations, etc. liable to be discharged by trustees. The mere act of corporate trustees ensuring due compliances in relation to trusts, through causing any one or more of several beneficiaries to make declaration(s) for anti-money laundering purposes, whether under PMLA or the analogous Swiss anti-money laundering frarbework, is incapable of causing vestiture upon such beneficiary(ies) of the trust assets within a discretionary trust structure. A regulatory declaration caused by tmstees, who are ineligible to declare themselves as beneficiaries, cannot alter the entitlements of one or more beneficiaries under an instrument of trust, or have the legal effect of causing one or more beneficiaries to surrender or relinquish or waive distribution by discretionary trustees. Indeed, that is not the aim of PMLA or AML compliances, and such .declarations which are to operate in. a different. statutory framework cannot simpliciter be imported into determination of statutory entitlements and obligations under BMA. Declarations made by both trustees and beneficiaries for fulfilling AML, in consonance with the requirements•of a regulatory regime, cannot impact or supersede Or render redundant the governing Instrument of Trust, which must continue to determine rights, powers, obligations, privileges, limitations inter se between the settlot, trustees and beneficiaries. The limited purpose of AML compliances is to ensure legitimacy of the ‘source’ of monies banked by a comorate entity or individual. Fulfilment of AML compliances cannot, in law, bind the Appellant from the standpoint of taxability, as indeed stands certified by the Swiss FTA (PB Vol.l, pg.33-36).

77. In any event, this Hon’ble Tribunal having concluded in para. 37 of the WE order, after examining Form A’s, that – “.. . these bank accounts are running accounts of these entities and can never be the bank accounts belonging to the assessee, even though for the purpose of KYC norms and Anti Money Laundering provisions, the assessee was declared as the beneficiary, it does not take away the ownership of the companies and trusts.’; conclusively sets at bay any scope for the Revenue to rely upon Form A’s to claim that the Appellant is the beneficial owner of such bank accounts for purposes of BMA.

78. The Revenue contention, overlooking that Form A for purposes of WT Act does not constitute evidence of ‘beneficial ownership’ of the Appellant, but must somehow be treated as evidence of ‘beneficial ownership’ for purposes of BMA, borders on the absurd.

79. Despite Revenue having admitted to receipt of a few thousand pages through inter alia tax information exchange (TWA), most of these documents have not been furnished to. the Appellant, despite legal entitlement.

80. In any event, jurisdictional adjudication was liable to be confined to documents relied upon in the SCN dated 22 November 2017.

81. However, the Commissioner (Appeals), purporting to rely upon the assessment order, has travelled beyond the SCN and the AO’s order dated. 17 January 2019, without grant of opportunity to the Appellant to rebut material. The Impugned Order has also transgressed the legally permissible realm within the framework of a ‘jurisdictional’ adjudication, through overlooking that this Hon’ble Tribunal’s order dated 24 December 2020 constituted relevant evidence in favour of the Appellant, and was bound to be considered in the jurisdictional adjudication, and also importing the findings in the assessment order, in effect virtually rendering meaningless the ‘jurisdictional’ determination contemplated by s.15(1)(b) BMA.

82. It was not available to the COmmissioner (Appeals) to overcome this Hon’ble Tribunal’s order, through a fleeting observation that: “In light of dear distinction between the two laws, it is held that the above decision cannot be treated as binding precedent, not even as a normal precedent. It is liable to be treated as ‘a normal evidence produced by the assessee at the time ojappellate proceedings. Since this evidence was not in existence at the time of decision taken by the AO to issue notice under section 10(1) of the EMIT Act, it cannot be admitted as fresh evidence now.” (page 44, para 6.5), then import.and combine en masse the AO’s ‘merits’ adjudication order within the jurisdictional adjudication. The course of action adopted by the Commissioner (Appeals) has betrayed an attempt to reach a predetermined outcome.

ONUS TO BE DISCHARGED BY NOTICEE UNDER BMA

83. A noticee may be called upon to provide an explanation in relation to allegedly undisclosed foreign asset(s) or income, where ‘information’ is available with the AO, through issuance of a notice under s.10 BMA by the designated officer.

84. The core question that arises in the present jurisdictional challenge is whether the Appellant has discharged the onus of offering a satisfactory explanation to the AO in reply to the s.10 notice in relation to the alleged undisclosed foreign assets and income.

85. To the extent that the Commissioner (Appeals) has in the exercise of jurisdiction under s.15(1)(b) examined the issue of ‘jurisdiction’ in order to determine whether BMA can be invoked against the Appellant, a coterminous jurisdiction exists with that of the AO, limited to examining whether there is any error in the threshold jurisdictional determination by the AO as to entitlement of the Revenue to invoke BMA.

86. It is trite law that the only manner in which an assessee can make disclosure of income is through a Return of Income (CIT v. KR, Enterprises (2013) 3 SCC 196 – Para 17- Tab 7). This position remains unaltered for purposes of BMA where, by virtue of $.139(1) IT Act fifth proviso, a person having beneficial ownership or the status of beneficiary in relation to foreign assets or income is liable to disclosure in the return of income, in the prescribed Schedule FA.

87. Instead of examination of details of the Schedule FA disclosure in the return of income of the Appellant, in consonance with ‘information’ available with the AO, the SCN was premised on ‘Form A’ – which was incapable of reliance (FAQ 31), alleging ‘beneficial ownership’ of the assets and/or income of the Trust, bereft however of ‘source’ or `contribution’ to the Trust traceable to the Appellant.

88. It is well-settled that the Appellant cannot be called upon to prove a negative fact, viz. that the Appellant has not made contribution to tnist funds. In Hemant Mansukhlal Pandya [20181 100 com 280 (Mumbai Trib.)] this Hon’ble Tribunal has held that “AO is not justified in placing the onus of proving a negative on the assessee”.

89. It must follow then that the onus must lie on the Revenue to prove that a particular asset is within taxing provisions – CIT v. Daulat Ram Rawatmull [1973] 3 SCC 133 —Para 17, Parimisetti Seetharatnamma v. CIT [1965]. 57 IrR 532 (SC) — Para 7, DCIT (IT), Mumbai v. Hemant Mansukhlal Pandya [2018] 100 com 280 (Mumbai Trib.) —Para 17.

90. The Appellant haling, in prior proceedings under the IT Act and the WT Act, relied upon the source of trust.wealth certificate issued in June 2017 (PB Vol.5 @ page nos.2303 to 2307) by trustees conftancc Limited, was entitled.to rely upon such uncontroverted document by way of explanation, to establish that the Appellant was not a contributor to the foreign assets or income of the Trust.

91. Such a certificate issued by the trustees was bound to constitute valid evidence, and a satisfactory explanation, more so in circumstances where the Revenue had conceded in WT Act proceedings that the Appellant had not made any contribution to the Trust (from out of income taxable in India). Para 30 of the order of this Hon’ble Tribunal in the WT Act proceedings records “the case of the Revenue is not that the investments were moved from India by the setdor or any beneficiaries … It is a fact on record that there are no investments, which were made by the assessee or the investments were moved from India”.

92. All the assets and/or income and/or bank accounts set forth in the SCN formed part of the Trust and were fully explained within the source of trust wealth certificate. Accordingly, due regard had also to the letter of the PCIT dated 28 August 2017 wherein it was accepted that Late Pratap Malpani owned and controlled Kinetic Holdings Limited and Avit Investments Limited, the Appellant’s explanation to the BMA AO was liable to be treated as satisfactory in all respects. Having accepted this position (at the level of PCIT) in 2017 in IT Act proceedings, no revision of this position can be permissible by the Revenue in BMA proceedings, in the absence of any new material produced by the Revenue.

93. The Revenue has not assailed the contention of the Appellant that he is neither a shareholder or director or signatory to bank accounts of the corporate vehicles within the Trust structure. The Revenue has not placed reliance upon any material to support that the Appellant exercises control as shareholder of corporate entities or any control to appoint directors or control the management or policy decision of the corporate entities in any capacity whatsoever.

CASE OF REVENUE THAT APPELLANT IS SOLE BENEFICIARY

94. The case of the Revenue (advanced in the BMA assessment order, and imported into the Impugned Order by the Commissioner (Appeals)) is that the power of appointment and removal of trustees is vested in the Appellant, which in turn renders the Appellant as the sole beneficiary and confers beneficial ownership and control of assets of the Trust upon the Appellant. The cardinal error on the part of the Commissioner (Appeals) in relying upon this finding of the BMA assessment order, emanates from overlooking the order of this Hon’bie Tribunal; which has already rejected this very contention in the WT proceedings: “In our considered view, a private discretionary trust is mated and few trustees were appointed to look after the trusts property. There if an enabling Clause for continuity of the trusteesin case of incapacity or other exigencies, ceitaim trustees have to be appointed or replaced. For that purpose, generally the power to appoint or re-appoint trustees lies with the settlor or vests in the declaration of trust itself. Similarly, in this case, it was given to assessee s father and mother. After their lifetime; it devolved on the assessee. Merely because, it is exercised by the assessee, it does not make .the trust to lose its identity. The trust still will continue. with the new trustees: The properties attached to the trust will continue to be the properties of the bust. It is wrong to presume that the properties governed by the trustee will be. considered as the properties. of the individual beneficiary who exercises the appointmenfof trustees. In the given case, .no doubt the assessee is vested with the power to appoint or remove the trustees, does not change the status of the trust and its independent. functioning.” (Vol. 5, pg 2014, para 29).

POWER OF APPOINTMENT AND REMOVAL OF TRUSTEES CANNOT  LEAD TO CONCLUSION THAT APPELLANT IS SOLE BENEFICIARY OF TRUST

95. In any event, the contention of Revenue that the vestiture of power of appointment and removal of trustees in the Appellant renders the Appellant liable to be treated, for tax purposes, as the sole beneficiary and beneficial owner of assets and income of the Trust, defies logic. Fatal errors in this contention of Revenue, hitherto tested in the WT proceedings, are reiterated hereinbelow.

96. Firstly; the contention of Revenue overlooks that the Instrument of Trust stipulates all lineal descendants of Pratap Malpani and Ashokvardhan Birla shall be beneficiaries, and also extends the list of beneficiaries to include bodies, organizations and/or associations in India and Guernsey, the objects of which are charitable (Vol.1, pg. ). The Revenue’s attempt at selective reading of the Instrument of Trust, ignoring sections inconvenient to myriad postulates by Revenue, is unsustainable. The Appellant cannot be regarded as sole beneficiary of the Trust, in manner oblivious to express stipulations to the contrary in the Instrument of Trust.

97. Secondly, since persons other than the Appellant (i.e. lineal descendants of the two branches-Pratap Malpani and Ashokvardhan Birla) were expressly nominated as beneficiaries, and thus entitled to the assets and income of the Trust (albeit subject to the exercise of ‘discretion’ of the trustees), no scope existed for treating the entire assets and income of the Trust exigible to BMA in the hands of the Appellant. Such an interpretation denudes and eviscerates lawful rights and entitlements of beneficiaries under the Instrument of Trust.

98. Thirdly, if the power of appointment and removal of trustees were in fact capable of rendering such person as the sole beneficiary of the Trust and beneficial. owner of its assets and income, then in such event the power of appointment and removal hitherto vested first in and was exercised by the Settlor himself, i.e. the Late Pratap Malpani. The consequence of the Revenue contention, premised on the. Settlor being vested with and having exercised the power of appointment and removal of trustees, would result in the incongruity that since the Settlor remained the sole beneficiary and beneficial owner of its assets and income, the Trust was revocable. Under the Instrument of Trust, such power of appointment and removal vested in Ashokvardhan Birla (PB Vol.1, pg. 18, clause 8(1)). If the contention of Revenue were upheld, upon such vestiture of power, Ashokvardhan Birla should have become the sole beneficiary and beneficial owner of the assets and income of the Trust. Thereafter, the power was vested in Sunanda Birla. Again, applying the contention of Revenue to such a fact pattern, Sunanda Birla should have become the sole beneficiary and beneficial owner of the assets and income of the Trust. That power of appointment and removal no doubt finally vested upon the Appellant (under clause 8(1) of the Trust- @ Vold, page 18), but where such power had hitherto vested in Ashokvardhan Birla, it must follow that (according to the case of the Revenue) Ashokvardhan Birla became the beneficial owner of assets and income settled upon trust. Thereafter, the beneficial ownership of assets and income vested, upon Sunanda Birla, and only finally in the Appellant Such .a theory of revolving ‘beneficial ownership’ depending on who is vested with power of appointment and removal, is completely inconsistent with the provisions of the Instrument of Trust.

