TaxTMI 
TaxTMI 
2024 (2) TMI 828
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....f Income Tax (Appeals) and the Assessing Officer erred in invoking the provisions of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 without furnishing the alleged nature of 'account' for which appellant is alleged as beneficial owner to provide an effective rebuttal. 3. For that the Learned Commissioner of Income Tax (Appeals)-18, Chennai erred in confirming the additions made without being in possession of any basic details of alleged undisclosed asset and without any corroborative evidence in this regard. 4. For that the Learned Commissioner of Income Tax (Appeals)-18, Chennai erred in confirming the addition of Rs. 24,09,00,431/- towards alleged investment in Foreign Asset being the Windsor Trust without considering the facts and circumstances of the case. 5. For that the Learned Commissioner of Income Tax (Appeals)-18, Chennai erred in confirming the addition of Rs. 2,00,00,000/- towards alleged investment in Foreign Asset being the Dalham Trust without considering the facts and circumstances of the case. 6. For that the Learned Commissioner of Income Tax (Appeals)-18, Chennai erred in confirming t....
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....t under the account no. GG004789_ADR06332 in Guernsey, the assessee has made an investment of Rs. 24,09,00,431/- and also made investment of Rs. 2,00,23,778/- with Dalham Trust under the account no GG004793_ADR06332. Although, the assessee has filed evidence including bank statements, confirmation of inward remittance from his son Shri. Balaji Ramamoorthy and outwards remittance by the assessee to various persons for the financial year 2015-16 relevant to assessment year 2016- 17, but in respect of investment in both trusts including the initial corpus investment, the assessee neither furnished any evidences nor explained source for said investment, except stating that entire investment in both trusts was made by Shri. Balaji Ramamoorthy. Therefore, the Assessing Officer opined that, since the assessee neither explained the source for investment in both trusts nor disclosed said investment in the return of income filed in the capacity of resident Indian, above investments in two trusts is assessable u/s. 10(3) of the Black Money (Undisclosed Foreign Income and Asset) and Imposition of Tax Act, 2015. Accordingly, made additions of Rs. 26,09,24,209/- towards undisclosed investment in....
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.... considering that he had not been able to explain the source of the investments and also not had disclosed the said investments in Sch FA of his Return of Income for AY 2016-17 and AY 2017-18: 1. The Windsor Trust under the account number GG004789 ADRO6332 inGuernsey, where you are having an.aggregate account balance to an extent of Rs. 24,09,00,431. 2. The Dalham Trust under the account number GG004793_ ADRO6332 inGuernsey, where you are having an aggregate account balance to an extent of Rs. 2,00,23,778. 20 The assessee replied to the show cause notice on 29/03/2020, the contents of which is discussed. The objections to the assessee's submissions are also discussed: 1. The assessee has again reiterated that he is only the Settlor of the Trust and hence it is wrong to assume that all the funds are contributed only by the Settlor and he maintains that the only high value remittances were solely towards family members and other than this there has been no remittances anywhere and not to either The Windsor Trust or The Dalham Trust. This reply of the assessee does not establish that he has not made any investments in either The Windsor....
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....tment has been computed to be Rs. 26,09,24,209/-, which is assessable u/s 10(3) of the Black Money Act (Undisclosed Foreign Income and Assets) and Imposition of Tax Act,2015 (taxable at the rate of 30% as provided u/s 3 of the said Act) pertaining to AY 2018-19. 23 In line of the above discussion and after considering all the facts, replies submitted by the assessee and after deliberation on the various issues, the total income assessed in the hands of the assessee is Rs. 26,09,24,209/-, Interest u/s 40 of the Act rws of 234A, 234B, 234C of the Income Tax is to be charged on the same." 5. Being aggrieved by the assessment order, the assessee preferred appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee has filed a detailed written submissions on the issue which has been reproduced at Para 6 at pages 9 to 38 of the ld. CIT(A) order. The assessee had also furnished certain additional evidences including financial statements of the Windsor Trust along with details of loan borrowed from the bank for purchase of property in the name of the trust. The sum and substance of the arguments of the assessee before the ld. CIT(A) are that, he is a senior citizen aged a....
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....s of the Black Money (Undisclosed Foreign Income and Asset) and Imposition of Tax Act, 2015, opined that the assessee is a beneficial owner of the trust, which is evident from the various clauses of both trusts, where the assessee is retaining the power of revocation of the trust. Further, the power of revocation is with the assessee. The assessee is vested with absolute control over the trust. The management trust companies appointed as trustees are basically for managing the day-to-day activities of the trusts and they do not have power by deed to override the Settlor by any means. The assessee settled the trust with initial contribution of 3,500 Pounds. The assessee is not furnishing the bank account statement of the assessee for the period relating to 2003 on one hand and on the other hand, he has claimed that his son paid the initial contribution for which no evidence has been furnished. Further, as per facts available on record, there are enough pointers towards indirect payments for the assets of the trust, but source of which has not been satisfactorily explained by the assessee. The assessee has given unlimited personal guarantee for availing loan from bank for purchase of....
