Income Tax Appellate Tribunal - Mumbai
Mr. Yashovardhan Birla, Mumbai vs Cit (A)-51, Mumbai on 3 September, 2021
THE INCOME TAX APPELLATE TRIBUNAL
"BMA" Bench, Mumbai
Justice Shri P.P. Bhatt (President) & Shri Shamim Yahya (AM)
SA No. 61/Mum/2021
(Arising out of BMA No. 01/Mum/2021)
(Assessment Year 2016-17)
And
BMA No.01/Mum/2021
(Assessment Year 2016-17)
Mr. Yashovardhan Birla Vs. CIT(A)-51
Birla House, 21 Mount Room No. 631
Pleasant Road Aayakar Bhavan
Mumbai-400 006. M.K. Road
PAN :AAJPB2505N Mumbai-400020
(Appellant) (Respondent)
Assessee by Ms. Fereshte Sethna, Dr. Mithil Chokshi,
Mrunal Parekh, Hasmukh Ravaria,
Priyank Ghia, Munir Merchant, Chirag
Naik & Priyanshi Chokshi
Department by S/Shri Sham Walve, Dinesh Kukerja &
Vishvesh Srivastava
Date of He aring 11.08.2021
Date of Pronouncement 03.09.2021
ORDER
Per Shamim Yahya (AM) :-
BMA No.01/Mum/2021This appeal under the Black Money Act is directed against the order of learned Commissioner of Income Tax (Appeals) [in short learned CIT(A)] dated 26.4.2021 pertaining to assessment year (A.Y.) 2016-17.
2. Grounds of appeal read as under :-
1. That, in the facts and circumstances of the case and in law, the Assessing Officer ("AO") and the Commissioner (Appeals) [collectively, hereinafter referred to as "Lower Authorities"] erred in law, in rejecting the jurisdictional challenge of the Appellant, and in acting inconsistent from and disregarding the binding ruling of the Income Tax Appellate Tribunal ("Tribunal") in the wealth tax proceedings of the Appellant for AY's 2007-08 to 2013-14, wherein vide order dated 24 December 2020 (bearing Wealth Tax Appeal Nos.2 to 8/Mum/2020), it has been held as under:
a) That the Appellant was nominated as one of several beneficiaries of an offshore irrevocable discretionary trust, settled in the year 1989 by the 2 M r . Y as h o v a r d h an B i r l a Appellant's non-resident late maternal uncle Shri PratapMalpani, governed by the laws of Guernsey ("Malpani Trust").
b) That the Appellant was not a contributor to the Malpani Trust structure.
c) That the Appellant is not liable to be construed as sole beneficiary of the Malpani Trust.
d) That the Revenue cannot collapse the offshore trust structure i.e., corporate veil cannot be lifted, since offshoreentities are independent entities are taxable in their respective jurisdictions.
e) That the Appellant was not the 'substantial owner' of assets held by Kinetic Holdings Ltd.
f) That bank accounts in foreign jurisdictions pertaining to offshore entities of the offshore trust could not be treated as bank accounts of Appellant even though for compliances by the offshore trustees in relation to local anti-money laundering laws, the Appellant (in capacity as one of several beneficiaries of the offshore trust) was declared as beneficial owner thereof for the limited purpose of fulfilling compliances (since principally, a trustee has no right to declare itself as 'beneficial owner).
Further, the Hon'ble Tribunal exercises judicial functions, and it is well settled that it has all the powers of a Court. Hence, any proceeding before the Tribunal shall be deemed to be judicial proceedings. Thus, the facts as mentioned above, as accepted in the wealth tax proceedings, ought to be considered in the given case. Refusal to follow the binding order of the Tribunal in the wealth tax proceedings, would lead to serious prejudice to the Appellant and judicial impropriety. The law of judicial discipline ought to be followed in all circumstances.
The Hon'ble Tribunal has in the Wealth tax proceedings referred above, already extensively deliberated upon and decided the core issues which have a direct bearing on the BMA proceedings. Thus, the impugned order is at best capable of being classified as a case of mere change of opinion; hence, the assessment is bad in law. Reliance is also placed on the legal principle of rule of consistency' and Article 141 of the Constitution of India.
2. That the order dated 17 January 2019 passed by the AO under section 10(1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 ("BMA"), which has merged into the order dated 26 April 2021 passed by the Commissioner (Appeals) suffers from patent ex facie errors, is bad in law, and is liable to be quashed, in that no new information whatsoever was received by the AO after the enactment of the BMA; on the contrary, the purported assets which are the subject-matter of the ostensible BMA proceedings have been the subject-matter of Income- tax Act, 1961 proceedings against the Appellant for AYs 1998-99 to 2014-15, and as such the jurisdictional threshold requirement itself is not fulfilled.Further, the material information/documents relied upon or referred to in previous AYs, have continued to remain the same. These facts have been duly considered by Revenue in the Income-tax Act proceedings, and 3 M r . Y as h o v a r d h an B i r l a also examined and confirmed by this Hon'ble Tribunal in the Wealth Tax Proceedings of the Assessee/Appellant.
3. That, in the facts and circumstances of the case and in law, the Lower Authorities erred in invoking the provisions of BMA (reserving the Appellant's position as to constitutionality thereof) overlooking that the alleged foreign assets and/or income purported to be brought to tax in the hands of the Appellant were not sourced from India, and die legal ownership whereof was vested in the offshore discretionary trust(s) and/or corporate entities within the framework of such offshore discretionary trust(s); as such precluding authority in law to seek to bring to tax in the hands of the Appellant such foreign assets and/or income, whose 'situs' was not India, and which remained amenable to tax strictly in their offshore jurisdictions.
4. That, the Revenue has failed to appreciate the distinction between "undisclosed" and "part disclosure". The Appellant prays that based on the facts and information available with the Lower Authorities, the question of any jurisdiction based on such facts having been duly undisclosed does not arise and hence the CIT(A) order ought to be quashed along with all consequential action thereto.
5. That the purported invocation of the provisions of section 4 of BMA proceeds on the fatal error that the Appellant is the sole beneficial owner of the assets and/or income held under the offshore trust structure, which this Hon'ble Tribunal has, in the wealth tax proceedings of the Appellant, concluded in its order and judgment dated 24 December 2020, that "From the above chart of beneficiaries, it is clear that the assessee is not the only beneficiary, it consists of other beneficiaries, who are direct lineal descendants of LMte Shri Pratap Malpani, Late Ashokvardhan Birla and spouses of their respective descendants. In any case, it could be seen that a charitable organisation is also one of the beneficiary together with assessee and aforesaid individuals. Hence, even if aforesaid individuals other than assessee do not survive, still assessee alone is not the sole beneficiary. It is the duty of the existing trustee to distribute the income and benefits among all the beneficiaries including charitable institution.. 39. Even though, in the KYC compliance, the assessee is mentioned as the beneficiary, it does not alter the fact that assessee is one of the beneficiary, and it is fact on record that assessee is not the only beneficiary. Therefore, we have to consider the actual legal ownership rather than deemed ownership which is without any evidence on record, to show that assessee has the legal ownership on bank account and other assets held by Trust." (as set forth in paragraphs 24 and 39 of the Tribunal order). That, in any event, in the absence of lawful applicability of principles of lifting of 'corporate veil' to offshore trust assets in relation to which the Appellant had not received any distribution and had ceased to be a 'beneficiary', there was no scope for any purported foreign assets and/or income in the legal ownership of the offshore discretionary trust(s) being brought to tax in the hands of the Appellant under BMA, or at all, as a matter of Indian law.
6. That, the Commissioner (Appeals) had no liberty, in law, to reject the instrument of trust and/or other duly notarised and apostilled documents 4 M r . Y as h o v a r d h an B i r l a pertaining to the offshore discretionary trust structure, which had been relied upon by the Revenue in proceedings before the Hon'ble Income Tax Settlement Commission, and in particular, were the subject-matter of a letter dated 28 August 2017, wherein it was concluded by Revenue that "As to the submissions of the assessee that formation of Avit Investment Ltd./Kinetic Holdings Ltd. and related entities/structures by Pratap Malpani took place in the early and mid-1980 's is concerned, the same is not disputed at present but this information needs to be thoroughly and independently enquired and investigated into; as such, the Revenue had no power to approbate and reprobate, including through purporting to contend that certain instruments of migrated trust (including Bird International Foundation) were unavailable with Revenue, despite these very instruments coming to be furnished to the Appellant as part of the FT&TR documents provided inspection of to the Appellant, and therefore available on the files of the Revenue.
7. That the Commissioner (Appeals) has erred, in law, in purporting to rely upon certain documents produced by the AO which are unsigned, unstamped and have no record of formal receipt by the concerned FT&TR division, and hence cannot be considered as valid evidence under the provisions of Indian Evidence Act, 1872.
8. That the Lower Authorities have erred in overlooking the duly apostilled/notarized documents received from the relevant foreign parties, prior to the BMA Act coming into force, which represent the factual position with regard to the offshore discretionary trust in which the assessee is only one of the named beneficiaries and not the sole beneficiary.
9. That, the Commissioner (Appeals) has erred in overlooking the declaration made in the Appellant's return of income filed for assessment year 2015-16, wherein the Appellant's cessation as beneficiary of the Malpani Trust has been disclosed, which was bound to be construed with the duly apostilled Source of Wealth document executed by the current trustees of the Malpani Trust, which unequivocally confirms cessation of the Appellant as beneficiary of the Malpani Trust (since migrated to The Banyan Trust), which migration of trust has been affirmed by this Hon'ble Tribunal in paragraph 29 of its order dated 24 December 2020, in recording that "The trust still will continue with the new trustees. The properties attached to the trust will continue to be the properties of the trust. It is wrong to presume that the properties governed by the trustee will be considered as the properties of the individual beneficiary who exercises the appointment of trustees. In the given case, no doubt the assessee is vested with the power to appoint or remove the trustees, does not change the status of the trust and its independent functioning
10. That, the Lower Authorities have erred in ignoring the fact that Schedule FA has undergone changes between 2012 to 2016 with limitations on the number of characters that can be filled while uploading the details in Schedule FA of the ITR. Consideration of such limitation as non-disclosure of foreign assets by the Lower Authorities, is bad in law.
5 M r . Y as h o v a r d h an B i r l a
11. That, the Commissioner (Appeals) has grossly erred in failing to appreciate that the beneficial ownership status in Anti-Money Laundering Know Your Customer ('KYC') compliance form of foreign entities which required any one trust beneficiary's name from among the various beneficiaries of the trust structure to be set forth, was incapable of equating the Appellant as ultimate or sole beneficial owner of the assets of an offshore discretionary trust structure. In fact, the conclusive apostilled opinion of foreign lawyers Reichlin Hess dated 11 January 2016 on this issue, has been erroneously overlooked by the Commissioner (Appeals). The Hon'ble Tribunal has duly considered the factual position in its order under the Wealth Tax Proceedings.
12. That the Lower Authorities have erred in concluding that the provisions of BMA were applicable to the Appellant in circumstances by disregarding the fact that the trust structure had not effected any distribution to the beneficiaries, and as such no income was capable of being brought to tax in the hands of the Appellant. These facts had inter alia been corroborated by certificates of the original and the easting Guernsey trustees, i.e. Michael Collins on 7 March 2016, and Confiance Limited, Guernsey on 15 and 24 March 2016, which -was not disputed by the Revenue.
13. The Lower Authorities misplaced reliance upon retracted statements of Shri G L Lath and failure to consider that Shri G L Lath's statements constituted 'hearsay evidence' which had no standing in law, and similarly, reliance upon purported statement of Ms. Nita Shivdasani without grant of opportunity for cross-examination, thus violated quintessential principles of natural justice; which has led to egregious legal errors, in effect, nullifying scope for Revenue to rely thereupon. The Hon'ble Tribunal has duly considered the factual position in its order under the Wealth Tax Proceedings
14. That the Lower Authorities erred in concluding that the Appellant has not made full and true disclosure of foreign asset(s) and/or income disregarding the specific finding of this Hon'ble Tribunal in the Appellant's own wealth tax proceedings that "we notice that there was no obligation on the part of assesses to declare the wealth/assets in the 'ROI' up to AY 2012-
13. The declaration of details of foreign bank account and trust were mandated only from AY 2013-14". Further, the Appellant had duly disclosed in 'Schedule FA of the returns of income' filed on 13 January 2016 for AY 2014-15 and on 26 August 2016 for AY 2015-16, interest as beneficiary in the Banyan Trust with corollary offshore companies/trusts/entities there under. That the Lower Authorities has erred in ignoring the very crucial aspect that the Schedule FA has undergone changes between 2012 to 2016 with limitations of the 125 characters that can be written while uploading the details in Schedule FA of the ITR This limitation has been construed by the Lower Authorities as non-disclosure of the foreign assets.
15. That the Lower Authorities erred in applying the provisions of the BMA to the Appellant overlooking that Writ Petition No.862 of 2018 is pending adjudication in the Hon'ble Bombay High Court, which has a direct bearing on assessment qua the right of a beneficiary of an offshore irrevocable trust, and in any event, the findings of the Hon'ble Income Tax Settlement 6 M r . Y as h o v a r d h an B i r l a Commission ("ITSC") were superseded by the later order dated 24 December 2020 of the Hon'ble Tribunal.
16. That the Lower Authorities have laid misplaced reliance upon the Order of the Income Tax Settlement Commission (ITSC) by ignoring the position taken by the Revenue vide letter of Pr. CIT-2 dated 28th August, 2017 confirming the factual position about the offshore entities held under the discretionary trust structure.
17. That, in the facts and circumstances of the case, and in law, the Impugned order of the Commissioner (Appeals) has been made without affording an opportunity for in-person personal hearing, despite having been sought by the Appellant. The Appellant has merely been provided an opportunity to discuss the case telephonically, wherein such a matter could not have been explained in detail. Thus, the above is contrary to the principles of natural justice, and liable to quashed in limine.
18. The Appellant prays that until the disposal of this appeal or such time, a stay be granted against the implications arising from the proceedings before the CIT(A) filed u/s. 15(l)(a) that may result in quantification of the amount of tax payable, against the order passed u/s. 10(3) of the Act. The same could lead to multiplicity of proceedings, with the possibility of such proceedings becoming meaningless if ultimately the order passed by the Lower Authorities is found to be invalid on grounds of jurisdiction; and undue hardship to the Appellant if the apparent unlawful and unrealistic demand arising on account of non-appreciation of entire facts of the case and consequential settled legal position, is made to be recovered. This in turn would not be in consonance with the powers of the Tribunal to ensure that the fruits of success in such appeals are not rendered meaningless or nugatory.
19. Your Honour may consider that such order of jurisdiction relying upon misplaced facts, available with the authorities prior to the BMA coming into force and continuing thereafter, and which have already been considered and accepted by the Tribunal in other proceedings (based on identical facts and circumstances), is an inappropriate use of the facts to one's advantage leading to serious prejudice to the Appellant. Hence, it is submitted that jurisdiction under BMA on the basis of such facts be considered bad in law, and accordingly the order of CIT(A) alongwith consequential implications of the application of such jurisdiction and its related assessments be quashed thereto."
3. Brief facts of the case are that the assessee-Shri Yashovardhan Birla is an Indian national and tax-resident of India. He was served a notice under section 10(1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (in short 'BMIT Act') dated 22.11.2017. The said notices read as under :-
7 M r . Y as h o v a r d h an B i r l a 8 M r . Y as h o v a r d h an B i r l a 9 M r . Y as h o v a r d h an B i r l a 10 M r . Y as h o v a r d h an B i r l a 11 M r . Y as h o v a r d h an B i r l a 12 M r . Y as h o v a r d h an B i r l a 13 M r . Y as h o v a r d h an B i r l a 14 M r . Y as h o v a r d h an B i r l a 15 M r . Y as h o v a r d h an B i r l a 16 M r . Y as h o v a r d h an B i r l a
4. The assessee made a jurisdictional challenge against the said notice issued by the Assessing Officer under section 10(1) of BMIT Act. The Assessing Officer vide order dated 17.01.2019 rejected the said objection. The order rejecting the jurisdictional challenge read as under :-
"Shri Yashovardhan Birla 1st Floor, Dalamal House, Nariman Point Mumbai-400 021 Sir, Sub: Assessment proceedings u/s 10(1) of the Black Money Act, 2015-rejection of jurisdictional challenge-Regarding.
Ref: Your letters dated. 5.12.2017 & 18.12.2017
*****
Please refer to the above.
1. The applicant in his letters dated. 5.12.2017 & 18.12.2017, filed through v his Authorised Representative, has raised certain jurisdictional issues against the issue of notice u/s 10(1) of the Black Money Act, 2015. These claims are neither factually nor legally tenable. The jurisdictional objections raised are dealt with as under:
2. The applicant in his letter dated. 5.12.2017 has stated that he was searched u/s 132 of the IT Act, 1961 (IT Act) on 7/14th January 2014 and consequent to search action, notices u/s 153A/148 of the IT Act were issued to him for the AY 2008-09 to 2014-15 and 1998-99 to 2007-08 respectively.