99. Fourthly, the Revenue has neither asserted nor laid evidence in support of any purported exercise by the Appellant of the power of appointment and removal of trustees, and has completely overlooked (A) clause 8(3) of the Instrument of Trust, which expressly confers absolute power and authority upon the trustees to appoint new trustees, and (B) Clause 8(4) of the Instrument of Trust wherein express powers for migration of trust assets to new trustees, that may in turn be appointed by existing trustees. Thus, in circumstances where trustee appointments and migrations have occurred, without exercise of the power ‘of appointment or removal of trustees by the Appellant, in consonance with the framework of the Instrument of Trust, it cannot be reasonably contended by the Revenue that the vestiture of power of appointments and removal vests control of the Trust with the Appellant.

99.1 Clause 8(3) @ PB Vol.1, pg.4, reads thus: ‘In any appointment the Trustees shall have power (If they so desire) to appoint separate Trustees of the property of which trusts are declared under sub-clause (2) of this clause and to provide for the appointment of new or additional separate trustees thereofso that all or any such trustees or new or additional trustees may be persons resident outside the jurisdiction of the courts of the Island of Guernsey”.

99.2 Clause 8(4) @ PB page no.5, reads thus: In any appointment made pursuant to this clause the Trustees shall during the Trust Period have power in their discretion to pay or transfer any income or capital of the Trust Fund to the trustees of any other trust wherever established and subject to the laws of whatever jurisdiction under which any one or more of the Beneficiaries is or are interested PROVIDED THAT no interest thereunder is capable of vesting in interest later than the expiration of Trust Period. For the purposes of this sub-clause “trust” includes any trust created by any settlement declaration of trust will codicil or other instrument under the law of any jurisdiction and a person shall be deemed to be interested under a trust if any capital or income thereof is or is capable of being transferred paid applied or appointed to him for his benefit either pursuant to the terms of the trust or in consequence of any exercise of any power or discretion conferred on any person by the trust”

100. Finally, the theory evolved by the Revenue in seeking to allege that it is not the trustees that control the Trust but the Appellant who maintains and exercises full power and absolute authority, such that the trustees are mere puppets in the hands of the Appellant, overlooks .that the trustees are lawfully incorporated entities, several of which have been the trusteeship arms of leading global banks, each rendering trusteeship services which are regulated under the laws of the countries of their incorporation, each bearing. full accountability to theif respective statutory and regulatory authorities, who in turn are bound, through international treaties, to render full cooperation with the Indian Competent Authority, including exchange of tax information. It is a matter of record, in the present proceedings, that the Swiss Federal Tax Administrationds actively engaged with the Indian Competent Authority. The Appellant has reliably learnt that the. Indian Competent Authority has actively engaged with the Guernsey Tax Office, however, no documentary evidence obtained by the Indian Competent Authority from the Guernsey Tax Office has been made available to the Appellant. The Appellant asserts that material exculpatory evidence is available to the Indian Revenue, which is not being shared with or delivered over to the Appellant, and in the circumstances,.there is grave prejudice, jeopaidy and detriment being caused to the Appellant as a direct consequence of these selective disclosures by the Indian Revenue.

NO TERRITORIAL JURISDICTION OVER TRUST AND ENTITIES OF TRUST

101. The Trust and the corporate structures within the framework of the Trust are each independent taxable entities, in relation to which territorial jurisdiction is not available to the Indian Revenue under the BMA. Under s.1(2) BMA, it extends to the territory of India. The contention of the.Appellant on matters of `territoriality’ has been upheld in.WT Act, proceedings and must equally apply to BMA proceedings. This Hon’ble Tribunal, in WT Act proceedings of the Appellant, has conclusively held, that “In conclusion, it clearly indicates • that the offshore assets held by the offshore trust, which is irrevocable discretionary mat in which assessee is • one of the beneficiary, who happens to be bestowed with light to appoint /re-appoint the trustees, it does not inherit .Me right or control over the trust. As per the declaration of the trust, the trust remains an independent entity and taxable entity outside India. The entities controlled by the trust are independent taxable entities outside India. Therefore assessee can only be a hriiefi.Ci alY and rernai n a “(V01.5. page 2016, pan 32)

APPLICABILITY OF BMA WHERE CESSATION FROM CLASS OF BENEFICIARIES OF DISCRETIONARY TRUST

102. By virtue of the Appellant’s cessation from the class of beneficiaries of the Trust since July 2014, which fact is duly certified by the trustees in the source of trust wealth certificate issued in. June 2017, and duly revalidated in the certificate dated 4 August 2021 issued by Praxis Trustees Limited (current trustees of The Banyan Trust) to put beyond the realm of any doubt. the position of the Appellant remaining unchanged in the year 2021, it must follow that on the date when the BMA was enacted, and on the date when the BMA (subsequently) entered force, there was no obligation for the Appellant to become amenable to and/or to make any disclosure under BMA.

DECLARATION UNDER SECTION 59 BMA

103. The case of the Revenue that the Appellant has not made a declaration under s.59 BMA overlooks that the Appellant made a valid declaration under the. IT Act, in Schedule FA for AY 2014-15 (Vol.5, pg. 2299) filed under s.139(1) IT Act; in the capacity of member of a class of beneficiaries under The Banyan Trust. In the return filed for AY 2015-16 (Vol.5, pg.2302) the Appellant specifically declared cessation of status of ‘beneficiary’ on and with effect from July 2014, in the following terms: “The Banyan Thirst & All Companies/ Trust/ Entities, thereunder (Discretionary Trust) Upto 14.07.2014″. Therefore, no scope arose to treat the Appellant as non-compliant with s.59 BMA in AY 2016-17, when BMA came into force on and from 1 July 2015.

104. In any event, s.59 BMA had no application to the Appellant, in the facts of the case, in view of:

104.1    by virtue of the Appellant having no ‘beneficial ownership’ in relation to foreign assets or income of the Trust, no corollary obligation arose to make a s.59 BMA declaration. In fact, express incorporation of Chapter XV of the IT Act (ss.159 to 181) into BMA, vide s.70 BMA, in turn preserved the statutory remit and entitlement of beneficiaries of discretionary trusts available under the IT Act, to not be treated as beneficial owners in relation to such assets or income until distribution, and to be exigible to income tax restricted to the remit of distribution; •

104.2 the Appellant, by making full and true disclosure in Schedule FA, for the duration when the Appellant was a member of a class of beneficiaries of the Trust (AY 2014-15) and until cessation (AY 2015-16) of the Appellant’s membership of the class of beneficiaries, had duly complied with s.139(1) of the IT Act. The statutory framework of BMA lays emphasis on the term “undisclosed”, in the context of the disclosure framework provided under Chapter VI s.59, through a window until 30 September 2015 vide CBDT Notification No.S0 1791 (E) [No.57/2015 (F.No.133/33/2015-1PL)] (CBDT Circulars Compilation Tab 2) in the form of a declaration to be filed for disclosure of foreign income and assets. The Appellant duly.complied with Schedule FA, and as such there is no scope to claim that matters concerning foreign assets and income (Wherein the Appellant did not have ‘beneficial ownership’ and was not a ‘beneficiary’) remained. undisclosed;

104.3 statutory obligations under BMA cannot reasonably be interpreted and construed in manner that would render the Appellant entitled to claim entitlement to beneficial ownership to the assets and income of the Trust, thus denuding the tights and entitlements, in law, of other beneficiaries, including non-resident beneficiaries, to the assets and income of the Trust (albeit, subject to exercise of discretion by the trustees).

104.4 imposition of a statutory requirement upon the Appellant to make a declaration under s.59 would imply that the Appellant is obligated to declare that the assets and income of the Trust were contributed from income on which tax was evaded in India and/or escaped assessment in the hands.of the Settlor of the Trust, and thus such assets anc income were traceable to a ‘source’ in India, which is not only wholly erroneous, bui also entirely inconsistent with the case advanced by the Revenue, in the WT proceeding duly recorded in this Hon’ble Tribunal’s order, viz..  isPertinent to note that the trusts wen created in 1989 and the assessee was nominated as the beneficiary by the Late Shti Pratap Ma1pansi It is fact on record that there are no investments, which were made by the assessee or the investment.’ were moved from India.” (Vol.5, pg. 2015, para 30).

104.5 8.59 BMA does not have retrospective application, inasmuch as it cannot reasonably be construed as imposing upon the Appellant an obligation to make a declaration under s.59 in circumstances where at no stage prior to July 2014 did the Appellant, merely by virtue of being a nominated beneficiaiy, have anything more than a hope that the trustees will exercise discretion in favour of the Appellant. Thus, absent ‘beneficial ownership’ of the Appellant in relation to the assets and/or income of the Trust at any time prior to 1 July 2015, there was no scope for any such declaration under s.59 BMA to be made by the Appellant;

104.6 furthermore, s.59 BMA imposes an obligation to make a declaration in respect of information that is not available to the Indian Revenue, whereas the present BMA proceedings are based on information that has been long available with the Revenue, hitherto deployed in both IT and WT proceedings against the Appellant. As such, there was no scope for any declaration to be filed by the Appellant under s.59 BMA. In fact, the Black Money (Undisclosed Foreign Income and Assets). and Imposition of Tax Rules, 2015, specifically stipulate in Rule 9 that if such information has already been obtained by FT&TR by the Revenue, then any declaration encompassing such information will be liable to rejection by the Principal Commissioner;

104.7 in view of a s.59 BMA obligation requiring the declarant to confirm and validate that the ‘source’ of such foreign asset or income is India, inherent to the contention of the Revenue must be that the Appellant must make a declaration as to the ‘source of the source’, i.e., the source of the Settlor’s assets and income. It is the case of the Appellant that BMA does not and cannot impose obligation for disclosing ‘source of source’, in circumstances where the admitted case of the Revenue is that the Kinetic and Avit shareholding belonged to Late Mr. Pratap Malpani (PCIT letter 28 August 2017, Vol.1 pg.311). Assuming without admitting that there were an obligation of a declarant to make a ‘source of source’ declaration in respect of a non-resident setdor of a foreign discretionary trust dating back 32 years earlier, in circumstances where it is not disputed by the Revenue that the Settlor died 31 years ago, the Appellant cannot have a duty in law wider BMA to explain ‘source of source’, since the BMA cannot impose a requirement upon the Appellant to do the impossible. In the reahn of IT Act, the law laid down in Pr. CIT-13, Mumbai. Veedhata Tower Pvt. Ltd.. (Hon’ble Bombay High Court order dated 17 April 2018 in ITA No. 819 of 2015); and, Gaurav Triyugi Singh v. ITO-24(3)(1), Mumbai [2020] 423 ITR 531 (Born.), holds the field, and must equally apply to BMA;

104.8 in any event, the source of trust wealth certification issued in June 2017 by the trustees distinctly certified that the source of wealth of Late Mr. Pratap Malpani was “commissioning/ trading and other commercial interests out of Singapore with several international clients” (Vol.5, page•2303, para 1.3). In the, circumstances, no scope would lie for the jurisdictional remit of s.59 BMA to be fulfilled, i.e:, “undisclosed asset located outside India and acquired from income chargeable to tax under the Income-tax Act”;

104.9 despite thousands of pages obtained by the Revenue, through Tax Information Exchange. Agreements and various other avenues available to the Revenue, no material is available to the Revenue to establish that ‘source’ or contribution to the Trust is traceable to the Appellant, and in the circumstances s.59 BMA can have no application to the Appellant;

104.10 in any event; the case of the Revenue that the Appellant had a statutory obligation under s.59 BMA to make .a declaration as to (allegedly) undisclosed foreign assets and income is wholly inconsistent with the statutory framework of s.71(d) BMA, which operates as an express bar .to the Appellant from resort to s.59 BMA; in light of proceedings s.1530 IT Art in relation to Avs.9nns-n9 to 9014_14 and under cAttg IT Act for AY 1998-99 to AY 2007-08 and AY 2014-15 pertaining to the subject foreign assets and income (currently in abeyance, owing to s. 245C IT Act proceedings, currently pending adjudication in Writ Petition No.862 of 2018. in the Hon’ble Bombay High Court).

