Income Tax Appellate Tribunal - Mumbai
Ambrish Manoj Dhupelia, Mumbai vs Dcit Cen Cir 1, Mumbai on 23 October, 2017
आयकर अपील य अ धकरण "एक-सद य मामला" यायपीठ मब ुं ई म।
IN THE INCOME TAX APPELLATE TRIBUNAL "SMC" BENCH, MUMBAI ी शमीम याहया, लेखा सद य के सम ।
BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. Nos.5720, 5722, 5726 & 5728/Mum/2016 ( नधारण वष / Assessment Years: 2005-06, 2010-11, 2012-13 & 2011-12) Shri Ambrish Manoj Dhupelia Dy. CIT, Central Circle-1, 12/13, Esplanade, 3rd Floor, बनाम/ Old CGO Building, Annexe, 9th 3 A.K. Nayak Marg, Fort, Vs. Floor, M. K. Road, Mumbai-400 001 Mumbai-400 020 थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. AAIPD 2710 L (अपीलाथ /Appellant) : ( यथ / Respondent) आयकर अपील सं./I.T.A. Nos.5721, 5723, 5725 & 5727/Mum/2016 ( नधारण वष / Assessment Years: 2005-06, 2010-11, 2012-13 & 2011-12) Shri Mohan Manoj Dhupelia Dy. CIT, Central Circle-1, 12/13, Esplanade, 3rd Floor, बनाम/ Old CGO Building, Annexe, 9th 3 AK Nayak Marg, Fort, Vs. Floor, M. K. Road, Mumbai-400 001 Mumbai-400 020 थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. AAIPD 4113 F (अपीलाथ /Appellant) : ( यथ / Respondent) आयकर अपील सं./I.T.A. Nos.5724, 5729, 5751 & 5752/Mum/2016 ( नधारण वष / Assessment Years: 2005-06, 2011-12, 2005-06 & 2010-11) Shri Bhavya Manoj Dhupelia Dy. CIT, Central Circle-1, (now known as Bhavya S. Shanbhag) Old CGO Building, Annexe, 9th बनाम/ 12/13, Esplanade, 3rd Floor, Floor, M. K. Road, 3 AK Nayak Marg, Fort, Vs. Mumbai-400 020 Mumbai-400 001 थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. AAHPD 2422 N (अपीलाथ /Appellant) : ( यथ / Respondent) 2 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 अपीलाथ क ओर से / Appellant by : Shri Sanjay Parikh यथ क ओर से/Respondent by : Ms. Hemalatha सनु वाई क तार ख / : 28.08.2017 Date of Hearing घोषणा क तार ख / : 23.10.2017 Date of Pronouncement आदे श / O R D E R Per Shamim Yahya, A. M.:
These are appeals by three assessee's against the orders by the Commissioner of Income Tax (Appeals), Mumbai ('CIT(A)' for short) for concerned assessment years.
Since the issues are common, the appeals were heard together. These have been consolidated and disposed of together for the sake of convenience.
ITA Nos. 5720, 5721 & 5751/Mum/2016 (A.Y. 2005-06)
2. The appeals by three assessee's are against the respective orders of the ld.
CIT(A), pertaining to assessment year 2005-06, wherein reopening as well as merits of the addition have been challenged. The grounds are common except for the change in amounts involved. For the sake reference, the grounds of appeal from ITA No. 5720/Mum/2016 are being referred as under:
A) Reopening of assessment
1) On the facts and circumstances of the case and in Law the learned Commissioner of Income Tax (Appeals) - 47, Mumbai [CIT(A)] erred in holding that the reopening of assessment made by the Deputy Commissioner of Income Tax, Central Circle-1, Mumbai (AO) was in accordance with law.3
ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016
2) That, the Learned CIT(A) erred in agreeing with the AO that on the facts and in the circumstances of the case, the latter had reasons to believe that the appellant was one of the beneficiaries of Ambrunova Trust, Vaduz, which had a bank account with LGT Bank, Liechestein, and that from the said bank account the appellant had interest income of Rs. 8,04,855/- which had escaped original assessment u/s. 143(3) of the Income Tax Act, 1961.
