TaxTMI 
TaxTMI 
2020 (10) TMI 1077
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....he assessee has more or less filed common grounds of appeal for all Asst.Years. Therefore, for the sake of brevity, grounds of appeals filed for Asst.Year 2004-05 in ITA No.139/Mum/2009 are reproduced as under:- 1) On the facts and circumstances of the case and in law, the assessment order date 25/03/2015, passed under section 147 read with section 144of the Act is invalid and bad in law as the following jurisdictional conditions required to assume jurisdiction under section 147 were not fulfilled by the AO: Existence of reason to believe; Sanction of appropriate authority; and Notice issued beyond the expiry of period of limitation. 2) On the facts and circumstances of the case, the order passed by the AO and as confirmed by CIT(A), is bad in law and contrary to the principals of natural justice, as adequate opportunity of being heard was not provided to the Appellant. The AO further erred in invoking the provisions of section 144 of the Act. 3) On the facts and circumstances of the case, the learned AO as well as the Commissioner of Income Tax (Appeals) has erred in Confirming the following factual assumptions: a)The ....
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.... resident in India up to Asst.Year 1999-2000 under the provisions of the I.T.Act, 1961. In the year 2001, the assessee came back to India for settling in India. Since, then the assessee has been filing his return of income in India from Asst.Year 2002-03 onwards. The assessment has been reopened u/s 147 of the I.T.Act, 1961 by issue of notice u/s 148 of the Act, dated 30/04/2013 for the reasons recorded, as per which information received from the Government of France under the convention of avoidance of double taxation and the prevention of Fiscal Evasion with respect to taxes on Income and on capital dated 28/09/1992. The said information received was regarding bank accounts in HSBC Private Bank (Suisse), SA, Geneva, Switzerland held by certain persons in India. The information received from the French Government in the form of summary sheets (hereinafter referred to as the Base Document) reveals that the assessee is opened a bank account in HSBC Bank, Geneva. The information further revealed that the assesse was a beneficiary of an account opened under code BUP 5090171854 with HSBC Bank. The account had been opened under client name "Dipak Varandmal Galani and/or Kamal Varandm....
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....iddle East in the year 1998, which was subsequently taken over by HSBC Pvt. Bank (Suisse). The assessee, further stated that bank account was opened by his brother and all rights, interest in the said bank account is completely belongs to his brother and his name was included as a second account holder as a respect to his elder brother. The assessee further stated that his brother Mr.Dipak V.Galani has owned up the account and stated that account is opened by him in the year 1998 and his brother name was included as a mark of respect and further, his brother do not have any right in bank account. 6. The Ld. AO after considering relevant submissions of the assessee and also by taken note of base documents observed that although, the assessee claims that account is belongs to his brother, but failed to file any evidences to prove that he was not the owner of funds/assets held in bank account. The Ld. AO, further noted that instead of furnishing complete details of bank accounts, the assessee merely filed a letter from his brother to support his claim. Therefore, he opined that in absence of any corroborative evidences to prove his claim that account is belongs to his brother, an a....
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....se accounts individually or set them off wholly or in part after effecting the necessary conversions into the currency of its choice 15.2 Thus in terms of the above condition of the Bank as the account holder the assessee is vested with the totality of the rights and obligations connected with the Numbered account number 509-4077262; is authorized to accomplish alone or jointly in accordance with relevant power of signature all transactions through the a;,-;*^mentioned numbered account without any limitation whatsoever; and all the current accounts connected with that account are deemed to constitute one entity and whatever the currency and the name or the heading of the accounts might be the Bank combined the balances in these accounts individually or set them off wholly or in part after effecting the necessary conversions into the currency of its choice and so reflected as maximum balance between November 2005 to February 2007 in the Base Document. 15.3 I am, therefore, constrained to observe that despite the rights and obligations cast on him as the owner of the Numbered Client Account 4077262 the assessee has not co-operated and remained evasive so far. ....