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.... son for making the inward remittances have not been explained. 9.1.5 The AO passed order u/s. 10(3) of the Act assessing the above amounts stated in para 9.1.1 (Rs.26,09,24,209/-) as undisclosed asset of the assessee located outside India as per section 2(11) of BMA, in respect of which he is the beneficial owner. 9.1.6 The assessee in the written submission clarified that the accounts\reflected in para 9.1.1 pertains to the capital balances of each of the aforementioned trust. 9.1.7 Section 2(11) of the BMA defines 'undisclosed asset located outside India' as an asset including any financial interest in any entity located outside India held by the assessee in his name or in respect of which he is a beneficial owner and he has no explanation about the source of investment in such asset or the explanation given by him is in the opinion of the Assessing Officer unsatisfactory. 9.1.8 The term beneficial owner is not defined under the Black Money Act, however section 2(15) states that "all other words and expressions used herein but not defined and defined in the Income-tax Act shall have the meanings respectively assigned to them in that Ac....
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....avour of Spread Trustee company Limited. This clarifies that Shri. Narayaswamy Ramamoorthy has been instrumental in the creation of Dalham Trust who possesses even the powers of revocation. 9.1.13 BGL Reads Trust company Limited for Windsor Trust and Spread Trustee company Ltd for Dalham Trust are the 'Original Trustees' which are entrusted with the management and administration of the Trusts as per Schedule 1 of the Trust deeds. 9.1.14 The Trusts are revocable by the assessee Settler. Revocable Trust of initial and additional Property /Power of Revocation: The Original Trustees or the trustees for the time being of this Trust (the Trustees") shall hold the Trust Fund upon this Trust and may accept any Property as an addition to the Trust Fund and further this Settlement Deed is wholly revocable by Deed by the Settler during his life subject to the provisions specified in Schedule 7 ("the Power of Revocation"). 9.1.15 Windsor Trust was initially formed with the capital contribution of 3500 Sterlings and holds the asset- Leasehold Property at Flat 1, 10 Eaton Gate, London. The said property was claimed to have been purchased by av....
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....Trust. 9.1.24 The assessee also admitted and stated that the non-disclosure of the assets to be on account of oversight. 9.2 The averment of the assessee that he has not been provided with the information in the possession of the department is totally false. Paras 9.1.1, 9.1.2 and 9.1.3 are clear on this. Information has been given to the assessee, assessee furnished part details on them and after analyzing the same only, the AO passed the order after duly issuing show cause notice. 9.3 The Resident Assessee is the principal beneficiary of the assets of the Trusts located outside India as per the Trust Deeds themselves. He is the beneficial owner of the assets of the above Trusts. Section 2(11) of the BMA defines 'undisclosed asset located outside India' as an asset including any financial interest in any entity located outside India held by the assessee in his name or in respect of which he is a beneficial owner and he has no explanation about the source of investment in such asset or the explanation given by him is in the opinion of the Assessing Officer unsatisfactory. Explanation 4 to section 139 of the Income Tax Act states "beneficial owner ....
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.... enough pointers towards indirect payments towards the assets of the trusts, but source of which has not been satisfactorily explained by the assessee. Thus, (c) above is also satisfied. Thus, assessee is clearly the beneficial owner even as per the decisions cited by the AR. 9.5 In the written submissions, with reference to the unlimited personal guarantee given by the assessee for the loan for purchase of the property, the AR stated "The Trustees, being Professional service providers, cannot be included in the loan structure. There are multiple Beneficiaries and none of them are sure whether they may receive the benefit of the trust during the life time. In this back ground for securing the repayment of the facility the bank always takes personal guarantee. In this Circumstances, Settlor is the only person identifiable and is the person on record who has signed the trust deed. Hence settlor has to give Personal Guarantee to comply with bank norms." This is the tacit admission that the trustees only professional service providers and assessee is the sole beneficiary for life directly or indirectly identifiable in the Trusts concerned. 9.6 In view of the above det....