3) That, while agreeing with the AO as stated in the preceding Ground No. 2, the Learned CIT(A) failed to consider as to whether before assumption of jurisdiction u/s.147, the AO had applied mind to the alleged information said to have been received from the C.B.D.T., and as to how before receipt of credible information sought by C.B.D.T. from German Authorities, he could have formed honest belief that the appellant had interest income of Rs.8,04,855/- from the alleged foreign bank account, which escaped the assessment.
4) That, the Learned CIT(A), while confirming the alleged interest income of Rs.8,04,855/-, failed to consider that on the same facts and in the circumstances, similar alleged interest income reassessed by the AO u/s. 147 of the Act for the immediately preceding assessment year 2004-2005, had been deleted in appeal and such appellate order was not further challenged by the Revenue
5) That the order of the Learned CIT(A) in confirming the addition of the interest income of Rs.8,04,855/-, was based on no credible material on record against the appellant, and on irrelevant facts, which rendered the impugned appellate order bad in law and perverse.
B) Addition on account of alleged interest/benefit derived on deposit with LGT Bank, Liechtenstein in the name of Ambrunova Trust -Rs. 8,04,855/-
6) Without prejudice to the above, the Learned CIT(A) erred in confirming an addition of Rs. 8,04,855/- on account of alleged unaccounted interest/benefit on deposits in LGT Bank, Liechestein in the name of Amrunova Trust.
7) The Learned CIT(A) failed to appreciate that the appellant had not received any income from Ambrunova Trust and that no addition could be made on account of alleged unaccounted interest/benefit received on deposit in LGT Bank, Liechestein in the name of Ambrunova Trust on the basis of surmises and conjectures.
3. The appeals for the other years are by the three assessee's against the respective orders of ld. CIT(A) and pertain to the merits of the addition. The grounds are common 4 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 except for the change in amounts involved. For the sake reference the grounds of appeal from ITA No. 5722/Mum/2016 is being referred as under:
A) Addition on account of alleged interest/benefit derived on deposit with LGT Bank, Liechtenstein in the name of Ambrunova Trust -Rs.3,03,259/-
1) On the facts and circumstances of the case and in Law the Learned Commissioner of Income Tax (Appeals) - 47, Mumbai [(CIT(A)] erred in confirming the addition made by the Deputy Commissioner of Income Tax, Central Circle-1, Mumbai (AO) of Rs. 3,03,2597- on account of alleged interest/benefit derived on deposit with LGT Bank, Liechtenstein in the name of Ambrunova Trust.
2) The Learned CIT(A) failed to appreciate that the appellant had not received any income from Ambrunova Trust and that no addition could be made on account of alleged unaccounted interest/benefit received on deposit in LGT Bank, Liechestein in the name of Ambrunova Trust on the basis of surmises and conjectures.
3) The appellant prays that the addition made by the AO of Rs. 3,03,259/- on account of alleged interest on deposit with LGT Bank, Liechtenstein in the name of Ambrunova Trust and as upheld by the CIT(A) may be deleted.
4. These appeals relate to foreign bank accounts found in LGT Bank, Liechtenstein in the name of Ambrunova Trust. The cases pertaining to the same bank account of the same assessees' relating to A.Y. 2002-03 which had come up before this Tribunal in ITA Nos.3544, 3545 & 3546/Mum/2011. In the said case, the reopening as well as the merits of addition was confirmed by the ITAT. The appeals against the above order of ITAT are pending before the Hon'ble High Court. The reopening of the case as well as the addition of the undisclosed income in the shape of deposit in the bank account was confirmed by the ITAT vide order dated 31.10.2014:
5ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016
5. In the present case before us, in three of the appeals relating to the assessment year 2005-06, the reopening is under challenge as well as merits. In the rest of the appeals, only the merits are under challenged.