He has further stated that he has challenged the order of Hon'ble income Tax Settlement Commission (ITSC) u/s 245D dated 27th September, 2017 before the Hon'ble Bombay High Court and the same is pending. Having said so, it was requested to keep the notice u/s 10(1) in abeyance. The claims of the assessee are perused and they are dealt with as under:-
3. The assessee has simply stated certain case specific facts and requested for keeping the notice issued u/s 10(1) of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA, 2015) in abeyance. It is to be noted that the WP filed by the applicant against the order of the hon'ble ITSC dated. 29th September, 2017 is under Income Tax Act, 1961 but the notice issued to the assessee u/s 10 (1) is related to the Black Money, 2015. These two things are quite different and can never be clubbed as scheme of taxation is completely different. Further, the AY for which WP filed is different (AY 1998-1999 to 2014-15) from the AY for which notice u/s 10 (1) of BMA, 2015 (AY 2016-17) issued. Hence, the claims of the assessee and his request to keep the notice u/s 10(1) in abeyance is emanating from his lack of awareness of the scheme and purpose of bring BMA, 2015.
4. In his letter dated 18.12.2017, the assessee further raised some more objections. They are discussed and dealt, with as below.
17 M r . Y as h o v a r d h an B i r l a 4.1. It was averred that notice u/s 10(1) of BMA, 2015 issued to assessee is ex-facie prematxire, but failed to give any reasoning why it was premature. It is a valid notice for cogent reasons communicated to the assessee along with the notice u/s 10(1) under the BMA, 2015.
4.2. The assessee is of the opinion that chapter XIX-A of the IT Act bars the Department to institute proceedings under BMA, 2015, as he has a right to settle the matter with the ITSC and if such settlement is done, there is no scope for pursuit of proceedings under BMA, 2015. It is also averred that issue of notice u/s 10(1) of BMA, pending the settlement process would aggravate the disputes and tantamount to abuse of process.
It is to be noted that the cause of action and basis on which notice issued u/s 10 (1) of the BMA is different from the issue before the Hon'ble ITSC. The claims of the assessee are unfounded and emanating from the ignorance of scope of undisclosed foreign asset and income under BMA, 2015, 4.3. In this context, the attention of the assessee is invited to the subsection 3 of section 4 (charging section under BMA, 2015) and clause (ii) to the section
5 (Computation of income under BMA, 2015). Section 4 (3) states that "The income included in the total undisclosed foreign income and asset under this Act shall not form pan. of the total income under the Income-tax Act."
It means that the undisclosed foreign income and asset which assessed under BMA, 2018 would not become income under Income-Tax Act, 1961, but not vice-a-versa.
4.4. Section 5 of the Black Money Act, 2015 which describes the computation of total undisclosed foreign income and asset under BMA, 2015 is reproduced as under.
"Section 5 (1): In computing the total undisclosed foreign income and asset of any previous year of an assessee,-
a) No deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee, whether or not it is allowable in accordance with the provisions of the Income-tax Act; (ii) any income, - a.
which has been assessed to tax for any assessment year under the Income-tax Act prior to the assessment year to which this Act applies; or b. which is assessable or has been assessed to tax for any assessment year under this Act, shall be reduced from the value of the undisclosed asset located outside India, if, the assessee furnishes evidence to the satisfaction of the Assessing Officer that the asset has been acquired from the income which has been assessed or is assessable, as the case may be, to tax".
4.5. On perusal of the clause (ii) to the section 5, it is very clear that: where the assessments related to foreign asset and income have been covered under the Income-Tax Act and such income only to be reduced from the income assessed under BMA, 2015, but not vice-a-versa. In other words, undisclosed foreign asset and income have to be assessed under Black Money Act only from 18 M r . Y as h o v a r d h an B i r l a the AY 2016-17. It is to be noted that this act came into force w.e.f 1st July, 2015 and hence the first year of assessment under BMA is AY 2016-17. In cases where foreign income or assets were assessed under Income Tax Act, 1961, before the application of the BMA, 2015, the assessee can seek reduction to the extent assessed under IT Act, 1961 from the total income assessed under BMA, 2015. But the reverse is not possible, 4.6. In the assessee's case, the foreign assets and income were considered and assessed under Income Tax Act vide assessment orders u/s 143(3) r.w.s.l53A for A.Y.s 98-99 to 2014-15 made on 30.03.2016 and served on the assessee on 31.3.2016. These assessment orders for A.Y.s 98-99 to 2014-15 were quashed by the Hon'ble High Court of Bombay in its order dated. 10.08.2016 on the ground that assessee has filed an application before the Hon'ble 1TSC for the years under consideration. Thus, practically no assessment under Income-Tax Act related to the undisclosed foreign asset and income has been made under IT Act. Thus, in the assessee's case, notice u/s 10(1) of BMA has rightly been issued and undisclosed foreign income and asset has to be assessed under the BMA, 2015. It is to be noted that no facility of settling income with the ITSC is available under the BMA, 2015.
5. The assessee in his letter dated.18 December, 2017, has claimed that he neither holds beneficial ownership nor a beneficiary of foreign asset or income. It is interesting to note that, on one-hand, he is claiming that he is settling the undisclosed foreign income with ITSC and on the other hand claiming that he is not even beneficial owner. This is self-contradictory and self-serving. Even otherwise, if the facts are such that, according to him, he has not a beneficial owner of any undisclosed foreign asset and income, he has an opportunity to prove his case before the Addl. C1T, Central Range-4, being the AO under BMA, 2015.
6. The assessee is of the opinion that he has acquired the beneficial ownership by way of inheritance and therefore not liable to be taxed under BMA, 2015. No such exemption has been granted under the BMA, 2015.
7. In view of the above, all the claims of the assessee are unfounded. Hence, the jurisdictional challenge raised by the assessee has been redressed and his request to withdraw notice u/s 10(1) of the BMA, 2015 in abeyance is herewith rejected. He is once again requested to submit the details called for and co- operate in concluding the assessment of undisclosed foreign asset and income (UFAI) for the AY 2016-17."
5. Against that order the assessee filed appeal before learned CIT(A). As the assessment proceedings were continuing without disposal of the said appeal the assessee filed write petition before Hon'ble Bombay High Court. Hon'ble Bombay High Court passed an order in the said Write Petition (L) No. 7887 of 2021 dated 30.3.2021, which read as under :-
19 M r . Y as h o v a r d h an B i r l a 20 M r . Y as h o v a r d h an B i r l a
6. In the meanwhile the Assessing Officer has passed an order under BMIT Act making assessment vide order dated 31.3.2021. Thereafter learned CIT(A) passed an order dated 26.4.2021 disposing of assessee's appeal regarding 21 M r . Y as h o v a r d h an B i r l a jurisdictional challenge to issue of notice under section 10(1) of BMIT Act. In the said order learned CIT(A) noticed the following grounds raised by the assessee :-
1. That, in the facts and circumstances of the case, and in law, the order dated 17 January 2019 (Impugned Order), passed by the Additional Commissioner of Income Tax, Central Range 4, Mumbai (Adjudicating Authority), under section 10(1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (BMA), is bad in law.
2. That, in the facts and circumstances of the case, and in law, the Impugned Order of the Adjudicating Authority is based on mis-
appreciation of facts, incorrect findings, myriad conjectures, surmises, overlooks relevant considerations, takes into account irrelevant considerations, and, is perverse and bad in law, and therefore liable to be set aside.
3. That, in the facts and circumstances of the case, and in law, the Impugned Order of the Adjudicating Authority has been made without affording a personal hearing, despite having been sought by the Appellant, and as such contrary to the principles of natural justice, and thus liable to be quashed in limine.
4. That, in the facts and circumstances of the case, and in law, the Adjudicating Authority has erred in issuing a notice under section 10(1) of the BMA on 22 November 2017, without appreciating that the starting point under the BMA is a return of income filed for the relevant assessment year under the Income-tax Act, 1961, whereas it was available to the Appellant to file a return of income for the relevant assessment year until 31 March 2018, i.e. well beyond the date of the purported notice under section 10(1) served upon the Appellant, and as such the notice issued to the Appellant was premature and bad in law.
5. That, in the facts and circumstances of the case, and in law, the Adjudicating Authority has erred in invoking the provisions of section 4 of the BMA against the Appellant, disregarding that section 4 applies in case of undisclosed foreign asset and/or income, overlooking that in a preceding year when the Appellant did in fact have a beneficial interest in a foreign discretionary trust structure, such a disclosure of beneficial interest, albeit not an 'asset', was validly made under the aegis of the Income-tax Act, 1961.
6. That, in the facts and circumstances of the case and in law, after appreciating that the assessment years in contention in the pending writ petition, viz. AY 1998-99 to 2014-15, were distinct from the assessment year in relation to which the notice under BMA was issued, viz. AY 2016- 17 are different, the Adjudicating Authority nevertheless proceeded to 'cherry picking', in order to return a finding of jurisdiction, without any supporting factual basis, and overlooking cessation of the Appellant's 22 M r . Y as h o v a r d h an B i r l a beneficial interest in the foreign discretionary trust, with effect from is 15 July 2014.
7. That, in the facts and circumstances of the case, and in law, the Adjudicating Authority erred in concluding that the Appellant has undisclosed foreign income and/or assets during the relevant assessment year, overlooking the Appellant's denial in this regard, and relying upon pending proceedings concerning Chapter XIX-A, which was neither contradictory nor self-serving.
8. That, in the facts and circumstances of the case, and in law, the Adjudicating Authority erred in concluding that notice under section 10(1) of BMA was properly issued to the Appellant in view of practically no assessment in relation to foreign income and/or assets under the Income- tax Act, 1961, overlooking that the outcome of Chapter XIX-A proceedings will determine the scope for assessment of the Appellant in relation to beneficial interest held in foreign income and/or assets under the discretionary trust structure wherein the Appellant ceased to have interest with effect from 15 July 2014.
9. That, in the facts and circumstances of the case, and in law, the Adjudicating Authority erred in concluding that the Appellant is of the opinion that he has acquired beneficial ownership by way of inheritance which is not exempt under BMA, whereas it is the case of the Appellant that the source of the corpus of the foreign discretionary trust structure was not the Appellant, but rather the Appellant's maternal uncle, who settled upon trust his income earned outside India, and as such analogous to a case of 'inheritance', albeit until distribution of trust corpus or income no tax exigibility arose in the hands of the Appellant. The Appellant craves leave to add, modify, alter or delete the afore-stated grounds of appeal.
The appellant craves leave to add, modify, alter or delete the aforestated grounds of appeal."
7. Learned CIT(A) referred to the provisions of section 15(1)(b) of the BMIT Act as under :-
15. Appeals to the Commissioner (Appeals).-- (1) Any person,--
(a) objecting to the amount of tax on undisclosed foreign income and asset for which he is assessed by the Assessing Officer; or
(b) denying his liability to be assessed under this Act; or
(c) objecting to any penalty imposed by the Assessing Officer; or
(d) objecting to an order of rectification having the effect of enhancing the assessment or reducing the refund; or
(e) objecting to an order refusing to allow the claim made by the assessee for a rectification under section 12, may appeal to the Commissioner (Appeals) 23 M r . Y as h o v a r d h an B i r l a
8. Referring to the above section learned CIT(A) noted that under section assessee is not allowed to raise any other ground relating to the assessment as these are appealable under remaining limbs of the sub-section. Thereafter learned CIT(A) observed that the assessee has taken nine grounds of appeal spanning various issues related to the letter of the AO disposing off the jurisdictional objection raised by the assessee before him. That in his view, Section 15(l)(b) of the Act is very specific and is strictly limited to the determination of the liability of the appellant to be assessed under the provisions of BMIT Act 2015 based on the facts and circumstances existing in the case of the assessee. No other adjudication can be made under these provisions. In light of the limited scope of an appeal under section 15(l)(b), the Grounds no. 1, 2 and 3 of assessee's appeal which are connected with disposal of objections by the AO in conformity with the rules of natural justice are found to be beyond the scope of an appeal filed under section 15(l)(b) of the BMIT Act and hence, cannot be adjudicated. Consequently, ground no. 1, 2, and 3 of the appeal raised by the assessee are found to be unconnected with determination of assessee's liability, beyond the scope of section 15(l)(b) of the Act and are dismissed.
9. Thereafter learned CIT(A) held that ground Nos. 4 to 9 are on the issue of the liability of the assessee to be assessed under the BMIT Act, 2015. That these grounds of appeals are clubbed together and are taken up for adjudication together. Thereafter, he reproduced the assessee's submission in this regard. In the said submission of the assessee reproduced by learned CIT(A), it was inter alia noted that the Income Tax Appellate Tribunal in Wealth Tax Act, 1957 have conclusively adjudicated that the assessee have held limited interest in the offshore discretionary trusts, as only one of several beneficiaries of such trust structures with no distribution by the trustees ever made to the assessee, no scope lay for any declaration to have been made by the assessee within the ambit of Chapter VI of the BM Act. Assessee's quotation from the Wealth Tax order dated 24.12.2020 was reproduced as under :-
24 M r . Y as h o v a r d h an B i r l a "29. In our considered view, a private discretionary trust is created and few trustees were appointed to look after the trusts property. There is an enabling Clause for continuity of the trustees. In case of incapacity or other exigencies, certain trustees have to be appointed or replaced. ... The trust still -will continue with the new trustees. The properties attached to the trust will continue to be the properties of the trust. It is wrong to presume that the properties governed by the trustee will be considered as the properties of the individual beneficiary who exercises the appointment of trustees. In the given case, no doubt the assesses is vested with the power to appoint or remove the trustees, does not change the status of the trust and its independent functioning."
"32. In conclusion, it clearly indicates that the offshore assets held ly the offshore trust, which is irrevocable discretional trust in which assessee is one of the beneficiary, who happens to be bestowed with right to appoint /re- appoint the trustees, it does not inherit the right or control over the trust. As per the declaration of the trust, the trust remains an independent entity and taxable entity outside India. The entities controlled by the trust are independent taxable entities outside India. Therefore, assessee can only be a beneficiary and remain a beneficiary."
10. Submission also included that the appellant is pursuing income tax proceedings under which notice have been issued and assessment made for A.Ys.2008-09 to 2013-14, A.Ys. 1998-99 to 2007-08 & A.Y. 2014-15. It was submitted that Revenue continues to pursue the right to assess to tax the assessee for the offshore trust assets under Income Tax Act these must stand excluded from the remit of BMA (this submission is advanced without prejudice to the primary contention that there is no scope to bring to tax in India in the hands of the assessee either the corpus or income of the offshore Malpani Trust). It was also pointed out that in a detailed submission dated 18.12.2017 on the limited issue of jurisdictional objections it was inter alia pointed out that the BMA had no application to the assessee's case emphasizing that the show-cause notice issued was premature as the assessee had time until 31.3.2018 to file a return of income for A.Y. 2016-17 under section 139(4) of the I.T. Act. The said submission reproduced has following conclusion :-
"The jurisdictional facts mandatory for invocation of BMA are absent. None of the three genres of income in relation to the acquisition of offshore assets and/or income exist, viz. (a) undisclosed income of the Appellant chargeable 25 M r . Y as h o v a r d h an B i r l a to tax, or (b) partly out of disclosed income, or (c) exempt income. The foreign assets and/ or income constitute the corpus and/or income of an irrevocable discretionary offshore trust structure admittedly established in 1989 by the non-resident maternal uncle of the Appellant Late Shri Pratap Malpani, whereof the Appellant is neither settlor nor trustee, and has no absolute right, tide or interest either in the corpus or income of the Trust, but at best merely a hope that the trustee will exercise a discretion in favor of the Appellant, which too came to an end on 14 July 2014, when the Appellant ceased to be a beneficiary of the Trust, and as such and otherwise there is no foreign asset or income of the Appellant from unexplained sources amenable to BMA.
The Appellant respectfully seeks a right of personal hearing. The above reply is filed in pursuance of a limited opportunity for presentation of its written submissions, within barely seventy-two hours from the time of the notice, and all rights are reserved, accordingly."
11. Learned CIT(A) thereafter noted alongwith submission dated 16.4.2021 the assessee has enclosed certain documents which was as under :-
"(i) Annexure A-l of 22 pages purported to be a trust deed
(ii) Annexure A-2 of 5 pages purported to be summary of share capital of Kinetic Holdings as on 1.1.1986, 1.1.1987, 1.1.1988, 1.1.1989 and 1.1.1990.
