Renu T Tharani Vs DCIT (ITAT Mumbai)
The assessee is not a public personality like Mother Terresa that some unknown person, with complete anonymity, will settle a trust to give her US $ 4 million, and in any case, Cayman Islands is not known for philanthropists operating from there; if Cayman Islands is known for anything relevant, it is known for an atmosphere conducive to hiding unaccounted wealth and money laundering, and that does not advance the case of the assessee. This is a jurisdiction which has double the number of companies than resident, most of which remain only on paper, and it will be no naïve to believe that these companies are located here, in a country with around 65,000 residents, for bonafide core activities, rather than the benefits of anonymity, secrecy and liberal tax laws. 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. The assessee before us is closely involved with the transaction and it is unconceivable that the assessee will have no direct knowledge of the owners of the underlying company and settlors of the trust which has her, as she herself puts it, as beneficiary of such a huge amount. This inference is all the more justified when we take into account the fact that the assessee has been non-cooperative and has declined to sign the consent waiver. One of the arguments raised by the assessee, as set out in a chart showing arguments of the assessee- below paragraph 20 earlier in this order, that the assessee could not have performed the impossible act of signing consent waiver because she was not owner of the account is too naïve and frivolous to be even taken seriously. If the assessee was indeed not the owner of the account, there was all the more reason to sign the consent waiver form because it would have established that fact when the HSBC Private Bank (Suisse) Geneva was to decline the information on the basis of that consent waiver. A consent waiver signed by the assessee would have been infructuous in that case, and it could not have done any harm to the assessee. Consent waiver form does not prejudice the claim of the assessee that he does not own the account in question; all it does is, as can be seen from the extracts from consent waiver form format reproduced earlier, is that it waiver assessee‟s rights, if any, under the data protection and banking secrecy laws. The plea of the assessee, as noted earlier, is fit, if at all it is fit for anything, only to be rejected. 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 donot take “a superficial approach to the problem”, the inescapable conclusion is that the explanation of the assessee is only fit to be rejected. In the present case, there is even direct evidence available on record. As the base note categorically states, this is “synthèse individuelle” (individual synthesis, in literal meaning, which refers to „individual‟s profile‟) and name of the person is Renu Tikamdas Tharani, and her address is under the heading “Adresses de la personne physique”(i.e. addresses of the natural person). In the heading “Profils client lies a la personne”(i.e. customer profiles linked to the person), GWU Investments Limited is shown as Nom du profil client (customer profile name) but then the same note shows nature de profil (i.e. profile nature) as Nominatif (nominative, or nominal) and that the Détails du lien ( i.e. link details) between the individual and the company is that of “beneficiary/ beneficial ownership”. It is important to note that the reference to “link details”is in respect of customer profile name, which is stated to be GWU Investments Limited, and only an individual can be beneficiary of the company or beneficial owner of the company, and not the other way round. There is no reference to Tharani Family Trust at this stage and in this section of the base note. That comes at the fag end of the base note under the heading “personnes légales liées”( i.e. related legal persons). Clearly, therefore, the link details, or “détails du lien”, are between the individual and GWU Investments Limited, and these link details clearly show that the assessee is a beneficiary and beneficial owner of the GWU Investments Ltd.
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 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. All that this letter, addressed to one Mahesh Tharani, states is 3As per the request of director, we hereby confirm that, GWU Investments Ltd was holder of the account 1414771. According to our records GWU Investments Ltd. Used to be an underlying company of the Tharani Family Trust for which M rs. Renu Tharani was a discretionary beneficiary. To the best of our knowledge, The Tharani Family Trust was terminated and none of the assets deposited with HSBC Private Bank (Suisse) SA were distributed to M rs. Renu Tharani‘. It is not clear as to how is the director, and of which company; if Mahesh Tharani was a director of GWU Investments Ltd, when he could share this letter, he could have as well shared the information. If he is not the director, he would have at least known the director because director requested the Bank to provide this information to Tharani. Nothing is clear, nor does the assessee throw any light on the same. Be that as it may, this letter does not show deny, nor show any material to controvert, what is stated in the base note i.e. GWU Investments Ltd and the assessee are linked as beneficial owner. 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. There is another letter from HSBC Private Bank (Suisse) SA to the assessee which states that “Further to your request, we hereby confirm that you, M rs Renu Tharani, are not the holder nor, to the best of our knowledge, the beneficial owner of any account opened in the books of HSBC Private Bank (Suisse) SA. However, you are a discretionary beneficiary of a trust called the Tharani family Trust for which HSBC Guyerzeller Trust Company, acts as trustee. No bank account is maintained in the name of the trustee, and we confirm that you are not, nor have your even been, an authorized signatory on the bank account held in the name of the trust‟s underlying company”. As for the first statement made in this letter, it does not show why the base note records assessee as the beneficial owner of the company, and how does the bank reconcile these two conflicting positions taken. As regards the assessee being a discretionary beneficiary, nothing turns on it anyway for the reasons we have discussed earlier in this paragraph. As for assessee not being authorised signatory for GWU Investments Ltd, that is not even the case of the assessee or the position taken in the base note. An HSBC entity, i.e, HSBC Guyerzeller Trust Company, being a trustee for Tharani Family Trust shows that if it was indeed desired by the assessee, trust deed would have been available with the HSBC entity. It‟s a also a coincidence that with all this available all this available information, neither the assessee asks for the trust deed nor does the HSBC share the same. On the contrary, assessee, in one of the communications to the Assessing Officer, specifically states her inability to furnish the same. What these letters state may have some truth- half truth or technical truth, but then these qualified truths are only different forms of falsehood in entirety. There is something seriously amiss in all this; something is rotten in the State of Denmark. There is a series of coincidences, right from the HSBC account being closed after the information contained in the base note coming out and to the underlying company being removed from the name of Register of Companies in Cayman Island, right from assessee living in complete denial about any knowledge about a HSBC Private Bank (Suisse) SA account in her name to her lack of information about the company which is holding US $ 4 million for her, and, despite assessee being purportedly so clean in her affairs, her thwarting any efforts of the income tax department to get at the truth by declining to sign the consent waiver form. It is wholly un-understandable as to how can assessee, on one hand, seek to treat a cleverly worded private letter from HSBC Private Bank (Suisse) SA as gospel truth, and, on the other hand, effectively stall, by declining consent waiver and by stating half truths- even if her statements have an element of truth, the Assessing Officer obtaining direct information from the same organization. There is no meeting ground in this approach. In any case, for the reasons set out above and as evident from the base note, the assessee is beneficial owner of GWU Investments Ltd, Cayman Islands. There is nothing to controvert this fact stated in the base note, and since the assessee has declined consent waiver in this case, the assessee cannot decline correctness of the details obtained from the HSBC Private Bank (Suisse) SA.