6. For the sake of convenience I am referring to the facts and figures from ITA No.5720/Mum/2016.
7. Brief facts of the case are under:
In this case, the information was received from Central Board of Direct Taxes that the assessee was beneficiary of Ambrunova Trust, Vaduz, having account in LGT Bank, Liechtenstein, Germany. The information received also gave summary bank statement of the said trust on 31.12.2001 in which the balance was USD 24,06,604.90, including interest. The information regarding the said trust and bank account in LGT Bank, Liechtenstein was obtained by the sovereign government of Germany. It was thereafter passed over to the Sovereign Government of India and then to the CBDT and then to the Assessing Officer. In this factual scenario, the assessment was reopened. In A.Y. 2002-03, the said amount of Rs.8,04,855/- was added in the hands of the assessee and his family members as undisclosed income. The reopening as well as merits of the case was challenged. The ITAT vide order dated 31.10.2014 confirmed the addition as well as the reopening. For the present assessment years, the A.O. noted that in their return of income filed which was completed u/s. 143(3) of the Act, the assessee had not 6 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 disclosed the above deposit/bank account in LGT Bank, Liechtenstein and interest/benefits derived thereof. Under these circumstances, the Assessing Officer noted that he has reasons to believe that by virtue of assessee's failure to discourse all true and material fact relating to the amount deposited in the bank or the benefit derived out of the interest accrued or otherwise on such deposits was nowhere reflected in the return of income of the assessee for A.Y. 2005-06 in LGT Bank, Liechtenstein in the name of Ambrunova Trust, Vaduz. Therefore, such income/benefit is chargeable to tax as escape assessment to that extent in terms of provision of section 147 of the Act.
Accordingly, the assessment was reopened. The Assessing Officer also noted the assessee's objection and also referred to his rejection of the objections. The Assessing Officer also referred to the assessment order in A.Y. 2002-03. The Assessing Officer after noting the submissions of the assessee recorded his findings in assessment order as under:
4.2 The submission of the assessee has been carefully perused and considered and are not found tenable as per following discussion.
4.2.1 Information was received by CBDT from German Authorities about bank account held by a trust Ambrunova Trust where economically beneficial ownership of the assets is of the assessee and his family members. Specific details such as date of birth, residential address, nationality, domicile, nature of business activity of the assessee in India, copy of the passport of some of the family members etc. were available with the bank authorities. It is also seen from the information in possession of the department that origin of deposits the said trust in the LGT bank has been indicated to be 'Income from business activities as securities dealer in India. The other necessary details such as date of creation etc. with regard to the trust and its beneficiaries are also provided in the information received by the department. The summary of account as on 7 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 31.12.2001 also shows that the Interest income has accrued on the deposits made in the said bank account. All these information was duly provided to the assessee during the course of assessment proceedings for A.Y. 2002-03.
4.2.2 When the above specific information was confronted to the assessee, the assessee merely has been denying the existence of such trust and being beneficiary of the trust without adducing any iota of evidence in support of its claim, which then remains only a self-serving statement. There is credible and reliable information available that the assessee is beneficiary of above trust along with his family members, which has been setup by or on behalf of the family and for the benefit of the family members, The details such as name, address, date of birth, nature of business activities in India of assessee and family members mentioned in the trust documents are those of the assessee and his family members. The documents regarding the trust received by the department contain the photocopy of the passport of brother of the assessee Shri Mohan Dhupelia and Shri Manoj Dhupelia, assessee's father who are also beneficiaries of the said trust along with the assessee. In these circumstances, the outright denial by the assessee of existence of the said trust or the bank account or other information with which he was confronted amounts to an explanation which is false, fraudulent, malafide and with intention to commit tax fraud.
4.2.3 The source of information is reliable and the validity of information cannot be in doubt The ITAT Delhi Bench had occasion to consider a similar issue in the recent case of Shri Hersh Win Chadha. In this judgment, it was held that "if the statement of a sovereign Covt. Is not acceptable as reliable evidence in Indian tax proceedings, no case of cross-border transaction can ever be detected or proved". In this background the onus lies on the assessee to prove that the information is wrong and also to prove that no benefits has been derived by the assessee from the deposits made in bank account held by the said trust.