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....brother and estimation of annual returns on said investments @17%. During the course of appellate proceedings, the assessee has filed various additional evidences to justify his stands that account is not belongs to him, nor does he have any interest in the bank account. During the course of appellate proceedings, the Ld.CIT (A) has called for remand report from the Ld. AO on various averments made by the assessee. In response, the Ld. AO vide remand report, dated 13/03/2018 and 17/08/2018 has commented upon various averments made by the assessee on ownership of bank account, as well as return on investments estimated @17% on total initial deposits stated to be made by the assessee. The Ld.CIT(A) after considering relevant submissions of the assessee and also taken note of remand report of the Ld. AO rejected legal grounds taken by the assessee challenging validity of reassessment proceedings, on the ground that the Ld. AO has initiated and completed reassessment proceedings as per law. The relevant findings of the Ld.CIT(A) are as under:- v. Conclusion on the grounds related to re-opening of assessment: i I have considered the submission of the Appellant and do n....
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....ermination of actual income, which is the subject matter of the assessment proceedings to be undertaken subsequently. iv. The arguments of the appellant regarding incorrect residential status being mentioned for AYrs. 1999-2000, 2000-01, 2001-02, 2002-03 and non obtaining of sanction from the appropriate authority i.e. the Principal CIT, are also delving upon mere technicalities to take the attention off, the main issue on hand. The same are liable to be rejected. The contention that notice u/s 148 is issued beyond period of limitation also fails. The provisions of section 149 clearly states that no notice under section 148 of the act shall be issued for an assessment year if: a) four years have elapsed from the end of the assessment year; or b) if four years but not more than six years have elapsed from the end of the relevant assessment year unless the income chargeable to .tax which has escaped assessment amounts to or is likely to amount to Rs. 1 lakh or more for that year; or c) if four years, but not more than 16 years, have elapsed from the end of relevant assessment your unless the income in relation to any asset (including financial inte....
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....nexus in the material available, which should be germane and relevant to form a subjective opinion. Besides, it also clearly states, that it is enough to show tentatively or prima facie that income has escaped assessment. A plain reading of the reasons recorded by the assessing officer, shows that there was enough material before him, to form a prima facie belief that income beyond the threshold level had escaped assessment. He was not required to arrive at a conclusive finding of fact regarding escapement of income. ' x The Hon'ble Supreme Court in ACIT V/s Rajesh Jhaveri Stock Brokers Put. Ltd. (291 ITR 500 at 511) while dealing with the question regarding the validity of issue of notice under section 148 of the Act has held as under: "The word 'reason.' in the phrase 'reason to believe' would mean cause or justification, if the A.O. has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the A.O. should have finally ascertained the fact by legal evidence or conclusion. The function of the A.....
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.... such situation cannot be subject to challenge. . , xii. Reliance is further placed on the decision in the case of Mohan Manoj Dhupelia vs. Dy.CIT, Central Circle (52 tajcrnctnn.com 146) and the decision in the case of Ambrish Manoj Dhupelia (87 taxmaim.com 195) wherein it is held that the assessee being the beneficial owner of deposits in foreign bank accounts failed to disclose interest from said deposits in its. return of income, reopening of assessment in case of assessee was justified. xiii. In view of the above, the grounds of appeal challenging the invoking of jurisdiction u/s 147, are rejected. 8. As regards, additions made by the Ld. AO towards balance in bank account and return on investments for subsequent years, the Ld.CIT(A) observed that as per the facts brought on record by the Ld. AO, the assessee was an account holder along with his brother Mr. Dipak V.Galani. Although, the assessee claims that account belongs to his brother, but evidences brought on record by the Ld. AO clearly proves that the assessee is a joint holder of bank account and he is having a beneficial interest in said account. Once, the fact of having account jointly wit....
