TaxTMI 
TaxTMI 
2021 (7) TMI 325
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....s allowed in favour of the assessee. 2. The learned assessing officer has made an addition of Rs. 5,66,47,000/- which is deleted by the learned CIT - A. Therefore the learned AO is aggrieved and has raised following grounds of appeal:- BMA No. 01/Del/2020 : " 1. C1T(A) has ignored the findings of the AO formed on the basis of information received under the provisions of 'exchange of information Article' of India Singapore Double Taxation avoidance agreement (DTAA), wherein as per the account opening form assessee was the beneficial owner of the account. Details of his passport are mentioned as the identification document in the account. 2. During the assessment proceedings, assessee was categorically asked to submit unequivocal evidence in the form of money belonged to the assessee's son, Sh. Rajneesh Mehra. However, assessee has failed to make compliance in this regard. It is worthwhile to mention that as the account opening form contained the name of the assessee as beneficiary owner, onus lies on the assessee to provide evidence to support his claim that he was not the beneficial owner, thus he was not the beneficial owner, thus assessee....
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....charge, Cess and also Interest u/s 234B of the Income-tax Act, all of which are not applicable to charge of tax u/s 3 of The Black Money Act, 2015. 5. That the Ld. A.O. erred in not serving upon the assessee the required Notice of Demand u/s 13 of The Black Money Act, 2015, in the prescribed "Form 1" (as per Rule 5). 6. That without any prejudice to the above, it is further objected that the Ld. A.O. has filed invalid appeal u/s 18(1) of The Black Money Act, 2015 before the Appellate Tribunal inasmuch as the same was required to be filed in prescribed "Form 3" [see Rule 7(2)] as against the "Form 36" under Rule 47(1) of the I.T. Rules so filed by the Ld. A.O. being the Appellant. 7. That the entire proceedings in the case of the assessee carried out under The Black Money Act, 2015, being from the assessment to the appeal before the Tribunal, are all flawed and illegal and being all beyond the provisions of the said Act, the entire proceedings may thus be quashed ab initio. " 4. Brief facts of the case shows that assessee is an individual and is earning salary from Essar Services India Ltd. A search was conducted in case of "Rakesh Agarwal Group" Baroda....
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....$ 826,161.51, on 30 March 2012 credit of US$ 7712.50 and on 15/10/ 2012 credit of US$ 151.25 amounting in all to US$ 834,025.32 were made. 7. The learned assessing officer issued a show cause notice on 14 June 2018 that why the above sum of US$ 834,025.32 amounting to Rs. 56,647,000 should not be considered as Undisclosed Foreign Income and Assets under the Black Money (Undisclosed Foreign Income and Assets) Act 2015. 8. On 22nd November, 2018, assessee submitted a reply stating that AO has supplied page number 1 to 19 on 14 June 2016 being the account opening form of Watergate advisors Ltd for opening of the bank account in Clariden Lieu Ltd Singapore and stated that a. None of the above documents bear any of the signature of the assessee and assessee has neither signed the above documents and nor gone to that bank anytime. b. Watergate advisors Ltd belongs to the son of the assessee Mr. Rajneesh Mehra, who is a non-resident Indian since 1998. c. He is neither a shareholder nor a director of Watergate advisors Ltd at any point of time. d. Certificate of incumbency issued by the registered agents M/s Vista BVI Ltd on 12 March 2018 according....
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....ons of Section 3 and 4 of The Black Money Act and satisfied that the assessee has not declared foreign assets/income/accounts of Rs. 56,647,000 Under The Black Money Act and made an addition. He passed an order u/s 10 (3) of the act on 29th of March 2019 determining the total income of the assessee at Rs. 122,377,070/- against the returned income of Rs. 65,730,070/- wherein addition of Rs. 56,647,000/- was made on account of credit appearing in the account of Watergate advisors Ltd in bank account number 806694 with Clariden Leu Ltd Singapore. 10. Assessee aggrieved with the order of the learned AO preferred an appeal before the learned CIT - A. Assessee challenged applicability of the black money act as per ground number 2 -5, these grounds were dismissed. As per ground number 6 - 15 assessee challenged the additions on the merits of the case. On the merits The learned CIT - A decided as Under:- "4.3 Ground no 6 to 15 related to the merits of the case stating that the said account does not belong to him and that he did not provide any money or received any money from the said account. It is seen from the order of the AO that during the assessment proceedings, ....