SCHEME OF BMA – DUTY OF & ONUS UPON REVENUE

105. The AO must initiate proceedings under BMA through the issuance of a show cause notice under s.10(1) BMA, based on ‘information’.

106. Upon receipt of a show cause notice issued under s.10(1) BMA, the recipient thereof may elect to file a reply or decline to comply, as the case may be.

107. The AO is entitled, under s.10(2) BMA, to continue enquiries after delivery of a notice under s.10(1) BMA, for the purpose of obtaining “full information”, ahead of carrying out an assessment under s.10(3) BMA.

108. Where a reply is not filed, the AO is empowered under s.10(4) BMA to proceed to a ‘best judgment’ assessment:

109. Where a reply is filed, be it a jurisdictional challenge, or a reply on merits, it. is the bounden duty of the AO to act judiciously, since the power granted under the BMA is coupled with a duty and must be exercised in manner that promotes the object of the Act. Such powers cannot be exercised arbitrarily or capriciously, as held in .State (Delhi Admn) v I K Nangia [1980] 1 SCC 258, Kumari Shrilekha Vidyarthi v State of UP [1991] 1 SCC 212 and Andhra Pradesh SRTC v State Transport Appellate Tribunal & Ors. [1998] 7 SCC 353.

ERRORS IN JURISDICTIONAL DETERMINATION BY AO

110. In the present case, as set forth in the foregoing, the Appellant filed a jurisdictional challenge, which came to be disposed of by a cryptic order dated 17 January 2019 issued one year after the jurisdictional challenge, without regard being had to the law or the material placed before the AO.

111. The jurisdictional order of the AO was erroneously focused entirely on the fact of ITSC proceedings initiated by the Appellant, and on the fatal erroneous assumption that “be is settling the undisclosed foreign income with ITSC”. Both, in the assessment proceedings and at the ITSC, the consistent case advanced by the Appellant was that lie was a mere beneficiary of an irrevocable discretionary trust established by non-resident maternal uncle (Late) Mr. Piatap Malpani, and as such the Appellant held no interest in the assets or income of the Trust. The filings before the ITSC were consistent with the Schedule FA disclosures by the Appellant. In the circumstances, no application for settlement in respect of the foreign assets or income of the Trust, on the premise that the Appellant is the ‘beneficial owner’ thereof, or otherwise, has been filed by the Appellant before the ITSC.

112. The Revenue opposed the Appellant’s application to the ITSC primarily on the ground that there was no full and true disclosure of the foreign assets and income of the Trust in the hands of the Appellant. The Appellant contested the stand of the Revenue in relation • to tax exigibility under the IT Act in relation to foreign assets and income of the Trust in the hands of the Appellant. Therefore, the conclusion of the AO, in the jurisdictional order, that the Appellant was seeking to settle, through the ITSC, matters concerning foreign assets or income of the Trust, is perverse.

113. The Appellant was thus constrained to challenge the ITSC order dated 27 September 2017, whkh came to be stayed by the Hon’ble Bombay High Court.

114. In the circumstances, no scope arises for the Revenue to rely upon the findings of the ITSC, in proceedings under BMA. In any event, since the subsequent order of this Hon’ble Tribunal in WT proceedings made on 24 December 2020 has concluded that the Appellant has no beneficial interest or ownership whatsoever in the assets or income of the Trust, there can be no scope for the Revenue to continue to rely upon the ITSC order, which has been stayed.

NO SCOPE TO RELY UPON ITSC ORDER IN BMA PROCEEDINGS

115. In the case of ITO v. Dhrangadhra Chemical Works (P.) Ltd. [1989] 28 It’ll 499, this Hon’ble Tribunal held that “the Settlement Commission cannot exercise or supersede the powers of the ITAT. This has been well settled by a decision of the Supreme Court in the case of CIT v. B.N Bhattachargee [1979] 118 ITR 461”. Further, in Hooghly Mills Ltd. v. CIT. (1990) SCC OnLine Cal 336, it has been held that “the order passed by the Settlement Commission cannot affect the determination already made under the provisions of the Surtax Act. Similarly, under the provisions of the Wealth-tax Act, 1957, there are provisions for settlement of cases in Chapter VA of the Wealth-tax Act, where similar provisions have also been made. This is so because the Income-tin-Act, the Wealth-tax Act and other Acts including the SurtaxAct are independent statutes covering different fields and the orders are to be passed under the aforesaid Acts or within the four corners of those Acts.”

116. Thus, it must follow that where an order is made under the WTA by this Hon’ble Tribunal, and the order of the ITSC is stayed, there is no scope for the ITSC order to impact adjudication by the Commissioner (Appeals) for purposes of BMA. The 24 December 2020 order of this Hon’ble Tribunal was binding upon the Commissioner (Appeals), in circumstances where findings on substantial’ or ‘beneficial’ ownership in relation to the assets and income of the Trust were returned in favour of the Appellant.

STATUS OF PROCEEDINGS UNDER INCOME TAX ACT

117. Meanwhile, since assessment proceedings under 9.143(3) rw.s.153(A) IT Act for AY 2008­09 to 2013-14 and corollary s.148 proceedings in relation to AY 1998-99 to 2007-08 and 2014-15, culminating in assessment orders dated 30 March 2016, were quashed by the Hon’ble Bombay High Court on 10 August 2016, in light of the application filed at the ITSC, ahead of service of the assessment orders upon the Appellant, there is no scope for the Revenue.to pursue their case under the IT Act, in the guise of invoking the BMA against the Appellant, bringing with its draconian consequences including prosecution under PMLA, which is illegal, and liable to be so declared.

DILATORY AND UNFAIR TACTICS

118. The Revenue seeks to bring to tax the assets and income of the Trust, whether through the IT Act, or the WT Act, or the BMA, resorting to deliberate delays in disposing of the jurisdictional challenge on frivolous grounds of lack of infrastructure created by the CBDT for disposal of a s.15(1)(b) BMA appeal followed by judicial indiscipline in declining to be bound by orders of this Hon’ble Tribunal in the WT proceedings and also declining to be bound by orders of this Hon’ble Tribunal in the BMA proceedings, aimed to defeat the salutary statutory right and remedy prescribed in s.15(1)(b) BMA that entitles a noticee under s.10 BMA to initiate a jurisdictional challenge, rather than participate in assessment proceedings. Details of the one-year delay in disposal of the jurisdictional challenge,

BEFORE THE INCOME TAX APPELLATE TRIBUNAL,
`BMA’ BENCH, MUMBAI

followed by the Commissioner(Appeals) declining to set down the s.15(1)(b) BMA appeal, warranting written representations caused to be made to the CBDT on behalf of the Appellant in order to establish requisite infrastructure for a s.15(1)(b) appeal, and fmally the Article 226 Constitution of India remedy availed by the Appellant, culminating in the order dated 30 March 2021 of the Hon’ble Bombay High Court, are set forth in the Stay Application. The Hon’ble Bombay High Court order of 30 March 2021 is at Paper Book Vol.5, at pages 2029-2030.

119. In circumstances where the Revenue has conceded, during the WT Act proceedings before this Hon’ble Tribunal, that there was no contribution by the Appellant to the Trust, the Revenue cannot be permitted to assert in BMA proceedings that there is contribution by the Appellant to the Trust. In the circumstances, there is no scope for the Revenue to discharge its onus in BMA proceedings against the Appellant.

120. In the case of CIT v. Dana Mahendra Shah (2015) 378 ITR 304 (Born), the jurisdictional High Court has held that “The Income Tax Department functions as one unit and its stand in identical matters cannot be different merely because the officers dealing with the two files are different. In any case, if there are substantive reasons in facts or in law to take a different view the same should be set out in the affidavit and the explanation that a different view was taken because the officers who took the two decisions were different, is no justification.’

121. The position conceded by the Revenue in the WT proceedings, in relation to no contribution by the Appellant to the Trust; must bind the Revenue, also on principles of `approbate and reprobate’ and the doctrine of, fair play in adjudication.

DOCUMENTS RELIED UPON BY REVENUE

122. The Commissioner (Appeals) has selectively relied upon a series of irrelevant documents to support jurisdiction under BMA. Significantly, none of these documents were put to the Appellant in the course of the BMA jurisdictional (appellate) proceedings.

BEFORE THE INCOME TAX APPELLATE TRIBUNAL,
BMA’ BENCH, MUMBAI

123. A draft unsigned letter alleged to be issued to HSBC by the Appellant, retrieved from the Appellant’s computer, during search proceedings conducted in the year 2014, is relied upon by the Commissioner (Appeals) to claim that the Revenue has ‘information’ that the Appellant withdrew a consent waiver letter dated 11 July 2013 issued by Appellant to HSBC, Geneva. Quite apart from the fact that such a draft letter does not establish that the Appellant is a ‘contributor’ to the Trust, in circumstances where the Swiss Federal Tax Administration certified in its letter dated 30 June 2015 to the Indian Competent Authority one and a half years later, that “The person authorized to consent, Yashovardban Bbla, has irrevocably consented to the transfer of the information,”, and has been “very co-operative”, it must follow that the draft letter was not ever issued by the Appellant Where an advisor may have provided a draft letter to the Appellant, but such draft was not ever actioned, it constitutes a ‘dumb’ document, in law, and therefore has no legal validity or efficacy. In CIT v. Vatika Landbase (P.) Ltd. [2016] 67 taxmann.com. 372 (Delhi) – Para 40, 41, 45, and again in ITO v. Kranti Inupex Pvt Ltd (ITA No.1229/Mum/2013, order dated 28.02.2018 — Para 6 & 7) the issue as to ‘dumb documents’ has been extensively considered by this Hon’ble Tribunal.

124 The Commissioner (Appeals) placed heavy reliance on the judgment of this Hon’ble Tribunal in the case of Renu Tharani v. DCIT [2020] 117 taxmann.com 804 (Mumbai Trib.) to allege that on similar facts, addition in respect of foreign bank account held in the name of Tharani Family Trust, of which Ms. Renu Tharani was g beneficiary, was upheld by this Hon’ble Tribunal. The case is distinguishable; since in that case, the assessee declined to sign the consent waiver letter to enable the Revenue to obtain’ all necessary details from the foreign bank, and accordingly; an adverse inference was drawn by this Hon’ble Tribunal; and consequently the additions were upheld. In the present case; not only has the Appellant duly co-operated with all relevant authorities, but rather this fact is also affirmed by the relevant . competent authority, i.e. the Swiss Federal Tax Administration. Thus, the case of Renu Tharani (supra) is not applicable.

125. Similarly, an unsigned letter purportedly issued to Credit Suisse AG, Zurich by Sorwood DevelopMent SA is relied upon by the Commissioner (Appeals) to claim that certain payment authorizations were issued, but neither has the letter been shown to have been acted upon by any person or party, nor is the letter signed, and furthermore, inspection has not been furnished. In any event the purported letter does not bear the signature of the Appellant, and it must, therefore, constitute a ‘dumb’ document.

126. A Linked-in profile of Confiance Limited, the trustee of The Banyan Trust, is upon by the Commissioner (Appeals) to claim that Confiance Limited is a service provider, and it is therefore inconceivable that such a service provider would certify anything contrary to the interests of the service recipient. In. levelling such a baseless assertion, the Revenue overlooks that trusteeship business abounds globally, including in India. In fact, the Income-tax Act, 1961, Chapter XV devotes several provisions of law to taxation of trusts, as does die Ihdian Trusts Act, 1882 lay down the Statutoq framework Mrclation to creation of trusts; the roles,. duties and responsibilities vested upon settlor(s), trustee(s) and beneficiary(ies), dissolution of trusts, migration of trust property, etc. Barring conjecture and surmise, there is no rational basis advanced by the commissioner (Appeals) to support the inferences drawn around Confiance Limited. The Commissioner (Appeals) overlooks that Confiance Limited is a corporate entity, incorporated and carrying on business under the laws of its incorporation, with a duty to discharge obligations in conformity with – governing laws; and full accountability owed to its tax administration (the Guernsey Tax Office). The Revenue has not produced any material to discredit Confiance Limited, Whether in the form of any observation of non-cooperation with its statutory authorities in relation to matters concerning the Appellant, and therefore, no scope arises to sustain the allegations of the. Commissioner (Appeals).

