TaxTMI 
TaxTMI 
2020 (7) TMI 504
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....d, 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 29th July 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), Bangalore. 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 scru....
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....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 148. 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....
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....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 t....
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....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 Court, in the case of Sunrise Education Trust Vs Income Tax Officer [(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 [(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 i....
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....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 $ 3,97,38,122. 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, a....
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....e 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, ....
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....would show as meaning "max wealth observed during the period") on 02/2007 as US $ 5,62,47,590, 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 was "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 ....
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.... 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 r....
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....uld 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 "non-resident" 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 with. We confirm the ac....
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....nu 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 ....
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....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_5090178411 & 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 ....
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.... 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 no....
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.... 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 di....
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.... 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....
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.... 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 th....
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.... 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 Document Contents Inference and Conclusion Letter addressed to Mrs Renu Tharani by HSBC Private‟Bank (Suisse). Dear Mrs Tharani, Further to your request, we hereby confirm that you, Mrs 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, C.1 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 This contradicts the base not Exactly for the same reason consent waiver was sought. This was refused. This is a letter addressed to Mrs. Renu Tharani. The information with Assessing Officer has backing of law which outweighs the documents now relied upon. Letter....
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....of GWU Investments Limited as Trustee of the Tharani Family Settlement Vital facts emerging from the document bunch obtained officially from Sovereign Government shows address of both appeal and that of GWU is same viz 1 Prabhat Building, 28 B Road, Chruchgate, Mumbai 400020 and that HSBC International Trustee Limited has confirmed that they hold issued shares of GWU Investments Limited as Trustee of the Tharani Settlement. The trust has only one beneficiary viz Renu Tharani. Shares or a company which provided Indian Address to a Foreign Bank is held on her behalf. These facts reinforce the case against her. 24. Settlor means "a person who makes a settlement, especially of property on establishing a trust". This adds additional dimension to case. Settlor is Indian, holder of asset is India. Address given to asset based abroad by the beneficiary (sole beneficiary) is in India and not proven to be reported in the country of residence. Lastly and most important consent waiver" was never filed before Assessing Officer showing that the appellant was disinclined to department collecting authentic information from HSBC Geneva. The legally settled principle of discharging....
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.... of the trust asset which is sole in the a beneficiary of the assets/income under consideration of Assessing Officer without the authorization of the appellant. c. Indian address given is passport address and should not be viewed adversely. On this matter, this in not to be viewed in isolation but considering totality of circumstances, consideration of vital information brought before IT authorities and lack of information from side of appellant, These were the determining factors in the decision in this order d. There was interim remand report. The appellant seeks the same: As this is not considered in my decision making since it contained no meaningful comments and is basically for seeking extension of time, the same is not provided. No prejudice is caused to assessee. e. Certain information from foreign tax jurisdiction is still due: As these have not been received there is no case of drawing any inference. Some information is to come from foreign jurisdiction like Cayman Islands, and receipt is uncertain and appellate proceedings cannot be held in abeyance indefinitely under uncertain circumstances. f. Reasons for not signing consent waiver: ....
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....hey are ready for giving open consent for any enquiry. Collection of information has a procedure as per tax treaty between sovereign nations. It is not to be at will and at inappropriate time, the appropriate time being when Assessing Officer sought the same. Considering all aspects, I disregard the contents of the affidavit. 29. The Appellant relied on many case decisions. In none of the cases the combination of facts brought out in this case applies. Hence they are not considered. Also produced is order of CIT(Appeals) -56, Mumbai circumstances. I find that the fact brought out in this case is different and far more and same which according to Appellant is on identical cannot be adopted as such. Only when facts and circumstances are identical rules of precedence is followed. That is not the case here. The layering/structure of entities, information on the case etc are different. Hence they were not considered. 30. In view of foregoing discussion, I hold that the Assessing Officer has approached the assessment correctly in assessing income as per the base note received from French Government. 18. Coming to the quantum of additions, however, learned CIT(A) uphe....