As regards the repeated references to Hon‟ble Supreme Court‟s judgment in the case of Estate of HMM Vikramsinhji of Gonda (supra), it is important to understand that it was a case in which a discretionary trust was settled by the assessee and the limited question for adjudication was taxability of income of the trust, after the death of the settlor and in the hands of the beneficiary. It was in this context that Hon‟ble Supreme Court held that the question of taxation in the hands of the beneficiary arises only when he receives the money because, as Their Lordships noted, (Adiscretionary 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.‘ 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 légales liées”(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.
As regards the question of income which can be brought to tax in the hands of the assessee being a non-resident and certain errors in computations on account of duplicity of entries etc, we have noted that the learned CIT(A) has given certain directions which we have reproduced below paragraph 18 of this order, and neither these directions are challenged nor any infirmities are shown therein. Obviously, therefore, there is no occasion, or even prayer, for interference in the same.
As we part with the matter, we have a couple of observations to make. The first observation is that we must add that though the hearing in this case was concluded on 28th January 2020, in view of Covid-19 lockdown in Mumbai city- which is, for all practical purposes, still continuing, with limited functionality of our office, the order is being pronouncement today on 16th July 2020. However, in the light of a coordinate bench decision in the case of DCIT Vs JSW Limited, and vice versa [(2020) 116 com 565 (M um)], the period of lockdown is to be excluded in computation of 90 days period. As further noted in the said order, Hon‟ble Bombay High Court has observed that while calculating the time for disposal of matters made time-bound by this Court, the period for which the order dated 26th M arch 2020 continues to operate shall be added and time shall stand extended accordingly’ and the said order continued to operate till 15th July 2020. Viewed thus, this order is being passed within the permissible time limit in terms of time limit Hon‟ble High Court‟s directions. The second point is that this decision cannot be an authority for the proposition that wherever name of the assessee figures in a base note from HSBC Private Bank (Suisse) SA Geneva, an addition will be justified in each case. The mere fact of an account in HSBC Private Bank (Suisse) SA Geneva, by itself, cannot mean that the monies in the account are unaccounted, illegitimate or illegal. The conduct of the assessee, actual facts of each case and the surrounding circumstances are to be examined, on merits, and then a call is to be taken about as to whether the explanation of the assessee merits acceptance or not. There cannot be a short cut and one size fits all approach to this exercise.
Our conclusions on correctness of addition of Rs 196.46 crores in relation to HSBC Private Bank (Suisse) SA, Geneva
In view of the above discussions, and for the detailed reasons set out above, we approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. The impugned addition of Rs 196,46,79,146, in respect of assessee‟s account with HSBC Private Bank (Suisse) SA, Geneva, is thus confirmed.
FULL TEXT OF THE ITAT JUDGEMENT
1. This appeal, filed by the assessee, calls into question correctness of order dated 17th January 2018, passed by the learned CIT (Appeals) in the matter of assessment under section 143(3) r.w.s. 147 of the Income Tax Act, 1961, for the assessment year 2006-07.
Issues requiring our adjudication in this appeal:
2. The assessee has raised as many as nineteen grounds of appeal, but, as the learned representatives fairly agree, all that we are required to adjudicate upon, in this appeal, is:
(a) whether, on the facts and in the circumstances of this case, learned CIT(A) was justified in upholding the validity of reassessment proceedings,
and, in the event of our holding this issue against the assessee,
(b) whether or not the learned CIT(A) was justified in upholding the addition in the hands of the assessee for Rs 196,46,79,146, being an amount equivalent to US $ 3,97,38,122 at the relevant point of time, held by HSBC Private Bank, Geneva, Switzerland, in the name of Tharani Family Trust, of which the assessee was a beneficiary.
Challenge to validity of reassessment proceedings:
3. Let us first take up the challenge to the validity of reassessment proceedings.
Relevant material facts:
4. So far as this grievance of the assessee is concerned, the relevant material facts are like this. The assessee before us an elderly lady, now in her late eighties. On 29thJuly 2006, she had filed her income tax return, stating her residential address as 301, Embassy Erose, Ulsoor Road, Bangalore and disclosing a returned income of Rs 1,70,800, in Ward 9(1), This case was, by way of an order dated 20th December 2013 passed under section 127 of the Income Tax Act, centralized with the present Assessing Officer. The income tax return filed by the assessee, in the meantime, was not subjected to any scrutiny at any stage. The assessment thus reached finality as such. On 31st October 2014, however, this assessment was reopened by issuance of notice under section 148. The reasons recorded, for so reopening the assessment, are as follows:
Reason for re-opening the assessment
The case of THARANI RENU TIKAMDAS was centralized with the undersigned vide order u/s 127 of the IT Act- 1961 bearing No. 45/Centralization/CIT-IV/201 3-14 dated 20.12.2013. Information has been received in respect of her from .the office of DIT(Inv.), Bangalore.” The information pertains to her having a bank account with HSBC Bank, Geneva bearing a number BUP_SIFIC_PER_ID-5090178411. From the said bank statement, it is seen that she is having a peak balance of USD 39738122 in the said account during the period 2005-06. The records of this office show that this amount has not been considered by her in her return of income and this income therefore has escaped assessment. This evidence has come into the possession of the undersigned; therefore, I have reason to believe that the income to the extent of at least USD 3,97,38,122 has escaped assessment within the. meaning of para (d) to the Explanation 2 below section 147 of the Act.
In light of this, notice u/s 148 of the Income Tax Act, 1961 is issued.
5. In response to the notice so issued, it was submitted by the assessee that the income tax return filed by the assessee on 29thJuly 2006, in Bangalore, be treated as return in response to the notice under section 148. The assessee also demanded the reasons for reopening the assessment, which were eventually furnished to the assessee. The assessee objected to the reopening of assessment, and, inter alia, stated as follows:
With reference to above and further to our letter dated!4th November 2014, we would further like to submit that we are in receipt of your order sheet dated 30th October 2014, wherein you have stated that, the Assessee has maintained a bank with HSBC Bank in Geneva bearing account number BUP_SIFC_PER_ID_5090178411. You have also mentioned in the order sheet that she has maintained a peak balance of USD 39738122 in the above said account during the financial year ended 31.03.2006 hence this is the only reason why you have reopened, the-above said assessment.
To this we would like to submit that the assessee has not maintained any bank account with HSBC Bank in Geneva, hence information you have got is completely erroneous. The assessee is not the owner of the said bank account; hence there is no reason why the above case should be re-opened u/s 1 48.
Without prejudice to above, we would like to submit that the residential status of the assessee during the above said Assessment year is Non resident as defined in section 6(1) of the Income Tax Act, 1961. We enclose herewith a copy of the passport of the Assessee, wherein the dates of departures & arrivals in India are stated therein.