The assessee has not denied that it is his name and details mentioned in the list of beneficiaries. The evidence is therefore direct reliable and demonstrative proof of the assessee having stashed unaccounted money, in the name of trust, abroad. Although the assessee has simply denied knowledge of any such trust or bank account, he has no explanation as to how his correct name, address, date of birth, nationality or copy of passport could be available to a person creating trust in a far off place like Vaduz. It is the trust created for the sole benefit of the assessee and his family members. The knowledge of the trust and its other related details sought by the assessee are information which are in the exclusive knowledge of the assessee and the assessee has no option to remain selective, elusive, evasive or restrained in disclosure. It has been held in the above cited judgment of Hersh 8 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 Win Chadha that "The assessee has to give proper explanation and disclose facts which are in his exclusive knowledge. The assessee has no option to remain selective, elusive, evasive or restrained in disclosure. Further, it has been held that "It h the duty of the revenue authorities to be mindfui of clues and coincidences and bring them to the logical conclusion, otherwise clandestine tax evasion through shady economic deals will go undetected, as appears to be the order of day. India is neither a tax heaven nor a banana republic."
4.2.4 Hence, in view of the above discussion, it is held that all the contention of the assessee that existence of the trust cannot be believed is not acceptable unless the assessee brings on record any such evidence to establish its self-serving claims. Further, the assessee's arguments that the beneficiaries cannot be assessed directly is incorrect and it is necessary to quote section 166 of the Act here which reads as under -
"Direct assessment or Recovery not barred Nothing contained in the foregoing sections in this chapter shall prevent either the direct assessment of the person on whose behalf or for whose benefit income therein referred to is receivable, or the recovery from such person of the tax payable in respect of such income......."
4.2.5 The assessee has also claimed that there is no tangible material to have reason to believe that there is income escaping assessment and no such income is chargeable to tax. In this regard, it is stated that the contentions of the assessee with regard to validity of issue of notice has already been dealt with by a separate order. However, it is important to note here that the information received by the department also contained a summary of bank account as on particular date which showed that interest has been paid by the bank on the deposits made in the said bank account held by the trust of which the assessee and his family members are the beneficiaries. The assessee has not disclosed any such bank account or the benefits derived out of it in the income tax returns filed by it. Hence, there is tangible material on record to believe that income chargeable to tax has escaped assessment and it is for the assessee to prove with supporting evidence that no such benefit has been derived by the assessee out of the deposits made in the bank account held by the trust. It has also been held by the Hon'ble ITAT Delhi in the above cited judgment of Hersh Win Chadha that "There is no presumption in law that the AO is supposed to discharge an impossible burden to assess the tax liability by direct evidence only and to establish the evasion beyond doubt as fn criminal proceedings. He can assessee on consideration of material available on record, surrounding circumstances, human conduct, preponderance of 9 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 probabilities and nature of incriminating information/ evidence available on record;"
4.2.6 In view of above discussion, I have no hesitation in holding that interest income/benefits derived by the assessee out of the deposits made in the said bank account have to be brought to tax. However, in the absence of any specific details being provided by the assessee of such benefits, the following method of calculation of interest is adopted as reasonable method. Therefore, an average rate of interest (0)3.8225% on US $ (U.S. Department of the Treasury interest rates as on 31.03.2005 on deposits for 1 year: 3.35%, 2 years: 3.8%, 3 years:
3.96% and for 5 years: 4.18%), the interest accrued during the F.Y. 2004-05 on the deposited amount of 1)5524,06,604.9 is worked out to US $92,004.50.
Considering the conversion rate of US $ to INR as on 31.03.2005 at Rs.43-74/-, the total accrued interest / benefit derived out of deposit / asset in LOT Bank in the name of Ambrunova Trust, Vaduz, Liechtenstein is worked out in INR at Rs.40,24,277/-. The assessee's share @ 20% amounts to Rs.8,04,855/- (Rs.40,24,277/- * 20%) which is taxed as his concealed income for the assessment year under consideration.