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....whatsoever about the source of deposits in this account, and the assets have held therein. It is pointed out that the account is held with GWU Investments Limited with which assessee has no relationship whatsoever. The assessee is at best a beneficiary of the discretionary trust, settled by GWU Investments Limited, but then in such an eventuality, the question of taxability would arise only at the point of time when the assessee actually receives any money from the trust. Reliance is placed on the judgment of Hon'ble Supreme Court, in the case of CWT Vs Estate of HMM Vikramsinhji of Gonda (supra), in support of this proposition. It is his submission that entire case of the Assessing Officer is based on gross misconception of facts and ignoring the well settled legal position. He points out all these fallacies once again. The assessee does not have any account with the HSBC Private Bank (Suisse) SA, and yet assessee is treated as owner of the account. The account is of the investments, and it is treated as a bank account. The assessee is a non-resident, taxable in India in respect of its income earned in India, and yet the assessee is being taxed in respect of an account which undis....
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....e note the name of the company GWU Investment Ltd and its Director, Mr. Tharani Haresh Tikam and his address at New Jersey, United States of America is clearly stated. Thus, by no stretch of imagination it can be assumed that the base note pertains to assessee and what is stated therein is the income that has arisen in India and that too in the Financial Year 2005-06 i.e. Assessment Year 2006-07. Pg 4, Para 5 AO has stated that assessee has not provided Bank Account Statement. This assertion by the AO in this para contradicts his own assertion in Para 2, Page 1 where he has stated that the base note received is the bank account. In case the AO has received the bank statement where was the need for AO to ask the assessee to give bank statement. Further, the assessee has categorically stated that she does not have any bank account and as such there was no way she could have provided her statement. Pg 7, Para 12 AO has alleged in this para that assessee has not stated that the source of deposit in HSBC account is not from India. The allegation by the AO is incorrect. Assessee has filed an Affidavit placed at Paper Book Page 41-46 where in she has categorically sta....
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....h Tax, Rajkot Vs. Estate of Late HMM Vikramsinhji of Gondal reported in [2014] 363 ITR 679 and has preferred to rely upon judgment of ITAT in the case of Mohan Manoj Dhupelia ITA No. 3544/Mum/2011 It is submitted that judgment of ITAT in the case of Mohan Manoj Dhupelia was that of a resident not non-resident. Further, judgment of Supreme Court was delivered on 16.04.2014 and was not considered in the case of Mohan Manoj Dhupelia which was delivered on 31.10.2014. Further, the judgment of the Supreme Court in the case of Vikramsinhji has been now considered in following cases whereby it has been held that in the case of discretionary trust income arises in the hands of the beneficiary only at the time of distribution only. 1 .Shri Harshad Ramaniklal Mehta Versus DCIT in ITA No. 7307/Mum/2011 dated 04.09.2019 It may be relevant to point out that in this case there were four beneficiaries of the trust out of which two were non-resident. The proceeding against two persons were dropped by the AO itself as these two persons were nonresidents and the dispute before the 1TAT was with respect to resident only. This fact has been captured in para 9 of the Order which is a Synopsis filed ....
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....rgeable to tax. The money is not in India as per the allegation itself. Thus, it was for the AO to show that the money has accrued or arisen in India or was received in India. In fact, AO is ignoring the facts and the explanation of the assessee that she has been a non-resident all along and has no business connection whatsoever in India. The assessee having stated these facts and the same tiaving not been rebutted or found false, the assessee has discharged its onus. It was for AO to demonstrate that the amount fall within the ambit of Indian Tax Law. Pg 10, Para 13.3 AO has referred to the judgment of Delhi High Court in the case of Nova Promoters and Finlease Pvt. Ltd. 342 ITR 169 (del) Suffice to say that this judgment is in respect of Share Capital raised by a resident company and hence, same has no relevance with that of the assessee. In the case of the resident Global Income is chargeable to tax. Further, in this case the amount was found credited in the bank account in India. The assessee is a non-resident and the issue is that of deposit in foreign bank account which is not chargeable to tax in the hands of nonresident in view of provision of section 5(2) of the I....