(iii) Annexure A-3 being a Letter written by the PCIT (Central)-2 to the Secretary, ITSC dated 28.8.2017
(iv) Annexure A-4 being a general letter from one M B Collins dated 7th March 2016
(v) Annexure A-5 being a letter on the letter head of 'Confiance Limited' addressed to Yashovardhan Birla clarifying certain issues."
12. Learned CIT(A) thereafter noted that the assessee's counsel has filed further explanatory comments which was reproduced as under :-
a) The appellant has been conclusively adjudicated by the final fact-finding authority under the Wealth Tax Act, 1957 to have held limited interest in the offshore irrevocable discretionary trust(s), as only one of several beneficiaries of such trust structures, with no distribution by the trustees ever made to the Appellant and which is duly disclosed by the Appellant in the Schedule FA of the Income Tax Return for AY 2014-15 & 2015-16. Copy of Schedule FA for AY 2014-15 & AY 2015-16 is enclosed in Annexure 1.
b) Letter dated 28 August 2017 of Pr. Commissioner of Income Tax (Central)-
2 issued to Income Tax Settlement Commission (ITSC) concedes trusts created by Pratap Malpani. Further, it is conclusively established that the equity interests in Kinetic Holdings Limited belonged to (Late) Pratap Malpani. It follows that it is not in dispute that the (Late) Pratap Malpani appointed Albany Trustee Company Limited as trustee of the offshore 26 M r . Y as h o v a r d h an B i r l a 'corpus' settled upon trust by him. Moreover, it confirms that there is no documentary material on record to show that Appellant had unaccounted money, or money that has escaped tax or money that was remitted through illegal channels. Copy of Letter dated 28.08.2017 of Pr. CIT (Central)-2 is enclosed in Annexure 2.
c) The Appellant relies on the findings recorded by the Hon'ble Tribunal in wealth tax proceedings of the Appellant, wherein it has been conclusively held, in para 30 of its order, that "The case of the revenue is not that the investments were moved from India by the settlor or any beneficiaries...... It is fact on record that there are no investments, which were made by the assessee or the investments were moved from India." Copy of Wealth Tax order for AY 2008-09 to AY 2013-14 is enclosed in Annexure 3.
d) Assets and/or income which the AO purports to bring to tax under BMA already form part of income tax proceedings. The entities referred in the Notice u/s. 10(1) of the BMA is already a part of the erstwhile Income Tax Assessment Orders which was quashed by the Hon'ble Bombay High Courts. The said income tax orders were passed by the AO and hence the AO had complete knowledge of the foreign assets being purportedly assessed under the provisions of Income Tax. Copy of the Income Tax Assessment Order u/s 153A r.w.s. 143(3) for AY 2013-14 is enclosed in Annexure 4.
e) Further, an apostilled certificate from M/s. Confiance Limited being the Trustee of the Banyan Trust was submitted to the Income Tax Authorities during the Income Tax Assessment Proceedings which states that the entities referred in the notice u/s 10(1) of the BMA are forming part of the trust structure where the Appellant being one of the beneficiaries. A Copy of Certificate dated 15.03.2016 is enclosed in Annexure 5.
f) Appellant was nominated on 7 September 1989, then aged 22 years, as beneficiary of offshore irrevocable discretionary trust established by Pratap Malpani (Malpani Trust) and ceased to be a beneficiary beyond 14 July 2014. A Copy of source of Wealth Timeline document duly apostilled is enclosed in Annexure 6."
13. After having noted grounds of appeal and assessee's submission, learned CIT(A) proceeded to adjudicate the issue.
14. Firstly he rejected the assessee's reliance upon the ITAT, Mumbai decision in assessee's own case in WTA No. 02 to 08/Mum/2020 vide order dated 24.12.2020 by holding that it was not in existence at the time of issue of notice under section 10(1) of the Act by the Assessing Officer. That the documents not in existence at the time of issue of notice, cannot be taken as evidence while deciding the issue. After having held so, learned CIT(A) further proceeded to distinguish the ITAT decision and also at the same time held that 27 M r . Y as h o v a r d h an B i r l a the same was not in existence at the time of issue of notice. He noted that provisions of BM Act are admittedly harsher and address the issue of beneficial ownership/beneficiary irrespective of the ownership shown in relevant docuemnts. That hence, any decision under Wealth Tax Act where the concept of 'beneficial ownership' or mere 'beneficiary' is not there, cannot be imported to decide the issues in BM Act. Thereafter learned CIT(A) observed that since the appeal papers did not contain the documents/information which had been before the Assessing Officer at the time of issue of notice under section 10(1) of the Act, it was found necessary to call for details of such documents from the Assessing Officer. He noted that it was also informed by the assessee that the assessment order under section 10(3) of the BMIT Act had been passed by the Assessing Officer on 31.3.2021. He noted that the Assessing Officer has intimated that the details of various documents/information available with the Assessing Officer and which have been relied upon for issue of notice under section 10(1) of the Act have been elaborated in detail in the assessment order passed by the Assessing Officer. He noted that these documents have already been shared with the assessee and are in the knowledge of the assessee. He observed various documents/information quoted by the Assessing Officer will be referred to in his decision at appropriate places. That in this connection, it is to be noted that Hon'ble Bombay High Court in the order in Writ Petition No.921 of 2021 dated 30.3.2021 had ordered learned CIT(A) to pass an order on the jurisdictional challenge to the notice and it has directed that the assessment proceedings was to go on. But the fact here is that assessment proceedings were duly completed before disposal of the appeal of Jurisdictional challenge by learned CIT(A) and learned CIT(A) has referred to the assessment orders which were directed by Hon'ble High Court to be carried on. Now learned CIT(A) held that information before the Assessing Officer at the time of issue of notice under section 10(1) of the Act has been elaborately reproduced by the Assessing Officer in his order dated 31.3.2021 and the same is summarised as below.
28 M r . Y as h o v a r d h an B i r l a
15. Thereafter learned CIT(A) quoted from the assessment order.
"8. The information before the AO at the time of issue of notice u/s 10(1) of the BMIT Act has been elaborated by the assessing officer in his order dated 31.3.2021 and is summarized as below:
8.1 The AO has noted existence of a hank account with MSEC Geneva wherein the appellant was linked with another entity NEBDA Trust, the appellant being a beneficiary of this account. While the assesses signed a consent waiver so as to enable the Department to seek desired information from HSBC Geneva, subsequent search led to documents which indicated that the assessee had written a letter to HSBC directly claiming that the consent waiver had been obtained by the Department through coercion and that such waiver was not to be implemented. This led to the Bank not sharing any worthwhile information with the Department. This was contrary to the fact the assessee could obtain a letter from the same bank by writing a letter to the Bank and obtaining a reply on the same day. This could happen only if the assessee had a close association with the Bank as against his denial of any relationship. The AO notes that the close associate of the assessee has confirmed in his statement that the assessee closed the accounts with HSBC in 2011 and got amounts in the bank account transferred to Barclays , indicating his beneficial ownership of this account.
8.2 Details obtained under Exchange of Information under the Treaty arrangement established existence of offshore entitles in which the assessee was the sole beneficiary / beneficial owner of the assets in these entities. These accounts are:
LIST OF BANK ACCOUNTS IN SINGAPORE Bank Branch A/c no Name of Account Credit Suisse AG Singapore 125042 Mokopane Ltd Credit Suisse AG Singapore 125114 Kinetic Holdings Ltd Credit Suisse AG Singapore 125132 Alea Management Limited Barclays Bank PLC Singapore 91321400 Vashovardhan BIrla & Shloka Birla Barclays Bank PLC Singapore 91312600 Vashovardhan Birla & Avanti Birla Barclays Bank PLC Singapore 91321300 Vashovardhan Birla & Vedant Birla Barclays Bank PLC Singapore 91320000 Mokopane Ltd Barclays Bank PLC Singapore 91318600 Confiance Limited as Trustee of The Banyan Trust Barclays Bank PLC Singapore 91403600 Kinetic Holdings Ltd.
29 M r . Y as h o v a r d h an B i r l a
TABLE -3
LIST OF BANK ACCOUNTS IN SWITZERLAND
BANK BRANCH A/CNO NAME OF ACCOUNT
CREDIT SUISSEAG SWITZERLAND 1367551 KINETIC HOLDINGS LIMITED
CREDIT SUISSEAG SWITZERLAND 1494489 ANDRID LLC
CREDIT SUISSEAG SWITZERLAND 722484 ALEA MANAGEMENT
HSBC BANK/CREDIT SWITZERLAND 1541518 ALEA MANAGEMENT
SUISSE BANK 5
HSBC BANK/CREDIT SWITZERLAND 1689383 ALEA MANAGEMENT
SUISSE BANK 8
HSBC BANK/CREDIT SWITZERLAND 1403021 ALEA MANAGEMENT
SUISSE BANK 2
M5BC BANK/CREDIT SWITZERLAND 1689387 ALEA MANAGEMENT
SUISSE BANK 0
HSBC BANK/CREDIT SWITZERLAND 1733039 ALEA MANAGEMENT
SUISSE BANK 0
HSBC BANK/CREDJT SWITZERLAND 1351839 ALEA MANAGEMENT
SUISSE BANK 4
H56C BANK/CREDIT SWITZERLAND 1371008 ALEA MANAGEMENT
SUISSE BANK 2
HSBC BANKCREDIT SWITZERLAND 1803144 ALEA MANAGEMENT
SUISSE BANK 2
HSBC BANKCREDIT SWITZERLAND 18033450 ALEA MANAGEMENT
SUISSE BANK
CREDIT SUISSE AG SWITZERLAND SAFE MOKOPANE LIMITED
KEEPING
A/C
1282411-
35-2
CREDIT SUISSE AG SWITZERLAND SAFE MOKOPANE LIMITED
KEEPING
A/C
1282411-
35-3
CREDIT SUISSE AG SWITZERLAND 1282411 MOKOPANE LIMITED
CREDIT SUISSE AG SWITZERLAND 40639 SORWOOD DEVELOPMENT SA
30 M r . Y as h o v a r d h an B i r l a
The AO was in possession of information that the assessee was a beneficial owner of amounts in bank accounts of these entities:
1. Alea Management
2. Kinetic Holdings Limited
3. Makopane Limited
4. Andrid LLC
5. Sorwood Development SA G. Confiance Limited as Trustee of the Banyan trust 8.3 The AO has referred to the search action u/s 132 carried out in the case of the assesses and his group on 7.1.2014. Various electronic data and documentary evidences led to information about existence of offshore entities, bank accounts and investments therein which had close proximity with the appellant. Post-search, documents were collected from various countries under EOI agreements leading to detection of undisclosed offshore accounts / investments in the name of companies, LLPs, Trusts and Foundations in which the assessee was clearly identified by these banks/institutions as beneficial owner / Asset contributor. The AO noted that an elaborate structure was put-
up by the assessee with front entities whose bank accounts were effectively controlled by the assessee and intermediate and back end entities to mask the ownership of the front end entities. The front end companies listed by the AO are:
S.N NAME OF THE OFFSHORE FRONT ENTITIES
(i) Kinetic Holdings Limited
(ii) Alea Management Ltd
(iii) Herritor Investments limited
(iv) Mokopane Limited
(v) Sorwood Corporation SA
(vi) Anrid LLC
(vii) Magenta Property Investments Ltd
(viii) Manwell Investment Properties Ltd
(ix) Manwell Investments Ltd
(x) The Banyan Trust (Panama)
(xi) The Banyan Trust (Guernsey)
(xii) Confiance Ltd as Trustee of The Banyan Trust
(xiii) Nebola Trust
(xiv) The Bird International Foundation
(xv) Capital Wizard Limited (xvi) Zeus (xvii) Epicor Software (xviii) Avit Investments Limited (xix) AAL (S) Pte Ltd (xx) Stripe 10 LP -Carlyle Partners V (xxi) The LP Property Trust (xxii) Felt Learning Limited 31 M r . Y as h o v a r d h an B i r l a The layers or intermediate companies are companies which provide web of intricate layering by functioning as subscribers, directors, authorized signatories, settlers, trustees, protectors etc. of the front entities. Such entities were identified by the AO as below:
SN Name of the Layering Entitles Service Provider
(i) Credit Suisse Trust
(ii) Manex Ltd
(iii) Blue Sea Administration Ltd
CREDIT SUISSE
(iv) One Sun Limited GROUP
(v) Snow Fall Limited
(vi) Verduro Associated Ltd
(vii) EFG Reads Trust Company Limited
Jersey
(viii) HSBC Guyerzeller Trust AG
(ix) Codivo Management AG
(x) First Corporate Director Inc HSBC GROUP
(xi) Corhold Ltd.
(xii) GZ Trust Corporation
(xiii) Confiance Limited
(xiv) Consec Ltd.
(xv) CCD Alpha Ltd.
CONFIANCE
(xvi) CCD Beta Ltd. GROUP
(xvii) CN Alpha Ltd.
(xviii) CN Beta Ltd.
(xix) Manwell Investment Properties Ltd., BVI
(xx) City Management Limited
(xxi) Warrant Securities Ltd
(xxii) Nelson Management Ltd
(xxiii) ETC Management Services Ltd OTHERS
(xxiv) Island Nominees Ltd
(xxv) Continental Nominees Ltd
(xxvi) Argonaut: (Guernsey) Ltd
32 M r . Y as h o v a r d h an B i r l a
(xxvii) Pennymore Investment Corporation Int
8.4 The AO identified various private foundations and trusts under which
offshore properties were being managed. Critical aspects of such Trusts have been elaborated by the AO as below:
1. THE BIRD INTERNATIONAL FOUNDATION, PANAMA It is formed as a Foundation of Private Interest under Law 25 of 1995 of Republic of Panama in which the assessee Shri Yashovardhan Birla is declared as the Beneficiary. Founder of The Bird International Foundation is named as Alcogal Corporate Services SA, represented by its directors Andres Maximino Sanchez and Nyrna De Navarreo.
As per the First Schedule to the Regulations of the Foundation adopted on 15.10.2010, the "Initial Foundation Fund" (Patrimony) is declared as USD 10,000. The Second Schedule identifies the "Beneficiaries" as the son of Mr. and Mrs. Ashok Vardhan Birla:
Yashovardhan Birla and his family and descendants The Third Schedule Identifies the Protectors as Mr. Andrew Hart and Mr, Geffrey Spencer.
The AO notes that the Foundation was set up only to act as a front for the assessee to hold assets/investments through other fiduciaries and front companies. The Foundation was in existence for about 1 year from 17.09.2010 to 02.11.2011. As per the letter dated 20.04.2012 from Confiarcce Ltd to Credit Suisse AG, Singapore in connection with Mokopane Ltd, it is confirmed that they are the trustees of The Banyan Trust and that the settlor of the Trust is mentioned as The Bird international Foundation which has been dissolved on 02.11.2011. It is further confirmed that the asset contributor of the Trust is Mokopane Ltd which is corroborated by the funds transfer from the accounts of Mokopane Ltd.
As per further letter dated 24.04.2012 addressed to Credit Suisse AG, Singapore in connection with Mokopane Ltd, it is confirmed by Confiance Ltd that the asset contributor of the Trust 4s Shri Yashouardhan Birla and Beneficiary of the Trust is also Shri Yashovardhan Birla.
It is also seen that in the name of The Banyan Trust, there is an account with Credit Bank, Singapore with account number 91513600, being held by Confiance Ltd as the Trustee. !n the name of The Banyan Trust Capital Account, there is an account with Royal Bank of Scotland International bearing account number 56450634.
2. NEBDA TRUST REG.
As per the information received from the French authorities in the year 2011, the assessee had a Client Profile on the records of HSBC, Geneva. This profile with BUP ID 5090181710 was created on 10.02.2005 and assigned personal ID 140826 and Personal No. 181710. Assessee's profile was further linked to one NEBDA TRUST REG, which had BUP ED 5090281709. No further details have been received in this regard from the bank.
33 M r . Y as h o v a r d h an B i r l a
3. NEBOLA TRUST REG., LECHTENSTEIN Nebola Trust Reg. is registered in Liechtenstein. The date of entry in the Register of Liechtenstein is reported as 02.06.1998 and it was cancelled on 20.03.2012. The present status is shown as in liquidation. No further details about the formation of the Trust, the settlor, corpus fund, terms and conditions, beneficiaries and trustees, details of assets and investments held by the Trust and its bank accounts etc., are known. Nebola Trust Reg. is shown as the shareholder of one of the front companies, Kinetic Holdings Limited as on 01.01.2001 onwards and up to 21.11.2011 as per the Annual Returns filed with the Companies Registry of Jersey Financial Services Cornmission. The entire issued share capital comprising of 100 shares of USD 1 each of Kinetic Holdings Limited are held m the name of Nebola Trust during this period.