From the dates of arrivals in India & departures from India, you would be able to see that the Assessee has not stayed hi India for more than 182 days in any of the financial years starting from 1st April 2001 to 31st March 2005. Moreover, the total number of days which he has stayed in India during the previous 4 (four) financial years preceding the financial year ended 31st March 2006 is less than 365 days and finally during the previous year relevant to the above mentioned assessment the assessee has stayed in India for less than 60 -days, hence all the conditions as specified in section 6(1) of the Income Tax Act 1961 has been complied with, wherein it concludes that the Assessee is a Non-Resident.
As per the provisions of section 9(1) of the Income Tax Act 1961, the Non-Resident is chargeable to tax only on income which accrues or arises in India, hence, the income which accrues or arises out of India, the same is not chargeable to tax in the hands of the Assessee. In lieu of the above said facts & circumstances of the case, any income which accrues & arises out of India, which includes the income- deposited in HSBC Bank Geneva is not liable to be taxed in the hands of the Assessee as per the provisions of section 9(1) of the Income Tax Apt 1961.
Finally we would like to submit that the assessee has filed its Return of Income for the above mentioned Assessment Year on 29th July 2006, which was enclosed in our letter dated 14/11/2014 as the returned income was below the threshold limit; hence no tax was liable to be paid.
Thus, as the information received to you is incorrect (and) there is no reason why the case should be re-opened, hence, we request you to kindly drop the re-opening proceedings & oblige.
6. These objections, however, did not impress the Assessing Officer. He rejected the objections taken by the assessee and proceeded to frame the assessment under section 143(3) r.w.s. 147 of the Income Tax Act, 1961. Aggrieved, assessee carried the matter in appeal before the CIT(A), inter alia, on the ground that the reassessment proceedings were bad in law, but without any success. Learned also, i nter ali a, CIT(A) upheld the validity of reassessment proceedings and declined to interfere in the matter. The assessee is not satisfied and is in further appeal before us.
Submissions of the parties:
7. Shri Ved Jain, learned counsel for the assessee, begun by pointing out that the assessee is admittedly a non-resident assessee, inasmuch as the impugned assessment was framed on the assessee in her residential status as “non-resident”, and it was thus not at all required of her to disclose her foreign bank accounts, even if any. Learned counsel submits that unlike in the United States, where global taxation of income of the assessee is on the basis of citizenship, the basis of taxability of income outside India, in India, is on the basis of residential status of the assessee. He takes pains to explain the fundamental principles of taxation of global income in India. In response to a question from the bench, he accepts that all he wants to point out is that unless someone in resident in India, taxability of such a person is confined to income accruing or arising in India, income deemed to accrue or arise in India, income received in India and income deemed to have been received in India. None of these categories, he submits, covers the income, even if any, on account of an unexplained credit outside India. He then points out that since 23rd March 2004, the assessee is regularly residing in the United States of America, and that, post the financial year ended 31st March 2006 onwards, she assessee is a non-resident assessee. In this backdrop, learned counsel‟s submission is that so far as a non-resident is concerned, it is not required of such an assessee to disclose any bank account outside India or report any income outside India unless it is covered by the specific deeming fiction which is admittedly not the case at present. It is, therefore, contended that any sums credited in the bank account in question cannot be taxed in the hands of the assessee, and, when it cannot be so taxed, the very foundation of the impugned reassessment proceedings ceases to hold good in law. Leaned counsel submits that the reason for formation of belief must have rational connection with or bearing on formation of belief. Rational connection was said to postulate that there must be direct nexus and live link between material coming to the notice of the Assessing Officer and formation of belief that there is some escapement of income which was taxable in the hands of the assessee. That live link, according to the learned counsel, is missing in the facts of this case. Learned counsel then submits that in any event the assessee did not have a bank account with HSBC, Geneva. What is being referred to in the “base note”, on the basis of which the assessment is being reopened, is not in respect of the assessee but admittedly GWU Investments Ltd, as has been factually found, and, in any case, it is not even a bank statement but statement of investment. It is contended that the Assessing Officer was clearly in error in assuming that the base note is in respect of a bank account. Learned counsel further submits that the assessee has categorically stated, on an affidavit,, that (a) the assessee never had any bank account with HSBC Private Bank, Geneva; (b) that the assessee has never been signatory to any bank account with HSBC Private Bank, Geneva; (c) that the assessee is neither a director or a shareholder of GWU Investment Limited; and (d) that source of deposits made in Geneva has no source in India. It is reiterated time and again that the assessee is a nonresident, that the alleged income, even if any, cannot be taxed in India in the hands of a nonresident, that the assessee did not have any bank account with HSBC Geneva and that the assessee is not a shareholder or director in GWU Investment Limited which is admittedly settlor of the Tharani Family Trust and which has given all the funds for the same. On the strength of these submissions, it is contended that the reasons for reopening the assessment are not sustainable in law. Learned counsel for the assessee takes us through a large number of judicial precedents in support of his arguments. Our attention is invited to a coordinate bench decision in the case of DCIT Vs Hemant Mansukhlal Pandya [(2019) 174 ITD 101 (Mum)] wherein it is inter alia held that where additions were made to income of assessee, who was a non-resident since 25 years, since, no material was brought on record to show that funds were diverted by assessee from India to source deposits found in foreign bank account, impugned additions were unjustified. It is thus contended that the assessee also being a non-resident, such an income in foreign bank deposits, even if that be so, cannot be taxed in the hands of the assessee, and when that be so, the allegation in the reasons recorded for reopening the assessment, even if it is hypothetically assumed to be correct, cannot be legally sustainable basis for reopening the assessment. Learned counsel for the assessee then invites our attention to Hon‟ble Gujarat High Couj, in he case of Sunrise Education Trust Vs Income Tax Officer L(2018) 92 taxmann.com 74], in support of the proposition that assessment could not be reopened for mere verification in respect of alleged unexplained cash deposits in a bank account. A reference is then also made to Hon‟ble Gujarat High Court‟s judgement in the case of Krupesh Ghanshyambhai Thakkar Vs DCIT L(2017) 77 taxmann.com 293] when the assessment is sought to be reopened for deep verification of the claims, such an reopening of assessment cannot be sustained in law. A reference was then made to yet another judgment of the same Hon‟ble High Court, in the case of PCIT Vs Manzil Di nesh Kumar Shah (406 IT R 326) wherein it has been held that a completed assessment cannot be reopened only for verification of information received by Assessing Officer from VAT Department relating to purchase alleged to have been made by assessee from hawala dealers. It is also pointed out that SLP against this judgment has been dismissed by Hon‟ble Supreme Court in the judgment reported as PCIT Vs M anzil Dinesh Kumar Shah L2019] 101 taxmann.com 259 (SC). Learned counsel then invites our attention to the judgment of Honble Rajasthan High Court, in the case of M ukesh M odi Vs DCIT L(2014) 366 ITR 418 (Raj)], wherein it is said to have been held that reassessment proceedings only to for his AO‟s