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....d that there was no material with him to show that the amount in HSBC account is from any source in India. In the absence of any such material re-opening of assessment of a non-resident in respect of deposit in bank outside India is bad in law. As per provision of section 139(1), every person being a person other than a company or a firm, if his total income during the previous year exceeded the maximum amount which is not chargeable to tax is required to file the return. Thus, the obligation to file the return is only when income chargeable to tax exceeds the maximum amount not chargeable to tax. In order to expand the scope of filing return, the Finance Act, 2012 has inserted 4th Proviso below section 139(1) making it mandatory for a person who is a resident to furnish a return in case at any time during the previous year, he has held a foreign asset including financial asset in any entity located outside India. Further, income tax return form was amended by inserting foreign asset schedule called FA applicable only for resident and not for non-resident. Thus, there is no requirement for a non-resident to furnish a return in case his income does not exceed ....
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....eived in India. In the absence of any material or evidence that income has arisen or received in India, the addition cannot be sustained. Pg 8 Para 18 The CIT(A) in this para has referred to section 9(1)(i) and has admitted that it has never been the case of the AO that assessment has been made as a result of business connection. This finding of the CIT(A) in this para is in favour of the assessee. The CIT(A) has held that section 68 is not applicable. The CIT(A) has also held that assessee does not have a business connection in India and section 9(1}(i) is not applicable. If that be the case, the addition is absolutely untenable and he ought to have deleted it. Pg 8 to 12 Para 19 to 21 The CIT(A) in these paras has referred to the beneficial ownership of the assessee stating that the assessee has right to receive directly or indirectly a mandatory distribution or may receive directly or indirectly discretionary distribution from the trust. The CIT(A) relied on the judgment of ITAT in the case of Mohan Manoj Dhupelia. It is submitted that judgment of ITAT in the case of Mohan Manoj Dhupelia was that of a resident not non-resident. Further, judgment of Supreme C....
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....e beneficiary is untenable and bad in law. Pg 14. Para 24 The CIT(A) has held that the assessee has failed to discharge the onus of explaining the source of income. The CIT(A) has put a negative onus on the assessee. It is an admitted fact that the assessee is a non-resident and accordingly only such income as has accrued or arisen or received or deemed to be received in India is chargeable to tax. The money is not in India as per the allegation itself. Thus, it was for the AO/CIT(A) to show that the money has accrued or arisen in India or was received in India. In fact, AO is ignoring the facts and the explanation of the assesses that she has been a non-resident all along and has no business connection whatsoever in India. The assessee having stated these facts and the same having not been rebutted or found false, the assessee has discharged its onus. It was for AO to demonstrate that the amount fall within the ambit of Indian Tax Law. Pg 14.Para 25 The CIT(A) has relied upon the judgment of Bombay High Court in the case of Soignee R Kothari vs. DCIT The CIT(A) has ignored the fact that this judgment was in a writ petition where the High Court has refused to invo....
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....entative vehemently relies upon, and elaborately justifies, the orders of the authorities below. He submits that it is a case in which a specific information has come to in the possession of the Government of India, through official channels, and this information, amongst other things, categorically indicates that the assessee was beneficiary and beneficial owner of a particular account which had peak assets worth US $ 3,97,38,122. The genuineness of this account is not in doubt and has not even been challenged by the assessee. These realties cannot be wished away. The income tax department has discharged its burden of proof by brining on record authentic information received from, through Government channels, about the bank relationships which were unaccounted in India and unaccounted abroad. Whatever documents the assessee has given are self-serving documents and hyper technical explanations, which do not contradict the official information received by the Government of India, through official channels, and it does in fact corroborate and evidence the existence of account with the assessee as beneficiary, and, in any case, these documents cannot be considered enough to discharge ....
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....orities below and decline to interfere in the matter. 22. In brief rejoinder, learned counsel submits that these sweeping generalizations have no relevance to the facts before us. The hard reality is that the account does not belong to the assessee, that there is no direct or indirect evidence to support that inference, that the assessee was only a beneficiary of a trust but the taxability in her hands must, at best, be confined to the monies actually received from the trust, that admittedly GWU Investments Ltd was owner of the account- in which neither the assessee is a director or a shareholder, and that, in any case, nothing remains in the account as the same stands closed now. It is then reiterated that the assessee is a non-resident and she cannot be taxed in respect of monies credited, even if that be so, in her accounts outside India. He once again reiterates that there is no evidence whatsoever of the assessee having account abroad, that whatever evidence has been given to the assessee is successfully controverted by the assessee, that assessee is a non-resident and her taxability is confined to the incomes sourced in India, and that, for the detailed reasons advanced by....