As per the financial reports of Kinetic Holdings for the period ended 17.01.2012, sum of USD 9,306,269.54 has been shown as Loan brought forward as on 31.12.2010 from Nebola Trust. This loan is reported as unsecured, interest free and has unspecified repayment date. The entire loan of USD 9,106,169.54 given to Kinetic Holdings Limited by Nebola Trust has been assigned to The Bird International Foundation during 2011 and is then waived by the Bird international Foundation.
ft is evident that before dosing the Nebola Trust on 20.03 2012, at least part of the funds held by it was transferred to Kinetic Moldings Limited through The Bird International Foundation as seen from the above entries. The liquidation fees for Nebola Trust Reg. have been paid from the account of another front company of the assesses, revealing the nexus of all these entities.
4. THE BANYAN TRUST* (PANAMA) The Banyan Trust* (Panama) is mentioned In the documents available on the bank records which show that the trust was created by The Bird International Foundation with the assessee as the sole beneficiary. Thereafter, through other fiduciaries, the shares of front entities including Mokopane Limited, Manwelf investments Ltd, Alea Management Limited, Magenta Properties Ltd etc., were brought under the direct control of the Foundation through The Banyan Trust from the year 2010-11 onwards.
As per the bank documents of Alea Management Ltd and Mokopane Ltd, the beneficial owner of the assets in their name is identified as the assesses through a trust which Was created by The Bird International Foundation on 04-05.2011 as the "Settlor" arid the Trust was registered in Panama, Address of this Trust is the same as the Foundation, at 53rd East Street, Marbella, MMC Building, 2nd Floor, Panama, However, copy of Trust Deed has not been provided in the bank documents. As admitted by Ms. Nita Shivdasani, who was assisting the assessee in opening accounts in Barclays Bank, Singapore in the names of front entities including Mokopane Ltd whose assets were held indirectly for the assesses? as the ultimate beneficial owner, the Trust Deed was not produced to the Bank.
As per letter dated 13.08.2011 from Mokopane Ltd to Credit Suisse Bank, Singapore, it is reported that the Trustee of The Banyan Trust is HSBC 34 M r . Y as h o v a r d h an B i r l a Guyerzeller Trust Company AG. This is in turn confirmed by the letter dated 23.08.2011 written by HSBC Guyerzeller Trust Company AG to Credit Suisse AG, Singapore in connection with Mokopane Ltd declaring therein that the settler of the trust is The Bird International Foundation and that the beneficiaries are Shrl Yashovardhan Birla and his family and that protectors are Andrew Hart and Geoffrey Spencer.
5. THE BANYAN TRUST (GUERNSEY) It is seen that the assessee had changed the service provided from HSBC to CCS Trustee Group/ Confiance Group of Guernsey in the year 2011-12 and the layering entities which acted as shareholders and directors of the front companies were also changed accordingly from HSBC group entities to CCS Trustee/ Confiance Group entities.
After this, in the bank records, the name of the Trust is mentioned specifically as The Banyan Trust (Guernsey), These details are reaffirmed in the letter of Confiance Limited dated 24.02.2012 addressed to Credit Suisse Bank, Singapore, wherein The Bird International Foundation, Panama is reported as the "Settlor" of The Banyan Trust (Guernsey]. Confiance Limited is reported as the trustee and Consec Ltd, the secretary. David Bell and Andrew Hart are named as the Protectors of the Trust.
Since The Bird International Foundation itself was formed 3.7.09.2010 only, the date of creation Of The Banyan Trust (Guernsy) could be sometime after that date only. After the creation of The Bird International Foundation, the Trust in Panama (though not identified but referred to as The Banyan Trust, (Panama) and The Banyan Trust (Guernsey) under its fold, the other front companies, namely, Alea Management Limited, Mokopane Limited, Manweel Investment Properties Limited, Kinetic Holdings Limited, Herritor Investments Ltd and Magenta Property investment Limited UAE were brought under the holding of the Foundation, This is confirmed by the declaration of beneficial holding available on the documents of account no.12504-2 duly attested by Ms.Shilpa Chowdhary, RM of the Bank.
6. THE LP PROPERTIES TRUST The existence of this trust was revealed in the assessee's written submissions to the department during the course of assessment proceedings on 18.03.2016 for the first time. According to a letter purportedly addressed by Confiance Limited to the assessee Shri. Yashovardhan Birla, this trust was set up on 28.03.2014 and the "Settlor" is mentioned as The Banyan Trust No further details as to the incorporation documents, corpus fund, terms and conditions of the trust, trustees etc. are furnished.
8.5 It is noted that detailed inquiries have been conducted and information has been gathered from offshore tax jurisdictions to ascertain the source of funds and investment of the front entities and to establish the beneficial owners / beneficiaries of accounts owned by these entitles. The details of the front entities, bank accounts and assets held by them and the beneficial owner / beneficiary as per the records of the banks have been outlined by the AO while dealing with the information available with him. The various front 35 M r . Y as h o v a r d h an B i r l a entities, the bank accounts / assets held by them and evidences of the appellant being a beneficial owner of such assets is discussed by the AO and summarized as below:
1. KINETIC HOLDINGS LIMITED The company was incorporated in Jersey on 23.09.1985. The company has since been re-domiciled and registered in Guernsey on 12.11.2013. At the time of incorporation, the beneficial owner is stated as Shri Pratap Malpani of Singapore. Till 01.01.1990, the shares were shown in the name of Shri Pratap Malparsi (60 shares) and two other fiduciary companies, Nelson Management Services Ltd and ETC Management Services (Isle Of Man) Ltd (20 shares each).
Shri Pratap Malparsi was still holding 60 shares in Kinetic Holdings Ltd in his own name till date of his untimely demise on 14.02.1990. Regarding the assets or properties held if any, in the name of Kinetic Holdings Ltd as on 01.01.1990, there is no information. After the demise of Late Pratap Malpani, the shares of Kinetic Holdings Limited were reportedly transferred to three fiduciaries of Albany Trustee Group, namely, Pennymore Investment Corporation Inc. Island Nominees Ltd and Continental Nominees Ltd and continued to be in their names till 01.01.1999. Thus, it is evident that the Albany Trustee Group came to hold the shares of Kinetic Holdings Limited after the demise of 3hrt. Pratap Malpani only. The actual descendants of Shri Malparo have alleged that they were made to sign some share transfer documents.
As on 01.01.2000, entire shares comprising of 100 shares of USD 1 each were shown in the name of Nebola Trust Reg., Liechtenstein for the first time and continued to be in the Trust's name till 21.01.2011. The service providers were Credit Suisse Trust during this period. From the declarations filed to the banks during this period by Blue Sea Administration Ltd and Manex Ltd, the fiduciary companies of Credit Suisse Group, as the directors of Kinetic Holding Ltd, it is noted that the assessee, Shri Vashovardhan Birla is the beneficial owner of the shares held In the name of Nebola Trust Reg.
On 21.01.2011, the shares were transferred to Corhold Limited, a fiduciary company of H5BC Group, as nominee of The Bird international Foundation, which had by then been created with the assessee as the sole Beneficial Owner. This is also corroborated by the Foundation documents and declarations filed before the bank. Thereafter, the service providers were changed to CCS Group / Confiance Group and Manwell Investment Properties Ltd, BV1, one of the fiduciaries of the new service provider held the shares from 08.10.2012 as nominee of Mokopane Ltd, another front company in which the assessee is the beneficial owner through the new trust structure brought in place namely The Banyan Trust (Guernsey), On 12.11.2013, the company Kinetic Holdings Ltd was re-domiciled to Guernsey.
Regarding the details of investments and assets including properties, if any, held by Kinetic Holdings Ltd, the only information available is the financial reports for the period 01.01.2011 to 17.01.2012 which was received from the Jersey authorities. It is seen that the source of funds in the hands of Kinetic Holdings Ltd included basically the following [as per Book Value) as on 17.01.2012:
(A) Share Capital USD 100.00 (B) Accumulated Profit of earlier years till 31.12. 2010 USD 111,208. 67 (C) Profit for the current year 36 M r . Y as h o v a r d h an B i r l a
(i) Excess of expenditure over property income USD (-) 20,595.18
(ii) Gain on sale of Fixed assets USD 568,895.66
(iii) Gain on Currency Exchange USD 320,142.00 (D) Loan from shareholders waived USD 7,170,002.61 The funds were found invested in the following assets as on 17.01.2012:
(A) PROPERTIES;
(i) 17, Cairnhill Circle, Helio Residences, Singapore USD 4,533,980.97 (ii) 56, Cairnhill Circle, Singapore (iii) Flat C-8, Lees Place, London USD 3,839,102.38 (B) INVESTMENT IN COMPANIES (i) AAL (PTE) LTD, Singapore (524,999 shares) USD 524,999.00 (ii) Lee Place Property Ltd, London (1 share) USD 1.55 (C) AGENTS ACCOUNT USD 18,892.58 (D) CASH AND DEPOSITS USD 65,282.63
The Financial statements reveal that Kinetic Holding Limited had very little accumulated profits till 31.12.2010, USD 111,208.67 as per the data, The issued and paid to capital is USD 100. But loan of USD 9,106,369.54 received from Nebola Trust Reg., the sole shareholder, was outstanding in the books of Kinetic Holdings Ltd as on 3112.2010. This loan is stated to be interest free and unsecured without any specific time frame of repayment. During the period 01.01.2011 to 17.01.2012, this loan has been assigned by Nebola Trust Reg,, Liechtenstein in favour of The Bird International Foundation, Panama having far Birla as beneficial owner.
Since from 21.01.2011 the shareholding of Kinetic Holdings Limited had changed hands from Nebola Trust Reg., Liechtenstein to Corhold Limited as nominee of The Bird International Foundation Panama, it is evident that this assignment of loan given by Nebola Trust to Kinetic Holdings Ltd in favour of The Bird International Trust was done with a view to consolidate the holding structure of which the assessee is the sole beneficiary/ beneficial owner. Subsequently, Nebola Trust Reg., Liechtenstein was liquidated on 20.03.2012.
In addition to this assigned loan of USD 9,106,369,54 from Nebola Trust Reg,, Liechtenstein, further sums were given as loan by The Bird International Foundation, Panama also and was repaid in part by Kinetic Holdings on various dates after which, the balance loan amount of USD 7,170,002.61 was waived by The Bird International Foundation and has been taken to the accumulated profits of Kinetic Holdings Limited.
37 M r . Y as h o v a r d h an B i r l a The AO notes that in his statements, the assessee admitted that he had invested in a company Herritor Investment Ltd under LR5 scheme of RBI from 2007 to 2011. Details of remittances made through LRS furnished by the assessee showed that a sum of USD 400,000 and GBP 89,210 has been remitted from FY.2007-0 to FY 2010-11 through his CA No. 00960200001427 with UCO Bank, Church Gate Reclamation Branch, Mumbai. Further details about Herritor Investment Ltd have not been, furnished by the assessee so far. However, from the declarations filed with the banks and the structure of holding, it emerges that Herritor Investment Ltd is also indirectly held by the aseessee as the sole beneficiary Sum of USD 635,568.54 was reported as loan from Herrltor Investments Ltd in the financial statement of Kinetic Holdings limited which is much more than the remittance claimed by to have been made by the assessee under LRS.
As per the asset details furnished in the financial statements as on 17.01.2012, Kinetic Holdings Ltd has three properties, two at Singapore and one at London. Out of the two properties m Singapore, the one at No.56, Cairnhill Circle, Singapore appears to have been sold during the years since no value is assigned in the balance sheet. It is also seen that gain from sale of fixed assets is also shown as USD 568,895.66 in the Income & Expenditure statement.
The details of purchase of the other property at No.17, Cairnhill Circle, Singapore are not known. However, perusal of account number 125114 of Kinetic Holdings Ltd with Credit Suisse, Singapore shows that payments have been made to Khattarwong, apparently a law firm of Singapore towards maintenance fee and installment regarding property no.17 at Cairnhill Circle, Singapore during the year 2010-11.
Regarding the property at Flat C-8, Lees Place, London, the assessee had denied that he had any knowledge about it. However, Shri G. L. Lath, his wealth manager had clearly stated in his statement that the property at OS was acquired: through some trust. The entity Lees Place Properties Ltd is a company fn which Kinetic Holdings Ltd and another entity Purewell Investments Ltd have one share each, out of the total issued capital of 4 shares. The remaining shares are held by nominee directors. Kinetic Holdings Limited is shown as a director in Lees Place Properties Ltd and C-S is shown as the address of Kinetic Holdings Ltd in its statutory return filings. This address Flat C-8, Lees Palace, London is found mentioned as the address of Herritor Investments Ltd also as per data available on the public domain. The delivery challan produced by !he assessee himself during the course of income-tax assessment proceedings shows that vehicle, was purchased for his son who is studying at UK, also showing Flat C-3, Lees Palace, London as the address for delivery.
In account no.125114 with Credit Suisse, Singapore in the name of Kinetic Holdings Limited, periodical payments have been found to have been made to Olander Property Service Ltd. towards property expenses for Fiat C-8. These evidences establish that the property at C-8, Lees Paiace, London was very much in the knowledge of the assessee and is reportedly being used by his son who is studying at UK.
The fact that the assessee Shri Yashovardhan Birla is the ultimate beneficiary of Kinetic Holdings Limited is borne out by the documents exchanged between 38 M r . Y as h o v a r d h an B i r l a the service providers and the banks in connection with the opening of accounts as well. As proof of identity of the beneficial owner, copies of passport of the assessee, duly attested by the service providers and in some instances by Shri Bharat Ankaraju, the Advisor of the assessee were obtained by the banks and are part of the documents received by the Department from the off-shore tax authorities.
Letter of HSBC to IFG Trust (Jersey) Ltd dated 07.03.2011, enclosing therewith the duly attested copy of passport of the assessee not oniy brings out the fact that Shri Yashovardhan Birla is the beneficial owner of Kinetic Limited but also proves his long standing banking relationship with HSBC.
Kinetic Holdings Limited was found to be having the following bank accounts. The documentary evidences establishing the identity of the assessee as the sole beneficial owner of the assets held in these accounts and the transactions found entered therein are discussed in detail by the AO in his order and are summarized below for the sake of brevity.
i. KINETIC A/C NO. 0835-1367551-0 WTH CREDIT SUISSE BANK, ZURICH Though the account was in existence since 0701.2008, information of bank account statement and deposits for the period 01.04.2011 to 11.01.2012 only has been furnished by Credit Suisse Bank, Zurich citing treaty provisions. No details in respect of earlier years have been furnished yet. Except for small debits and credits on account of earlier transaction settlements and payment of fees, there are no substantial transactions during this limited period. This account was closed on 11.01.2012.
As per Form A for Establishment of the Beneficial Owner's identity, Shri Yashovardha.n Birla has been declared as the beneficial owner of the assets held under this account in the name of Kinetic Holdings Limited.
ii. KINETIC-A/C NO. 10-125114-01780 WITH CREDIT SUISSE BANK, SINGAPORE The account was opened on 21.02.2008. At that time, Credit Suisse Trust was the service provider and one of its companies Glue Seas Administration Ltd was acting as the Director/ secretary of Kinetic Holdings Ltd and hence acting as authorized signatory of the bank account. The authorized signatories have been authenticated by Shri. Bharat Ankaraju, assessee's advisor who has been issued Limited Power of Attorney to operate this account. This account has since been dosed on 28.02.2012 and the balance has been transferred to account no. 32257120 in the name of Brian Hams S Co maintained with the private bankers of UK, namely C Hoare & Co, London. This further establishes the fact that the assesses is having such fiduciary arrangements with persons other Than the regular bankers Elke law firms etc.. The details o! which have not been revealed till date.
39 M r . Y as h o v a r d h an B i r l a In the documents filed with the Bank, the assesses Shri Yashovardhan Birla has been identified as the Beneficial Owner of all assets / deposits In the said bank account.
Perusal of the credit / debit notes, copies of which were part of the information received shows that substantial payments have been received from / transferred to certain other entities of the assesses including Alea Management Ltd and Herrilor Investments Ltd, in the account of Kinetic Holdings Ltd, Some investments have been found made in another company AAL (S) Pte Ltd on various dates from out of funds received by Kinetic Holdings Ltd from an undisclosed account.
Among the entities from which, money is received by Kinetic Holdings Ltd is A/c, No.41322005831 with standard Chartered Bank, Hongkong in the name of Int'l Commercial Agencies / Syed Abdul Kader Ahmed and the nature of payment is stated as B/O. SUNMOON. The total sum received in FY. 2007-08 is USD 499,913.38 on various dates.
It is also seen that vide letter dated 19.06.2012 addressed to Credit Suisse, Singapore, the account was requested to be closed and after converting the balance into pound sterling, the balance was directed to be transferred to the account of UK based lawyers Brian Harris & Co, a/c.no.32257120 with C Hoars & Co, London, one of the leading private banker of UK. The account has been confirmed as closed on 28.06.2012.