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....judication. a. What was the initial amount deposited at the time of opening of account on 17.04.1998. b. Whether such amount should be taxed in the hands of the appellant for the assessment year 1999-2000. a. Initial amount deposited at the time of opening of account i. The first issue is regarding the validity of the evidence available with the assessing officer to arrive at the view that the initial deposit must have been USD 3 Million. The assessing officer has relied on the information contained in the web site of HSBC Private Bank in the year 2013, to arrive at the finding about initial deposit of USD 3 Million. He has also referred to the balances maintained by two other assessees, namely Ms Janki Mukhi, and Mr Kanu Bhai Patel which exceed the figure of USD 3 Million. ii. On the other hand the appellant has questioned the same on the grounds that the said information about USD 3 Million contained in the web site of the bank pertains to the year 2013, and that it has since been raised to USD 5 Million. The account was opened on 17.04.1998, and that it was opened with the British Bank of Middle East. The HSBC Private bank ca....
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....fied not only the initial amount deposited, but also the balance in the account up to 2005. The Appellant being the account holder, is the person of this information, and the rules of evidence clearly casts a burden upon him to lead evidence in his support. I am of the view that the appellant for reasons best known to him, has failed to discharge this liability cast upon him, and hence I am upholding the action of the assessing officer in computing the amount of initial deposit at the time of opening of account on 17-04-1998 at USD 3 Million. Further, there is nothing on record which would lead to formation of belief, that the balance in such account was less than USD 3 Million up to 33/10/2005, and hence in the absence of any evidence provided by the appellant, I am of the view that from the date of opening of account till 31-10-2005 the balance in the impugned account shall have to be considered as USD 3 Million. From November 2005 onwards, the Base document itself provides complete details of the balances maintained in this account, and hence no further presumptions are called for. b. Whether such amount should be taxed in the hands of the appellant for the A.Y....
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.... included unless it is derived from a business controlled in or profession set up in India" The Appellant therefore submits that the interest income as assessed at 17% for the AYrs. 2000-01, 2001-02 and 2002-03 are also income which have accrued or have arisen to him outside India. Hence there cannot be any assessment of income from bank account held in HSBC for these years as well. As regards the residential status of the appellant for the A.Yrs. 2003-04 to 2007- 08, the AO has enclosed a factual report in his remand report dated 13.08.2018 regarding the stay of appellant in India on the basis of passport and immigration details. It is evident from the chart enclosed that the appellant is Ordinary Resident from the A.Yrs. 2003-04 to 2007-08. iv.. Further, with respect to the years in which the appellant is ordinary resident, it has been contended as follows: "the assumed rate of return is applied on assumed amount of Investment of USD 3 Million,. There is no evidence brought on record by AO. Further, in western developed economies the yield / return of 17% is unheard of in the past 15-20 years and is an impossibility. We enclose herewit....
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....y on investment made on USD 3 Million. Your Honour, we reiterate that such statement lacks evidentiary value for reasons stated in aforesaid paragraph. Further, this assumption also suffers from a lot of Infirmities as stated below;- a) The asset of so called Janki Mukhi comprises of various classes such es Fiduciary Deposits, shares, Liquid Assets, Mutual Funds, Stocks and Structured products, etc. which cannot have uniform returns for obvious reasons due to difference in the asset class per-se, b) The asset class alleged to have been owned by Appellant are different than that of Ms. Janki Mukhi. c) The accretion to assets need cannot be solely attributed to any interest income but also can be due to new investments or withdrawals also, which is totally ignored. Any increase need not be only due to income. d) The Risk profile of persons are different and cannot be same. e) The Return cannot be uniform 17% for a period of a years altogether(9 years to be specific). We, therefore, submit that reliance of A. 0. to estimate return @17% for purpose of reopening the assessment U/s. 147 is absolutely on incorrect basis and same needs ....