own verification and to clear his doubts cannot be sustained in law. Learned counsel then refers to the decision of a coordinate bench of this Tribunal, in the case of Sonal Arpit Doshi Vs ITO (ITA No. 366/Ahd/16; order dated 21st October 2015), wherein it is held that the reassessment proceedings cannot be initiated merely for verification of certain transactionsLearned counsel then refers to the judgment of Hon‟ble jurisdictional High Court, in the case of Cyrus Kersi Vandervala Vs ITO (WP No. 2551 of 2016; judgment dated 11 January 2017), wherein it is said to have been held that in the case of a non-resident, the reassessment proceedings cannot be started even for non filing of return merely on the basis of certain assumptions about business connection in India which could lead to income taxable in India. It is thus submitted that on these facts, and in the light of the legal position so well settled, the reassessment proceedings cannot be sustained in law. We are urged to hold these reassessment proceedings as bad in law, and quash the same. Shri Avneesh Tiwari, learned Departmental Representative, submits that it is an open and shut case for reopening of assessment. It is stated that the claim of the assessee being non-resident was made only after the reopening of assessment was initiated. In any case, looking to the huge funds found at the disposal of the assessee abroad, such amounts could not have been earned by the assessee after becoming non-resident, i.e. 23rd March 2004. It is pointed out that the income tax return is filed showing a meagre income of Rs 1,70, 800 and a person of such modest means is, on the basis of credible information available from abroad, is found to be at the disposal of US $ 3,97,3 8,122. Obviously, this huge income could not have been earned by the assessee in the US, where she was resident, in one year. Learned Departmental Representative then submits that as per the base note, received by the investigation wing, the assessee was holding an account in HSBC Private Bank Geneva, with BUP Code as 5090178411, and this account was created on 28th July 2004, and the assessee was beneficial owner of the said amount. He submits that the unaccounted monies are not deposited in the Swiss Banks in own names, but through a complex web of layering, nominee directors and trusts or companies, and, therefore, as long as an assessee is a beneficiary of the amounts held in trust by Banks in tax havens, that is a good reason to believe that, unless such amounts are found to be disclosed in assessee accounts or tax returns- which admittedly is the case here, these amounts represent income escaping assessment. Learned Departmental Representative submits that so far as reopening of assessment is concerned, all that is to be seen is whether prima facie there is a reason to believe that some income has escaped assessment, and when one sees a person, with returned income of Rs 1,70,800, being beneficial owner of Rs 196,46,79,146 in a Swiss Bank, there is clearly good reason to believe that income has escaped assessment in the hands of the assessee. Learned Departmental Representative submits that there cannot be any reason for anyone, leave aside an entity of unknown people in a tax haven, leaving such a sum for her as a beneficiary. It is contended that based on the material on record, the Assessing Officer indeed had reasons to believe that the income has escaped assessment. Learned Departmental Representative then takes up these judgments and makes efforts to show how the facts of these cases are materially different from the facts of the case before us. He submits that unless the facts of these judicial precedents are in par i mater ia with the facts of the case before us, the conclusions arrived at in these cases cannot be straightaway applied to the present case. He submits that here is a case in which cogent and specific information has come to be in possession of the Assessing Officer, about the assessee being linked with Swiss Bank account holding huge balance, and the material on record does not indicate means of the assessee to justify such huge investments, and it is for this reason that the assessment has been reopened. The bank account remains undisclosed to the income tax authorities, and the amounts so placed therein have not been considered in the return of income filed by the assessee. It is for these reasons that learned Departmental Representative contends that the reopening of assessment is perfectly justified in law and on the facts of this case. escaping assessment. Learned Departmental Representative submits that so far as reopening of assessment is concerned, all that is to be seen is whether prima facie there is a reason to believe that some income has escaped assessment, and when one sees a person, with returned income of Rs 1,70,800, being beneficial owner of Rs 196,46,79,146 in a Swiss Bank, there is clearly good reason to believe that income has escaped assessment in the hands of the assessee. Learned Departmental Representative submits that there cannot be any reason for anyone, leave aside an entity of unknown people in a tax haven, leaving such a sum for her as a beneficiary. It is contended that based on the material on record, the Assessing Officer indeed had reasons to believe that the income has escaped assessment. Learned Departmental Representative then takes up these judgments and makes efforts to show how the facts of these cases are materially different from the facts of the case before us. He submits that unless the facts of these judicial precedents are in parimateria with the facts of the case before us, the conclusions arrived at in these cases cannot be straightaway applied to the present case. He submits that here is a case in which cogent and specific information has come to be in possession of the Assessing Officer, about the assessee being linked with Swiss Bank account holding huge balance, and the material on record does not indicate means of the assessee to justify such huge investments, and it is for this reason that the assessment has been reopened. The bank account remains undisclosed to the income tax authorities, and the amounts so placed therein have not been considered in the return of income filed by the assessee. It is for these reasons that learned Departmental Representative contends that the reopening of assessment is perfectly justified in law and on the facts of this case. Learned Departmental Representative also vehemently relies upon the orders of the authorities below, and justifies the same. In a brief rejoinder, learned counsel for the assessee reiterates his submissions, and submits that his basic points remains unanswered in the sense that the Assessing Officer himself has framed the assessment in the status of the assessee as “non-resident”and when there is no requirement requiring a “non-resident” assessee to disclose his bank account or income abroad, how can the assessment be reopened on the ground that the assessee failed to disclose the bank account or the assessee did not consider the said foreign bank account in the income tax return. He submits that when an assessee is a “non-resident”it cannot be for the Assessing Officer to examine income of such an assessee outside India or bank accounts held by such an assessee outside. He submits that the Assessing Officer was clearly travelling much beyond the call of, or the scope of, his duty in going into that aspect of the matter. The very foundation of the reassessment proceedings, according to the learned counsel, is vitiated in law, and, for this short reason alone, he must succeed. Once again a reference is made to the judicial precedents, which according to the learned counsel, have not been specifically dealt with beyond too general a line of arguments. It is again pointed out that the assessee did not have any bank account in HSBC Private Bank, Geneva, and that this account was operated by some GWU Investments Ltd which is neither owned by the assessee nor the assessee is a shareholder in the said company. The existence of this account, therefore, cannot be a good ground for reopening of the assessment of the assessee before us. He submits that it is not even a bank statement, but a statement of investment, which is referred to in the base note. The reasons for reopening the assessment are thus factually incorrect too. Whichever way we look at it, it is submitted, the initiation of reassessment proceedings are unsustainable in law. We are thus once again urged to quash the reassessment proceedings.