(iii) KINETIC - ACCOUNT NO.91403800 WITH BARCLAYS BANK, SINGAPORE Account No.91403800 with Barclays Bank, Singapore in the name of Kinetic Holdings Limited v/as opened on 17.04.2013 with Confiance Limited as the Service Provider. MsVay Osborn, an employee of Confiance Ltd was listed as the contact person and one of the authorized signatories in the bank documents. Manwell Investments Properties Limited is shown as the shareholder and the Beneficial Owner is recorded as a Trust, registered on 04.05.2011 in Panama bearing no.43377 which was reportedly set up by The Bird International Foundation. This is one of the accounts which was directly handled by Ms. Nita Shivdasani in her capacity as a director of Barclays Bank, Singapore at the time of its opening and it is seen that the Risk Disclosure statement which forms part of bank documents has been signed by her. As admitted by Ms. Nita Shivdasani, the account of Mokopane Ltd and also Kinetic Holdings Ltd with Barclays Bank, Singapore were opened during her time as an employee of the bank and that no trust deed was produced. It emerges that the account has been opened accordingly without obtaining the mandatory proof of Beneficial Ownership of the assets to be held in this account. As per the bank statements furnished, there are no substantial transactions found during the relevant period. This account has since been closed and the balance transferred to Kinetic Holdings Ltd's a/c.56474312 with RBS, Guernsey.
(iv) KINETIC-ACCOUNT NO.56474312 WITH ROYAL BANK OF SCOTLAND, GUERNSEY 40 M r . Y as h o v a r d h an B i r l a The existence of this account is revealed from the letter dated 25.04.2014 written by Kinetic Holdings Ltd to Barclays Bank, Singapore requesting to close the account Mo.91403800 with them and to transfer the remaining balance to A/c. No.56474312 in the name of Kinetic Holdings Ltd with Royal Bank of Scotland, Guernsey. No further information is available about this account as on date.
(v) KINETIC -A/C No.33257120 OF BRIAN HARRIS & CO WITHC HOARS & CO, LONDON As mentioned supra, the presence of an account in the name of Brian Harris & Co with private bankers C Hoars & Co, London is established from the letter of Kinetic Holdings Ltd addressed to Credit Suisse, Singapore. Further details of beneficial ownership of this account and the investments /assets held thereunder are not yet known.
2. ALEA MANAGEMENT LTD Alea Management Ltd was incorporated under the laws of The Common wealth of The Bahamas on 14.09.2006 as an International Business Company.
Ms. Sharon Sueess was identified by Shri. G. L. Lath as the person who is looking after the Accounts of the front entities in Singapore which are held by Mr, Yashovardhan Birla and the Telephone numbers +41442042809 arid +41442042828 mentioned by him, were found to match with the details given in the bank documents as well. The Service Providers were changed later on to HSBC Trust and Cordico Ltd became the authorized signatory on 20.01.2011. Documents forming part of the bank records such as declarations in Form A and the attendant details including copies of passport of the assesses and the holding structure as furnished by the authored signatories to the banks in respect of the accounts in the name of Alea Management Limited etc., clearly established the identity of the beneficial ownership of the assets/investments held therein beyond doubt.
The following bank accounts were found to exist In the name of Alea Management Limited whtch have been discussed by the AO elaborately and are summarized below:
i. ALEA - ACCOUNT No. 0835-722484-9 WITH CREDIT SUISSE BANK, ZURICH Though this account was opened way back on 07.08.2007, the details of transactions / assets for the period from 2007 to 2011 have not been furnished by the Bank citing treaty restrictions. As a result, the details for a very small period of about 4 months alone have been shared through the treaty arrangements.
However, as this limited period data would show, substantial sums have been routed through this account and safe proceeds of securities have also been found credited in large sums. The transactions also show that there are fund transfers from the account of Alea Management Ltd to other front entities of the assessee like Capital Wizard Limited and Mokopane Ltd.
41 M r . Y as h o v a r d h an B i r l a As per Form A, which is a document within the meaning of Article 110 of Swiss Penal Code, fifed by Manex Limited, the authorized signatory of Ales Management Ltd. the Beneficial Owner of the assets held in the name of Alea Management Limited is identified as the assessee, Shrl Yashouardhan Birla. Another direct link to the assessee was found in the form of Power of Administration issued to Shri Bharath Ankaraju, assessee's advisor for purposes of managing the investment portfolio of Alea Management Ltd.
(ii) ALEA -ACCOUNT NO. 125132 WITH CRFOITSUISSE. SINGAPORE
As per documents an the records of the Bank, Limited Power of Attorney dated 1E.06.20G7 was granted to Shri. Bharat Ankaraju as Administrator on behaEf of the assesses. The copy of incorporation documents were provided by Credit Suisse Trust Ltd vide its letter dated 08.08^2007 to Shri BhaitAnkaraju, so as to facilitate the opening of an account for A[ea Management Ltd with Credit 5uisse Bank at Singapore.
Thereafter, account no.l2S132 was opened with Credit Suisse Bank, Singapore in 2007.
It is further seen that in add it ion to thJs existing account no,l25132, a new account has also been opened with Credit Suisse Bank, Singapore as can be seen from the letter of Alea Management Ltd dated 04.07.2011 addressed to Credit Suisse AG, Singapore regarding the new account proposed to be opened in the name of Alea Management Ltd.
It is confirmed therein that the beneficial ownership of the new account is Mr. Yashouardhan Birla, being the beneficial owner of the Bird International Foundation, This account no.125132 was dosed subsequently onll.ll.Z012 and the balance / all assets were transferred to Alea Management Ltd - HSBC A/C13518394. The summarv of transactions during the relevant period indicates that there were numerous sub accounts and voluminous transactions were carried out over therein during the relevant period:
There was a Safe Keeping Account also with the Credit Suisse Bank and among the securities which were thus held by the bank in Alea Management Ltd's safe keeping account included 250000 shares of 9% Kaupthing Bank 2007 Parp, which was renounced by the company on
03. 11.2011 in favour of the bank.
Further contemporaneous record of Client note maintained by Credit Suisse Bank regarding Alea Management Ltds account, duly confirmed by the Relationship Manager (RW) of the Bank, gives a detailed account of the interactions that the bank officers / relationship managers had with the assessee, Shti Vashovardhan Birla in person at his office in Nariman Point, Mumbai and his intention to shift to HSBC.
(iii) Account No. 1510428 with Credit Suisse, Geneva It is in the name of Alea Management Ltd was opened on 11.01.2011 in which, the Beneficial Owner as pet Form A is declared as Shri Yashovardhan Birla. Account is under this client code.
42 M r . Y as h o v a r d h an B i r l a
(iv) A/c. 13518394 - ALEA-
A summary of this account has been provided by the AO at Table 15 (page 116) of his order
(v) ALEA - OTHER ACCOUNTS From the information received from offshore banks so far, it is seen that the sub accounts of Alea Management Ltd indifferent currencies have substantial transactions therein, some of which included inter-account transfer to other entitles like Mokopane Ltd also. The AO reproduced these transactions at Table- 17 on page 117 of his order. Alea Management Ltd has an account with Barclays Bank, Singapore in which the Beneficial Owner is once again confirmed as Yashovardhan Birta, F 3355431 as per Form A signed on 07.08.2007 by Manex Ltd. Details of transactions through Alea Management Ltd's account No. 1510428 with Credit Suisse, Singapore and Royal Bank of Scotland, are also not yet known.
3. MOKOPANE LTD Mokopane Limited was incorporated in the British Virgin Islands on 15.06.2010 under Company No. 158993? by HSBC International Trustee (BVI) Limited, with registered office at Woodbourne Hall, PO Box 916, Road Town, Tortola, BVI.
As observed in the case of other front entities like Kinetic Holdings Ltd and Alea Management Ltd, in the case of Mokopane Ltd also, there were multiple accounts with different banks and locations spread across different countries. The documents filed with the banks once again bring to the fore that the sole beneficial owner is the assessee Shri Yashovardhan Birla only and the Power of Administration has been granted to Shri Bharat Ankaraju to deal with the accounts, There are payments to Confiance Ltd as the Shareholder which again establishes the fact that there are accounts in the names of the Intermediate layer entities also which are held for the beneficial ownership of the assessee.
Since Confiance Ltd is the Trustee of The Banyan Trust, which in turn is having the assessee as its sole beneficiary, all these accounts, irrespective of The fact whether they are held in the name of the front entities themselves or others like the Layer entities in this case, the sole beneficial owner of all such assets held there under is the assessee, Shn Yashovardhan Bfrla himself, as can be seen from the documents. In his order, the AO has discussed the evidences and Investments in these accounts in detail and the findings are summarized as under.
(i) MOKOPANE - ACCOUNT No.0835-1282411 WITH CREDIT SUISSE, ZURICH The information about this account is made available from 01.04.2011 only. This account has since been closed on 16.07.2013 and transferred to Account No. 9132000 with 43 M r . Y as h o v a r d h an B i r l a Barclays Bank, Singapore in the name of Mokopane Ltd.
Documents filed in connection with this account shows that the beneficial owner is the assessee, Shri Yashovardhan Birla. Though the details of pre 2011 period is not known, the available information shows that substantial transactions have been carried out through this account with Credit Suisse, Zurich in the name of Mokopane Ltd, including dealing in securities.
(ii) MOKOPANE-A/C No. 125042-01-780 WITH CREDIT SUISSE, SINGAPORE The account No. 125042-01-780 was opened on 16.08.2011. Regarding the Beneficial Ownership, there are five correspondences from the authorized signatories over a period. All of them invariably declare that the assessee Shri Vashovardhan Birla is the sole beneficial owner of the asset held under account No. 125042-01-780 with Credit Suisse in the name of Mokopane Ltd. The first letter dated 19.08.2011 mentions The Banyan Trust as the Beneficiary, The second letter dated 23.08.2011 mentions that the beneficiary of The Banyan Trust is the assesses, Shri Yashovardhan Birla. The third letter dated 23.08.2011 mentions the beneficiary of The Bird International Foundation as the assessee, Shri Yashovardhan Birla and his family The fourth letter dated 20.04.2012 from Confiance Ltd first states that the Asset Contributor of The Banyan Trust is Mokopane Ltd. The fifth Letter dated 24.09.2012 from Confiance Ltd further reveals that the assessee is not only the sole beneficial owner of the assets but is also the contributor of the assets of The Banyan Trust.
As per Form A, filed under Article 3 of CDS, which is a document as defined In Article 110 of Swiss Penal Code, Shri Yashovardhan Birla is identified as the Beneficial Owner of the assets held in the name of Mokopane Ltd.
(iii) MOKOPANE-ACCOUNT NO. 91320000 WITH BARCLAYS BANK, SINGAPORE The account with Barclays Bank was opened on 26.03.2012. Declaration of Trust regarding Mokopane Ltd by CN Alpha Ltd addressed to Barclays Wealth, Singapore dated 25.04.2013 - shares of Mokopane Ltd held as nominee and Trustee for Confiance Limited as Trustee of The Banyan Trust as per Declaration of Trust dated 06.02.2012.
The correspondences in the file of Barclays Bank reveal that there are other accounts also in the name of Mokopane Ltd, The Banyan Trust, The Banyan Trust Capital Account and The Bird International Foundation. Substantial sum has. been transferred to Capital Wizard Ltd and The Banyan Trust Capital Fund. It Is also seen that money have been transferred for the credit of A/c. No. 88022936 of Capital Wizard Ltd's account with Coutts & Co, Hong Kong, a private banker.
(iv) MOKOPANE- ACCOUNT NO.050038915 44 M r . Y as h o v a r d h an B i r l a The only information available on date about the account is the Debit Note issued by Credit Suisse, Singapore to Mokopane Ltd intimating funds transfer from Mokopane Ltd's A/c. no. 125042- 01-780 to this account no. 050038915 No further details are available as on date about this account.
(v) MOKOPANE- ACCOUNT NO.56448176 WITH ROYAL
BANK OF SCOTLAND
The correspondences found in A/c.N0.91320000 of Mokopane Ltd with Barclays Bank, Singapore contains information on the account opened with RBS International in the name of Mokoparie Ltd which also shows that substantial funds have been transferred to this new account with RB5, Further details about this account not ascertained as on date.
MOKOPANE -ACCOUNT WITH HSBC, LUXEMBOURG The correspondence dated 12.09.2011 from Credit Suisse; Singapore indicated that Mokopane Ltd also has an Account with HSBC Bank, Luxembourg. Further details of this account are not yet ascertained.
The AO claims that the documents in the case of Mokopane Ltd are clinching on the issue of the identity of the person who has been contributing to the assets of the entity. Though the entity's ownership was structured in such a way to present it as a case of a private trust, in fact, the entire structure starting from The Bird International Foundation to The Banyan Trust and then to the layering entitles was only a camouflage to cover the trail of funds and the real owner of such assets. However, the letters of Confiance Ltd above establishes beyond doubt that the assessce. Shri Vaahovardhan Birla himself was the asset contributor through this carefully woven holding structure.
4. SORWOOD DEVELOPMENT SA Sorwood Development SA was incorporated on 25.05.1998 as an International Business Company In the British Virgin Islands. Sorwood Development 5.A opened an account on 15.11.2001 with Credit Suisse Bank, Zurich, bearing the business relationship number 0835-40639-1, which has since been dosed on 25.07.2012.
As per the documents filed with the Bank, the assessee Shri Yashovardhan Birfa is mentioned as the Legal Owner of the assets held under this business relationship in Form A, which is a mandatory document as per Article 3 under VSB Agreement on the Swiss bank's code of conduct with regard to the exercise of due diligence, referred to as CDB.
This declaration is duly supported by other official documents of identification including the copy of passport issued in the name of the assessee, bearing NO.FB355431 on 28.03.2005. These documents establish beyond doubt that the assessee is the legal and beneficial owner of the assets, which were found invested under the name of Sorwood Development S.A with Credit Suisse, 45 M r . Y as h o v a r d h an B i r l a Zurich and that these entities were in fact only a front for holding the investments of the assessee in their fiduciary capacity.
The KVC documents state that the Origin of Assets deposited on 15.11.2001, has come from the business activities of The assessee and not from any legacy as claimed by the assessee. Regarding the expected account movement, it mentions as restructuring of the trust set up on 04.2010/01.2011.
The passport copy of the assessee arid that of Shri Bharat Ankaraju has been found furnished to the bank which fact was admitted by the assessee's wealth manager Shri G. L Lath also.
As per the copies of letters addressed to the bank by Sorwood Development SA, it is seen that the bank had been issued a standing instruction to debit this account towards the credit card bills of Shri Yashovardhan Birla up to USD 50,000 per month and in fact the credit card bilk of the assessee had been found to have been debited to the account.
The liquidation fee for Alea Management Limited, another entity connected to the assessee, has also been paid from the account of Sorwood Development S,A which reinforces the nexus of Sorwood with the other entities of the assessee.
There are written Instructions to the bank, which is supported further by the confidential client notes, to transfer assets of Sarwood Development S.A. which held by the bank, to the newly opened account No.0835-1282441-3 in the name of Mokopane Limited, an entity of which the assessee is the beneficial owner.
There are remittances made from the account of Sorwood Development to Herritor Investments Limited, with narration "Dividend to the shareholder". This clearly established the fact that the shares of Sorwood Development were being held by Herritor Investments Limited, which in turn was beneficially owned by the assessee.
The account was closed on 25.07.2012 and the balance was transferred to Herritor Investments Limited - account no.41171925 held with HSBC Private Bank (UK) Ltd, London.
5. ANRID LLC, DELAWARE, USA Anrid LLC is a limited liability company formed under the Delaware Limited Liability Company Act on 01.10.2007. Anrid LLC was having an account with Credit Suisse, Zurich bearing relationship number 0835-1494489-2. As per Form A filed under Article 3 of CBD by the company, Shri Yashovardhan Birla is the sole beneficial owner of the assets held under this account.
As per the KYC document, the Origin of assets deposited is mentioned as from "savings accumulated over the last couple of years" and the expected movement in the account is stated to be part of export revenues.
All assets in the account of Anrid were transferred to Alea Management Limited
- account no. 13518394 with HSBC Private Bank (Suisse) 5A, Geneva on 29.08.2011 at the request of Credit Suisse Trust AG.
6 MANWELL INVESTMENT PROPERTIES LIMITED 46 M r . Y as h o v a r d h an B i r l a Manwell Investment Properties Limited was incorporated as a limited liability company on 26.07.2012 under the BVJ Business Companies Art, 2004 and registered at no. 1725776 with maximum authorised shares of 50,000 with par value of USD 1 each. The first Registered Agent is CCS Trustees Limited and registered office is at 263, Main Street, PO box 2196, Road Town, Tortola, BVI. The company's issued share capital comprises of 2 shares of USD 1 each and is fully owned by Mokopane Limited. The directors of Manwelf Investment Properties Limited are CCD Alpha Limited and CCD Beta Limited both incorporated in Guernsey. Consec Limited is the secretary of Manwell Investment Properties Limited. The entire share capital of Kinetic Holdings Limited, comprising of 100 shares of USD 3 each were transferred to Manwell Investment Properties Limited vide Certificate No.13 on 08.10.2012, No further information on the accounts and assets held by the entity are known as on date.