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....any trust submitted that, the trustee have borrowed loan facility of 2 million GBP for purchase of property. The source for investment in Windsor trust is out of loan borrowed from bank. The Assessing Officer and the CIT(A), on the basis of trust deed and the guarantee given to the bank came to the conclusion that, the assessee is a principal beneficiary of the trust and whatever investment made in trust is unexplained income of the assessee under Black Money (Undisclosed Foreign Income and Asset) and Imposition of Tax Act, 2015. 9. The Ld. Counsel for the assessee, further referring to show cause notice issued by the Enforcement Directorate, Chennai Zonal Office, dated 26.12.2022 submitted that, the ED issued show cause notice with a reference to Foreign Exchange Management Act, 1999 to ascertain nature of investment in trusts and source for investment is said trusts. The Enforcement Directorate, Chennai Zonal Office after considering relevant facts in Para 2.16 clearly observed that, on the basis of financial statement of Windsor Trust, it is noticed that Shri. Narayanaswamy Ramamoorthy, has not made any investment/contribution to the Windsor Trust. From the above it is very c....
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.... property in the name of the Windsor Trust. Although, the assessee is a beneficial owner of both trusts and also made initial contribution, but failed to explain source for investment in both trusts by furnishing relevant evidences including bank statements for those assessment years, except stating that investment in both trusts is made by his son. Although, his son has filed confirmation letter stating that the investment in both trusts is by himself and his associate enterprises, but he could not file any evidences including bank statements to prove his arguments. Further, he has failed to prove source for so called investment. The ld. DR further submitted that, the proceedings under Black Money (Undisclosed Foreign Income and Asset) and Imposition of Tax Act, 2015 and the proceedings before the Enforcement Directorate, Chennai Zonal Office are different. Under Black Money (Undisclosed Foreign Income and Asset) and Imposition of Tax Act, 2015, the Assessing Officer is authorized to verify the source of investment in foreign assets and also to ascertain whether the assessee is liable to tax on income earned from foreign asset or not and said proceedings is nothing to do with the ....
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....ent in both trusts. The assessee primarily contended that except being a Settlor of the trusts, he has not contributed any funds to both trusts including the initial contribution of 3,500 GBP in the year 2003. In this regard, the assessee has furnished bank account copies for the assessment year 2016-17 and argued that except inward remittance from his son Shri. Balaji Ramamoorthy and outward remittance to various beneficiaries as gift given by him, he is not having any other transactions that relates to both trusts for the impugned assessment year. The assessee further contended that, the value of investment in Windsor Trust is consisting of immovable property and same has been explained out of loan borrowed from EFC Private Bank. The assessee had also explained the account balance with the Dalham Trust in light of confirmation letter filed by Shri. Balaji Ramamoorthy, where he has owned up total investment in the trust and also claims that entire contribution to the trust is by himself and his associate entities. 12. In light of above factual background, if we examine the reasons given by the Assessing Officer to assessee the account balance in both trusts as undisclosed forei....
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....ondon has been explained out of loan borrowed from bank. The assessee neither contributed any money nor received any benefit from the trust. Therefore, the findings of the ld. CIT(A) that the assessee is a beneficial owner of the trust, because of a Settlor and also certain clauses in trust deed with reference to revocation of trust is totally baseless and devoid of merits. Further, the Enforcement Directorate, Chennai Zonal Office, has issued show cause notice dated 26.12.2022 in connection with section 16 of Foreign Exchange Management Act, 1999, regarding enquiry about two trusts and investment made in the above trusts. The Enforcement Directorate, in the said show cause notice in Para 2.16 clearly stated that, the property purchased in the name of the Windsor Trust is sourced out of borrowed money from the bank to the extent of 2 million GBP and the appellant Shri. Naranayanaswamy Ramamoorthy, has not made any investment/payment in Windsor Trust. Further, the initial contribution of 3,500 GBP and subsequent contribution has been owned up and explained by Shri. Balaji Ramamoorthy, son of the appellant, which is evident from confirmation letter filed by the son of the assessee. F....
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....f investment in the trust is undisclosed foreign income/asset u/s. 10(3) of Black Money (Undisclosed Foreign Income and Asset) and Imposition of Tax Act, 2015. In our considered view, the Assessing Officer is completely erred in arriving at a conclusion that the assessee is a beneficial owner only on the basis of recitals of trust deed, even though he does not have any other corroborative evidence to prove his allegation that the assessee is a beneficial owner and value of investment in the trust is undisclosed income of the assessee. We further noted that, Shri. Balaji Ramamoorthy has filed a confirmation letter and also explained source for investment in Dalham Trust. Therefore, once investment in trust has been owned up and explained by a non-resident, then the question of making additions towards investment in said trusts in the hands of the assessee only on the basis of recitals of trust deed is incorrect, more particularly when the assessee is able to explain with necessary evidences that he has not made any contribution to the trust. In the present case, the Assessing Officer except CRS information in Insight portal, does not have any other evidence to prove his allegation t....