Our analysis:
8. As we have given our careful consideration to the rival contentions and the material on record in the light of applicable legal position, we have also taken of the factual matrix of this case. Here is an assessee who files her return of income, disclosing a meagre income of Rs 1,70,800, giving a Bangalore address and files the income tax return a ward which was meant for resident assessees. Going by the facts placed by the assessee on record, which are also set out in the paper-book, the Bangalore property was sold in the year ended March 2003, but yet income tax return continued to be filed at that address. It is not clear as to what was the basis of filing the income tax return at Bangalore but then let‟s leave it at that for the time being. The income tax return filed by the assessee, a copy of which is placed before us at page 62 of assessee‟s paper-book, does not at all tick the status as “non-resident”, but there is a clearly visible mark in the status as “resident” On these fact the Assessing Officer, to whom this case was transferred as a result of order under section 127, notices that the assessee has a bank account, as per information in his possession, with HSBC Private Bank Geneva, bearing a number BUP_SIFIC_PER_ID- 5090178411 with a peak credit, during the relevant period, of a sum of more than US $3.97 crores equivalent to around Rs 200 crores at that point of time. The base note, a copy of which is placed at pages 3 to 12 of assessee‟s paper-book, clearly shows “Tharani Renu Tikamdas” as “beneficial owner/ beneficiary” of th s accoun , that her date and place of birth are 10th May 1934 and Hyderabad (Pakistan) respectively, and that the account was opened on 28th July 2004. This note also shows, under the heading “personnes liees aux profile client” (which as simple google translation would show as meaning “people linked to customer profile”), GWU Investments Limited as with “power of adminis ration”. The overall “patrimoine max constatй sur la period” (which as simple google translation would show as meaning “max wealth observed during the period”) on 02/2007 as US $ 562,47,590, but then that aspect of the matter is not relevant for this year. Suffice to note that the residential status of the assessee as shown in the income tax return wa “resident”, and definitely not “non-resident”, that the peak credit at her disposal in this Swiss Bank account was over 11,500 times of her annual income, and that the assessee had admittedly not taken into account this account in her return of income. The claim of the assessee regarding her having a non-resident status in the relevant previous year came much after the reasons recorded, and, quite contrary to this claim, as our perusal of records shows, the assessee herself had claimed the residential status as “resident” in the income tax return. The Assessing Officer has to record his satisfaction about income escaping assessment as on the basis of material in his possession and on record as on the time of recording the reasons for reopening the assessment. A subsequent claim, which was not on record at the time of the reasons being recorded, cannot affect the correctness of these reasons, even though once this claim is made in the assessment proceedings, it will have to be examined on merits and it will have to be adjudicated as such in the outcome of the assessment proceedings. Nothing, therefore, turns on the facts not on record before the Assessing Officer as on the stage of recording the reasons of reopening the assessment. In any case, when the assessee herself is making an incorrect claim in the income tax return, she cannot claim that because the Assessing Officer believed the claim so made, and took initial steps on that basis, the Assessing Officer was in error in taking that path. Of course, all this does not affect the question of determination of her residential status on merits, but that is not the question as on now. The question is whether the Assessing Officer had reasons to believe income escaping the assessment, or not. It is also important to bear in mind the fact that at the stage of issuance of notice, the Assessing Officer is to only form a prima facie view. Explaining this principle, Hon‟ble jurisdictional High Court, in the case of Multi Commodity Exchange of India Ltd Vs DCIT [(2018) 91 taxmann.com 265 (Bom )] [SLP dismissed as reported in (2019) 101 taxmann.com 13 (SC)], has RbserHeG JIIJ LWe find that the power of the Assessing Officer to reopen an assessment under Section 147/148 of the Act on the basis of reasonable belief is not fettled or circumscribed, to be formed only on material found during a tax audit or with material found during examining a case of tax evasion. In fact the basis of fresh tangible material is unqualified i.e. the source of the material could be from any place, however, the only pre-condition is that on the basis of the material so found/obtained by the Assessing Officer, he himself must form a reasonable belief that income chargeable to tax has escaped assessment before issuing a notice for reopening. In fact the Apex Court has observed in Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 161 Taxman 316/291 ITR 500 has observed that if the Assessing Officer for whatever reasons (material) has reason to believe that income chargeable to tax has escaped assessment then jurisdiction is conferred upon the Assessing Officer to reopen the assessment’. As held by Hon’ble jurisdictional High Court, in the case of Multiscreen Media Pvt Ltd Vs CIT [(2010) 324 ITR 54 (Bom)],L the expression “reason to believe” must obviously be that of a prudent person and it is on the basis of the reasons recorded by the Assessing Officer that the question as to whether there was a reason to believe that income has escaped assessment, has to be determined. At the same time, the sufficiency of the reasons for reopening an assessment does not fall for determination, at the stage of a reopening of assessment’. In the light of this legal position, in our considered view, based on the facts above i.e. credible information about existence of her account with HSBC Private Bank Geneva with a peak credit of around Rs 200 crores in the relevant financial year- which is far disproportionate to her reported annual income and which is not taken into account in her return of income, the Assessing Officer was perfectly justified in holding the view that the income has escaped assessment.
9. As regards the judicial precedents cited at the bar, all these cases deal with the situation in which the assessee was stated to be non-resident or when the reassessment was done only for verification of some information. That‟s not the case here. The income tax return filed by the assessee, which was available at the time of recording the reasons for reopening the assessment, did not show the status of non-resident. The recording of reasons cannot thus be faulted. Whatever claim is made subsequently is required to be dealt with in the subsequent proceeding but it will not vitiate the validity of reasons recorded for reopening the assessment. The facts of the decision cited on the line of reasoning that cases of nonresidents cannot be reopened on the basis of existence of foreign bank account, in any event, are not in pari materia inasmuch as in none of these cases the assessee had filed the income tax return in the status of resident. As regards the decisions that reopening cannot be done for mere verifications, the present case is not a case which some general and vague information is received about the assessee, which may or may not lead to an income escaping assessment in the hands of the assessee, and which is thus required to be examined on merits, but of a very specific cogent information regarding a bank account, with complete details that is good enough for holding at least the prima facie view that income has escaped in the assessment in the hands of the assessee. The peak balance in the account, which has subsequently come to the knowledge of the Assessing Officer and on the basis of which reopening is done, is tens of thousand times more than annual income of the assessee.
10. We have also noted that the assessee had shifted to the United States only just seven days before the beginning of the relevant previous year, and it will be too unrealistic an assumption that within these seven days plus the relevant financial year what the assessee could have earned this huge amount of around Rs 200 crores, which, at the rate at which she did earn in India in the last year, would have taken her more than 11,500 years to earn. Even if one goes by the basis, though the material on record at the time of recording reasons did not at all indicate so, that the assessee was a non-resident in this assessment year, which is, going by the specific submissions of the assessee, was admittedly first year of her “nonresident”status, it was wholly unrealistic to assume that the money at her disposal in the Swiss Bank account reflected income earned outside India in such a short period of one year. Viewed thus, whether the assessee was a resident in India in this year or not, the Assessing Officer would have been perfectly justified in holding the “prima facie”view that, de-hors her new acquired non resident status, the peak amount of US $ 3,97,38,122 “not being considered in her income tax return”shows that “income has escaped assessment”in the hands of the assessee. Be that as it may, since the assessee did not disclose the status of “nonresident”in the income tax return filed by the assessee anyway, and the reasons recorded for reopening the assessment can only be on the basis of material on record or the information coming in the possession of the Assessing Officer- which indicated that the assessee was a “resident”in the relevant previous year, this aspect of the matter is wholly the sole and decisive factor leading to our conclusion about correctness of the reasons recorded for reopening the assessment.
