Reassessment based on Swiss bank information sustained, and offshore balance addition upheld on documentary evidence and human probabilities.

ITAT Mumbai upheld reassessment where the Assessing Officer had prima facie material linking the assessee to a Swiss bank profile and possible escapement of income; the later plea of non-resident status did not invalidate reasons recorded on the basis of the return then available. It also sustained the addition relating to the HSBC Geneva base note, finding documentary material showed beneficial ownership or beneficiary interest in an offshore structure, and applying surrounding circumstances and human probabilities to reject the assessee's explanation. The assessee's refusal to sign the consent waiver supported the inference that fuller foreign-bank verification was frustrated. The appeal was rejected, subject to the existing computation directions.

---

---

Issues: (i) Whether the reassessment proceedings were validly initiated under the Income-tax Act, 1961. (ii) Whether the addition of Rs. 196,46,79,146 in respect of the HSBC Private Bank, Geneva base note could be sustained in the assessee's hands.

Issue (i): Whether the reassessment proceedings were validly initiated under the Income-tax Act, 1961.

Analysis: The reopening was founded on specific information that the assessee was linked to a Swiss bank profile showing a peak balance far exceeding the returned income and not reflected in the return. At the stage of recording reasons, the Assessing Officer was required only to form a prima facie belief on the basis of material then available. The assessee's later assertion of non-resident status did not vitiate the recorded reasons, particularly when the return available to the Assessing Officer showed resident status. The information had a direct nexus with possible escapement of income, and the challenge based on mere verification or a non-resident case did not fit the facts recorded at the time of reopening.

Conclusion: The reassessment proceedings were validly initiated and the challenge to reopening failed.

Issue (ii): Whether the addition of Rs. 196,46,79,146 in respect of the HSBC Private Bank, Geneva base note could be sustained in the assessee's hands.

Analysis: The materials on record, including the base note, identified the assessee as beneficial owner or beneficiary in relation to the offshore structure linked to GWU Investments Limited. The assessee declined to sign the consent waiver, which prevented the department from obtaining fuller information from the foreign bank. Applying the test of human probabilities and surrounding circumstances, the explanation that a huge offshore balance had no tax relevance in India was not accepted. The claim that the assessee was only a discretionary beneficiary of a trust did not displace the documentary material showing beneficial ownership of the underlying company, and the cited trust law principle did not govern the issue of taxability on these facts. The appellate directions on computation and exclusion of duplication were left undisturbed.

Conclusion: The addition was sustained in principle in the assessee's hands, subject to the computation directions already issued.

Final Conclusion: The appeal was rejected in its entirety, with both the reopening and the substantive addition upheld.

Ratio Decidendi: A reopening is valid where, on the material available at the time, there is a prima facie nexus between the information received and escapement of taxable income, and an offshore balance linked by documentary material to the assessee may be brought to tax when the surrounding circumstances and human probabilities negate the assessee's explanation and the assessee frustrates fuller verification.

---