8. Against the above order, the assessee appealed before the ld. CIT(A) challenging both the reopening as well as merits of the addition. The ld. CIT(A) confirmed the reopening, while confirming the reopening the ld. CIT(A) held as under:
5.2.1 On consideration of the facts of the present case, it is e. cent that the Department received information indicating that the appellant was one of the beneficiaries of the bank account in the name of AmbrunovaTrust, Vaduz with LGT Bank, Leichtenstein. The information received also gave details of the bank balance in the account and as on 31.12.2001 and also showed interest accrual on the said balance. Assessment for the A.Y,2002-03 was reopened and the share of the appellant was added back in his hands vide order dated 30.12.2009 u/s 143(3) r.w.s 147. The said assessment order was challenged in appeal and confirmed at the level of CIT(A) vide order dated 25.02.2011. The nptice for reopening the case for A.Y.2005-06 was issued on 27.03.2012. From perusal of these details it is seen that as on the date of issuance of the said notice the re-assessment for A.Y.2002-03 had already been completed (it has subsequently been upheld at the level of the CIT(A) and ITAT). Thus the issue to be dwelt upon in whether there was reason to believe before the AO while re-
opening the assessment of the year under consideration. The objections raised 10 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 by the appellant have mainly focused on the lack of information regarding accrual of interest during the financial year relevant to the A.Y. under consideration and the fact that the AO in reasons recorded, referred to further information having been called for with reference to the details of the deposits; sources/ origins of the deposits; persons who had deposited the money and other information, which had not been received as on the date of the reopening of assessment. In this respect, it is to be noted that as is evident from the assessment for A.Y.2002-03, the AO was in possession of information received from the German Authorities, through the Central Board of Direct Taxes that the appellant was a beneficiary in an account in the name of Ambrunova Trust, Vaduz with LGT Bank, Leichtenstein. The details received clearly showed that the account in question carried a substantial nee and that interest accrued on this balance. The appellant was to adduce any evidence to the contrary during the assessment proceedings for A.Y.2002-03. From these facts it is clear that the existence of the bank account is proven as is that of the balance standing in deposit 'therein as well the accrual of interest. As such there was enough 'reason to believe' for the AO to initiate the proceedings u/s 147 as courts have repeatedly clarified that it is the existence of reasons and not the sufficiency of reasons that is to be examined at the stage of initiation,; It is also clear that the appellant, in the return originally filed for the year, under consideration did not reflect the interest income accrued on the balance in the said account. So this was not a case where the AO did not have information or where there was no failure of the appellant to disclose the material facts. In the decision rendered by the Bombay High Court in the case of Bright Start Syntex P. Ltd. vs ITO (71 taxmann.com 64), the Hon'ble Court has elaborated as follows:
"6. It is settled position in law that while considering a challenge to a reopening notice on the ground that it is without jurisdiction, the Court has to keep in mind that a settled position in law is not being disturbed as evident from the orders passed earlier, without any justification. However, the Court will certainly interfere where the reason to believe that income has escaped assessment, is a clear case of change of opinion i.e. the same material was subject to consideration in regular assessment proceedings or where the reopening is being done only on suspicion and/or to carry out investigation or where the assessment is sought to be reopened after a period of more than four years from the end of the relevant assessment year and there has been no failure on the part of the assessee to truly and fully disclose all material facts necessary for assessment. However, in all other cases of reopening of assessment, the Court will examine whether there is material available with the Assessing Officer to form a reasonable 11 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 belief that income chargeable to tax has escaped assessment and for that purpose ensure that the material is not vague and/or irrelevant. However at this stage i.e. on issue of reopening notice, the Assessing Officer is not required to have conclusive evidence that income chargeable to tax has escaped assessment but is only required to have reasonable belief of the same. The reasons recorded must on the basis of the material available establish a link between the material available and the conclusion. This should lead to prime facie view that income chargeable to tax has escaped assessment. At this stage, we are not required to consider the merits of the case nor the sufficiency or correctness of the material but only whether the Assessing Officer had reason to believe on the material available that income chargeable to tax has escaped assessment."