127. The Commissioner (Appeals) overlooks that the Revenue has elected, in the course of IT. Act proceedings, to rely upon the notarized source of trust wealth certification issued in June 2042 by Confiance Limited in coordination with a former trustee, together with lawyers representing the trustees and non-resident beneficiaries of the Trust in relation to the accumulation of trust wealth over three decades, from various inVestrnents in multiple international jurisdictions, including Indonesia, etc., and instead purports to rely upon Confiance letters dated 20 April 2012 and 24 April 2012, which lack material detail. In fact, the PCIT letter dated 28 August 2017 (Vol.1, pg.311) being based on the notarized source of trust wealth certification issued in June 2017 by Confiance Limited, prior Confiance letters which were also available with the Revenue at the time of issuance of the PCIT letter cease to bear relevance. The Revenue has also obtained the records of formation and shareholding patterns of Kinetic Holdings Limited and Avit Investments Limited, and therefore, no scope remains to assert that the Appellant is a contributor to the Trust.

128. The Revenue having also conceded the existence and validity of the Trust and the Instrument of Trust dated 7 September 1989 in the IT Act proceedings and the WT proceedings, through inter aka purporting to rely upon covenants concerning appointment and removal of trustees, etc., is precluded from challenging the validity of the Instrument of Trust in BMA proceedings. The Instrument of Trust has been certified by the original trustee, Mr. Michael Collins of Albany Trustee Company Limited, whose authoritative validation dated 7 Match 2016 (Vol. 1, page 54) in relation to the Instrument of Trust is further borne out by his signature on the Instrument of Trust (Vol.’, page 22) and further participation in June 2017, in the preparation of the source of trust wealth certification jointly with then current trustees, putting beyond the realm of speculation the existence of the Trust since 1989.

128. The case of the Revenue that subsequent instruments of trusts have not been produced by the Appellant overlooks that in the course of IT Act proceedings the Bird International Foundation trust instrument was available with Revenue, obtained through FT&TR, and it must follow that all instruments are available among the thousands of pages available to Revenue. While the Appellant has reasonably made efforts to obtain papers, there are inherent limitations on the Appellant seeking documentation exchanged between trustees, in circumstances where the Appellant ceased to be a member of the class of beneficiaries in July 2014. These documents in any event go back some decades, and therefore, their availability with the trustees is not within the knowledge of the Appellant. The source of, trust wealth certification issued to the Appellant in 2017 has extensively plotted the • existence of the Trust since 1989 and the trust migrations, which is liable to be treated as a satisfactory explanation for the Trust and its migrations. The Revenue has the source of trust wealth certification since 2017 but has neither controverted its contents thereof for over four years nor produced any reliable evidence to the contrary. The search proceedings took place seven years ago; in 2014. In any event, the lack of purported documentation cannot serve to alter the stand of the Revenue that the Appellant has not contributed to the Trust.

129. The case of the Revenue that;the Appellant is sole beneficiary of the Trust is not only inconsistent with the case of the Revenue that no valid Trust exists but is also contrary to the express terms of the Instrument, of Trust. It appears founded on the Form A declarations of beneficial ownership, but plainly, that contention is. flawed, since disclosures obtained by the Revenue through the Swiss Federal Tax Administration was limited strictly to the person in relation to whom administrative assistance was sought under the relevant bilateral treaty framework, and therefore any additional Form A’s pertaining to other beneficiaries of the Trust were not forthcoming to the Revenue. Thus, a limited disclosure in conformity with the tax exchange network protocols, cannot be relied upon by Revenue to claim that the Appellant is the only beneficiary. In any event, the Hon’ble Tribunal in the wealth tax proceedings of the Appellant, after referring to the beneficiaries listed in Part II of First Schedule of Instrument of Trust, has categorically rejected this contention. of the Revenue as, to ‘sole beneficiary’, holding that — “24. From the above chart of beneficiaries, it is clear that the assessee is not the only beneficiary, it consists of other beneficiaries, who are direct lineal descendants of Late .ShriPratap Malpani, Late Ashokvardhan Birla and spouses of their respective descendants. In any case, it could be seen that a charitable organization is also one of the beneficiag together with assessee and aforesaid individuals. Hence, even if aforesaid individuals other than assessee do not survive, still assessee alone is not the sole beneficiary. It is the duty of the existing trustee to distribute the income and benefits among all the beneficiaries including charitable institution.”

130. The Revenue is bound to have considered all records available, gathered since the 2014 search proceedings, when it conceded in the WT Act proceedings that the Trust wealth did not emanate from India, and is bound to be held liable to that position in the BMA proceedings. On the legal principle of consistency, justice and fairness, this Hon’ble Tribunal’s conclusions in the Appellant’s own wealth tax proceedings, are liable to be followed in the BMA proceedings, for reasons of identical underlying facts concerning the ownership of the foreign assets and income’. The Revenue has failed to establish a real or tangible interest of the Appellant in the foreign assets and/or income of the Trust. In the circumstances, the Appellant having offered a satisfactory explanation to the AO, which was consistent with the case of the Revenue in WT Act proceedings, must follow that the jurisdictional objection of the Appellant to invocation of BMA is bound to be granted, and the order of the Commissioner (Appeals) is liable to be set aside, and it is respectfully prayed, accordingly.

132. A gist of Revenue Submissions, and Appellant’s rebuttal, is set forth in tabular format below:

36. The Revenue’s submissions are as under:

BEFORE THE HON’BLE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI
IN THE APPEAL OF
SHRI YASHOVARDHAN BIRLA (APPELLANT)
BLACK MONEY APPEAL NO. 1/MUM/2021 – AY 2016-17
HEARING DATES: 3rd and 11th AUGUST. 2021

INDEX

Sr no. Particulars Page
no.
1 Whether the appellant has discharged the onus placed upon him to satisfactorily explain the source of the investment in the assets i.e. foreign bank accounts where he is listed as the sole beneficial owner? [ Ground Nos 3, 8, and 9] 1
2 Whether the Appellant has ceased to be beneficiary with effect from 14 July 2021 and does the Black Money Act apply retrospectively? 6
3 Does the FAQ 31 of the CBDT circular exclude the beneficial owner’s definition under the PMLA Act, 2002 and restricts the definition of beneficial owner to that defined under section 139(1) of the Income Tax Act? [Ground Nos – 5, 8, 11 and 12J 11
4 Whether the Tribunal order dated 24 December 2020 in Wealth Tax proceedings can be relied upon by the appellant for the proceedings under BMA? [Ground Nos – 1 and 2] 22
5 Whether the assets have already been considered in the proceedings under the Income Tax Act, 1961? [Ground Nos -2 and 15J 24
6 If the appellant was precluded from filing voluntary declaration under Section 59 of the BMA due to express bar under Section 71 of the BMA, can he be liable to tax under BMA? 26

BEFORE THE HON’BLE INCOME TAX APPELLATE TRIBUNAL, MUMBAI IN THE APPEAL OF

SHRI YASHOVARDHAN BIRLA (APPELLANT)  BLACK MONEY APPEAL NO. 1/MUM/2021 — AY 2016-17

HEARING DATES: 3rd and 11th AUGUST, 2021

The Appellant, most humbly and respectfully, submits the following
submission in support of its claim and in rebuttal of the submissions of
the Appellant
for Your Honour’s kind consideration

ISSUE 1

Whether the appellant has discharged the onus placed upon him to satisfactorily explain the source of the investment in the assets i.e. foreign bank accounts where he is listed as the sole beneficial owner? [ Ground Nos 3, 8, and 9]

Section 2(11) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015

“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 bu him is in the opinion of the Assessing Officer unsatisfactory.”

As evident from the above definition, there are two conditions for an asset to be called an “undisclosed asset located outside India”:

1. The assessee must be listed as the legal or beneficial owner of the asset; and

2. The assessee offers no explanation, or the explanation given by him is in the opinion of the Assessing Officer unsatisfactory.

Condition 1

The first condition is fulfilled in the present case as the appellant is listed as the sole beneficial owner in Form A for all the undisclosed foreign bank accounts.

The appellant’s counsel has put in strenuous efforts to justify that the impugned trust (AT-351) is a discretionary trust and appellant is one of the beneficial owners of the said trust and not the sole beneficial owner. Appellant has heavily relied on the judgment of the Supreme Court in HMM Vikramsinhji of Gondal. It is important to note that the Mumbai Tribunal in the case of Renu T Tharani v DCIT, International Taxation [20201 117 taxmann.com 804 (Mumbai – Trib.) has distinguished the judgement of the Supreme Court in HMM Vikramsinhji of Gondal (supra) on the ground of non-availability of trust deeds.

Relevant extract:

47. As regards the repeated references to Hon’ble Supreme Court’s judgment in the case of Estate of HMM Vikramsinhji of Gonda (supra), ………………. These observations have no relevance in the present context. Firstly., neither there is anti trust deed before us, nor the question before us pertains to taxability of income of the trust. Secondly, beyond a mention in the base note as a personneslegaleslides” (i.e. related legal persons), there is no evidence even about existence, leave aside nature, of the trust. Thirdly, the point of taxability here is beneficial ownership of GWU Investments Ltd., a Cayman Island based company, by the assessee. Finally, even if there is a dispute about the alleged trust, the dispute is with respect of taxabilitu of funds found with the trust and the source thereof Clearly, therefore, the issue adjudicated upon in the said decision has no relevance in the present context. The very reliance on the said decision presupposes that the assessee was discretionaru beneficiary simplicitor of a discretionaru family trust, and nothing more-an assumption which is far from established on the facts of this case.

The ratio laid down in the case of Renu Tharani (supra) for distinguishing the judgement in case of Commissioner of Wealth Tax, Rajkot v Estate of HMM Vikramsinhji of Gondal [2014] 45 taxmann.com 552 (SC) squarely applies in the present case also as no trust deeds have been produced by the appellant at all in the present case as was in the above case, also there is no evidence  even about existence, leave aside the nature of trust.

Also, in the case of HMM Vikramsinhji of Gondal (supra), admittedly trust deeds were produced before the Supreme Court and this fact is mentioned in the judgement:

“5. Thus the dispute in these appeals – Income Tax and so also, Wealth Tax – remains about the deeds of settlements executed in U.K. The copies of the deeds of settlements executed in U.K. are on record. Perusal thereof shows that one Mr. Robert Hampton Robertson McGill was designated as the trustee, referred to in the deeds as ‘the Original Trustee’….”

Whereas in the present case, as noted above, no trust deeds have been produced at all.

Condition 2

The second condition for an asset to be held as an undisclosed asset is that:

(i) No explanation is offered; or

(ii) The explanation offered is in the opinion of the Assessing Officer unsatisfactory.

It is very clear that the initial onus of explaining the source of investment in the asset is on the appellant.  He has to prove that the assets are acquired from disclosed sources.

In the present case, the appellant could not explain the source of the assets despite being given ample opportunities. The appellant has not rebutted the natural legal presumption of source, by adducing any legally admissible evidence.

Only a single unauthenticated copy of purported declaration of AT-351 trust which does not even mention who is the settlor of the Trust, (strangely Mr Pratap Malpani is only mentioned as the beneficiary in Part II of the said unauthenticated declaration and nowhere mentioned as Settlor in whole document) is attached as first item in the Paperbook – Volume I.

The appellant has stated without any evidence on record (again through his imagination) that the assets of the said AT-351 trust (with no settlor) were resettled in Nebola Trust in 1999, then from Nebola Trust to Bird International foundation in 2010 and therefrom in the Banyan Trust Limited in 2011.

An important thing to note here is that no explanation/document has been provided which would prove as to how the assets along with subsequent accretions have migrated from AT-351 trust to Nebola Trust and therefrom to the subsequent trusts.

The appellant has failed to provide any explanation i.e. live link connecting the assets of AT-351 allegedly settled by Mr Malpani and the source of funds deposited in the bank accounts wherein the appellant is listed as beneficial owner.

Only answer forthcoming from the appellant is reliance on a document issued by Confiance Limited who is expert in Somersault. Confiance Limited is paid service provider of the appellant and can be removed by the appellant at will (mentioned in Trust deed — Paperbook – Volume 1 – Page 19).