7. HERRITOR INVESTMENTS LTD This is the only entity which the assesses had admitted to have invested money through Liberalized Remittance Scheme (LRS) in his statement before JDIT(lnv) on 16.12.2011 in connection with the enquiry into offshore HSBC accounts. Though the assessee had claimed that certain amounts had been invested through LRS from FY.2007-08 to 2011-12, no further details about the nature of investment made, incorporation details of the company and its business operations were revealed in full, During the course of assessment proceedings, it has been claimed by the assesses that the entire sum invested in Herritor Investments Ltd has since been returned to him in the year 2012. However, the assessee has failed to provide any details or evidence of such receipt of money back from Herritor Investments Ltd.
As per the information available on the public domain, Herritor Investments Ltd is reportedly a LJK based company and the address is shown as Flat C-8, Lees Palace, London which is the same property found listed in the Balance Sheet of Kinetic Holdings Limited. This address is shared by Kinetic Holdings Ltd also and both are listed as Directors of a company Lees Palace Properties Ltd, UK. Both companies are shown to be holding 1 share each in Lees Palace Properties Ltd This address of Lees Palace is also found mentioned m the letter addressed to Credit Suisse requesting to hand over the contents of the overseas safe deposit locker of the assesses in the year 2011.
The documents received in connection with the other offshore entities of the assesses reveals that there is a very close nexus between Herritor Investments Ltd and other front entities like Alea Management Ltd, Kinetic Holdings Ltd, Sorwood Development SA and Mokopane Ltd, to list a few. Substantial sums have been transferred from one entity to the other, like in the case of Kinetic Holdings Ltd, loan has been given by Herritor investments Ltd which is much more than the investment admittedly made by the assessee.
As per client notes in the case of Alea Management Ltd, it is clearly stated that Heiritor Investment Ltd has the same Beneficial Owner as the former and that sums have been transferred to the latter. As on date, no further information has been received in connection with this entity from the offshore banks.
8. MAGENTA PROPERTIES INVESTMENTS LTD 47 M r . Y as h o v a r d h an B i r l a Magenta Properties Investments Ltd is mentioned in the Structure of Holding chart filed by the various offshore entities with the banks wherein it is mentioned as a UAE company incorporated on 10,03.2013 bearing Registration No.157735. This entity was referred to him by Shri Brijesh Thakkar, also as the one through which the assesses was looking to invest In a property, for which he was paid consultation fee.
9. MAGENTA PROPERTIES LTD The mention of this entity, Magenta Properties Ltd is found in the details of unauthenticated financial statements of Mokopane Ltd filed by the assessee for the first time in his submission dated 18.03.2016 under loans. No further information or documents are submitted by the assessee in this regard so far. 10 CAPITAL WIZARD LTD The entity Capital Wizard Ltd is found repeatedly mentioned in the documents furnished by the banks in the case of other offshore entities of the assessee. Substantial sums were found to have been transferred from the offshore entities like Alea Management Ltd and Mokopane Ltd to Capital Wizard Ltd with the remarks as loan repayment to the shareholder, dividend to the shareholder etc., which established the nexus of this entity with the assessee.
From the remittance details of other entities, it rsseen that Capital Wizard Ltd is having A/c. No, 88022936 with Coutts & Co, Hong Kong and A/c. No.,400- 922932 with JP Morgan Chase Bank Ltd. No further details are furnished so far about the incorporation details and structure of holding of the entity.
11. FELT E LEARING This entity was revealed for the first time by the assessee in his written submissions dated 18.03.2016. According to the letter, the shares are held by The Banyan Trust. However, no information regarding the incorporation details, capital and net assets of this entity has been submitted till date.
12. AAA (S) PTE LTD In the financial statement of Kinetic Holdings Ltd as on 17.01.2012, investment ins AAA (S) Pte Ltd is shown. No further details regarding the incorporation and holding structure are revealed tit] now, about this entity.
13. AVIT INVESTMENTS LTD According to the submission of Shri. G. L. Lath, part of the holding in an Indonesian company PT South Asia Pacific Viscose Ltd was made in the name of Avit Investments Ltd through the Credit Suisse AG as the front during the lifetime of Shri Ashokvardhan Birla. It was further submitted that the stakes were sold in FV 2007-08 and the proceeds have been credited to offshore Trusts / accounts set up by the assessee. This was denied by the assessee and no further details have been submitted by the banks concerned. Subsequently, it has been claimed that the original trust which was claimed to have been setup by his Late father and Late Pratap Malpani, was holding the shares of Kinetic Holdings ltd and that Avit Investments Ltd was held by Kinetic Holdings Ltd. However, except this admission of investment in Avit Investments Ltd, no information or evidence has been furnished. The submission of undisclosed offshore investment in PT South Asia Viscose 48 M r . Y as h o v a r d h an B i r l a through Credit Suisse AG in the name of Avit Investments Ltd made by Shri G.L Lath is corroborated by assessee's own admission. However, the AO notes that the very existence of such a discretionary trust extent of corpus therein, identity of the settlor, terms and conditions therein nave not been substantiated tin date. The claim of flow of funds from such a trust is also not supported with any documents.
14. EPICORP SOFTWARE INC In the client notes, a draft email in connection with the buy back offer involving the shares of a company Epicorp Software Inc is referred to. Though no further details are available so far, information on public domain shows that the company has since been shifted to the same address as that of Anrid LLC at Delaware, which prima facie reveals the proximate connection of this entity to the assessee and his offshore entities.
15. ZEUS The name of Zeus finds mention in the credit and debit notes furnished by the banks in the case of offshore entities like Alea Management Ltd and Mokopane Ltd, It is seen that on 11.11.2011, 500 shares of Zeus Private Equity 2 ICC Ltd were transferred from Alea Management Ltd (Client No.125132) to Mokopane Ltd. On 09.01.2013, USD 1,116,500 was credited to the account of Mokopane from Zeus Global Infrastructure Partners.
Though the assessee has denied any knowledge about this entity or the nature of receipts involved, the documents available indicate that the offshore entities are having significant connect on to this entity
16. STRIPE 10 IP An investment in the name of Stripe 10 LP has been confirmed by the $mail trail found in Ms. Nita Shivdasani's mail account. Though it is admitted as correct by the assessee, it Is claimed that there is no new infusion of funds into this investment but no further information & furnished.
17. KHATTAR WONG Khattar Wong is a Singapore based law farm which figures frequently in the bank statements of Kinetic Holdings Ltd as discussed earlier.
There are remittances to and from this entity over a period of time and the amounts involved are quite substantial. Certain payments have been clearly mentioned as towards property at Singapore. There are references to Client A/c also. The exact nature of these transactions and the details, of the client a/c mentioned therein are not yet known,
18. THE BANYAN TRUST Substantial sums have been found transferred to Banyan Trust from other offshore front entities of the assesses as discussed in the earlier. The Banyan Trust has an account with Credit Suisse Bank, Singapore with account number 91513600, by Confjance Ltd as the Trustee. In the name of The Banyan Trust Capital Account, there is an account with Royal Bank of Scotland Internal tonal bearing account number 56450534.
49 M r . Y as h o v a r d h an B i r l a Substantial sums have been found transferred to Banyan Trust from other offshore Front entities of the assesses In the name of The Banyan Trust Capital Account, there is an account with Royal Bank of Scotland International bearing account number 56450634 having considerable
39. OTHER ENTITIES From the bank account statements of the assesses, transfer of substantial sums to a few hitherto unknown entities like B/O. SUNMOON, HOMES, Powerdesk International, etc. is also noticed for which no further details are available in this office.
8.6 While dealing with the above bank accounts, the AO has noted that a beneficial owner Is recognized as the ultimate owner of the deposited assets under Swiss Law and understanding of the Banks. The AO has noted that the menaing of "Beneficial Owner" is also explained in the declaration filed with the banks as "the natural person who ultimately owns (directly /indirectly) and / or controls the account holder and or the person on whose behalf the transaction is being conducted. It also refers to those persons who exercise ultimate control over a legal person and / Of arrangement." It further clarifies that "the beneficial owner does not necessarily have to be granted power of attorney or signatory authority for the bonking relationship contemplated thereunder". 8.7 The examination of close aides handling sensitive affairs of the assessee led to clear admission by these employees that they had managed the assets of these foreign entities at the behest of the assessee. One of the persons having extensive knowledge is Shri G L Lath who acted as a wealth manager to the assessee and it has come out of his statements that:
i His statement u/s 132(4} contains critical details about offshore entities, their bank accounts crested for the benefit of the assessee and control of the assessee on these funds/assets and has been referred to by the AO.
ii He received instructions from Mr. Birla which was conveyed by him to bank authorities outside India through a separate mobile number. In addition, Mr Birla used to give direct instructions to various banks like Barclays Bank Pic Singapore, UBS and Credit Suisse AG etc. iii. That all the offshore entities, namely The Banyan Trust Mokopane Ltd, Alea Management Ltd and others were entities created for the beneficial ownership of the assessee.
iv. That the assessee has number of bank accounts abroad, with different banks, including H5BC, Credit Suisse Bank, Barclays Bank and UB5 either in his name or In the name of these entities, of which he is the beneficial owner.
v. That except three bank accounts with Barclays Bank, Singapore, ail other offshore hank accounts are undisclosed.
vi. That approximately USD 40-50 million was lying in the undisclosed offshore account? of the assessee as on December, 2012.
50 M r . Y as h o v a r d h an B i r l a vii. That the assessee has two flats at London. First one situated at C-8, Lees Palate, London, which was purchased during Late Ashokvardhan Birla's time and the second Flat at B-S, Lees Palace, London, which was purchased out of remittances from India through LRS by the assessee probably in the name of a company, which is 100% owned by the assessee, which has an account in H5BC London.
viii. That after the demise of Shri Ashokvardhan Birla, assessee's father, in the year 1990, a trust was formed in the year 1992 by the assessee and one Shri D. K. Agarwal, who was authorised to manage it. That the credit lying in the accounts of assessee's father Late Ashokvardhan Birla was transferred to this Trust created in 1992.
ix. That there was some undisclosed investment in an Austrian company (read, PT South Pacific Asia Viscose Ltd) held in the name of Credit Suisse AG (read, Avit Investments Ltd) which was sold in the FV .2007-08 and the proceeds from undisclosed stake sate was credited to Credit Suisse AG's account and was routed to some of these trusts.
x. He confirmed and corroborated! the statement given by Ms Nita Shivdasani. In a subsequent statement, he submitted that he had been pressurized by the assesses to retract his earlier statement. He accepted that varacity of his earlier statement.
xi. He accepted that he had met Mr Andrews, London [whose phone number was also available in the assessee's mobile) and that he assisted in closing assessee's bank accounts in HSBC and transfer of such funds to other accounts.
8.8 The other close aide who has, through documents seized from her computer, email correspondence and admission in the statements, provided irrefutable proof that it was the assessee who was in actual control of all the funds being managed in these accounts was Ms Nita Shivdasani. Ms Shivdasani was earlier an employee with Barclays Bank, Singapore and had assisted the assessee in opening some of the offshore accounts of the assesses while she was with the Sank. Later, she joined the team of the assesses managing his wealth. It has come out of the documents found with her and her statement recorded during search / post search/ assessment inquiries that:
i. She was in touch with trustees of various structures including Mokcopane Ltd. for managing the assessee's affairs. ii. Deleted emails recovered from her laptop revealed assessee's control over bank accounts belong to Mokopane Limited as well as bank account containing investments by Stripe 10LP. From the bank statement of Ocean Vista Point Limited A/c No. 20600226787 it is found on 30.11.2007, there is a fund transfer amounting to USD 2,55,000 to Yashovardhan Birla's personal account at UBS AG, Zurich with a narration "Capital call Stripe 10 LP" which clearly establishes the link of the assessee with Stripe 10 LP. Further it also gives credence to the statement of Ms. Nita Shivdasanr.
51 M r . Y as h o v a r d h an B i r l a iii. Ms. Shivdasani has admitted that the appellant had asked her to contact Mr Andrews in London for deletion of his name from some documents for a short period of time."
16. After quoting from the aforesaid order learned CIT(A) observed that the assessee was beneficial owner of various assets/companies/bank accounts owned by the front entities and that such information was not provided in the return of income filed by the assessee, the Assessing Officer proceeded to issue notice under section 10(1) of the BMIT Act on 22.11.2017. Thereafter he noticed that the assessee has challenged the issue of notice under section 10(1) and has denied his liability to be assessed under section 10(3) of the Act raising various issues. Learned CIT(A) thereafter rejected the assessee's contention that the assessee has time to file return of income for the relevant assessment year until 31.3.2018. learned CIT(A) held that there was fetters on the Assessing Officer placed by section 10(1) of the Act specifying the time frame in which the notice is to be issued either with reference to filing of income tax return or with reference to the BMIT Act. He noted that the section does not even specify that such notice should only be issued after the return of income under Income Tax Act has been filed. Referring to the provisions of section 10(1) of the Act, he noted that the issue of notice under section 10(1) of the Act, the only requirement is coming of any information to the notice of the Assessing Officer. Thereafter he referred to the definition of 'undisclosed asset located outside India' as per section 2(10) of the Act. He observed that the information available with the Assessing Officer has been elaborately discussed above and he noted that there were sufficient assets outside the country of which the assessee has been found to be a beneficial owner. Thereafter he referred to the scope of total undisclosed income and assets as per section 4 of the Act. Referring to the above he held that in the above definition of scope, only the determination of income element has been linked with the return of income filed by the assessee in proceedings going on under Income Tax Act.
That it has no reference to the issue of notice u/s 10(1) of the Act for which mere presence of sufficient information with the AO under BMIT Act is sufficient. That further, as clause (c) above would indicate, the 'value of 52 M r . Y as h o v a r d h an B i r l a undisclosed assets' is not linked with the return of income, the implication being that if the such information about such assets comes to the knowledge of the AO, he is free to issue notice under the BMIT Act and such notice would not have a relation with the return under Income Tax Act. That the present proceedings are predominantly related to existence of assets for which the appellant has been found to be a beneficial owner. That as such, no fetters are placed by the above definition on the AO in treating the assets as undisclosed and proceeding to issue the notice. That the information about the various foreign assets beneficially owned by the assessee as enumerated by the AO provide enough information in possession of the AO to issue the notice under section 10(1) of the Income Tax Act.
17. Thereafter he distinguished the decisions relied upon by the assessee in this regard. Thereafter, he rejected the assessee's contention that the A.O. should have waited till 31.03.2018 for issue of notice as such notice as the right of the assessee to file a belated return was available till that period. That in respect of 'undisclosed assets' coming to the knowledge of the A.O., there is no reference in BM Act, to any return of income under the Income Tax Act. He held that the decision in the case of Mannalal Barti [1978] 114 ITR 329 (Cal) and R P Dwivedi [2006] 99 TTJ 794 (Agra)and Godrej & Boyce Manufacturing Co. [1989] 44 ELT 3 (Bom), whereon different facts he held that the BM Act, does not prescribe any fixed or relevant date for issue of notice u/s. 10(1) and hence, the above decision does not apply to the facts of the present case. Hence, he dismissed ground no. 4 raised by the assessee.
18. Thereafter, the ld. CIT(A) referred to the assessee's claim that source of corpus of the foreign discretionary trust was not the assessee but rather the assessee's maternal uncle who settled upon trust his income earned outside India and that the assessee ceased to be beneficiary beyond 14.07.2014. In this regard, the ld. CIT(A) referred to the trust deed submitted and found that the document is unauthenticated and is signed by two unnamed directors. Thereafter, he referred to the assessee's submissions showing summary of 53 M r . Y as h o v a r d h an B i r l a share capital and shares of Kinetic Holdings Limited and the declaration signed by one M B Collins purported to be a director of Albany Trustee Company and a letter from Confiance dated 24.03.2016 and addressed to the assessee for the clarification that Mr. Birla may have been mentioned as beneficial owner or beneficiary in some of the bank accounts opened by them and that in the trust deed the assessee and his family were in the class of discretionary beneficiaries during their transteeship. He also referred to the assessee's reliance in the case of Malaysian International Trading Corporation vs. Mega Safe Deposit Vaults (P.) Ltd. [2006] 68 SCL 52 (Bom) to claim that where no evidence is adduced regarding foreign law, the presumption is that it is the same as Indian Law on the point in consideration. He noted that the assessee has now proceeded to argue his case as if the Trust was framed under the Indian Trust Laws. He observed that the assessee has elaborately submitted the rights and duties of the Settlor with reference to appointment of trustees and control over assets. That it is claimed that migration of trust assets does not alter the irrevocable nature of the trust settlement, rather the discretion merely becomes vested with new or additional trustees. That as per the assessee, the trust assets at AT 351 (above trust) are migrated by trustees to Nibola Trust (Liechtenstein) in 1998 with Credit Suise Limited as Trustee, in 2010 the trust assets are migrated to Bird International Foundation (Panama) with HSBC as trustee, in 2011, the trust assets are migrated to Banyan Trust (Guernsey) with Confiance Limited as trustees. It is claimed that such migration is not distribution.