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....tional did not make good on this promise, however, and Swiss authorities have been trying to get their hands on him ever since, thus far to no avail. Depending on who you believe, Herve Falciani is either a courageous whistleblower responsible for exposing industrial-scale fraud at one of the world's largest banks that deprived governments in dozens of countries of many millions of pounds, or a cynical, calculating criminal who maliciously stole sensitive data on tens of thousands of clients with the intention of lining his own pockets. Lebanon trip Herve Falciani grew up in Monaco, which, he says, made going into the financial sector an "obvious choice". In 2000 he joined HSBC in the principality, before transferring to HSBC Private Bank (Suisse) in Geneva, Switzerland six years later. Between 2006 and 2007, he collected confidential data on more than 106,000 of the bank's customers from more than 200 countries, pertaining to more than 300,000 private accounts. Many of them belonged to prominent figures in business, film, music, sport, and even the heads of royal families. Thousands of pages pertaining to the accounts were obtai....
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....ce of the Attorney General of Switzerland levelled several charges against Herve Falciani, accusing him of qualified industrial espionage, unauthorised obtaining of data, and violation of banking secrecy, noting that "several bank customers" whose data he leaked were also involved as private claimants. As to his own motivations, Mr Falciani, who has a security detail provided by the French government due to concerns about his personal safety, says he feels a kinship with Edward Snowden, whose revelations about the snooping activity of the US National Security Agency sent shockwaves around the world in 2012. Mr Falciani says it's crucial that there are people who, "speak the truth and point out systemic problems," and believes that banks such as his former employer HSBC, "have created a system for making themselves rich at the expense of society, by assisting in tax evasion and money laundering. https://www.bbc.com/news/world-europe-31296007 24. One more BBC report, which could throw some light on the backdrop of this case, is also worth a look. This is as follows: India will investigate a new list containing names of Indians suspected to have pa....
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....is not. https://www.bbc.com/news/world-asia-india-31282677 25. These actions of the HSBC Private Bank (Suisse) SA have not gone unnoticed so far as law enforcement agencies. It had to face criminal investigations in several parts of the globe, and had to pay millions of dollars in settlement for its lapses. A rather recent press release dated 10th December 2019 from the US Department of Justice, which indicates the nature of aftermath it had to face and the collusion it had in systematic tax evasion by unscrupulous taxpayers from different parts of the world, is as follows: Department of Justice Office of Public Affairs FOR IMMEDIATE RELEASE Tuesday, December 10, 2019 Justice Department Announces Deferred Prosecution Agreement with HSBC Private Bank (Suisse) SA Bank Admits to Helping U.S. Taxpayers Conceal Income and Assets from the United States; Agrees to Pay $192.35 Million Penalty HSBC Private Bank (Suisse) SA (HSBC Switzerland), a private bank headquartered in Geneva, has entered into a deferred prosecution agreement (DPA) with the Department of Justice today in the U.S. District Court for the Southern District of Florida, announced....
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....dmits that between 2000 and 2010 it conspired with its employees, third-party and wholly owned fiduciaries, and U.S. clients to: 1) defraud the United States with respect to taxes; 2) commit tax evasion; and 3) file false federal tax returns. In 2002, the bank had approximately 720 undeclared U.S. client relationships, with an aggregate value of more than $800 million. When the bank's undeclared assets under management reached their peak in 2007, HSBC Switzerland held approximately $1.26 billion in undeclared assets for U.S. clients. According to the terms of the DPA, HSBC Switzerland will cooperate fully with the Tax Division and the IRS. The DPA also requires HSBC Switzerland to affirmatively disclose information it may later uncover regarding U.S.-related accounts, as well as to disclose information consistent with the department's Swiss Bank Program relating to accounts closed between Jan. 1, 2009 and Dec. 31, 2017. Under the DPA, prosecution against the bank for conspiracy will be deferred for an initial period of three years to allow HSBC Switzerland to demonstrate good conduct. The agreement provides no protection for any individuals. The $192.35 million pe....