On 20th April 2012, Confiance Limited submitted that the Mokopane Limited was asset contributor of the Banyan Trust and 4 days later in the same month of April 2012 it has issued a certificate that Yashovardhan Birla was the asset contributor of the Banyan Trust. (Both certificates are mentioned on Page 185-186 of Paperbook — Volume I submitted by the appellant and also extracted in first written submission of the Revenue on Page 96-97).

Now yet again to prove its mettle in doing Somersault, Confiance Limited (now Praxis Trustees Limited) has on 4 August 2021, (within 1 day of the request by the appellant who has allegedly ceased to be beneficiary of the Banyan trust way back on 14 July 2014) issued a certificate staling that the Yashovardhan Birla did not contribute any assets to the Banyan Trust.

Alas! how do we place reliance on what Confiance Limited has to say!

Also, it cannot be ascertained whether Confiance Limited is a trustee of the alleged Banyan trust because of the non-availability of trust deeds.

The appellant’s counsel has also contended that the Revenue has already accepted the trust structure by relying on:

  • The Submission of the PCIT in the Rule 9 Report (on Page 311 – Paperbook- Volume 1); and
  • The Tribunal order dated 24 December 2020 of Mumbai Tribunal in the appellant’s case in Wealth Tax proceedings.

Firstly, the statement made by the PCIT is not conclusive, for it clearly states that the matter is subject to further investigation. Finally, it has also been clearly stated on Page 17 of the first written submission by the Revenue that the Tribunal order under the Wealth Tax Act, 1957 cannot be considered as binding precedent, because the nature and scope of the proceedings under the Wealth tax act is completely different in comparison to that of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

Hence, the contention of the appellant that the trust structure has been accepted by Revenue is incorrect.

Without prejudice to the above, reliance cannot be placed upon the Indian laws and Indian case laws to decide the legal issues on offshore trusts’. Reliance is placed on the decision of the Mumbai Tribunal in case of Ambrish Mang Dhupelia v DCIT, Mumbai [2017] 87 taxmann.com 195 (Mumbai – Trib.)

“As regards reference of the learned counsel of the assessee for the tax treatment of the discretionary trust is concerned, it is noted that the said trust is in Liechestein. The tax laws of government of India do not apply. Hence, reference to cases which are in the Indian context are not at all applicable. Some of the salient features of trust in liechestein are already mentioned in the above said tribunal order. Hence, reference by the Id. Counsel of the assessee to apply Indian case laws to that governed by law of Liechestein is bereft of cogency.”

Hence, the reference to certain sections of the Indian Trusts Act is wholly incorrect because the trust is allegedly based in Guernsey and governed bythe local laws. (See page 1 of the Paperbook — Volume 1 — for AT 351 Trust). However, as far as the alleged Banyan Trust is concerned since no trust deed is produced, it cannot be ascertained which country it is incorporated in. But the appellant contends that it is based in Guernsey albeit without any evidence.

Thus, the Assessing Officer has rightly assumed the jurisdiction under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, because both the conditions are satisfied i.e. the appellant is a beneficial owner of the undisclosed foreign bank accounts and has not provided any explanation whatsoever about the source of the investment in such accounts.

ISSUE – 2

Whether the Appellant has ceased to be beneficiary with effect from 14 July 2021 and does the Black Money Act apply retrospectively?

The appellant has merely stated that he has withdrawn from the status of discretionary beneficiary in Banyan trust from 14 July 2014 however no authentic supporting documents have been provided for the same. Also no new trust deeds have been provided after 2000. Instead only a unauthenticated letter from Confiance Limited , who is appellant’s service provider is submitted which cannot be admitted as reliable evidence as it is a self-serving document.

Since no trust deeds have been provided by the appellant of any trusts created after original trust settled by Mr Malpani the beneficiaries of all the above-mentioned trusts are not ascertainable.

Excerpts from The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (“BMA”)

1. Short title extent and commencement

(3) Save as otherwise provided in this Act, it shall come into force on the fist day of July, 20151.

3. Charge of tax

(1) There shall be charged on every assessee for every assessment year commencing on or after the 1st day of April, 2016, subject to the provisions of this Act, a tax in respect of his total undisclosed foreign income and asset of the previous year at the rate of thirty per cent of such undisclosed income and asset:

Provided that an 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….

5. Computation of total undisclosed foreign income and asset

(1) In computing the total undisclosed foreign income and asset of any previous year of an assessee,

Illustration

A house property located outside India was acquired by an assessee in the previous year 2009-10 for fifty lakh rupees. Out of the investment of fifty lakh rupees, twenty lakh rupees was assessed to tax in the total income of the previous year 2009-10 and earlier years. Such undisclosed asset comes to the notice of the Assessing Officer in the year 2017-18. If the value of the asset in the year 2017-18 is one crore rupees, the amount chargeable to tax shall be A-B=C

where,

A=Rs.1 crore, B=Rs. (100 x 20/50) lakh= Rs.40 lakh, C=Rs. (100-40) lakh=Rs.60 lakh.

72. Removal of doubts

For the removal of doubts, it is hereby declared that—

lc) where any asset has been acquired or made prior to commencement of this Act, and no declaration in respect of such asset is made under this Chapter,  such asset shall be deemed to have been acquired or made in the near in which a notice under section 10 is issued bu the Assessing Officer and the provisions o this Act shall a. .1 accordin 1

Analysis

Section 72(c) provides that, if the foreign asset has been acquired or made prior to commencement of this Act and no declaration in respect of such asset is made under section 59, such asset shall be deemed to have been acquired or made in the year in which notice for assessment issued by the assessing officer.

Further, Rule of Valuation of undisclosed foreign assets contained in “Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Rules, 2015” (hereinafter referred as “the Valuation Rules”), too, gives indication of such retrospective applicability, in the following manner –

Rule 3(1)(e) Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Rules, 2015

(e) value of an account with a bank shall be,-

(I) the sum of all the deposits made in the account with the bank since the date of opening of the account; or

(II) where a declaration of such account has been made under Chapter VI and the value of the account as computed under sub-clause (I) has been charged to tax and penalty under that Chapter, the sum of all the deposits made in the account with the bank since the date of such declaration:

Provided that where any deposit is made from the proceeds of any withdrawal from the account, such deposit shall not be taken into consideration while computing the value of the account.

Rule 3(1)(e) relating to valuation of asset, being an account with a Bank, provides that — “the sum of all the deposits made in the bank account from the date of opening of the account”, shall be deemed to be the value of such asset.

Thus, from the above provisions it is’ clear that the assets acquired prior to the commencement of the Act will also be covered under the provisions of the BMA irrespective of whether such assets are disposed off before or after commencement of the BMA and such asset shall be deemed to have been acquired in the year in which notice for assessment issued by the assessing officer. Also, illustration to section 5 clarifies the applicability of the act in case of asset acquired before the commencement of the Act.

Further, the following FAQ Nos 19,20,22 and 29 of the CBDT Circular no. 13 of 2015 dated 6 July 2015 clarify that BMA has retrospective effect and undisclosed assets disposed off before the act coming into force can also be brought to tax under the BMA.

Question No.19:

A person has a foreign bank account in which undisclosed income has been deposited over several years. He has spent the money in the account over these years and now it has a balance of only $500. Does he need to pay tax on this $500 under the declaration?

Answer:

Section 59 of the Act provides for declaration of an undisclosed asset and not income. In this case the Bank account is an undisclosed asset which may be declared. Tax on undisclosed asset is required to be paid on its fair market value. In case of a bank account the fair market value is the sum of all the deposits made in the account computed in accordance with Rule 3(1)(e). Therefore, tax and penalty needs to be paid on such fair market value and not on the balance as on date.

Question No. 20:

A person held a foreign bank account for a limited period between 1994-95 and 1997-98 which was unexplained. Since such account was closed in 1997­98 does he need to declare the same under Chapter VI of the Act?

Answer:

Section 59 of the Act provides that the declaration may be made of any undisclosed foreign asset which has been acquired from income which has not been charged to tax under the Income-tax Act. Since the investment in the bank account was unexplained and was from untaxed income the same may be declared under Chapter VI of the Act. The consequences of non-declaration may arise under the Act at any time in the future when the information of such account comes to the notice of the Assessing Officer.

Question No.22:

A person acquired a house property in a foreign country during the year 2000-01 from unexplained sources of income. The property was sold in 2007­08 and the proceeds were deposited in a foreign bank account. Does he need to declare both the assets under Chapter VI of the Act and pay tax on both the assets?

Answer:

The declaration may be made in respect of both the house property and the bank account at their fair market value. The fair market value of the house property shall be higher of its cost and the sale price, less amount deposited in bank account. If the cost price of the house property is higher the declarant will be required to pay tax and penalty on (cost price — sale price) of the house. If the sale price of the house property is higher the fair market value of the house property shall be nil as full amount was deposited in the bank account. The fair market value of the bank account shall be as determined under Rule 3(1)(e) and tax and penalty shall be paid on this amount. (Please also refer to the illustration under Rule 3(3) for computation of fair market value.)

Further, it is advisable to declare all the undisclosed foreign assets even if the fair market value as computed in accordance with Rule 3 comes to nil. This may avoid initiation of any inquiry under the Act in the future in case such asset comes to the notice of the Assessing Officer.

Rule 3(3) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Rules, 2015

(3) Where a new asset has been acquired or made out of consideration received on account of transfer of an old asset or withdrawal from a bank account, then the fair market value of the old asset or the bank account, as the case may be, determined in accordance with sub-rule (1) and sub-rule (2) shall be reduced by the amount of the consideration invested in the new asset.

Illustration

A house property (H1) located outside India was bought in 1997 for twenty lakh rupees. It was sold in 2001 for twenty five lakh rupees which were deposited in a foreign bank account (BA). In 2002 another house property (H2) was bought for thirty lakh rupees. The investment in H2 was made through withdrawal from BA. H2 has not been transferred before the valuation date and its value on the valuation date is fifty lakh rupees.

Assuming that the value of BA as computed under Rule 3(1)(e) is seventy lakh rupees, the fair market value (FMV) of the assets shall be as below:

FMV of Hl: (Higher of Rs. 20 lakh and 25 lakh) – Rs. 25 lakh (invested in BA) = Nil

FMV of BA: Rs. 70 lakh – Rs. 30 lakh (invested in 1-12) = Rs. 40 lakh FMV of 112: (Higher of Rs. 30 lakh and 50 lakh) = Rs. 50 lakh Question No. 29:

Whether for the purpose of declaration, the undisclosed foreign asset should be held by the declarant on the date of declaration?

Answer:

No, there is no such requirement. The declaration may be made if the foreign asset was acquired out of undisclosed income even if the same has been disposed off and is not held by the declarant on the date of declaration.

ISSUE 3

Does the FAQ 31 of the CBDT circular exclude the beneficial owner’s definition under the PMLA Act, 2002 and restricts the definition of beneficial owner to that defined under section 139(1) of the Income Tax Act? [Ground Nos — 5, 8, 11 and 12J

The appellant’s counsel has relied on Swiss ETA’s letter on Page 33 of the Paperbook – Volume I, to contend that the beneficial ownership information collected for anti-money laundering purposes cannot be used for tax purposes.

Further, the appellant’s counsel has repeatedly relied on FAQ 31 of the Circular no. 13 of 2015 dated 6 July 2015 to contend that the beneficial owner under the AML regulations cannot be considered as beneficial owner for the purpose of the BMA.

Question No. 31: A person is a beneficiary in a foreign asset. Is he eligible for declaration under section 59 of the Act?

Answer:

As far as ownership is concerned, as per section 2(11) of the Act “undisclosed asset located outside India” means an asset held by the person in his name or in respect of which he is a beneficial owner. The definition of “beneficial owner” and “beneficiary” is provided in Explanation 4 and Explanation 5 to section 139(1) of the Income-tax Act, respectively (which is at variance with the determination of beneficial ownership provided under Rule 9(3) of the PMLA (Maintenance of Records) Rules, 2005). Therefore, for the purpose of the Act “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. Further, “beneficiary” in respect of an asset means an individual who derives benefit from the asset during the previous year and the consideration for such asset has been provided by any person other than such beneficiary. Therefore, as per the Act the beneficial owner is eligible for declaration under section 59 of the Act.

There may be a case where a person is listed as a beneficiary in a foreign asset, however, if he has provided consideration for the asset, directly or indirectly, he will be covered under the definition of beneficial owner for the purposes of the Act.