19. However, the ld. CIT(A) held that the trust deed enclosed by the assessee has not been filed with any authority in Guernsey Island and is absolutely unauthenticated and does not contain signature of Mr. Pratap Malpani at any place can and, hence, it cannot be accepted as credible evidence. He further held that the current discussion is with respect to various assets existing after 2001 and that this trust is ceased to exist in 1998 and, hence, the assessee must produce authentic current records/deeds of existing trust to argue his case. That the assessee cannot be permitted to build his case on a non-existing 54 M r . Y as h o v a r d h an B i r l a case while refusing to provide the documents of the existing trusts/bank accounts which are only in his possession. He further distinguished the decision of the Malaysian International Trading (supra) by observing that it was not a case where unauthenticated documents, claimed to pertain to a tax heaven is involved. The assessee was operating through Tax Heavens which are known for their secrecy laws and liberal financial structures inviting wealthy persons and wealth managers all over the world. The onus was on the assessee to produce correct document and correct interpretations to support his case. Hence, he held that any reliance on the old Trust and its provisions is infructuous and irrelevant.
20. The ld. CIT(A) further noted that Shri Pratap Malpani met with an air accident and died along with the father of the assessee in 1990. That subsequent structures referred by the assessee has been created subsequent to his death. That if Mr. Malpani was the settler of the first trust, the person handling the affairs of the subsequent trusts and transfer of such assets to such trusts, if correct, has not been identified. That trust deed of subsequent trusts have not been provided. That in absence of any document relating to Nebola Trust, Bird International Foundation and Banyan Trust which are trusts existing at the relevant point of time, the irrelevant discussion made by the assessee in respect of a trust which ceased to exist in 1998 is found infructuous and not worthy of discussion. That clauses in the old Trust Deed cannot be used to elaborate on the provisions of some other trust for which the Trust deed is not available.
21. Thereafter, the ld. CIT(A) proceeded to elaborate upon the trusts created in tax heaven countries, etc. In this regard, he referred to the ITAT decision in the case of Renu Thadani [2020] 117 taxmann.com 804 (Mum-Trib.). He elaborately referred from the said decisions running into several pages. He noted that in the above order, the ITAT has given primacy to the documents with the bank which mention the assessee as 'beneficial owner' rather than the contents of the various structures cited by the assessee. That in the above 55 M r . Y as h o v a r d h an B i r l a decision, the assessee's conduct in declining to sign a consent waiver was observed adversely by the ITAT. He referred extensively to the ITAT order. Thereafter, he held that in the present case, the assessee has tried to mislead the department in a planned way. That each and every bank having bank accounts identified by the A.O. has confirmed that the assessee is the 'beneficial owner/contributor of assets' of these accounts. He further referred that sufficient evidence has been unearthed during search action indicating that while the assessee has given a consent waiver. The result has been lack of co-operation from HSBC, Geneva Bank. That evidence has also come in the form of Ms. Nina Shivdasani that she was directed to contact persons outside the country in order to erase certain evidences of ownership of assets. Thus, he held that in view of the above decision, the onus was on the assessee to produce all evidence with respect to source of evidence which have found in the various bank account whereas the assessee has been cited by the bank as beneficiary owner. Thereafter, he held that it is found relevant to discuss the letter issued by Confiance on this issue. He noted that M/s. Confiance is a paid service provider appointed by the assessee. That merely because the letter has notorised, the authenticity of the letter does not increase. That the contents of the letter written by M/s. Confiance is found to be patently false in light of the contemporaneous documentation supplied to the Income Tax Department by the banks where the accounts exist. That corresponece has been liberally received from all banks from where responses have been received. That the A.O. has referred to five contemporaneous letters including atleast one letter dated 24.09.2012 from Confiance itself categorically mentioning that the assessee is not only the sole beneficial owner of the assets but is also the contributor of the assets of The Banyan Trust. He further held that M/s. Confiance was found to have supplied other supporting evidences. That how can the assessee recuse himself as he was the sole beneficiary/asset owner of the bank accounts at the first place? Who are the other beneficiaries? Thereafter the ld. CIT(A) held that the assessee cannot place reliance on the earlier trust (even if accepted as true). Thereafter, the ld. CIT(A) reiterated the 56 M r . Y as h o v a r d h an B i r l a proceedings under BMIT Income Tax Act, 1961 as asset and income specific. That there was onus cast on the assessee to explain the source of the individual assets and income as identified by the A.O., wherein the documents have been found indicating that the assessee was the beneficial owner of such assets. That since the assessee has been cited as a beneficial owner and not the discretionary beneficiary of these assets, there was no question of waiting till distribution of trust corpus to treat these as assessee's income as assets. He further held that summary of share capital of shares in the case of Kinetic Holdings filed by the assessee does not offer any assistance in identifying assets of the company and source of finance in acquisition of such assets, if beneficially owned. He observed that it is noted that the A.O. has enough direct evidences in form of bank documents and bank fillings indicating the assessee to be beneficial owner of such bank accounts and funds therein. He further held that without prejudice with this, the assessee has failed to produce any document to support the source of funds in the various bank accounts identified by the A.O. and reproduced in his order. That the assessee's claim was also not accepted because the assessee was a discretionary beneficiary in the Bird International Foundation and Banyan Trust, the schedule of Bird International Foundation reproduced by the A.O. at page 58 of his order shows only Yashovardhan Birla and his descendants as beneficiaries. These are contemporaneous documents shared by the Competent Authorities of these countries. Thereafter, the ld. CIT(A) held that the only evidence filed by the assessee in support of his contention of his being a discretionary benefit is an unauthenticated copy of a purported declaration of trust by one Albany Trustee Company Limited regarding the corpus fund of the impugned trust. That the corpus of funds in this declaration is hundred shares of USD 1 each of Kinetic Holding Ltd. to competent authorities indicates that the shares of Kinetic Holding Ltd. continued to be in the name of Shri Pratap Malpani during his lifetime and no such shares were never transferred to Albany Trustee Company Limited. That in this declaration, the sons of Late Pratap Malpani are mentioned as the named beneficiaries but 57 M r . Y as h o v a r d h an B i r l a their names do not figure in the subsequent trust structure of the offshore entities which has only the assessee as its sole beneficiary. That this is probably the reason for the assessee refraining from filing the trust deeds and associated documents of other trust. That during search, it has been confirmed that the sons of late Pratap Malpani did not execute any renunciations of their rights Under the circumstances, the attempt made by the assessee to correlate his trusts to this declaration fail and cannot be accepted. These documents also demonstrate the incorrect claim made that the corpus fund of the Banyan trust is the result of resettlements from prior trust structures namely AT 351, Nebola, etc. originally set up by his maternal uncle Shri Pratap Malpani and that the assessee is merely a beneficiary of a discretionary trust structure. That it is clear that the subsequent Trusts have been constituted by the assessee solely for his own benefit and hence his name appears as beneficial owner in all the connected bank accounts.
22. Thereafter, he rejected the assessee's claim that there is no documentary evidence on record to show that the assessee has unaccounted money or money that has escaped tax or money that was remitted through illegal channels. He held that BMIT Act does not put any such onus on the assessee before the issue of notice u/s.10(1). The only requirement is existence of information and nothing else. In this regard, he referred to the decision of Independent Media (P) Ltd. 210 Taxmann 14 (Delhi) (2012)
23. Thereafter, he referred to the assessee's claim (on a without prejudice basis) that he was served with invalid notices under the Act, wherein authorities proceeded to endeavor to bring to tax the same assets and/or income which are now being assessed by the A.O. under BMIT Act. He noted that the Revenue authorities continues to pursue the right to assess to tax the assessee for offhosre trust assets under the Act. Hence, this must be excluded from the ambit of BMIT Act. He distinguished the decision referred by the assessee in this case and held that in absence of any specific bar on 58 M r . Y as h o v a r d h an B i r l a proceedings under BMIT Act in such circumstances, the action of the A.O. in issuig notice u/s.10(1) of the Act cannot be faulted.
24. Thereafter, he held that BMIT Act mandates assessment of undisclosed income/assets in the hands of beneficial owners/beneficiaries irrespective of ownership of paper. Referring to this, he held that in light of the discussion held earlier, the documents filed by the assessee at Annexure I, II, IV and V do not held the assessee. He again referred to the assessee's ground that the A.O. could not have issued a notice u/s.10(1) for the A.Y. 2016-17 as the assessee ceased to have an interest in the discretionary trust with effect from 15.07.2014. He held that similar issue has been raised by the assessee at ground no.6 as well. Referring to the earlier observation, he rejected this ground also. He held that while the issuing notice u/s.10(1), the A.O. has pointed out various entities and their bank account as well as documents evidencing that he was a beneficial owner of such accounts. That the assessee cannot rebut all these documents merely through these two letters which are unsupported by any document. Thereafter, the ld. CIT(A) referred to the A.O.'s summary of the information available with him at the time of initiating the proceedings under the BMIT Act and he reproduced the same. Referring to the A.O.'s order, the ld. CIT(A) held that it was incumbent upon the assessee to rebut the A.O.'s claim with respect to each and every asset separately.
25. The ld. CIT(A) further held that the A.O. had sufficient prima facie evidence that the assessee was the sole beneficial owner of assets in these bank accounts. That these documents cannot be rebutted merely by a general declaration obtained by the assessee. That credible evidence are not there. That the assessee has renounced his beneficiary status in these assets. He further rejected the assessee's claim that adjudicating authority could not have invoked the provisions of section 4 of the BMA against the assessee as section 4 applies in case of undisclosed foreign assets/income and in a preceding year, when the assessee in fact have a beneficial interest in a foreign discretionary trust structure, such a disclosure of beneficial interest, aleit not an 'asset', was 59 M r . Y as h o v a r d h an B i r l a validly made under the aegis of Income Tax Income Tax Act, 1961, 1961. The assessee has submitted the schedule FA for A.Y. 2014-15 in support of its claim. The ld. CIT(A) rejected this submission. He held that none of the assets (bank accounts) wherein the A.O. has significant information with reference to the beneficial interest in such accounts are found to be disclosed in this schedule.
26. The ld. CIT(A) further referred to the assessee's contention that the A.O. incorrectly concluded that the assessee has undisclosed foreign income and/or assets during the relevant assessment income, overlooking the assessee's denial in this regard and relying upon the pending proceedings concerning Chapter XIX-A which was neither contradictory nor self serving. The ld. CIT(A) noted that the assessee is claiming that the assets under reference are being assessed parallel under the I.T. Act and hence, assessment of these assets under the BMIT Act is invalid. The ld. CIT(A) further noted that it has been claimed that the Revenue is proceeding substantively in reliance upon the order dated 27th September, 2017 of the Hon'ble ITSC under section 2450(4) of the Income Tax Act 1961. That it is also claimed that the findings of the ITSC have been considered and rejected by the Hon'ble Tribunal in a later dated order (the copy of the order has been filed before me but has not been admitted as an evidence), it is claimed that the analysis and conclusion of the ITSC currently remain sub judice in a pending writ petition before Hon'ble Bombay High Court and that if the appellant were to succeed in the challenge, there is a clear prospect of a conclusive settlement being achieved in relation to the tax assessment and section 2451 will operate to bar reopening under any law including EMIT Act.
27. That the assessee has also contended that the Principal Commissioner of Income Tax (Central) - 2, Mumbai was aware of all the assets under discussion as clear from his letter dated 28.8.2017 addressed to the Secretary, Settlement Commission. Once he was aware of these assets under the Income Tax 60 M r . Y as h o v a r d h an B i r l a Proceedings; a separate notice u/s 10(1) of the EMIT Act could not have been issued.
28. That the submission made by the assessee has been examined. That there appears no provision in the BM Act which prohibits initiation or continuance of proceedings under the BM Act if assessment proceedings in other years are continuing under Income Tax Act. Hence, the proceedings continuing under the I T Act cannot operate as a bar on initiation of proceedings under the BM Act. That the assessee's argument that there is a possibility of the Settlement Commission settling the case finally (in case the Bombay High Court decision is in appellant's favour) is well taken. If the case is finally settled, natural consequences will follow as far as other Acts are concerned. However, the proceedings under these Acts cannot be stopped merely under such a presumption.
29. That the case of the assessee is that since search action took place on 7.1.2014 and notices under section 153A of Income Tax Act were issued, all particulars concerning foreign income and assets were confronted to the assessee. The appellant, in any case, ceased to hold the status of beneficiary of the offshore discretionary trust beyond 14.7.2014 to the knowledge of Indian Revenue Authority. Thus, prior to coming into force of the Act, the foreign income and assets alleged to be held outside India by the Appellant were not only within the full knowledge of the Indian Revenue Authority but were also subject matter of impugned proceedings under the IT Act thus precluding scope for declaration of any form whatsoever and / or disclosure by the assessee.
30. That the argument that the assessee could not disclose the assets in the window provided under the BMIT Act because of the search action appears flawed. That the BMST Act had specific provisions that such persons could not avail of the declaration window. Once the Act itself did not permit such declaration, the assessee cannot claim grievance in this regard unless he 61 M r . Y as h o v a r d h an B i r l a challenges the vires of the relevant provision. Further, the fact that these assets had come to the notice of Investigation Unit or the Income Tax Authority prior to coming in force of the Act has no impact on the power and functions of the Authority under BM Act. The scope of assets contemplated under BM Act is clear from the Board's Circular No. 13 of 2015.
31. The ld. CIT(A) concluded that there was no estoppels against continuing both the Acts and the grounds raised by the assessee is found not tenable. Thereafter, the ld. CIT(A) distinguished some of the decisions referred by the assessee and finally concluded as under:
10. In light of elaborate discussion with respect to the various grounds raised by the assessee, the claim of the assessee that he is not liable to be assessed under BMIT Act is not found acceptable. The grounds of appeal no. 4 to 9 raised by the assessee in his appeal in this regard are not found tenable and are dismissed. In light of the various facts which have already noted above, it is held under section 15(l)(b) rws 17 of the BMIT Act that the assessee is liable to be assessed under the Act and the notice under section 10(1) of the Act has been validly issued by the A.O.
32. Against the above order, the assessee is in appeal before us.
33. We have heard both the counsel and perused the records. Both the parties have been extensively heard. They made respective rejoinders as well.