Our conclusions on validity of reassessment proceedings:
11. In the light of the detailed reasons analyzed in the foregoing discussions, as also bearing in mind entirety of the case, in our considered view, the correctness of reopening of assessment, on the facts of this case and in the light of settled legal position, cannot be faulted We confirm the action of the authorities below on this point and decline to interfere in the matter.
Challenge to addition of Rs 196.46 crores to the returned income
12. We now turn to the question as to whether or not the learned CIT(A) was justified in upholding the addition in the hands of the assessee for Rs 196,46,79,146, being an amount equivalent to US $ 3,97,3 8,122 at the relevant point of time, held by HSBC Private Bank, Geneva, Switzerland, in the name of Tharani Family Trust, of which the assessee was a beneficiary.
The relevant material facts:
13. To adjudicate on this question, facts of the case, in detail, need to be taken note of. The assessee before us is an individual. The assessee had filed her income tax return, on 29 th July 2006, disclosing an income of Rs 1,70,800 for the relevant previous year, but subsequently the investigation wing of the income tax department, as noted in the earlier part of this order, received information that the assessee is having a bank account with HSBC Private Bank (Suisse) SA Geneva. Based on this information, a copy of which is placed before us at pages 3 to 12 of the assessee‟s paper-book, this case was reopened for fresh assessment on 30th October 2014. When the assessee was confronted with the information so received by the Assessing Officer, the assessee‟s representative, vide letter dated 9th January 2015 (wrongly stated to be letter dated 9th January 2014 in the paper-book; copy placed at pages 37 onwards in the assessee‟s paper-book), wrote to the Assessing Officer that “enclosed please find herewith a letter dated 14th November 2015 and 5th September 2011, which confirms that Mrs Renu Tharani has neither been an account holder of HSBC nor a beneficial owner of any assets deposited in account with HSBC Private Bank (Suisse) SA, Switzerland, during the last 10 years”. It was further stated that HSBC Private Bank (Suisse) SA has also “confirmed that GWU Investments Ltd was holder of the account number 1414771, and, according to their records, GWU Investments Limited used to be an underlying company of Tharani Family Trust for which Mrs Renu Tharani was a discretionary beneficiary”and that “(t)he Tharani Family Trust was terminated and none of the assets deposited with them were distributed to Mrs Renu Tharani”. It was further stated that “with this letter, as an evidence, it is now very clear that Mrs Renu Tharani does not hold any account with HSBC Private Bank (Suisse) SA, either in Geneva or any other place in Switzerland, hence the base note issued by you is inaccurate as she does not have any account with HSBC Bank Geneva bearing number BUP_SIFIC_PER_ID_5090178411 or any other number”. Copies of HSBC Private Bank (Suisse) SA‟s letters dated 5th January 2015 from to one Mr Mahesh Tharani in China, and dated 5th September 2011, copies of which were also placed on record at pages 39 and 40 of assessee‟s paper-book, were also furnished to the Assessing Officer. In a subsequent communication dated 16th February 2015- a copy of which is placed before us at paper-book pages 41 onwards, the Assessing Officer was further, inter alia, informed as follows:
In the letter dated 5th January (2015) received from HSBC Private Bank (Suisse) SA in Zurich also confirms the fact that account number 1414771 which is started in your base note belongs to GWU Investments Ltd, having its address at Avalon Management Limited, Landmark Square, 1st floor, Earth Close 64, West Bet Beach South, Grand Cayman, (PO Box No 715, KY1-1107), and it does not belong to Mrs Renu Tikamdas Tharani. The bank further clarifies that as per their records GWU Investments Ltd used to be an underlying company of Tharani Family Trusts for Mrs Renu Tharani was a discretionary beneficiary
The HSBC Bank in Geneva may have asked GWU Investments Ltd the proof of identity as well as proof of address of all the beneficiaries. The company may have provided my passport as proof of her identity and proof of address. As the address mentioned in the passport is that of Mumbai, hence the base note showed the account of GWU Investments Ltd along-with my Mumbai address.
As the address does not maintain any bank account with HSBC Private Bank (Suisse) SA in Switzerland, the question of explaining any source of deposit does not arise. Without prejudice to above, the HSBC Private Bank (Suisse) SA also confirms the fact, in their letter dated 5th January 2015, that according to their best of knowledge, Tharani Family Trust (GWU Investments Limited) has been terminated and none of the assets deposited with HSC Bank Private Bank (Suisse) SA were distributed to Mrs Renu Tharani
14. A copy of the assessee affidavit dated 12th February 2015 and notarized at China, was also filed before the Assessing Officer. A copy of this affidavit was also placed before us at pages 44 and 45 of the paper-book, and this affidavit stated as follows:
I, Mrs Renu Tikamdas Tharani aged 81 years, residing in 6, Country Club lane, Florham Park, New Jersey 07932, do solemnly affirm as under;-
1) I am an Indian Citizen till date & I holding an Indian Passport number At present the address mentioned in my Indian passport is 1 Prabhat building, ground floor, ‘B” Road, Church Gate, Mumbai 400020,
2) I have a Permanent Account Number AAXPT4838Q.
3) I am a Permanent Resident of United States of America Since 23rd March, .2004. I neither have nor ever had any business connections in India nor was I doing any business when I was staying in India.
4) I have already submitted you a copy of my Passport from 24th May, 2001 onwards till date which proves the fact that I am a Non-Resident during the financial year ended 31/03/2006 & thereafter
5) A Letter from “HSBC Private” Bank (Suisse) SA dated 5th January 2015 confirms the fact that no payment was made to me either as a beneficiary or as a beneficial owner by GWU Investments Limited who has its registered office at: address: C/o Avalon Management, Limited, Landmark Square 1st floor, Earth close 64, West pat Beach South, Grand Cayman, P.O.Box 715, KY1-1107, Cayman Islands (CYM).
6) I have received a notice under section 148 of the Income Tax Act 1961 dated 3151 October, 2014 for the Assessment Year 2006-2007 as well as for Assessment Year 2007-2008 under the pretext that I maintain a bank account with HSBC Bank in Geneva Switzerland bearing number BLIP_SIFIC_PER_ID_50901 78411 & that I have maintained a peak balance of USD $ 3,97,38,122/- during the financial year relevant to the Assessment Year 2006-2007 & a peak balance of USD $ 23,55,851.60 during the financial year relevant to Assessment year 2007-2008.