As pointed out earlier, the information about the existence of the bank account was clear and unambiguous as was data regarding the account having balance in it on which interest was accruing. As regards the nature of information, it has been held by the Courts that re-opening can be done on the basis of findings in other proceedings as well e.g. Wealth Tax (Muljimal N. Raghavanshi - Bom-225 ITR 586). In the present case, the reassessment for A.Y.2002-03 marshalled facts that clearly pointed to escapement of interest income in the subsequent years. The provisions of section 147 do not mandate that the information which forms the basis of the reason to believe must specify the quantification of income which is believed to have escaped assessment with respect to a particular point in time. Thus the reopening of assessment is not without basis. Further, it has not been shown that such interest was offered to tax subsequently, if accounted for on receipt basis. Neither has it been demonstrated that the Trust in question has offered the interest income to tax. As noted earlier, the interest income had not been offered to tax in the return originally filed u/s 139. In view of these facts it cannot be said that there was change of opinion in this case or that the A.O. had no material before him that indicated escapement of income. Thus, in the face of these facts, I find that I must differ from the decision of my Ld. Predecessor in the appellate order for A.Y.2004-05. Accordingly the reopening of assessment for A.Y.2005-06 is upheld and the Grounds 4, 5 and 6 raised by the appellant are dismissed. Further as regards Grounds 7 and 8, the facts enumerated above show that the AO in the order rejecting the objections to reopening, clearly mentioned that specific information with sufficient details was received, from credible sources, by the Department through government channels and that apart from denying knowledge or connection to the bank account in question, the appellant did not produce any documentary evidence to disprove the information available.
12ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 Accordingly, in the backdrop of these facts Grounds 7 and 8 raised by the appellant are also dismissed.
9. On merits of the addition also the ld. CIT(A) affirmed the action of the Assessing Officer and held as under:
5.3.1 From the impugned order, it is seen that the AO took note of the information received from the German Authorities which indicated that the appellant was a beneficiary In the bank account in the name of the Ambrunova Trust, Vaduz with LGT Bank, Leichtenstein. The AO noted that the assessment for A.Y.2002-03 had been completed by making an addition of the appellant's share of balance in the said bank account. The AO also noted that the appellant was asked to show cause why accrued interest/benefit should not be added in his hands for the A.Y.s in question. The AO further noted that information received from the German Authorities indicated that the economically beneficial ownership of the bank account was with the appellant and family members; the specific details such as passport number, date of birth, residential address, domicile, nature of business activity etc. were all provided in the information.
Interest was shown to have accrued in the account as on 31.12.2001. In the face of such specific and detailed information, the appellant had not furnished any documentary evidence but had only denied the existence of the trust or being beneficiary of such trust. The AO observed that such details could not be in the possession of the bank authorities unless provided by the appellant himself and were evidence of the appellant having stashed unaccounted moneys in bank accounts abroad. The AO also noted that in the case of Win Chadha, the ITAT had held that the onus was on the assessee to give proper explanation and disclose facts that are within his knowledge. The AO observed that section 166 of the Act specified that direct assessment or recovery was not barred vis a vis any person on whose behalf or for whose benefit the income was receivable. The AO then proceeded to add back the appellant's share of accrued interest for the A.Y. in question.
10. Against the above order, the assessee is in appeal before the ITAT.
11. I have heard both the counsels and perused the records. The ld. Counsel of the assessee has summarized his submissions as under:
13ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 Prepositions and case laws:
1) There is no evidence that appellant had received any benefit/income from trust. Hence, there could be no reason to believe that income of appellant had escaped assessment.
2) Appellant was not aware that he was beneficiary of any trust outside India.
In any case, at the relevant point of time, Return Form did not require assessee to furnish assets held abroad. Hence, no failure to disclose any material facts.
3) Reopening of assessment is after 4 years from the end of the assessment year. No failure on part of appellant. Hence, reopening bad in law:
a) ICICI Securities Ltd. v. ACIT (2016) 231 Taxman 460 (Bom)
b) Alliance Space P. Ltd. v. ITO (2016) 375 ITR 473 (Bom)
c) Tao Publishing (P.) Ltd. v. DCIT (2015) 370 135 (Bom)
d) Business India v. DCIT (2015) 370 ITR 154 (Bom)
4) There was no tangible material with Department to reopen assessment. Hence, reopening of assessment is bad in law :
a) Nivi Trading Ltd. v. UOI (2015) 375 ITR 308 (Bom) - Notice issued to verify certain details was bad in law.
b) Hemant Traders v. ITO (2015) 375 ITR 167 (Bom) - Survey report and other material not indicating any income chargeable to tax - Notice not valid.
c) Known Agro Foods P. Ltd. v. ACIT (2015) 375 ITR 460 (Del) - Notice issued on suspicion and surmises - not valid.
5) Appellant has specifically asked AO to furnish evidence, if any, which shows that appellant has earned income during the year. AO has not furnished any such details.