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.... nowhere involved in the management and control of Watergate advisors Ltd. It is further noticed that the AO's only claim in this regard is the mention of the appellant's name as the beneficial owner in the account opening form. Even if, to some extent, the AO's claim is to be considered to the extent of the appellant's involvement in the management and control of Watergate advisors Ltd, the involvement of Shri Rajneesh Mehra in the management and control of the said company has not been denied. Thus, even if management and control was partly in India and partly outside India, the said company does not qualify as an Indian resident as per provisions of Section 6 (3) of the Income Tax Act. Thus, Watergate advisors Ltd being a foreign company is not liable to tax in India or under the Black Money Act. Having examined the above, it is necessary to examine the purported beneficial ownership of Said bank account by the appellant. As The Black Money Act does not define "beneficial ownership', reference is drawn from explanation 4 to Section 139 (1) of The Income Tax Act, 1961 which defines a beneficial owner as follows:- "Explanation 4 - for the purposes of thi....
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.... The above statement emanates from the Memorandum of Family Arrangement that was also submitted before the AO during the assessment proceedings. A perusal of the assessment order shows that such document has not been denied or rejected by the AO. During the assessment proceedings and before the undersigned, the appellant has stated that he was unaware that his son had named him as the beneficial owner in the account opening form. This also reflects from the fact that the account opening form does not have any signatures of the appellant. The appellant's claim that no investment was made by him also appears to be correct as the credits in the said account came from Rajvin Ltd trust, which is as per the Memorandum of Family Arrangement created solely by Sri Rajneesh Mehra. This also reflects from the certificate of incumbency of Watergate advisors Ltd wherein Shri Rajneesh Mehra is the sole shareholder and director. The appellant's claim that he did not receive any funds from Watergate advisors Ltd also appears to be correct as per the confirmation from Matthew G Stock and G S Impex Pte Ltd stating that some business activities/share transactions hav....
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....lowed." 11. Thus, the learned assessing officer is aggrieved with the order of the learned CIT - A and preferred this appeal against this order before us on 14/12/2020 whereas the order of the learned CIT - A was communicated to The Principal Commissioner Of Income Tax, Delhi - 15, New Delhi on 1/10/2020. The learned AO filed an appeal in form No. 36 [ As per the Income tax Rules 1962 ] along with the authorization of the Ld CIT, Delhi - 15 New Delhi. The assessee has also filed a cross objection in form No. 4 according to rule 7 (2) of Black Money and Imposition of Tax Rules, 2015. 12. The learned senior departmental representative vehemently supported the order of the learned assessing officer and submitted that a. name of the assessee is clearly reflected in the column of beneficiary owner of account in the account opening form, b. Details of his passport is mentioned as the identification document in the account and therefore the contention of the assessee cannot be accepted that he has not signed any document and account is not maintained by him. c. Though the learned assessing officer has not denied that son of the assessee Mr. Rajneesh Mehra ....
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....see for the A.Y.2016-17 which could have never formed part of the total undisclosed foreign income and asset under the Black Money Act, 2015. The Ld. A.O. accordingly, based on such erroneous and invalid computation of the assessed total undisclosed foreign income at Rs. 12,23,77,070/-, raised the erroneous demand payable at Rs. 2,66,61,977/- by imposing tax on the said amount and also by imposing Surcharge, Cess and also interest u/s 234B of the I.T. Act, all of which are not applicable to charge of tax u/s 3 of the Black Money Act, 2015. Thus, on jurisdiction, it is contention of the Assessee that the Assessment Order and the subsequent Demand both being invalid being beyond the provisions of the Black Money Act, 2015 may accordingly be quashed at source. ii. Ld. A.O. after determining the alleged undeclared foreign assets/account of Rs. 5,74,45,180/-, he went on to recompute and assess u/s 5 r.w.s 10(3) of the Black Money Act, the total income of the Assessee as under: Returned Income (as filed u/s 139(1) of the IT Act) : Rs. 6,57,30,030/- Add: undisclosed foreign asset (under Black Money Act) : Rs. 5,66,47,000/- Assessed Income Rs. 12,23,77,070/- ....
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....referred to the certificate of Incumbency dated 12 March 2018 wherein Shri Rajneesh Mehra is shown to be the sole shareholder and director of the Watergate advisors Ltd. He submitted that in case of a company only the shows shareholder could only be the contributor as well as the beneficiary of that account. iii. That mention of the beneficial owner as the assessee in the above bank account in column number 4.3 of the account opening form placed at page number 183 of the paper book out of the gratitude in respect the assessee is named as beneficial owner by his son. He referred to the affidavit of the son of the assessee for this purpose. iv. The Account Opening Form is nowhere signed by the Assessee. v. He referred to the provisions of Section 2 (11) of the black money act where undisclosed assets located outside India is defined and submitted that on the facts and circumstances of the case the assessee is not a beneficial owner, he referred to the order of the learned and CIT appeal, wherein the assessee has also disclosed the source of such investment in such bank account even otherwise and his explanation is not found to be incorrect by the assessing ....