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....elf shall depend on the bouquet of investments made by any person. However, the onus of furnishing evidence regarding return received and income earned from the impugned account rests on the appellant. He is the account holder and hence the responsibility lies on him to lead evidence which shall help in the exact determination of income from such account. He has provided no assistance in making such evidence available, and hence he cannot be given the benefit of such stone walling. On the other hand the assessing officer has been able to bring on record evidence which gives rise to a reasonable belief that returns on investments held in and managed by HSBC Bank during the relevant period, were yielding high returns in the region of 17%. I am hence of the view that estimating return on investment / balance @ 17% per annum is reasonable keeping in view the facts of the case. Thus, the addition of Rs. 2,31,08,100/- for the A.Y.2004-05, Rs. 2,24,91,000/- for the A.Y.2005-06, Rs. 2,31,03,000/- for the A.Y.2006-07 and Rs. 2,10,83,400/- for the A.Y.2007-08 are confirmed. d. Finally, the issue to be considered is whether the entire amount of return on investments / balanc....
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....SD 3 Million, and interest earned thereon was dissipated on a date prior to November 2005. Thus, a balance of USD 940,191/- being less than USD 3 Million cannot be separately added as peak credit in the hands of the Appellant. In light of the above facts, further addition on account of peak balance in November 2005, and less than peak balance in September 2006 is uncalled for and unsustainable. Thus, the addition on account of peak credit for A.Yrs. 2006-07 and 2007-08 is unsustainable. 9. The Ld. AR for the assessee submitted that the Ld.CIT(A) was erred in confirming additions made by the Ld. AO towards return on investments on purported initial deposits made by the assessee to open account at HSBC bank, Geneva, even though, the assesee has clearly established with fact that account is neither belongs to him, nor he is having any interest in money lying with bank account. The Ld. AR, further submitted that the assessee has right from the day one made it very clear that account was opened by his brother in the year 1998 with the British Bank of the Middle East, UAE and said bank has been subsequently taken over by HSBC bank, Geneva and account opened in British Bank of the Midd....
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....sue of Jurisdiction: Your honours in these cases common issue raised by the appellant are issue of jurisdiction whereby validity of Re-assessment proceedings are challenged. The appellant challenged the jurisdiction primarily on the grounds that there was non-recording of reason to believe; there is absence of reasons to believe about income escaping assessment; there is absence of valid sanction u/s 151 of the Income Tax Act, 1961 (hereinafter, the Act) for issuance of notice u/s 148 of the Act and the notice for reopening u/s 148 of the Act are issued beyond the period of limitation. Your honours may appreciate that as far as issue of non-recording of reason to believe is concerned it is abundantly clear from the Assessment Orders which clearly states that reasons for reopening was recorded and were supplied to the appellant. Further the Ld. CIT (A) has disposed off the same in the order and held that reasons were duly recorded. Further your honours on perusal of the case records and the paper book of appellant, it is seen that for the AY 2004-05 to AY 2007-08 the AO has recorded reasons and sought approval from the JCIT which was granted by the JCIT after recor....
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....00 to 2003-04 whereas for AY 2004-05 to AY 2007-08 it emerges that no such objection is raised by the appellant this fact is also mentioned in the remand report dated 12/3/2018 which forms part of the order of Ld. CIT (A). Your honours are humbly requested to consider these facts. On issue of valid sanction u/s!51 of the Act the kind attention of your honours is invited to the order of the Ld C1T(A) in AYs it is held by Ld. CIT (A) in his order of Ays 1999-2000 to 2002-03 held that- After due application of mind; the jurisdictional Addl. CIT and the AO had reasons to believe that income of more than Rs. 1 lakh has escaped assessment during the year due to failure on the part of appellant to furnish fully and truly all facts in the return of income for respective years. The facts are clearly mentioned in the remand report dated 12/03/2018 the provision u/s 151 of the Act as applicable is reproduced for the ready reference; Sanction for issue of notice. 151. (1) In a case where an assessment under sub-section (3) of section 143 or section 147has been made for the relevant assessment year, no notice shall be issued under section 148 [by an Assessing Officer,....