To this, I solemnly affirm under oath that I do not maintain nor I had any account with HSBC in Geneva in my name, hence the question of being the owner of the above said funds does not arise. A certificate from HSBC Private Bank (Suisse) SA dated 05th January 2015 & 5th September, 2011 confirms the fact that I do not have or maintain any bank account in HSBC Geneva hence the question of mentioning you the source of deposits in HSBC Geneva does not arise.
7) Subsequently I received a base note from the Deputy Director of Income Tax (International Taxation) -1 (1), Room No. 117, Scindia House, Ballard Estate, N. M. Road, Mumbai-400 038 which is neither signed or sealed by the Income Tax Department alleging that the account number BLIP_SIFIC_ PER_ID_ 5090178411 is in the name of GWU INVESTMENTS LTD wherein it is said that I am the beneficial owner or the beneficiary. To this I would like to solemnly affirm that I have not received any amount from the above said company, either as a beneficiary or as a beneficial owner.
8) The bank account stated in the base note belongs to GWU Investments Ltd and does not belong to me. The HSBC Bank in Geneva may have asked from the GWU Investments Ltd the proof of identity & proof of address of all the potential beneficiary’s & beneficial owners. The company might have provided my passport as a proof of identity & proof of address. As the address mentioned in my Indian passport is that of Mumbai hence the base note states the same address.
9) I personally had a residential property in Bangalore which was sold by, me during the financial year ended 31.3.2003. The sale proceeds of this property were deposited into my account with Syndicate Bank in Bangalore. The question of depositing the Sale proceeds of any asset in HSBC Geneva Account does not arise.
15. It was, vide letter dated 25th February 2015, contended that the assessee has duly discharged the onus “by getting a clarification from the HSBC Private Bank (Suisse) SA that GWU Investments Ltd is an underlying company of Tharani Family Trust and she is only a discretionary beneficiary”. A reference was then made to Hon‟ble Supreme Court‟s judgment in the case of Commissioner of Wealth Tax, Rajkot v. Estate of HMM Vikramsinhji of Gonda (2014) 45 com 552 (SC) in support of the proposition that in the case of beneficiary of a discretionary trust, income can only be taxed when the income is actually received, but then in the present case, the assessee has not received any money in the capacity of beneficiary. It was submitted that “in the light of the above said facts, there is no reason as to why you should insist in asking the assessee to provide you the details of the account standing in the name of GWU Investments Ltd, as she is in no position to provide you the details for the reasons mentioned in the above para”.
16. None of these submissions, however, impressed the Assessing Officer. He rejected the submissions made by the assessee, and proceeded to make an addition of Rs Rs 196,46,79,146, being an amount equivalent to US $ 3,97,38,122 at the relevant point of time, by observing as follows:
12. The submission of the assessee are considered. The assessee has not provided the bank account statement in which she is the discretionary beneficiary nor has explained the sources of deposits made in the said amount. This is not acceptable because of the following reasons:
(a) The assessee is a discretionary beneficiary of the account held by the Tharani family Trust in HSBC, Geneva in the name of GWU Investments. She is a senior member of the family (Date of Birth 10.5.1934). It is surprising that she does not know about the settler of the Trust as well as the sources of deposits made in the HSBC account. No bank account statement has been provided nor the source of deposits made in the account explained by the assessee even after specific queries were raised on this.
(b) It is also surprising that as a beneficiary she did not receive any assets when the Tharani Family Trust was terminated and if that be so, then where all the money went after termination of the Tharani Family Trust is open to question and the same remains unexplained.
(c) The assessee has an address in India. As per the base note, the address is 1 Prabhat, 28B RD Churchgate, Mumbai – 400 020 which is recorded as her legal address. Further, during the years under assessment, she was filing her return of income with ITO, Ward 9(1), Bangalore in which her address is NO. 7, Embassy Erose, Ulsoor Road, Bangalore, Karnataka’ and ’38/2, Berlie Street, Langford Road, Bangalore. Even though the returned income were not substantial, these facts show that she is having her interests in India.
(d) Having interests and assets in India and not producing the details of an account that she ought to know creates a circumstance in which she is holding back the information that is prejudicial to her interests.
13. The assessee relied on the decision of the Hon’ble Supreme Court in the case of Commissioner of Wealth Tax Rajkot Vs. Estate of Late HMM Vikramsinhji of Gondal (Civil Appeal 2312 of 2007). However it must be understood that the main question before the Hon’ble Supreme Court in that case was whether the trusts settled in the UK were in the nature of specific trusts or discretionary trusts in order to determine whether or not income of the Trust should be included in the return of income of the settler of the Trust being the ex-ruler of Gondal Shri Vikramsinghji and on his death to his son. Shri. Jyotendrasinhiji who was the appellant in this case. The assessee during the assessment proceedings has not brought on record the various details of the Tharani Family Trust in order to show that this decision of the Hon’ble Supreme Court is applicable to her case. In fact, the assessee has not brought on record any material evidence about the Tharani family trust apart from the letter of HSBC that she is a discretionary beneficiary; this fact is already mentioned in the base note itself.
On the other hand, it must be seen that underlying company of the Tharanэ family trust, i.e. GWU Investments Ltd is a company having address in the Cayman islands which is a tax haven and the account is maintained in HSBC, Geneva which is known for its banking secrecy laws and in recent times has faced investigation from various authorities in its role in facilitating tax evasion of its clients. Considering the facts of this case, the decision of the Hon‟ble ITAT, Mumbai in the case of Mohan Manoj Dhupelia and other in ITA no. 3544/Mum/ 2011 etc, is directly applicable to this case. In this case, the assessee is a beneficiary of Ambrunova Trust having an account in Liechtenstein Bank which is another tax jurisdiction known for its secrecy law and modest tax regime. In fact, in the order of the ITAT, it has been concluded that Liechtenstein jurisdiction qualifies as an off shore financial centre due to a very modest tax regime, high standard of secrecy laws and further foreign investors had the opportunity to establish companies or trust in the principality of Liechtenstein to the enjoy the advantages of off-shore financial centre
The ground of appeal before the Hon’ble ITAT in this case was as follows:
“The ld. Commissioner of Income tax (Appeals), erred in confirming the order of the Assessing Officer making an addition of Rs.2,34,64,398/- on account of alleged undisclosed income, without appreciating the fact that the alleged trust was discretionary trust as neither the amount was accrued nor credited to the Appellant’s name, hence addition cannot be made in the hands of the Appellant”.
The Hon’ble Mumbai ITAT dismissed this ground of appeal raised by the assesse and held that discretionary trusts are created for the benefit of particular persons and those persons need not necessarily control the affairs of the trust. The bank account of the trust represents unaccounted money of the beneficiaries even though no benefit were transferred to them.