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.... fact, some HSBC Switzerland bankers assisted clients in closing their accounts in a manner that continued to conceal their offshore assets, such as withdrawing the contents of their accounts in cash. Acting Deputy Assistant Attorney General Goldberg, U.S. Attorney Fajardo Orshan, and Chief Fort commended special agents of IRS-Criminal Investigation, who investigated this case, as well as Senior Litigation Counsel Mark F. Daly, Assistant Chief Jason H. Poole, and Trial Attorney Grace E. Albinson of the Tax Division, who prosecuted this case. Acting Deputy Assistant Attorney General Goldberg also thanked Assistant U.S. Attorneys Thomas P. Lanigan and Danielle N. Croke of the Southern District of Florida, Assistant U.S. Attorney Gordon Kromberg of the Eastern District of Virginia, and agents with the U.S. Postal Service for their assistance in this case. Topic(s): Financial Fraud Tax Component(s): Tax Division USAO - Florida, Southern Press Release Number: 19-1368 https://www.justice.gov/opa/pr/justice-department-announces-deferred-prosecution-agreement-hsbc-private-bank-suisse-sa [Emphasis, by und....
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....rivate client trust businesses, with a history of more than 70 years. Our team is based across the globe and includes accountants, lawyers, bankers and trust specialists, whose skills and experience form the basis of the service we provide. These capabilities will help you develop and implement solutions that comply fully with all legal and regulatory requirements. We offer a full range of solutions and can hold a wide range of assets, within structures that are often designed to span generations of one family. While we are proud to be part of one of the most strongly capitalised banks in the world, we are happy to work with your preferred advisers and managers (and with other private banks). https://www.hsbcprivatebank.com/en/plan/wealth-planning/trust-administration 28. What is essentially implies that so far as the trust structures are concerned, it is a structure, to use the words of the HSBC Private Bank- parent company of the HSBC Private Bank (Suisse) SA Geneva, "whereby you, as the settlor, transfer the legal ownership of your assets (which then become the trust assets) to the trustee, who manages and holds the assets for the benefit of the ....
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....ion so as to understand that the assessee has not come with clean hands, and, quite to the contrary, the assessee has made conscious efforts to scuttle income tax department's endeavours to get at the truth. 31. For the sake of completeness, we may add that a consent waiver states, on a document titled 'Privileged and Confidential' addressed by the assessee to the HSBC Private Bank (Suisse) SA in respect of account(s) held by the said bank, inter alia, that: I/We hereby declare and confirm that I am/we are cooperating with the income tax department, Government of India. In connection with our cooperation, I am/We are providing this waiver to the Income Tax Department, Government of India. I/We hereby instruct and authorise HSBC Private Bank (Suisse) SA to provide to me any and all documents in HSBC Private Bank (Suisse) SA's possession relating to the above accounts. With this instruction, I/we waive all protections under the data protection privacy and/ or bank secrecy laws of Switzerland. I/We understand that "accounts records" encompass all documents that a customer is entitled to, including - documents identifying the account holder, the b....
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....on, as noted by Their Lordships, "On instructions of the Petitioner, the Learned Senior Counsel Mr. Pardiwalla informed us that her Uncle Mr. Dilip Mehta i.e the Executor of the Estate of late Mr. Ramniklal N Mehta was also willing to sign a modified consent waiver form. Thus both the Petitioner and her uncle agreed to give a modified Consent Waiver Form in effect disputing being either the beneficiary or being the person who has authority to operate the account" but, as noted by Their Lordships, "on enquiry by the Revenue from HSBC, Geneva, it was learnt that a modified Consent Waiver Form would not enable the bank to give copies of the bank statement of A/c. No. 5091404580 since the Waiver would have to be provided without modifications". Their Lordships then noted that neither the assessee has furnished the requisite information nor allowed the authorities to collect the information by giving unqualified consent waiver forms, and added that "In the normal course of human conduct if a person has nothing to hide and serious allegations /questions are being raised about the funds a person would make available the documents which would put to rest all questions which seem to arise i....