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....303 CTR 269 has held that 'we therefore make the position clear that non compliance of the procedure indicated in the GKN Driveshafts (India) Ltd., would not make the order void or non est. Such a violation in the matter of procedure is only an irregularity which could be cured by remitting the matter to the authority. The first issue is accordingly answered against the appellant'. Hon'ble High Court in para 19 of the judgement supra has mentioned that 'the core question is as to whether non compliance of a procedural provision would ipso facto make the assessment order bad in law and non-est. The further question is whether it would be permissible to comply with the procedural requirement later and pass afresh order on merits'. This order of Hon'ble High Court of Madras was challenged before Hon'ble Supreme Court in Special Leave Petition, Hon'ble Supreme Court dismissed the SLP vide Petition(s) for Special Leave to Appeal (C) No(s). 12721/2018 on 18/05/2018. In the light of the discussion in previous paragraph it is prayed from your good selves to consider the submission that the defect if any is a curable defect and would not make the Assessment ....
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....itted that it is evident from the case records that the AO consistently queried the appellant to furnish details relating to the bank account such as bank account statements, transactions in the bank accounts, name and address of the account holders, beneficial owners, correspondence between account holders and bank and other similar documents. Your honours will appreciate that the existence of account is not in dispute also it is not in dispute that the bank account jointly held by appellant and his brother. However, your honours despite of the fact that appellant is one of the account holder along with his brother the appellant completely failed to discharge the onus cast upon him to provide bank account statements and other details which were called from him vide various notices u/s 142(1) issued during the assessment proceedings in all the years. Only requirement your honours was to furnish the documents as required by the AO.\ Your honours the appellant claimed to have signed the consent waiver form and thus he has discharged the onus. In this regard it is humbly submitted that it is correct that the appellant has provided the consent waiver form. However it ....
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....e rather infamous for their secrecy laws this waiver from protection is important to enable the bank to provide requested details at the address of the account holder. Hence it is between bank and the account holder by no means the appellant can claim to have discharged the onus by signing the form and not providing the required details like account statements etc. d) Account holder instructs the HSBC Private Bank (Suisse) SA to follow these instructions until revoked by the account holder. e) Further the account holder instructs the HSBC Bank that documentation is to be provided in both paper and electronic to the above mentioned address (at the address mentioned by him) and also mentions again that he/she expressly waives the protections offered by the Swiss banking secrecy and data protection rules accordingly. The kind attention of your honours is drawn to the fact that from the consent waiver form it is clear that it is addressed to the HSBC Bank authorities to provide the bank account statement and other documents to the account holder waiving the secrecy laws at the address of the account holder and subject to the revocation of consent so waived. O....
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.... of the appellant is found on the base note and both the appellant and his brother has accepted to be the joint holder of the bank account mentioned in the note. Another issue raised by the appellant your honours is that the appellants brother Shri Deepak Galani is the owner/beneficial owner of funds/investments in the bank account. In this regard a letter has also been filed by Shri Deepak Galani some important aspects of the letter is that in this letter brother of appellant states that he had opened an account with HSBC Bank Geneva with client account number 4077262 in 1998 for the purpose of investments in bonds and securities out of my own funds. He also states that he had opened the account with his brother Kamal Galani as a joint second name out of convenience and also has a mark of respect for his elder brother. The brother of appellant further states that he is the sole beneficial owner of the funds and Kamal Galani (appellant) does not own any funds/investments/ asset accretion out of this account also that the appellant does not have any right title and interest in the funds etc. On the issue of the ownership of funds it is to be mentioned here your hon....