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.... has not brought on record any evidence to show that the bank account was not owned by Shri Rajneesh Mehra and that the Assessee had any beneficial interest in the same. The ld. A.O. simply went on to make additions in the hands of the Assessee on pure suspicious and surmises. x. He further relied on the decision of the coordinate bench in ITA Nos. 138/Mum/2019 to 142/Mum/2019 in the case of Kamal Galani Vs. ACIT dated 10/09/2020 wherein the issue is on the similar facts decided in favour of the assessee. xi. Thus in view of all the facts of the Assessee and in the light of the judicial decision as relied upon above, it therefore stands to be the case of the Assesee that, based on all the evidences duly furnished by the Assessee and accepted in totality by the A.O. without any rebuttal, it is the fact of the Assessee that the Bank A/c No. 806694 was in the name of and clearly belonged the Company WAL of which the sole shareholder thus the sole owner was Shri Rajneesh Mehra. Thus, the Assessee can under no circumstances be held to the owner of the said Bank Account. xii. He submitted that it is a settled legal principle that taxation would arise either on ....
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....r that the Assessee could not disprove that the name of the Assessee was reflected in the column of beneficiary owner of the account and could not prove that his son, Shri Rajneesh Mehra was the sole owner of the account. Hence, ld. A.O. held that the Assessee was the only beneficiary of the account, and by not disclosing such foreign asset in his Income Tax Return, assessee is covered by the Provision of The Black Money Act, 2015. So total credits as appearing in bank account no. 806694 maintained in the "Clariden Leu Ltd. Bank" (Presently Credit Suisse) belonging to "Watergate Advisors Ltd.' (WAL), being USD 8,34,025.32 amounting to Rs. 5,66,47,000 (1 USD = 67.92 @rate as on Dec 2016) was held to be the Black Money of the Assessee and order was passed. The learned CIT - A deleted the addition holding that the assessee is not the beneficial owner of the bank account and further the source of the fund in that bank account is emanating from Rajvin Limited trust in which the business receipts are credited belonging to the business dealings of son of the assessee Mr. Rajneesh Mehra . The bank account of Rajvin Ltd is also opened by the son of the assessee; the assessee has not prov....
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....gn income and assets and the sum payable by the assessee. There is no provision of charging of any interest over and above the tax at the rate of 30% provided u/s 3 of the act. Provisions of Section 5 (1) (ii) provides for exclusion of the income already charged to tax Under the income tax act from the value of the undisclosed assets located outside India and furnishing of the evidence by the assessee to the satisfaction of the assessing officer. Provisions of Section 4 (3) provide that the income included in the total undisclosed foreign income and assets under this act shall not farm part of the total income under the income tax act. Thus it can be stated that provisions of Section 10 (1) of the act provides that an assessing Officer can issue a notice in the year in which he discovers an undisclosed foreign asset or receives information about an undisclosed foreign asset/income provisions of Section 72 (C) which provides that a foreign asset shall be deemed to have been acquired or made in the year in which a notice u/s 10 is issued by the assessing officer and the provisions of this act apply accordingly. Wherein undisclosed foreign asset was acquired or offshore income earned ....
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....n form number 36 of IT Rules 962. Even the notes to the form are also similar and manner of verification is same. The only defect is that learned AO has to file appeal in form number 3 of respective rule of The Black Money Act but instead of that, it has been filed in form number 36 as per Income tax Rules 1962. However looking to the substance of the matter, we do not find any difference in the requisite information required by both these forms. Therefore, we do not find any merit in ground number 6 of the CO. At the time of hearing, the learned AR himself withdrew this ground and therefore it is dismissed. 20. Ground number 1, 3 and 7 are general in nature, these grounds support the other issues raised in the CO with respect to the invalidity of the appeal filed by the learned AO, no specific arguments were advanced on these three grounds, and therefore those are dismissed. 21. Now coming to the appeal of the ld AO, facts of the bank account shows that The Bank Account A/c No. 806694 maintained in the "Clariden Leu Ltd. Bank" (Presently Credit Suisse) is in the name of the foreign company "Watergate Advisors Ltd.' (WAL), whose sole shareholder and director is the son of ....