34. Final summary of assessee's submissions are summarized as under:
62 M r . Y as h o v a r d h an B i r l a 63 M r . Y as h o v a r d h an B i r l a 64 M r . Y as h o v a r d h an B i r l a 65 M r . Y as h o v a r d h an B i r l a 66 M r . Y as h o v a r d h an B i r l a 67 M r . Y as h o v a r d h an B i r l a 68 M r . Y as h o v a r d h an B i r l a 69 M r . Y as h o v a r d h an B i r l a 70 M r . Y as h o v a r d h an B i r l a 71 M r . Y as h o v a r d h an B i r l a 72 M r . Y as h o v a r d h an B i r l a 73 M r . Y as h o v a r d h an B i r l a 74 M r . Y as h o v a r d h an B i r l a 75 M r . Y as h o v a r d h an B i r l a 76 M r . Y as h o v a r d h an B i r l a 77 M r . Y as h o v a r d h an B i r l a 78 M r . Y as h o v a r d h an B i r l a 79 M r . Y as h o v a r d h an B i r l a 80 M r . Y as h o v a r d h an B i r l a 81 M r . Y as h o v a r d h an B i r l a 82 M r . Y as h o v a r d h an B i r l a 83 M r . Y as h o v a r d h an B i r l a 84 M r . Y as h o v a r d h an B i r l a 85 M r . Y as h o v a r d h an B i r l a 86 M r . Y as h o v a r d h an B i r l a 87 M r . Y as h o v a r d h an B i r l a 88 M r . Y as h o v a r d h an B i r l a 89 M r . Y as h o v a r d h an B i r l a 90 M r . Y as h o v a r d h an B i r l a 91 M r . Y as h o v a r d h an B i r l a 92 M r . Y as h o v a r d h an B i r l a 93 M r . Y as h o v a r d h an B i r l a 94 M r . Y as h o v a r d h an B i r l a 95 M r . Y as h o v a r d h an B i r l a 96 M r . Y as h o v a r d h an B i r l a 97 M r . Y as h o v a r d h an B i r l a 98 M r . Y as h o v a r d h an B i r l a 99 M r . Y as h o v a r d h an B i r l a 100 M r . Y as h o v a r d h an B i r l a 101 M r . Y as h o v a r d h an B i r l a 102 M r . Y as h o v a r d h an B i r l a 103 M r . Y as h o v a r d h an B i r l a 104 M r . Y as h o v a r d h an B i r l a 105 M r . Y as h o v a r d h an B i r l a 106 M r . Y as h o v a r d h an B i r l a 107 M r . Y as h o v a r d h an B i r l a 108 M r . Y as h o v a r d h an B i r l a 109 M r . Y as h o v a r d h an B i r l a 110 M r . Y as h o v a r d h an B i r l a 111 M r . Y as h o v a r d h an B i r l a 112 M r . Y as h o v a r d h an B i r l a 113 M r . Y as h o v a r d h an B i r l a 114 M r . Y as h o v a r d h an B i r l a 115 M r . Y as h o v a r d h an B i r l a 116 M r . Y as h o v a r d h an B i r l a 117 M r . Y as h o v a r d h an B i r l a 118 M r . Y as h o v a r d h an B i r l a 119 M r . Y as h o v a r d h an B i r l a 120 M r . Y as h o v a r d h an B i r l a 121 M r . Y as h o v a r d h an B i r l a 122 M r . Y as h o v a r d h an B i r l a 123 M r . Y as h o v a r d h an B i r l a 124 M r . Y as h o v a r d h an B i r l a 125 M r . Y as h o v a r d h an B i r l a 126 M r . Y as h o v a r d h an B i r l a 127 M r . Y as h o v a r d h an B i r l a
36. The Revenue's submissions are as under:
128 M r . Y as h o v a r d h an B i r l a 129 M r . Y as h o v a r d h an B i r l a 130 M r . Y as h o v a r d h an B i r l a 131 M r . Y as h o v a r d h an B i r l a 132 M r . Y as h o v a r d h an B i r l a 133 M r . Y as h o v a r d h an B i r l a 134 M r . Y as h o v a r d h an B i r l a 135 M r . Y as h o v a r d h an B i r l a 136 M r . Y as h o v a r d h an B i r l a 137 M r . Y as h o v a r d h an B i r l a 138 M r . Y as h o v a r d h an B i r l a 139 M r . Y as h o v a r d h an B i r l a 140 M r . Y as h o v a r d h an B i r l a 141 M r . Y as h o v a r d h an B i r l a 142 M r . Y as h o v a r d h an B i r l a 143 M r . Y as h o v a r d h an B i r l a 144 M r . Y as h o v a r d h an B i r l a 145 M r . Y as h o v a r d h an B i r l a 146 M r . Y as h o v a r d h an B i r l a 147 M r . Y as h o v a r d h an B i r l a 148 M r . Y as h o v a r d h an B i r l a 149 M r . Y as h o v a r d h an B i r l a 150 M r . Y as h o v a r d h an B i r l a 151 M r . Y as h o v a r d h an B i r l a 152 M r . Y as h o v a r d h an B i r l a 153 M r . Y as h o v a r d h an B i r l a 154 M r . Y as h o v a r d h an B i r l a 155 M r . Y as h o v a r d h an B i r l a
36. We have carefully considered the submissions and perused the record.
We note that we are sitting in appeal against the dismissal by the ld. CIT(A) to the assessee's challenge to judicial defect in issuing notice by the A.O. under BM Act to the assessee. We note that the assessee's challenge in this regard before the ld. CIT(A) was pending for quite some time. The assessee had to approach the Hon'ble Jurisdictional High Court in this regard. The Hon'ble Jurisdictional High Court has given certain direction.
37. The Hon'ble High Court had noted that the assessment proceedings in the meanwhile, were in progress against which the jurisdictional issue was raised. The Hon'ble High Court directed to the ld. CIT(A) that he shall dispose of the pending appeal before it within a period of four weeks from today that was 30.03.2021. That the assessment proceedings to go on. That the results of the assessment proceedings will be subject to the decision of the ld. CIT(A). Now we note that the A.O. has already concluded his assessment proceedings by the time the ld. CIT(A) disposed off the jurisdictional issue . In the said order of dismissal, the ld. CIT(A) noted that he had called for the documents which were relied upon by the Assessing Officer in issuing the notice. The ld. CIT(A) further notes that the A.O. informed him that these documents were duly referred in his final assessment order. Hence, the ld. CIT(A) without actually examining the original documents on the basis of which the A.O. has issued the notice, disposed the assessee's challenge to jurisdictional issue based upon the final assessment order. Thus, it is amply clear and duly accepted by the ld. CIT(A) that he has not examined the original documents based upon which the notice was issued, rather he has relied upon the final assessment order. In fact, the entire order of the ld. CIT(A) dismissing the jurisdictional issue is elaborately relied upon the final order of the A.O. We note that when the issue before the ld. CIT(A) was jurisdictional defect in issue of notice and the Hon'ble Bombay High Court had directed the ld. CIT(A) to dispose it off and that the assessment proceedings to go on, the reliance by the ld. CIT(A) in dismissing the jurisdictional challenge by taking the huge 156 M r . Y as h o v a r d h an B i r l a recourse of the final assessment order and even admitting that original documents were not examined by the ld. CIT(A) is not sustainable in law. While deciding the above jurisdictional issue, the ld. CIT(A) cannot rely upon the final assessment order. In other words, the findings in the final assessment order cannot be relied upon to overcome the jurisdictional defect/challenge. The jurisdictional issue has to be decided by reference to the materials relied upon the A.O. in disposing of the jurisdictional challenge. Hence, the ld. CIT(A)'s extensively reliance upon the final assessment order by the A.O. in dismissing the challenge to jurisdictional defect, is both unsustainable on account of law in this regard as well as the same is in contradiction to the Hon'ble Jurisdictional High Court's direction in this regard.
38. We further note that the same assessee had been the subject matter of wealth tax proceedings before this ITAT. The assets and the bank accounts in question were already the subject matter to the Wealth Tax Assessment. The ITAT in Wealth Tax assessment has decided the issue in favour of the assessee. Some of the findings of the ITAT in the aforesaid Wealth Tax order has already been extensively dealt with in the aforesaid orders of the ld. CIT(A) but the same may be reiterated in the summary of the same here as well.
39. We note that the ITAT in wealth tax proceedings have already given a finding that the assessee was nominated as one of several beneficiaries of an offshore irrevocable discretionary trust, settled-in the year 1989 by the assessee's non-resident late maternal uncle Shri Pratap Malpani. That the assessee was not a contributor to the trust structure. That the assessee is not liable to be construed as sole beneficiary of the trust. That the Revenue cannot collapse the offshore trust structure. That the assessee was not a 'substantial owner' of the assets settled upon trust held through Knitec Holdings Ltd. That the bank account in foreign jurisdictions pertaining to offshore entities could not be treated as bank accounts of the assessee even though for anti-money laundering purposes the assessee had been declared as 'beneficial owner'. That the case of the Revenue is not that the investments were moved from India by 157 M r . Y as h o v a r d h an B i r l a the settler or any beneficiaries. It is a fact on record that there are no investments which were made by the assessee or the investments were made from India.
40. We note that the above order of the ITAT has not been reversed by the Hon'ble Jurisdictional High Court. Now we note that the above submissions have been rejected by the ld. CIT(A) on the ground that the said order of the wealth tax assessment was not before the A.O. when he issued the notice to the assessee. We find that the Wealth tax assessment order was very much before the ld. CIT(A), he could not have brushed aside the findings by the ITAT in the wealth tax proceedings by claiming that the said order was not in existence when the notice was issued. This is more so when on the other hand the ld. CIT(A) is himself placing reliance upon the final order of the A.O. which obviously was not in existence at the time when the notice was issued.
41 We note that the Hon'ble Supreme Court in the case of Suzuki Parasrampuria Suitings Ltd. (supra) has held that the assessee cannot take shifting stand under different proceedings and such stand was liable to be rejected on the touch stone of the legal maxim of approbate and reprobate. In the present case, we note that the Revenue as well as ITAT cannot take shifting stands under different proceedings, when after evaluation of the same facts the ITAT had taken a decision in favour of the assessee that these assets do not belong to the assessee. Now we at the ITAT cannot take a contrary view by shifing the stand that ITAT's own findings and decision has no precedential value. This being so, the denial of liability by the assessee under Black Money Act under the jurisdictional challenge duly succeeds in view of the above said ITAT order in Wealth Tax proceedings.
42. Now we note that the legal maxim of approbate and reprobate applies to the Revenue as well. When it has already been accepted by the Revenue authorities in the proceeding before Income Tax Settlement Commission, that they are not doubting the trust deed executed by the uncle of the assessee Shri 158 M r . Y as h o v a r d h an B i r l a Pratp Malpani which is in fact a genesis of all the accounts in additions here. Now, the ld. CIT(A) is rejecting the same by holding that the same is not to be relied upon. In our considered opinion, on the touch stone of the Hon'ble Supreme Court decision referred above and the legal maxim of approbate and reprobate, the Revenue cannot be permitted to take a contrary stand in the proceedings before the ITAT that now they are doubting the veracity of the trust deed settled by Shri Pratap Malpani. Once it is held that the Revenue is not doubting the said trust deed, the entire edifice of Revenue's case in this case fails as it is clear that the said trust was settled by the assessee's maternal non residential uncle Shri Pratap Malpani. As held by the Hon'ble Bombay High Court in the case of Malaysian International Trading Corporation vs. Mega Safe Deposit Vaults (P.) Ltd. (supra) that where no evidence adduce regarding the foreign law, the presumption is that it is the same as Indian law on the point in consideration. The assessee's contention in this regard was that in such circumstances, the trust settled abroad has to be taken as under the Indian trust. In such circumstances, the rights and duties of the settler is governed with reference to appointment of trustees and control over assets. In such circumstances, the migration of the trust assets does not alter the irrevocable nature of the trust settlement. The reliance upon the said case laws and the submissions has been rejected by the ld. CIT(A) on the ground that it was not a case were unaccounted documents were unearthed. And the same was claimed to have pertained to a tax heaven case . We note that the above observations itself is fallacious as the veracity of the trust deed had already been not disputed by the Revenue in the proceedings before the Income Tax Settlement Commission. Moreover, these reasons mentioned by the ld. CIT(A) does not warrant that the afore-said case laws from the Hon'ble Jurisdictional High Court is to be ignored, once it is accepted that all the assets in the present case originate from the said trust deed. This is further supported by the decision of Hon'ble Supreme Court in the case of CIT vs. Estate of HMM Vikramsinhji of Gondal (supra).
In Commissioner of Wealth Tax vs. Estate of HMM Vikramsinhji of Gondal [2015] 5 scc 666]: "A discretionary trust is one which gives a 159 M r . Y as h o v a r d h an B i r l 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."(Judgment Compilation - Master Tab 1), delievered in wealth tax proceedings, precluding taxability in the hands of the Appellant under I.T. Act until distribution of Trust income, but no liability whatsoever under BMA.
43. On examination from the touchstone of the aforesaid case law, the ownership of these assets cannot be thrust upon the assessee. Hence, the denial of liability by the assessee at the jurisdictional stage also succeeds on this count too.
44. Another point in support in the present case is that the BM Act provides u/s. 4(2) an exclusion for the assets which have been created out of the income assessed in India. The assessee had duly submitted that it has already been assessed to income tax by the Income Tax Officer upto preceding assessment year. This submission was rejected on the ground that as the assessments were subject matter of settlement commission. We note that the settlement commission had rejected the assessee's plea and these matters & proceedings are already separately going on.Hence by no stretch of imagination can lead to a conclusion that incomes are not been assessed as the Revenue has not dropped its plea/withdrawn its plea, that these incomes are not exigible to income tax. Once it is so held, these assets cannot again be the subject matter of black money proceedings at this stage, as it will amount to double prejudice to the assessee which is not sustainable in law.
45. We further note that another grievance of the assessee is that various materials which have been referred by learned CIT(A) in his order rejecting the jurisdictional challenge have not been confronted to the assessee at the time of learned CIT(A)'s order dismissing the jurisdictional challenge. We note that this 160 M r . Y as h o v a r d h an B i r l a is a very germane point as the principle of natural justice in this regard have been ignored by learned CIT(A). It is evident that the catena of documents which learned CIT(A) has referred are in fact lifted by him from the final order of the Assessing Officer to support his order. These were never confronted to the assessee. In this view of the matter order of learned CIT(A) suffers from jurisdictional infirmity in as much as it is contrary to the rules of natural justice. Moreover we note that assessee has duly raised a ground before ld CITA that there is violation of natural justice inasmuch as assessee's request for a personal hearing in this regard has been rejected by the AO. Ld CIT(A) rejected this by holding that there is no such scope in section 15(1)b.We do not see the basis of such reasoning by Ld CIT(A),when assessee has duly submitted that the documents relied upon have not been confronted to the assessee.Ld CIT(A) in this regard has noted that these documents were not in appeal folder before him and he has simply accepted the AOs report that these documents are referred in AOs final order and the documents have been confronted to the assessee.This is palpable violation of natural justice and ld CIT(A) has fatally erred in rejecting the claim without himself examining the records.This proposition is duly supoerted by Honbe Supreme court decision in the case of Andaman Timber Industries Vs CCE vide order dated sept 2, 2015
46. We further note that in notice to the assessee, the Assessing Officer has referred to the names of certain bank accounts and Form-A obtained from banks for establishment of beneficial owners identity. Now in this regard it is the contention of learned Counsel of the assessee that declaration of beneficial owner in Form A is made for distinct purposes under the Swiss anti money laundering Act. In the submission above it has already been noted that in the aid of Swiss AML Act, the Swiss bankers Association has issued a Code of Conduct for Swiss Banks with regard to the exercise of due diligence (CDB Guidelines), wherein model Form A is prescribed for the declaration of identity of the beneficial owners. However, as clarified by the Swiss Federal Tax Administration, vide its letter dated 30.6.2015 it does not have application for 161 M r . Y as h o v a r d h an B i r l a matters of taxation. Hence, mention of assessee's name in this Form-A cannot be taken as any proof of assessee's ownership of this asset for tax purpose.
47. Another plea of the assessee is that these assets were already part of income tax proceedings up to preceding assessment year and that for present Assessment Year the assessee has still time to file income tax return. Hence, it is the claim of the assessee issue of notice is premature. This plea of the assessee has been rejected by the authorities below by holding that there is no such bar in the black money act. However, we note that definition of undisclosed asset in the back money act clearly provides that assets created out of income assessed in income tax already shall be excluded. Hence, when the revenue has already assessed these assets under income tax proceedings upto previous Assessment Year and for current assessment year time for filing the return has not expired, assessee's plea that the issue of notice is premature is tenable and accordingly we accept the same. The bar in the ACT is inbuilt inasmuch as it has been provided that assets out of income assessed to income tax shall be excluded from the purview of undisclosed asset in Black Money Act. Hence, it is abundantly clear that as per the scheme of the act, there cannot be a simultaneously proceedings on the same asset/income under Income Tax Act, 1961 as well as Black Money Act. The doctorine of double prejudice does come into play here. Above discussion amply prove that the assessee's challenge before the ld CITA to denial of liability in the jurisdiction of the Assessing Officer to issue notice under black money act deserves to succeed.
48. Various other facets of learned CIT(A)'s order as well as submissions noted hereinabove are in connection with the merits of the appeal proceedings of assessment under black money Act. We are conscious that we are only adjudicating jurisdictional issue challenged by the assessee before the Ld CIT(A). As noted above the said appeal before him also had the mandate of Honble Jurisdictional High Court. We shall not travel to the merits of the case which in fact will not be legally permissible when the only issue is 162 M r . Y as h o v a r d h an B i r l a jurisdictional challenge. In fact as noted by us learned CIT(A)'s order hereinabove is not sustainable on this count also, as he has dealt with the merits of the assessee's appeal wherein the mandate of learned CIT(A) was to examine the jurisdictional challenge only which as noted above the ld. CIT(A) has disposed of inter alia without examining the original documents on the basis of which the A.O. had issued notice.
49. In the background of the aforesaid discussion and precedent, this appeal filed by the assessee succeeds.
SA No.61/Mum/202150. As the appeal in connection with this stay application has already been decided by us in favour of the assessee herein above, this stay application becomes infructuous and it is disposed of as such.
Pronounced in the open court on 3.9.2021.
Sd/- Sd/-
(JUSTICE P.P. BHATT) (SHAMIM YAHYA)
PRESIDENT ACCOUNTANT MEMBER
Mumbai; Dated : 03/09/2021
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent
3. The CIT(A)
4. CIT
5. DR, ITAT, Mumbai
6. Guard File.
BY ORDER,
//True Copy//
(Assistant Registrar/Sr. Private Secretary)
PS & Roshani, Sr. PS ITAT, Mumbai
163 M r . Y as h o v a r d h an B i r l a