Rashesh Manhar Bhansali Vs ACIT (ITAT Mumbai)
Facts- Assessee argued that the alleged undisclosed foreign bank account was operated during the assessment year 2008-09 to 2010-11. The same was well before the Black Money Act came into force.
Conclusion- With regard to applicability of Black Money Act for the assessment year 2008-09 to 2010-11 it was held that the question appears to be infructuous and wholly academic.
We, therefore, hold that an undisclosed foreign bank account per se can indeed be treated as an asset under section 2(11) of the Black Money (Undisclosed Foreign Income & Assets) and Imposition of Tax Act 2015.
We uphold the action of the AO in bringing to tax, in the hands of the assessee, the income reflected, to the extent information was available to him, in respect of undisclosed accounts with UBS AG, Singapore, under the Black Money (Undisclosed Income and Assets) & Imposition of Tax Act, 2015. The order of the Assessing Officer is thus restored and the relief granted by the learned CIT(A) is vacated.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. This set of cross-appeals call into question the correctness of the order dated 5th July 2021 passed by the learned Commissioner (Appeals) in the matter of assessment under section 10(3) of the Black Money (Undisclosed Foreign Income & Assets) and Imposition of Tax Act 2015 (hereinafter referred to as the BMA’) for the assessment year 2017-18.This is amongst the first few cases, which is perhaps only the beginning of this new stream of cases, reaching this Tribunal concerning the assessments under thisAct. This legislation, it may be recalled, was brought in by the present Government in 2015, as a part of a series of measures, to address the menace of undisclosedincome and assets stashed abroad.
Factual backdrop:
2. It is a case where in based on the intelligence inputs with respect to offshore entities in the British Virgin Islands (BVI),that th eincome tax investigation wing claims to have learnt that Gold Jewel Corporation (GJC-BVI in short), a company formed in the BVI on 7th July 2008, had its beneficial owners in India and that GJC-BVI operated certain bank account in the UBS, AG, Singapore branch (UBS Bank, in short). It appears that this input wasinvestigated further, information was successfully requisitioned from, amongst others, the Government of Singapore under the ‗exchange of information‘ clause in the India Singapore Double Taxation Avoidance Agreement [(1994) 209 ITR (Stat) 1],and the inputs available to the investigation wing were analysed. The two undisclosed bank accounts reflect credit entries of US$ 122,011,244 and US$ 25,011,282 (equal to Rs 999.74 crores, as computed by the Assessing Officer by adopting the rate of 1US$ as equal to INR 68), but then many of these entries were intra-bank and contra entries. The incorporation documents of the GJC-BVI, the documents regarding the opening of and operation of the bank accounts with UBS,AG-including beneficial owner declaration, correspondence, account holder‘s instructions and bank statements, the KYC documents- including passport copies of the beneficial owners, and several other critical documents were obtained by the investigation wing. It was also found that Portcullis TrustNet BVI Ltd, (described as its incorporator and its first registered agent) assisted the assessee, or rather its ‘master client‘ (a term used for the persons who coordinate the incorporation of an offshore entity, such as a banker), i.e. UBS AG‘s Singapore branch, in the incorporation of GJC-BVI, and the said entity was incorporated as a company under the BVI Business Companies Act, 2004. It was also found that during the period 2008 to 2011, certain bank accounts abroad were maintained and operated by Rashesh Manha rBahansali (RMB- in short, or ‘the assessee before us‘) and his wife Ami Rashesh Bhansali (ARB- in short, or ‘the assessee‟s wife‘) and large amounts of credit entries were recorded in these accounts. One of these accounts (i.e. account no. 161753) was in the name of GJC-BVI and it was opened on 4th September 2008 and closed on 16th May 2011. This account showed credit entries of US $ 122,011,244 (equivalent to Rs 829,67,64,592 converting @ 1USD= INR 68). There was one more account (i.e. account no. 137274) was in the name of RMB, it was closed on 8th October 2008, and it showed credit entries of US$ 25,011,282 (equivalent to Rs 170,07,67,176). It appears that there was perhaps one more bank account, i.e. account no. 611254 in the same bank and this account is stated to be margin account of GJC‘s account no. 161753, but that does not find mention anywhere in the assessment or the appellate order before us, and is thus not a subject matter of proceedings before us. None of these accounts was reflected in the income tax returns filed by the assessee before us or by his wife, i.e. by RMB or ARB. It may be added that the investigation wing had some information, even if not backed by evidence or even if in the nature of preliminary leads, about assessee‘s connections with offshore companies- as evident from the summons dated 19th July 2013, issued by. The Dy Director of Income Tax (Investigations) which specifically required the assessee to disclose information about offshore entities ―in which you or your family members….. are promoter, partner, proprietor, trustee, settlor, beneficiary etc” and ―state whether interest in such offshore entities were disclosed to the income tax authorities”. Nothing further happened thereafter, except for taking the reply on record. A similar summons, with a requisition for the same information, was again issued on 24th November 2014, by the then Dy Director of Investigation. Copies of this summons and replies thereto are placed before us on pages 1-24 of the paper book filed by the assessee. The assessee was in denial mode and did not volunteer any information about the GJC-BVI or the bank accounts with the UBS Bank, Singapore. No such information was shared with the income tax authorities. It appears that the inputs available with the investigation wing were investigated further and relevant information was gathered from the agencies in different parts of the world. Armed with the information so collected, the investigation wing took steps to conduct search and seizure operations to take the matter to a logical conclusion.