It is respectfully submitted that the above answer does not mention that the definition of beneficial ownership provided under Rule 9(3) of the PMLA (Maintenance of Records) Rules, 2005) cannot be used for BMA.

The above FAQ also does not restrict the scope of the beneficial ownership to that provided under the section 139(1) of the Income Tax Act.

The definition of beneficial owner is not given under the BMA. Also, the BMA does not provide reference to any specific existing Indian legislation for the purpose of defining beneficial owner.

Further, the legislature has specifically mentioned in Section 84 of the BMA as to which provisions of the Income Tax Act,1961 can be imported for the purposes of the BMA.

Application of provisions of Income-tax Act

84. The provisions of clauses (c) and (d) of sub-section (1) of section 90, clauses (a) and (d) of sub-section (1) of section 90A, sections 119, 133, 134, 135, [138, 144A], Chapter XV and sections 237, 240, 245, 280, 280A, 280B, 280D, 281, 281B and 284 of the Income-tax Act shall aoplu with necessaru modifications as if the said provisions refer to undisclosed foreign income and asset instead of to income-tax.

If the intention of the legislature was to restrict the definition of the beneficial owner to that provided under the Income tax Act, it would have been so provided expressly in the BMA. In the absence of such express provision to restrict the meaning of beneficial owner to that under 139(1) of Income tax act would be absurd.

Hence, as correctly held in the case of ACIT v Jatinder Mehra [2021] 128 taxmann.com 152 (Delhi – Trib.), we may take cues to interpret the said term from the other Indian laws and reputed legal dictionaries.

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 onlu 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.

Following are some of the laws where the term beneficial owner has been defined:

Definition of Beneficial Ownership under various Indian Laws

Section 139(1) of Income Tax Act, 1961

 

Section Explanation

has a controlling ownership interest or who exercises control through other means

Explanation. – For the purpose of this sub-clause-

1. “Controlling ownership interest” means ownership of or entitlement to more than twenty-five percent of 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;

(b) where the client is a partnership firm, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has ownership of/ entitlement to more than fifteen percent of capital or profits of the partnership;

(c)where the client is an unincorporated association or body of individuals, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has ownership of or entitlement to more than fifteen percent of the property or capital or profits of such association or body of individuals;

(d) where no natural person is identified under (a) or (b) or (c) above, the beneficial owner is the relevant natural person who holds the position of senior managing official;

(e) where the client is a trust, the identification of beneficial owner(s) shall include identification of the author of the trust, the trustee, the beneficiaries with fifteen percent or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership; and

[(t) where the client or the owner of the controlling interest is an entity listed on a stock exchange in India, or it is an entity resident in jurisdictions notified by the Central Government and listed on stock exchanges in such jurisdictions notified by the Central Government, or it is a subsidiary of such listed entities, it is not necessary to identify and verify the identity of any shareholder or beneficial owner of such entities.]

Section 2(12) of the Prohibition of Benami Property Transactions Act, 1988

“beneficial owner” means a person, whether his identity is known or not, for whose benefit the benami property is held by a benamidar.

Definition of beneficial owner in some of the legal dictionaries is as follows:

Black law’s 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.’

Law Lexicon

“One who, though not having apparent legal little, is in equity entitled to enjoy the advantage of ownership”

Klaus Vogel

“Beneficial owner is a person who is free to decide whether or not the capital or other assets should be used or made available for use by others (i.e., the right over capital), or how the yields from them should be used (i.e., the right over income), or both”

Webster’s dictionary

Beneficial owner is a person who is entitled to receive the income of an “estate without its title, custody or control.”

Analysis

On a holistic reading of the above definitions, it is clear that there exist two primary conditions for a person to be considered as the beneficial owner:

  • A person who exercises effective control of the legal entity through ownership or otherwise; or
  • Is entitled to the benefits of the asset/interest without having legal ownership.

In the present case, there is no doubt that the appellant had effective control over the trust. He had right to appoint/remove trustee’s at his will. Further, it is common knowledge that the corporate trustees in tax haven jurisdictions are merely paid service providers and always act according to the directions of their clients.

Following extract of LinkedIn Profile of the Confiance Limited would make this very clear:

Linkedln Profile of Confiance Limited

Linkedln

In case of Rena T Tharani v DCIT, International Taxation [2020] 117 taxmann.com 804 (Mumbai – Trib.) modus operandi of offshore trust business has been explained in sufficient detail. (Para 26-28, 43). Further paras 22-25 of the said judgement also detail the actions taken against firms engaged in helping with tax evasion.

34 Their Lordships has disapproved and deprecated the conduct of the assessee in not signing the consent waiver form, in the judgment reported as Soignee R Kothari’s case (supra)….

44 The relevant question is whether she is beneficial owner of the said company or not. HSBC documents show that she is the beneficial owner, and there is nothing, save and except for self-serving statements of the assessee and contents of some unverified and uncorroborated letter of functionary of HSBC Private Bank- which has been indicted in several parts of the world for colluding with unscrupulous tax evaders and money launderers, to controvert that position….

45. …..Cayman Island is one of the few jurisdictions in the world where public records of the beneficiaries of firms and companies, like GWU Investments Ltd., are not maintained, and it is only with effect from 2023, that is if the promises made by the Government of Cayman Islands can be believed at face value, that such public records will be maintained. That is an ideal situation, as on now, for holding the unaccounted monies through a web of proxy corporate entities. The only persons who are privy to vital information about these transactions are the persons who are privy to these transactions-maybe as owner, as settlor, as beneficiaries or as facilitators or even as accomplices in these manoeuvrings, and when they decline to share the correct information, and thwart further probe in the matter, investigations reach a cul-de-sac……..

.. It is only elementary that direct evidence of illegal transactions of the assessee, as indicated by Hon’ble Supreme Court in the case of Sumati Dayal (supra), “would be rarely available” as such transactions “take place in secret”, and therefore, simply on the ground that such direct evidence is not brought on record by the revenue authorities, the assessee cannot go scot free. As observed by Hon’ble Supreme Court in the said case, “it is upon the alleger to prove that it is so, ignores the reality”. When we follow the path, as laid down by Hon’ble Supreme Court in the case of Sumati Dayal (supra), by “considering surrounding circumstances and applying the test of human probabilities” and do not take “a superficial approach to the problem”, the inescapable conclusion is that the explanation of the assessee is only fit to be rejected…

46. While we have noted the claim of the assessee that she is a discretionary beneficiary of Tharani Family Trust, that fact does not find mention in the base note. As we have clearly analyzed above, the base note shows that the assessee was beneficial owner or beneficiary of GWU Investments Ltd. We may add that in the rema the remand report filed by the Assessing Officer, there is a reference to some unsigned draft copy of the trust deed having been filed before him but neither this deed is authentic nor is it placed before us in the paper-book. The assessee has not submitted the trust deed or any related papers but merely referred to a somewhat tentative claim made in a letter between one Mahesh Tharani, apparently a relative of the assessee and the HSBC Private Bank (Suisse) SA- an organization with a globally established track record of hoodwinking tax authorities worldwide.

There is no dispute that account was in the nominal name of GSW Investments Ltd but the question is who is the natural person beneficial owner thereof As for the Trust, there is no corroborative evidence about the statement, but nothing turns thereon as well. The assessee being discretionary beneficiary owner of the trust, and beneficial owner of the underlying company, is not mutually exclusive anyway but the claim of the assessee being a discretionary beneficiary of the trust is without even minimal evidence.

47. As regards the repeated references to Hon’ble Supreme Court’s judgment in the case of Estate of HMM Vikramsinhji of Gonda (supra),………………….. These observations have no relevance in the present context. Firstly, neither there is any trust deed before us, nor the question before us pertains to taxability of income of the trust. Secondly, beyond a mention in the base note as a personnes legales liees” (i.e. related legal persons), there is no evidence even about existence, leave aside nature, of the trust. Thirdly, the point of taxability here is beneficial ownership of GWU Investments Ltd., a Cayman Island based company, by the assessee. Finally, even if there is a dispute about the alleged trust, the dispute is with respect of taxability of funds found with the trust and the source thereof. Clearly, therefore, the issue adjudicated upon in the said decision has no relevance in the present context. The very reliance on the said decision presupposes that the assessee was discretionary beneficiary simplicitor of a discretionary family trust, and nothing more-an assumption which is far from established on the facts of this case.

In case of Renu Tharani, the Tribunal has relied on the base note received from French government which was in turn received by French authorities through a whistleblower.

In case of Ambrish Dhupelia and Mohan Dhupelia (extracts reproduced below) reliance was placed on information received from German government which also had in turn received it through a whistleblower. Support was also taken from the investigation done by the Permanent Sub Committee of the US senate.

Thus, there is no reason as to why even better evidence of beneficial ownership i.e. Form A cannot be relied upon.

Ambrish Manoj Dhupelia v DCIT, Mumbai [2017] 87 taxrnann.com 195 (Mumbai – Trib.)

Furthermore, I find that in the present case, from the employee of the said foreign bank, sovereign government of Germany comes into possession of documents relating to the deposit in the said bank. These deposit and detail give the name and address, date of birth, passport copy and all relevant particulars of the assessee. Then the sovereign government of Germany passes on this information to the sovereign government of India. Thereafter, the said document and information comes into the possession of Central Board of Direct Taxes and, thereafter, to the assessing officer. In this scenario, the assessee claim that the assessee has no information about the said bank deposit is totally unsustainable. That assessee’s name and address, date of birth, passport copy and other particulars were planted in those documents to the prejudice of the assessee by some unknown person is totally an unbelievable story. That some good Samaritan deposited that huge amount for the benefit of the assessee in the said foreign bank account and gave all the names and address and particulars of the assessee without any information to the assessee, is equally an unbelievable story.

As regards reference of the learned counsel of the assessee for the tax treatment of the discretionary trust is concerned, it is noted that the said trust is in Liechestein. The tax laws of government of India do not apply. Hence, reference to cases which are in the Indian context are not at all applicable. Some of the salient features of trust in liechestein are already mentioned in the above said tribunal order. Hence, reference by the ld. Counsel of the assessee to apply Indian case laws to that governed by law of Liechestein is bereft of cogency.

Mohan Manoj Dhupelia v DCIT (Mumbai) [2014] 52 taxmann.com 146 (Mumbai – Trib.)

3.2. We note that the said documents were received officially by the Government pursuant to an investigation made by permanent sub-committee on investigation of United States Senate…… It is a common knowledge that discretionary trusts are created for the benefit of particular persons and those persons need not necessarily control the affairs of the trust. Still the fact remains that they are the sole beneficiaries of the trust. Thus totality of facts clearly indicate that the deposit made in the bank account of the trust represents unaccounted income of the assessee, as the same was not disclosed by the these assessees in their respective returns in India, consequently, the addition was rightly made by the Assessing Officer and confirmed by the ld. CIT(A).

As regards appellant’s contention that information in KYC forms cannot be relied upon, it is submitted that the Delhi High Court in the following case has given due importance to the KYC documentation for the purpose of holding the person as beneficial owner.

Moin A Qureshi v Commissioner of Income-tax (Central-II) [2018] 96 taxmann. com 566 (Delhi)

36. The documents filed with the BSI Bank Limited, Singapore specifically and categorically mention that the petitioner was a beneficial owner. The veracity of these documents and the entire documentation regarding KYC cannot be ignored and treated as imaginary creation of the officers of the said bank and without knowledge and involvement of the petitioner. The ITSC has made reference to the banking procedures applicable, the strict KYC norms, the legal mandate and the requirement to identify and record details and particulars of the real or beneficial owner. It was noted that the petitioner had not disputed his signatures on the documents. The objection was with reference to date of signing. The identity of the petitioner was also established by verified copy of the passport.

37. ….BSI Bank Limited, Singapore had also conducted due diligence vide Know Your Customer information. This information pertained and was relating to the petitioner, Merin Akhtar Qureshi i.e. beneficial owner. The information states that Ajit Prasad, father -in-law of the daughter of the petitioner, was an existing client of the said bank and two employees of the bank had known Ajit Prasad for the last five years. Ajit Prasad had introduced the petitioner, Moin Aktar Qureshi.