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....by him is in the opinion of the assessing officer unsatisfactory 23. On careful analysis of the above provision it clearly says that there has to be an "asset located outside India'. It can also be any financial interest of an assessee in any entity. These assets must be held in the name of the assessee. It can also be held by assessee as its beneficial owner. These assets can be charged to tax if assessee has no explanation about the source of investment in such asset or if the assessee provides an explanation which is in the opinion of the assessing officer is unsatisfactory then such asset can be charged to tax in the hands of an assessee Under the provisions of Section 3 of this act. 24. Undoubtedly, in this case there is an asset located outside India. It is in the form of a bank account number 806994 of a company Watergate advisors Ltd with Clariden Leu Ltd (Presently Credit Suisse) wherein $ 834,025.32 has been credited. Therefore, naturally the first text of having an asset located outside India is satisfied. The second condition whether this bank account as held by the assessee in his own name or not is not satisfied as it is held by the Watergate advisors Ltd a ....
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....he Trust Company "Rajvin Ltd.". Therefore now it is imperative to examine that where from Rajvin Limited has received the fund which are transferred on 21st of December 2011 into the account of Watergate advisors Ltd. Assessee has explained with the help of memorandum of family understanding placed at page number 125 - 129 of the paper book that "Rajvin Ltd' was a Trust formed by the son of the Assessee, Shri Rajneesh Mehra. The said Trust was conceived vide the "Memorandum of Family Arrangement" (MOA) dated 01/11/2003 entered into between the family members of the Assessee, being himself, his wife and his two sons. The said MOA, which was signed by the Assessee as one of the parties, was duly laid out before the ld. A.O. for his perusal. Salient terms of The MOA's provides that Shri Rajneesh Mehra, an NRI, was to form a Trust in any tax free jurisdiction and the father of Sh. Rajneesh Mehra i.e. assessee would be made the nominal settler for the said Trust out of love and respect. No settling amount or any other sum was to be contributed by the Assessee in the said Trust. Purpose of the Trust would be the furtherance of education/vocation/technical skills and for the furtherance o....
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....m Rajvin Ltd. assessee also submitted a confirmation of Mathew G Stock, a UK Resident, which shows that for the past 20 years and that he had business relationship with Mr. Rajneesh Mehra and wherein he invested a total of about 9,50,000 USD in his Company "Rajvin Ltd." between the years 2005 to 2008. He also stated that out of the said investments so made, a total sum of USD 8,18,580 was received back on 30/03/2012 from Rajneesh Mehra, out of which USD 3,18,580 was received from the bank account No.806694 of Watergate Advisors Limited (WAL) and the balance USD 500,000 was received in the form of certain securities. Thus from the above statement it was demonstrated that there is no involvement of the assessee either in Rajvin Limited or in Watergate advisor private limited in providing any fund directly or indirectly in any of the above entities. 25. However, as the entity involved where the money is found credited, it needs to be examined whether the assessee has "beneficial ownership' on these companies/entities. As stated earlier The Black Money Act 2015 does not define the term "beneficial ownership' and The Income Tax Act 1961 explanation 4 to Section 139 (1) defines the sa....
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....of a person alone or together with any other person to- (i) exercise or cause to be exercised any or all of the rights attached to such share; or (ii) receive or participate in any dividend or other distribution in respect of such share.] 30. Section 2 (27) of The Companies Act says that (27) "control" shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner 31. From the above the criteria to be considered for an individual to be considered as a beneficial owner where such person either by himself or in conjunction with others holds the a) Specified beneficial interest; b) has the right to exercise or exercises significant influence or control. 32. Testing the case before us on the above parameters laid down by The Companies' Act it is apparent that there is no any arrangement, contract et cetera between Watergate advisors private limited or Mr. Rajnees....
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....roperty. (c) Property of any kind 35. 'Beneficial owner' has been defined as "an individual who ultimately owns or controls a client of a reporting entity or the person on whose behalf a transaction is being conducted and includes a person who exercises ultimate effective control over a juridical person". 36. Testing the above facts with respect to this law, here there is no evidence that the consideration has been provided by the assessee of the sum deposited in the bank account of Watergate advisors Limited. Contrary to that assessee has shown that above funds have been transferred from Rajvin Limited, which is owned and controlled by the son of the assessee. Similar to the provisions of the Companies act here also it is not demonstrated that assessee enjoys and exercises any control the Watergate advisors Limited or the owner of the Watergate advisors Limited. 37. It is also required to be tested the test of beneficial ownership in the context of Prevention Of Money Laundering Act where reference is made to the ultimate ownership or control of the entity. Provisions of Rule 9(3) of The Prevention of Money Laundering (Maintenance of Records) Rules, 2005 ....