3. It was in this backdrop that a search and seizure operation was carried out, on 17th March 2016, on the residential and commercial premises of the assessee before us. During these search operations, some of the material so collected by the investigation wing was confronted to the assessee, but assessee feigned completed ignorance about the GJC-BVI and about the offshore bank accounts, as described above, with the UBG AG‘s Singapore branch. During these search operations, a statement of the assessee was recorded under section 132(4) and the assessee was specifically asked about the ―particulars such as name and address of offshore entities like companies, firm, proprietary concerns or trusts etc. in which, either you or any of your family members are the director(s), authorized representative(s) or beneficial owner(s) or trustee(s), manager(s) or master client(s) or settler(s) or are present in any official capacity‖ butthe assessee replied that “I am not personally the owner of any offshore entity. However, M/s Glodiam International Ltd. where I am a director has a fully owned subsidiary in New York in the name of M/s Goldiam USA Inc. and a Joint Venture called M/s. Goldiam HK Limited in Hongkong. When asked about the business entities who have interest in offshore companies, the assessee once again referred to these companies and stated that “Yes, M/s. Goldiam International Limited has a wholly-owned subsidiary in the USA called M/s. Goldiam USA Inc., in the USA. Further, there is also a Joint Venture company naming M/s. Goldiam HK Limited, Hongkong (A Joint venture between M/s. Goldiam International Ltd, Mumbai and M/s. Dia Gold Designs Limited or Mr. Milan Mehta or any of his family member (name of the other JV partner is subject to verification)”. When the assessee was asked whether he or any of his family members own any offshore companies or bank accounts, the assessee categorically replies in negative and stated that to the best of my knowledge, the answer is No”, and same was the position with respect to the question whether the assessee or any of his family members have earned any interest or dividend income from an offshore entity or have made any investment in any offshore entity. The next set of questions were about the specific information that the investigation wing had already gathered, but the assessee was completely in denial about the same. Some of these questions put by the search team and the answers as given by the assessee, which reflect the above position, are reproduced below:
Q 40. Are you aware about a concern M/s. Gold Jewel Corporation, BVI?
Ans. To the best of my knowledge, answer is No.
Q.41 Do you have any relation or connection in any manner whatsoever with the company M/s. Gold Jewel Corporation based in Portcullis, Trustnet Chambers, P.O. box 3444, Road Town, Tortola, British Virgin Islands (BVI)?
Ans. To the best of my knowledge, answer is No.
Q. 42 Do you have any business or personal transactions in any capacity in UBS AG Bank, Singapore or any other foreign bank in a foreign country?
Ans. No transactions have taken place.
Q.43 Did you sign any account agreement or any other document with UBS AG, Singapore or any other foreign bank in a foreign country in the last 10 years? If so, please state the detailed particulars of the same.
Ans. To the best of my knowledge, answer is No.
Q.44 Are you a beneficial owner or have any other interest in any foreign bank account?
Ans. Personally No. However, Goldiam subsidiary in America and Honkong has foreign bank accounts.
Q45. Did you have any business relations in any of your concerns with an entity M/s Hinkar Exports?
Ans. I do not remember at this moment However, I can check and confirm the same.
Q.46 Do you have any business connection or relation or any financial transactions of yours in your individual capacity or any of your family member or any of your entities in which you are having financial Interest in any manner whatsoever, with Hinkar Exports?
Ans. No
Q.47 Whether you had entered into any financial transactions with the Hinkar exports?
Ans. To the best of my knowledge, answer is No.
Q.48 Have you ever received any payments in India or out of India from Hinkar Export since the year 2008 in your personal capacity or in any of the entities to which you are associated in any manner whatsoever or having any financial interest?
Ans. In the personal capacity the answer is „No’. For the business to the best of my knowledge, answer is No.
Q.49 What do you know about Shri Kamawat Surya Prakash?
Ans. I don’t recall Shri Kamawat Surya Prakash.
Q.50 Do you have any business connection or relation or any financial transactions of yours in your individual capacity or any of your family members or any of your entities in which you are having financial and/ or controlling interest in any manner whatsoever with Shri Kamawat Surya Prakash?
Ans. As I don’t recall the name, the answer is No.
Q.51 Have you ever received any payments in India or out of India from Shri Karnawat Surya Prakash since the year 2008 in your personal capacity or in any of the entities to which you are associated in any manner whatsoever or having any financial interest?
Ans. As I don’t recall the name, the answer is No.
Q52 I am now showing you the correspondence between UBS AG, Singapore with M/s Gold Jewel Corporation, BVI, regarding Notification of Account Opening (Account No.161753) wherein it is stated, this account constitutes an Account as referred to in the Account Agreement; Account opening form signed by you and dated 26th August 2008 (the ―Account Agreement‖). Please go through the contents of this page and explain the document.