Further, the following facts demonstrate that the appellant was the beneficial owner as well as asset contributor of the alleged trusts:

  • The personal credit card bills of the appellant were found to have been debited Credit Suisse account of Sorwood development S.A.
  • Also, remittance of GBP 4,89,210 was made to the Herritor investment which in turn has granted loan to Kinetic holdings limited. Remittances were also made from bank account of Sorwood development to Herritor investments for dividends. Herritor investments was beneficially owned by appellant.
  • Appellant is mentioned as contributor of the assets to the Banyan trust besides being beneficial owner on Page 39 Para 8.4. of CIT(A) order, Pg 185,186 of Paper book — Volume I.

The appellant’s counsel has incorrectly stated that the Federal Act on Combating Money Laundering in the Financial Sector passed by the Federal Assembly of the Swiss Confederation (Swiss PMLA) and the Indian PMLA are in pan materia.

Firstly, there is no definition of beneficial owner given in the document for Swiss PMLA submitted by the appellant. Hence, it is incorrect to say that it is in pari materia with India PMLA, wherein beneficial owner is defined in Rule 9(3) of the PMLA (Maintenance of Records) Rules, 2005.

Furthermore, nothing is brought on record to explain how these two laws are in pan materia.

During hearing, it was submitted that the purpose of the AML regulations is to identify beneficial owners to stop drug trafficking and terrorism, but what was conveniently ignored was that one of the purposes of the AML regulations is also to stop tax evasion.

It is interesting to note that Section 88 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 has expressly made tax evasion a scheduled offence under the Prevention of Money-laundering Act, 2002

Amendment of Act of 15 of 2003

88. In the Prevention of Money-laundering Act, 2002, in. the Schedule, in Part C, after entry (3), relating to the offences against property under Chapter XVII of the Indian Penal Code (45 of 1980), the following entry shall be inserted, namely:—

“(4) The offence of wilful attempt to evade any tax, penalty or interest referred to in section 51 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.”.

Further, Article 8 of the Agreement on the Swiss banks’ code of conduct concerning the exercise of due diligence (CDB 08) also prohibits the Swiss banks from providing active assistance in tax evasion and similar acts.

Thus, one of the purposes of the documentation under the AML regulations is also to prevent tax evasion. Hence, there is no reason why Form A – one of the important documents under the AML regulations recording ultimate beneficial ownership cannot be used as evidence under tax proceedings.

ISSUE 4

Whether the Tribunal order dated 24 December 2020 in Wealth Tax proceedings can be relied upon by the appellant for the proceedings under BMA? [Ground Nos – 1 and 2]

Extract from the Tribunal Order in case of appellant in appeal no. W.T.A. No. 02 to 08/Mum/2020 – Assessment Year: 2007-08 to 2013-14

33. We are in agreement with the submission of the assessee that the narrow remit of ‘assets’ under section 2(ea) of the Wealth Tax Act, held to be an exhaustive definition, does not permit exigibility of offshore assets of an offshore trust to wealth tax in the hands of the Assessee. We hold that there is no room for intendment in a taxing statute.

38. Coming to the argument of the tax authorities that the undisclosed bank accounts in the foreign bank will be considered as the cash in hand and it will be included in the taxable wealth of the assessee, this argument is misplaced considering the fact that the definition of assets in the section 2(ea) of the Wealth Tax does not have a separate assets category for cash in bank…. The AO cannot stretch the definition of cash in hand, which is not the intention of the legislature. The outstanding balance in the bank will remain outside the provisions of the assets as per Wealth Tax Act.

39…. Even though, in the KYC compliance, the assessee is mentioned as the beneficiary, it does not alter the fact that assessee is one of the beneficiary, and it is fact on record that assessee is not the only beneficiary. Therefore, we have to consider the actual legal ownership rather than deemed ownership which is without any evidence on record, to show that assessee has the legal ownership on bank account and other assets held by Trust.

40. Therefore, in our considered view, the addition made by the AO on account of bank balance of the offshore entities as part of wealth of the assessee is farfetched and without any evidence of ownership as well as the definition of assets does not include the offshore bank account as part of assets as per the Wealth Tax Act, 1957. Accordingly, the ground raised by the assessee in this regard is allowed.

Analysis

It would be pertinent to note that the provisions of the Wealth Tax Act, 1957 (hereinafter referred as WTA) are not in path materia with the provisions of the BMA in as much as that the charge of tax u/s 3 the WTA is on the net wealth i.e. assets belonging to the assessee, whereas the charge of tax under the BMA is on any undisclosed asset (including financial interest in any entity) located outside India held by the assessee or in respect of which he is a beneficial owner. Therefore, as self-evident the scope of the provisions of BMA are far wider as compared to the WTA and thus the findings / observations in Yashovardhan Birla (supra) would not be applicable for interpreting the provisions of the BMA.

Also the scope of assets under BMA clearly includes foreign bank accounts, because there are special rules of valuation for foreign bank accounts [see Rule-3(1)(e) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Rules, 2015]

Hence, the Tribunal order under the Wealth tax act cannot be relied as binding precedent in assessment under BMA due to different nature and wider scope of proceedings under BMA.

ISSUE 5

Whether the assets have already been considered in the proceedings under the Income Tax Act, 1961? [Ground Nos – 2 and 15]

Excerpts from The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (“BMA”)

4. Scope of total undisclosed foreign income and asset

(1) Subject to the provisions of this Act, the total undisclosed foreign income and asset of any previous year of an assessee shall be,-…

(3) The income included in the total undisclosed foreign income and asset under this Act shall not form part of the total income under the Income-tax Act.

5. Computation of total undisclosed foreign income and asset

(1) In computing the total undisclosed foreign income and asset of any previous year of an assessee, -…

(ii) any income, –

(a) which has been assessed to tax for any assessment year under the Income-tax Act prior to the assessment year to which this Act applies; or

(b) which is assessable or has been assessed to tax for anu assessment uear under this Act, shall be reduced from the value of the undisclosed asset located outside India, if, the assessee furnishes evidence to the satisfaction of the Assessing 0 ficer that the asset has been acquired from the income which has been assessed or is assessable, as the case may be, to tax.

(2) The amount of deduction referred to in clause (ii) of sub-section (1) in case of an immovable property shall be the amount which bears to the value of the asset as on the first day of the financial year in which it comes to the notice of the Assessing Officer, the same proportion as the assessable or assessed foreign income bears to the total cost of the asset.

Analysis

Section 4 of the BMA deals with the scope of the total undisclosed foreign income and asset and Section 5 deals with the computation of the total undisclosed foreign income and asset.

In the present case, the assessing officer has only sought to tax undisclosed foreign assets (foreign bank accounts) under the Black Money Act. The dispute is not regarding undisclosed foreign income.

Interplay between Black Money Act and Income Tax Act

Section 4(3) of the BMA which defines scope of the Act provides that undisclosed asset brought to charge under the BMA will be excluded from the scope of Income tax act. Whereas in the Income tax act there is no such provision which excludes assets from BMA if they are already taxed under the Income Tax Act.

Interestingly, in both the laws there is no non-obstante provision ousting the jurisdiction of the Assessing Officer under the other law. Thus, the asset may be brought to tax under either of the laws and section 4(3) of the BMA ensures that there will be no double taxation.

Conclusion

In the present case, the assessment orders for AY 1998-99 to 2014-15 have been quashed by the Bombay High Court in its order dated 10th August 2016. Thus, no income/assets for those assessment years have been assessed under the Income Tax Act.

Also, we have observed in answer to the Issue 2 that the provisions of the BMA [Section 72(c)] are retrospective in nature and any asset that has been acquired or made prior to commencement of this Act, for which no declaration in respect of such asset is made, such asset shall be deemed to have been acquired or made in the year in which a notice under section 10 is issued by the Assessing Officer and the provisions of this Act shall apply accordingly.

Hence, the Assessing Officer under the BMA has right to proceed against the appellant for his undisclosed assets outside which have not been considered under the Income tax Act.

Further, Section 5(1)(ii)(b) of the BMA provides credit for income that has already been assessed under the Income tax Act. In the present case, BMA is invoked only for undisclosed foreign assets. Hence, section 5(1)(ii)(b) does not apply.

Thus, in the absence of the express provisions under the Income Tax Act which bars the initiation of proceedings under the BMA, the tax authorities have correctly proceeded under the BMA.

ISSUE 6

If the appellant was precluded from filing voluntary declaration under Section 59 of the BMA due to express bar under Section 71 of the BMA, can he be liable to tax under BMA?

Excerpt from The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (“BMA”)

Chapter not to apply to certain persons

71. The provisions of this Chapter shall not apply—

(d) in relation to any undisclosed asset located outside India which has been acquired from income chargeable to tax under the Income-tax Act for any previous year relevant to an assessment year prior to the assessment year beginning on the 1st day of April, 2016:

(i) where a notice under section 142 or sub-section (2) of section 143 or section 148 or section 153A or section 153C of the Income-tax Act has been issued in respect of such assessment year and the proceeding is pending before the Assessing Officer; or

(ii) where a search has been conducted under section 132 or requisition has been made under section 132A or a survey has been carried out under section 133A of the Income-tax Act in a previous year and a notice under sub-section. (2) of section 143 for the assessment year relevant to such previous year or a notice under section 153A or under section 153C of the said Act for an assessment year relevant to any previous year prior to such previous year has not been issued and the time for issuance of such notice has not expired; or

(iii) where any information has been received by the competent authority under an agreement entered into by the Central Government under section 90 or section 90A of the Income-tax Act in respect of such undisclosed asset. Explanation. – For the purpose of this sub-clause asset shall include a bank account whether having any balance or not.

The appellant’s counsel has contended that the appellant was precluded from filing voluntary declaration for the undisclosed assets located outside India, since in case of appellant, search was conducted by the income tax authorities in the year 2014.

The said plea is without any legal basis because no provision under the BMA specifically excludes the persons ineligible to file voluntary declaration.

Also, it is elucidated in the first submission by the Revenue, the BMA applies retrospectively. Thus, even assets purchased and disposed of before the BMA came into force are chargeable to tax under the BMA. (See Page 3-6 of the first submission).

Further, the contention of the appellant that he has been precluded from filing voluntary declaration under section 59 of the BMA is only “hypothetical” because he has never admitted owning any undisclosed foreign assets. Firstly, from 2011 till 2014 the appellant was denying any knowledge about these offshore trusts, entities and bank accounts. Later, in 20 January 2015 for the first time (after search was conducted) the appellant sought to explain the said structure as a legacy from Late Mr Pratap Malpani albeit without any evidence.

Hence, the Assessing Officer has correctly assumed jurisdiction under the BMA and must be allowed to proceed against the appellant to unearth the true extent of undisclosed assets located outside India.

36. We have carefully considered the submissions and perused the record. We note that we are sitting in appeal against the dismissal by the ld. CIT(A) to the assessee’s challenge to judicial defect in issuing notice by the A.O. under BM Act to the assessee. We note that the assessee’s challenge in this regard before the ld. CIT(A) was pending for quite some time. The assessee had to approach the Hon’ble Jurisdictional High Court in this regard. The Hon’ble Jurisdictional High Court has given certain direction.

37. The Hon’ble High Court had noted that the assessment proceedings in the meanwhile, were in progress against which the jurisdictional issue was raised. The Hon’ble High Court directed to the ld. CIT(A) that he shall dispose of the pending appeal before it within a period of four weeks from today that was 30.03.2021. That the assessment proceedings to go on. That the results of the assessment proceedings will be subject to the decision of the ld. CIT(A). Now we note that the A.O. has already concluded his assessment proceedings by the time the ld. CIT(A) disposed off the jurisdictional issue . In the said order of dismissal, the ld. CIT(A) noted that he had called for the documents which were relied upon by the Assessing Officer in issuing the notice. The ld. CIT(A) further notes that the A.O. informed him that these documents were duly referred in his final assessment order. Hence, the ld. CIT(A) without actually examining the original documents on the basis of which the A.O. has issued the notice, disposed the assessee’s challenge to jurisdictional issue based upon the final assessment order. Thus, it is amply clear and duly accepted by the ld. CIT(A) that he has not examined the original documents based upon which the notice was issued, rather he has relied upon the final assessment order. In fact, the entire order of the ld. CIT(A) dismissing the jurisdictional issue is elaborately relied upon the final order of the A.O. We note that when the issue before the ld. CIT(A) was jurisdictional defect in issue of notice and the Hon’ble Bombay High Court had directed the ld. CIT(A) to dispose it off and that the assessment proceedings to go on, the reliance by the ld. CIT(A) in dismissing the jurisdictional challenge by taking the huge recourse of the final assessment order and even admitting that original documents were not examined by the ld. CIT(A) is not sustainable in law. While deciding the above jurisdictional issue, the ld. CIT(A) cannot rely upon the final assessment order. In other words, the findings in the final assessment order cannot be relied upon to overcome the jurisdictional defect/challenge. The jurisdictional issue has to be decided by reference to the materials relied upon the A.O. in disposing of the jurisdictional challenge. Hence, the ld. CIT(A)’s extensively reliance upon the final assessment order by the A.O. in dismissing the challenge to jurisdictional defect, is both unsustainable on account of law in this regard as well as the same is in contradiction to the Hon’ble Jurisdictional High Court’s direction in this regard.