13.1 Considering the facts of the case and the decision of the Hon‟ble Mumbai ITAT as cited above it can be concluded that the bank account of the trust represents unaccounted money of the assesse. Considering the fact that the assessee is an Indian having interests and assets in India that no details were given to show the source of money deposited in the HSBC account leads to the circumstances that this unaccounted money is sourced from India. In absence of anything contrary, the only logical conclusion that can be inferred is that that the amounts deposited are unaccounted deposits sourced from India and therefore taxable in India. This presumption is as per the provisions of section 114 of The Indian Evidence Act, 1872 which reads as follows:
“Section 114. Court may presume existence of certain facts-
The Court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particulars case.
The Court may presume-
(g) That evidence which could be and is not produced would, if produced be unfavrorable to the person who withhold it….”
Section 114(g) of The Indian Evidence Act, 1872, thus clearly says that the Courts can presume existence of certain facts if the person liable to produce evidence which could be and is not produced, which if produced would have been unfavorable to the person who withhold it.
13.2 Further, the provision of Section 5(2) of the Act is reproduced as under:-
“ Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident included all income from whatever source derived which-
(a) Is received or is deemed to be received in India in such year by or on behalf of such person, or
(b) Accrues or arises or is deemed to accrue or arise to him in India during such year.”
During the assessment proceedings and as can be seen from the facts of the case that the assesse has not made out a case that the deposits in the above mentioned accounts in HSBC, Geneva do not all within the ambit of this provision of law.
13.3 As the assesse has chosen not to produce the details of his HSBC bank accounts and the source of deposits thereof, even though he could have been obtained all the details/evidences for the same, the only corollary that could be drawn is that the assesse has decided to withhold the information as if producing it would have gone against him. Thus, as per the provisions of Section 114 of The Indian Evidence Act, 1872 also, it need to be held at this stage that the information/details not furnished were unfavorable to the assesse and that the source of the money deposited in the HSBC account is undisclosed and sourced from India. Nova Promoters and Finlease (P) Ltd. 342 ITR 169 (Del), highlighting the legal effect of section 68 of the Act, the Division Bench has observed in para 32 that “ The tribunal also erred in law in holding Assessing Officer ought to have proved that the monies emanated from the coffers of the assesse company and came back as share capital. Section 68 permits the Assessing Officer to add the credit appearing in the books of account of the assesse if the latter offers and explanation regarding the nature and source of the creditor the explanation offered is not satisfactory. It placed no duty upon him to point to the source from which the money was received by the assessee.
13.4 The Hon’ble Supreme Court in the case of Sumati Dayal Vs. Commissioner of Income Tax (1995) 214 ITR 801 (SC) held that income tax proceedings are civil proceedings and the degree of proof required is to be judged by preponderance of probabilities. The Hon‟ble Supreme Court, in the case of CIT v Durga Prasad More [1971] 82 ITR 540 (SC), has held that “the taxing authorities were not required to put on blinkers while looking at the documents produced before them they were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents….The apparent must be considered as real only it is shown that there are reasons to believe that the apparent is not the real and that too taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probability…. Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and tribunals have to judge the evidence before them by applying the test of human probabilities. The Hon’ble Punjab and Haryana High Court, in the case of Som Nath Maini v CIT [2008]306 ITR 414 (Punj.&Har.), has held that “the assessing officer is to apply the test of human probabilities for deciding genuineness or otherwise of a particular transaction. Mere leading of the evidence that the transaction was genuine, cannot be conclusive. Any such evidence is required to be assessed by the assessing officer in a reasonable way. Genuineness of the transaction can be rejected in case the assessee needs evidence, which is not trustworthy, and the Department does not need any evidence on such an issue. In case of Smt. Vasantibai Shah 213 ITR 805 (Bom) the court observed that The Income tax Officer is entitled to take into consideration the totality of the facts and circumstances of the case and to draw his own inference on the basis thereof. Circumstantial evidence in such cases is not impermissible. Incases like this it is only the circumstantial evidence which will be available. No direct evidence can be expected ” In case of JS Parker 94 ITR 616 (Bom) it was held that” the tax
liability under the Income tax Act is of civil nature. To fasten a tax payer with such a liability it is not necessary that the evidence should be in the nature of “beyond doubt” as is required to fix a criminal liability. Tax liability can be fastened on the basis of preponderance of probabilities.”
14. In view of the above, the peak amount as appearing in the Base Note of
the assessee‟s HSBC account in AY 2006-07 being USD 44,041,227.22 which translates to Rs. 196,46,79,146/-(@Rs 44.61 per USD being the exchange rate on 31.03.2006 as per RBI) is hereby added to the total income of the assessee which is received or it deemed to be received in India in this year by the assessee or on his behalf or accrues or arises or is deemed to accrue or arise to him in India during this year.
17. Aggrieved, assessee carried the matter in appeal but without any success. Learned CIT(A) confirmed the conclusions so arrived at by the Assessing Officer, and observed as follows:
21. The focus of the submission is shifting responsibility on Assessing Officer without furnishing any supplementary and relevant details. Vital facts (at cost of repetition) regarding the entities involved/persons are as under
A. Renu Tharani is the beneficiary of Tharani Family Trust.
B. Renu Tharani is the sole beneficiary
C. Tharani Family Trust is the sole beneficiary of GWU Investments Ltd
D. Ren Tharani holds interest in GWU Investments Ltd through Tharani Family Trust
E. Income attributable directly or indirectly to GWU Investments Ltd or Tharani Family Trust pertains to Smt. Renu Tharani
F. GWU Investments Ltd having address in Cayman Islands has
investment managed as Shri Haresh Tharani, son of the appellant.
The Assessing Officer has rebutted the submission of the assessee before him. Virtually the same submission on the aspect is reiterated before me. As Assessing Officer has effectively rebutted the same, backed by judicial precedent, I hold that the reasons recorded in rejecting various submissions in the assessment order. The submission before me highlights certain drawbacks in the finding of the Assessing Officer is in order. It can be seen that arguments like “The Assessing Officer has also not brought any material to show and demonstrate that any money has been deposited by the assessee” are placed when the onus is on assessee that the same is explained lies with her, as judicially accepted. Another claim is full co-operation which is unacceptable since consent waiver form was not furnished when the Assessing Officer sought for same at the time he issued the first posting notice. Further, he cites that in the case relied upon by Assessing Officer, the assessee concerned is a resident where as the appellant is non-resident. This is not the issue here and the issue is decided on the totality of various circumstances and facts, discussed in this order The holding pattern of entities concerned and the contents of the base note cement the issue. The fact that the appellant is sole beneficiary implies that there is never a case of distribution and all income concerning the asset only belongs to her i.e. will accrue or arise only to her from the moment beneficial rights came to the appellant.
22. E. Information provided by appellant to justify their claim