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....rivacy, in the course of an income tax investigation about a transaction, stalling obtaining full, complete and correct information about the same. The presumption thus has to be that such information, as in possession of the income tax department and in respect of which the assessee has declined 'consent waiver' for further probe, is correct, and that the assessee is consciously trying to stall further probe in the matter so as to prevent further information, prejudicial to the interests of the assessee, coming to the light. When an assessee seeks protection on account of the position that the income tax department has not conclusively proved the things against the assessee, the assessee also has to show that he contributed to the efforts for getting at the truth or at least that he did not stall the efforts of the income tax department to get at the truth. By not signing the consent waiver, the assessee ends up protecting the actual facts coming to the lights by enforcing his own privacy under the Swiss secrecy and data protection laws, and, therefore, he cannot claim protection of the position that the income tax department has not conclusively established the alleged facts. In ....
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.................. personnes légales liées (related legal persons) nom-structure juridique : THE THARANI FAMILY SETTLEMENT (code BUP) (name- legal structure) (5090278408) lieu de domiciliation (place of domicile): non référence (No reference) date de creation (creation date): non référence (No reference) Date de cloture (closure date): non référence (No reference) Adresses (Address): non référence (No reference) [The information given above in italics, in the smaller font size, is English translation of text- as obtained through google translation tool] F: The factual position emerging in the light of the foregoing position, and our consideration to the stand of the assessee 39. The above base note also, under the heading 'autres personnes liés aux profils clients', information about "other people linked to customer profiles" which includes information about two other family trusts, namely 'Visions for the future' and 'The Children Hope Foundation', and HSBC International Tr....
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....ch 2015, a copy of which is placed before us at pages 57-58 of the paper-book also, the submissions of the assessee was as follows: With reference to your query on the date of last hearing held on 26th February 2015, wherein you wanted to know the following facts: (1) Who is settlor of Tharani Family Trust, and (2) What are the sources of funds which are deposited in GWU Investments Ltd To this, we would like to reiterate the fact that the assessee is neither a shareholder nor a director in GWU Investments Limited, which is an underlying company of Tharani Family Trust. Hence, the assessee is in no position to give you the details as to what are the sources of funds which are deposited in GWU Investments Ltd. Furthermore, she is also not signatory to the above said account belonging to GWU Investments bearing number 1414771. In the light of the above said facts, she is unable to provide you the above said details. Moreover, the assessee is neither the settler nor a trustee of Tharani Family Trust, she is just a discretionary beneficiary of the above trust, wherein she has not received any assets or funds at the time of disbursement. She ....
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.... monies, are a fact of life, and as much a part of the underbelly of the financial world, as many other evils. Even a layman, much less a Member of this specialized Tribunal, cannot be oblivious of these ground realities. Nothing, therefore, really turns on the assessee not being a director or shareholder of the GWU Investments Ltd. 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. It is also inconceivable that a Rs. 200 crore beneficiary in a trust will not know about who has settled that trust. Similarly, while dealing with Cayman Island entities, living in denial about beneficial ownerships, and confining to legal ownerships, is preposterous. The claim of the assessee, about a thing which is not in the knowledge of the Assessing Officer and further investigations about wh....
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.... of irrefutable evidences. Hon'ble Supreme Court has, in the case of Durga Prasad More (supra), observed that "human minds may differ as to the reliability of a piece of evidence but in that sphere the decision of the final fact finding authority is made conclusive by law". This faith in the Tribunal by Hon'ble Courts above makes the job of the Tribunal even more onerous and demanding and, in our considered view, it does require the Tribunal to take a holistic view of the matter, in the light of surrounding circumstances, preponderance of probabilities and ground realities, rather than being swayed by the not so convincing, but apparently in order, statements and letters and examining them, in a pedantic manner, with the blinkers on. The same has been the approach adopted by Hon'ble Supreme Court, in the case of Sumati Dayal Vs CIT [(1995) 214 ITR 801 (SC)], wherein Their Lordships have, inter alia, disapproved acceptance of a claim of winning the appellant claims to have won in horse races a total amount of Rs. 3,11,831 on 13 occasions out of which 10 winnings were from Jackpots and 3 were from Treble events by Chairman of the Income Tax Settlement Commission, and observed....
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.... 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....
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....onne 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 o....
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....nderlying 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, Mrs 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 ass....
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....preme 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, "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." These observations have no relevance in the present context. Firstly, neither ....