38. We further note that the same assessee had been the subject matter of wealth tax proceedings before this ITAT. The assets and the bank accounts in question were already the subject matter to the Wealth Tax Assessment. The ITAT in Wealth Tax assessment has decided the issue in favour of the assessee. Some of the findings of the ITAT in the aforesaid Wealth Tax order has already been extensively dealt with in the aforesaid orders of the ld. CIT(A) but the same may be reiterated in the summary of the same here as well.

39. We note that the ITAT in wealth tax proceedings have already given a finding that the assessee was nominated as one of several beneficiaries of an offshore irrevocable discretionary trust, settled-in the year 1989 by the assessee’s non-resident late maternal uncle Shri Pratap Malpani. That the assessee was not a contributor to the trust structure. That the assessee is not liable to be construed as sole beneficiary of the trust. That the Revenue cannot collapse the offshore trust structure. That the assessee was not a ‘substantial owner’ of the assets settled upon trust held through Knitec Holdings Ltd. That the bank account in foreign jurisdictions pertaining to offshore entities could not be treated as bank accounts of the assessee even though for anti-money laundering purposes the assessee had been declared as ‘beneficial owner’. That the case of the Revenue is not that the investments were moved from India by the settler or any beneficiaries. It is a fact on record that there are no investments which were made by the assessee or the investments were made from India.

40. We note that the above order of the ITAT has not been reversed by the Hon’ble Jurisdictional High Court. Now we note that the above submissions have been rejected by the ld. CIT(A) on the ground that the said order of the wealth tax assessment was not before the A.O. when he issued the notice to the assessee. We find that the Wealth tax assessment order was very much before the ld. CIT(A), he could not have brushed aside the findings by the ITAT in the wealth tax proceedings by claiming that the said order was not in existence when the notice was issued. This is more so when on the other hand the ld. CIT(A) is himself placing reliance upon the final order of the A.O. which obviously was not in existence at the time when the notice was issued.

41 We note that the Hon’ble Supreme Court in the case of Suzuki Parasrampuria Suitings Ltd. (supra) has held that the assessee cannot take shifting stand under different proceedings and such stand was liable to be rejected on the touch stone of the legal maxim of approbate and reprobate. In the present case, we note that the Revenue as well as ITAT cannot take shifting stands under different proceedings, when after evaluation of the same facts the ITAT had taken a decision in favour of the assessee that these assets do not belong to the assessee. Now we at the ITAT cannot take a contrary view by shifing the stand that ITAT’s own findings and decision has no precedential value. This being so, the denial of liability by the assessee under Black Money Act under the jurisdictional challenge duly succeeds in view of the above said ITAT order in Wealth Tax proceedings.

42. Now we note that the legal maxim of approbate and reprobate applies to the Revenue as well. When it has already been accepted by the Revenue authorities in the proceeding before Income Tax Settlement Commission, that they are not doubting the trust deed executed by the uncle of the assessee Shri Pratp Malpani which is in fact a genesis of all the accounts in additions here. Now, the ld. CIT(A) is rejecting the same by holding that the same is not to be relied upon. In our considered opinion, on the touch stone of the Hon’ble Supreme Court decision referred above and the legal maxim of approbate and reprobate, the Revenue cannot be permitted to take a contrary stand in the proceedings before the ITAT that now they are doubting the veracity of the trust deed settled by Shri Pratap Malpani. Once it is held that the Revenue is not doubting the said trust deed, the entire edifice of Revenue’s case in this case fails as it is clear that the said trust was settled by the assessee’s maternal non residential uncle Shri Pratap Malpani. As held by the Hon’ble Bombay High Court in the case of Malaysian International Trading Corporation vs. Mega Safe Deposit Vaults (P.) Ltd. (supra) that where no evidence adduce regarding the foreign law, the presumption is that it is the same as Indian law on the point in consideration. The assessee’s contention in this regard was that in such circumstances, the trust settled abroad has to be taken as under the Indian trust. In such circumstances, the rights and duties of the settler is governed with reference to appointment of trustees and control over assets. In such circumstances, the migration of the trust assets does not alter the irrevocable nature of the trust settlement. The reliance upon the said case laws and the submissions has been rejected by the ld. CIT(A) on the ground that it was not a case were unaccounted documents were unearthed. And the same was claimed to have pertained to a tax heaven case . We note that the above observations itself is fallacious as the veracity of the trust deed had already been not disputed by the Revenue in the proceedings before the Income Tax Settlement Commission. Moreover, these reasons mentioned by the ld. CIT(A) does not warrant that the afore-said case laws from the Hon’ble Jurisdictional High Court is to be ignored, once it is accepted that all the assets in the present case originate from the said trust deed. This is further supported by the decision of Hon’ble Supreme Court in the case of CIT vs. Estate of HMM Vikramsinhji of Gondal (supra).

In Commissioner of Wealth Tax vs. Estate of HMM Vikramsinhji of Gondal [2015] 5 scc 666]: “A discretionary trust is one which gives a beneficiary no right to any part of the income of the trust property, but vests in the trustees a discretionary power to pay him, or apply for his benefit, such part of the income as they think fit. The trustees must exercise their discretion as and when the income becomes available, but if they fail to distribute in due time, the power is not extinguished so that they can distribute later. They have no power to bind themselves for the future. The beneficiary thus has no more than a hope that the discretion will be exercised in his favour.”(Judgment Compilation – Master Tab 1), delievered in wealth tax proceedings, precluding taxability in the hands of the Appellant under I.T. Act until distribution of Trust income, but no liability whatsoever under BMA.

43. On examination from the touchstone of the aforesaid case law, the ownership of these assets cannot be thrust upon the assessee. Hence, the denial of liability by the assessee at the jurisdictional stage also succeeds on this count too.

44. Another point in support in the present case is that the BM Act provides u/s. 4(2) an exclusion for the assets which have been created out of the income assessed in India. The assessee had duly submitted that it has already been assessed to income tax by the Income Tax Officer upto preceding assessment year. This submission was rejected on the ground that as the assessments were subject matter of settlement commission. We note that the settlement commission had rejected the assessee’s plea and these matters & proceedings are already separately going on.Hence by no stretch of imagination can lead to a conclusion that incomes are not been assessed as the Revenue has not dropped its plea/withdrawn its plea, that these incomes are not exigible to income tax. Once it is so held, these assets cannot again be the subject matter of black money proceedings at this stage, as it will amount to double prejudice to the assessee which is not sustainable in law.

45. We further note that another grievance of the assessee is that various materials which have been referred by learned CIT(A) in his order rejecting the jurisdictional challenge have not been confronted to the assessee at the time of learned CIT(A)’s order dismissing the jurisdictional challenge. We note that this is a very germane point as the principle of natural justice in this regard have been ignored by learned CIT(A). It is evident that the catena of documents which learned CIT(A) has referred are in fact lifted by him from the final order of the Assessing Officer to support his order. These were never confronted to the assessee. In this view of the matter order of learned CIT(A) suffers from jurisdictional infirmity in as much as it is contrary to the rules of natural justice. Moreover we note that assessee has duly raised a ground before ld CITA that there is violation of natural justice inasmuch as assessee’s request for a personal hearing in this regard has been rejected by the AO. Ld CIT(A) rejected this by holding that there is no such scope in section 15(1)b.We do not see the basis of such reasoning by Ld CIT(A),when assessee has duly submitted that the documents relied upon have not been confronted to the assessee.Ld CIT(A) in this regard has noted that these documents were not in appeal folder before him and he has simply accepted the AOs report that these documents are referred in AOs final order and the documents have been confronted to the assessee.This is palpable violation of natural justice and ld CIT(A) has fatally erred in rejecting the claim without himself examining the records.This proposition is duly supoerted by Honbe Supreme court decision in the case of Andaman Timber Industries Vs CCE vide order dated sept 2, 2015

46. We further note that in notice to the assessee, the Assessing Officer has referred to the names of certain bank accounts and Form-A obtained from banks for establishment of beneficial owners identity. Now in this regard it is the contention of learned Counsel of the assessee that declaration of beneficial owner in Form A is made for distinct purposes under the Swiss anti money laundering Act. In the submission above it has already been noted that in the aid of Swiss AML Act, the Swiss bankers Association has issued a Code of Conduct for Swiss Banks with regard to the exercise of due diligence (CDB Guidelines), wherein model Form A is prescribed for the declaration of identity of the beneficial owners. However, as clarified by the Swiss Federal Tax Administration, vide its letter dated 30.6.2015 it does not have application for matters of taxation. Hence, mention of assessee’s name in this Form-A cannot be taken as any proof of assessee’s ownership of this asset for tax purpose.

47. Another plea of the assessee is that these assets were already part of income tax proceedings up to preceding assessment year and that for present Assessment Year the assessee has still time to file income tax return. Hence, it is the claim of the assessee issue of notice is premature. This plea of the assessee has been rejected by the authorities below by holding that there is no such bar in the black money act. However, we note that definition of undisclosed asset in the back money act clearly provides that assets created out of income assessed in income tax already shall be excluded. Hence, when the revenue has already assessed these assets under income tax proceedings upto previous Assessment Year and for current assessment year time for filing the return has not expired, assessee’s plea that the issue of notice is premature is tenable and accordingly we accept the same. The bar in the ACT is inbuilt inasmuch as it has been provided that assets out of income assessed to income tax shall be excluded from the purview of undisclosed asset in Black Money Act. Hence, it is abundantly clear that as per the scheme of the act, there cannot be a simultaneously proceedings on the same asset/income under Income Tax Act, 1961 as well as Black Money Act. The doctorine of double prejudice does come into play here. Above discussion amply prove that the assessee’s challenge before the ld CITA to denial of liability in the jurisdiction of the Assessing Officer to issue notice under black money act deserves to succeed.

48. Various other facets of learned CIT(A)’s order as well as submissions noted hereinabove are in connection with the merits of the appeal proceedings of assessment under black money Act. We are conscious that we are only adjudicating jurisdictional issue challenged by the assessee before the Ld CIT(A). As noted above the said appeal before him also had the mandate of Honble Jurisdictional High Court. We shall not travel to the merits of the case which in fact will not be legally permissible when the only issue is jurisdictional challenge. In fact as noted by us learned CIT(A)’s order hereinabove is not sustainable on this count also, as he has dealt with the merits of the assessee’s appeal wherein the mandate of learned CIT(A) was to examine the jurisdictional challenge only which as noted above the ld. CIT(A) has disposed of inter alia without examining the original documents on the basis of which the A.O. had issued notice.

49. In the background of the aforesaid discussion and precedent, this appeal filed by the assessee succeeds.

SA No.61/Mum/2021

50. As the appeal in connection with this stay application has already been decided by us in favour of the assessee herein above, this stay application becomes infructuous and it is disposed of as such.

Pronounced in the open court on 3.9.2021.

Notes:-

[1] SA No. 61/Mum/2021.

[2] (2016) 15 SCC 785.

[3] (2015) 5 SCC 666.

[4] (2018) 10 SCC 707.

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Qualification: LL.B / Advocate
Company: Majesty Legal
Location: Jaipur, Rajasthan, India
Member Since: 23 Aug 2021 | Total Posts: 7
Founder of law firm – Majesty Legal (Advocates & Legal Consultants), Standing counsel for CGST, FEMA,FERA, and ED (Government of India), Standing counsel for Legal Aid, Rajasthan High Court, Jaipur, Standing counsel/consultant for leading industries, companies and firms. View Full Profile

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