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....t cases. In the instant case neither the appellant nor his brother has furnished the identification of beneficial owner form. In light of the above facts and other facts mentioned in the Assessment Order and the Order of the CIT (A) it is prayed from your honours to kindly treat the letter filed by the brother of the appellant as a self serving document. Ill Issue of quantification of Investment and interest/return on investment and the residential status and taxing rights: During the proceedings before your honours the appellant also raised objection on the issue of quantification of investment and the rate of interest earned, whereas revenue challenged the order of the Ld. CIT (A) on the relief granted by him in the appellate order on the ground of the residential status. On the issue of quantification it is important to mention your goodselves that no evidence pertaining to bank account statements and other documents were provided by the appellant to the AO. The appellant and even his brother accepted that the appellant is a joint holder of the account. The appellant has failed even to submit the basic form which is 'The Identification of ....
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....e the Hon'ble IT AT in this case was as follows: "The Id. 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". ITA No. 2333/Mum/2018 Assessment year: 2006-07 Page 14 of 55 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 IT AT 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 ....
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.... information/details not furnished were unfavorable to the assesse and that the source of the money deposited in the IISBC account is undisclosed and sourcedfrom India. Nova Promoters and Fin/ease (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. In the light of the facts and judicial precedents discussed above it is requested to kindly consider the written submission uphold the order of the AO dismiss the grounds of appeals of the appellant and allow the appeals of revenue. 11. We have heard both the parties, perused the material available on record and gone through orders of ....
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....les is not recorded in the books of accounts, if any maintained by him for any source of income and assessee offers no explanation about the nature and source of acquisition of money, bullion, jewellery and other valuable articles or the explanation offered by him is not, in the opinion of the ld. AO, satisfactory, the money and the value of the bullion, jewellery and other valuable articles may be deemed to be the income of the assessee of such financial year. A close look at the provisions of section 69A of the I.T.Act, 1961, it is abundantly clear that in order to bring any money or other valuable articles within the ambit of said section, the Ld. AO has to prove that the money is belong to the assessee. Of course, the initial burden is on the assessee to prove that the money or other valuable articles found in his position is not belongs to him. But, once, the assessee filed necessary evidences to prove that said unexplained money is not belongs to him, then, onus shift to the revenue to prove that unexplained money is in fact belongs to the assessee. Unless, the Ld. AO proves that unexplained money is belongs to the person, he cannot make any addition in the hands of the asses....
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....facts have been disregarded by the Ld. AO without providing any basis for the same. The Ld. AO has also not disputed that Mr. Dipak Galani is account holder and the principle holder of the bank account , but went on to make additions in the hands of the assessee on pure suspicious and surmises by invoking provisions of general clause Act, and further being a second account holder, the assessee is vested with rights and obligations connected with the account and therefore, he is a beneficial owner of the bank account. However, at the same time, the Ld. AO has failed to appreciate that Mr. Dipak Galani by virtue of being a first account holder is also vested with some rights and therefore, the same principle / logic even applies to him. Therefore, we are of the considered view that the conclusion drawn by the Ld. AO that assessee is a beneficial owner and Mr.Dipak Galani is not the beneficial owner on the basis of above arguments is highly incorrect. 14. Further, it is the case of the Ld. AO that account with HSBC bank , Geneva is opened by resident Indian and black money earned by such resident Indian has been stashed abroad without paying taxes/disclosing income in India. But, f....
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.... 16. Insofar as, additions made towards return on investments @17% PA on year basis, once, it was established that bank account was not belongs to assessee and he was not a beneficial owner, then further additions towards estimated return of income on said unexplained money is arbitrary. As stated above, the account was opened by the Appellant's brother with the British Bank of Middle East. Therefore, the reliance placed by the AO on the account opening information appearing on the website of HSBC Bank cannot be relied upon. Further, the account was opened by the Appellant's brother in 1998, whereas the website information sought to be relied upon by the AO pertains to accounts sought to be opened at about the time of the assessment proceedings, i.e. around 2013. Such reliance on website information is impermissible as the same is merely based on fanciful presumptions. The AO has not brought any material on record to justify the use of account opening information as at time of assessments to presume and arrive at the conclusion that the same would be applicable to an account alleged to have been opened by the Appellant 15 years earlier. It may be pertinent to point ....