6) Even Remand Report does not specify any specific income earned by appellant during the year.
7) Without prejudice, even for A.Y. 2002 - 03, Department has only taxed income which was reflected in papers received from German Authorities and no notional income has been added for the period 1/1/2001 to 31/3/2001. Hence, even on this count, there could be no reason to believe that income had escaped assessment for the year under consideration.
8) Hence, reopening of assessment may be held to be bad in law.
B) Addition on account of alleged undisclosed income - Rs. 8,04,855/-
Page 7; para 4.2.6 of assessment order Para 5.3.3 to 5.3.6; pages 15 to 17 of CIT(A's) order Submissions before CIT(A) at pages 97 to 102 and pages 107 to 11 of paper book 14 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 Facts :
1) AO has on the basis of material received from CBDT for A.Y. 2002 - 03 has presumed that appellant must have received some benefit/income during the year under consideration.
2) In absence of any information, AO has taken average rate of interest of US Department of Treasury and held that US $ 24,06,604.19 must have earned interest of US$ 92,004.50. AO has considered appellant's share @ 20% and has added Rs. 8,04,855/- as income of appellant.
3) Before CIT(A) it was argued on merits that:
a) There is no evidence that any income has accrued or arisen during the year to the trust (Refer para 37 to 43: pages 97 to 100 of paper book).
b) Trust is non-resident and as per section 6, all income received outside India or accruing outside India would not be liable to tax in India (Refer para 41 to 43 on page 100 of paper book.
c) Trust is a separate entity. Hence, trust itself was liable to tax on its income (Refer para 44 and 45 on pages 100 and 101 of paper book).
d) Nature of trust not known i.e. whether specific or discretionary.
Accordingly, whether tax is payable by trust or by the beneficiaries is not own (Refer para 44 and 45 on pages 100 and 101 of paper book).
e) Appellant has not received a single penny from the trust (Refer para 43 on page 101 of paper book).
f) Without prejudice, appellant is following cash method of accounting. Hence, income can be taxed only on receipt basis (Refer para 46 and 48 on pages 101 and 102 of paper book).
4) In rejoinder to Remand Report, appellant drew the CIT(A's) attention to the fact that for a receipt to be taxable, Department has to prove that it is income. Reliance in this regard was placed on the following decisions:
a) Parimisetti Seethramamma v. CIT (1965) 57ITR 532 (SC)
b) Dr. K. George Thomas v. CIT (1985) 156 ITR 412 (SC)
5) In present case, there is no income or receipt in the first place. How can appellant be taxed?
6) CIT(A) summarily dismissed submissions of appellant.
7) Aggrieved by said order, appellant is in appeal before your honour. Proposition and case laws : .
1) Appellant is not a beneficiary of Ambrunova Trust. Hence, no amount can be added to income of appellant.
2) Control and management of trust is in the hands of Trustees who are non-
resident Indians and income of trust is also received outside India. Hence, as per section 5(2) read with section 6(4), income of the trust cannot be taxed in India.
15ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016
3) As shares of beneficiaries are indeterminate, trust is discretionary and income can only be taxed in hands of trust - CWT v. Estate of Late HMM Vikramsinhji of Gondal (2014) 363 ITR 679 (SC).
4) Department has not brought any evidence that appellant had any income from trust. Addition made merely on the basis of presumption and assumption cannot be sustained:
a) K. P. Varghese v. ITO 131 ITR 597 (SC)
b) Umarchand Shaw & Bros. v. CIT 37 ITR 271 (SC)
c) St. Teresa's Oil Mills v. State of Kerala 76 ITR 365 (Ker) ;
d) Md. Umer v. CIT 101 ITR 525 (Pat)
e) CIT v. Amitbhai Gunvantbhai 129 ITR 573 (Guj)
5) Appellant has not received a single penny till date from trust. Neither Department has established that appellant has received any benefit from trust. Hence, no amount can be added to income of appellant.
6) Without prejudice, in all cases in which a receipt is sought to be taxed as income, the burden lies upon the Department to prove that it is within the taxing provisions -Parimisetti Seethramamma v. CIT (1965) 57ITR 532 (SC)
7) The subject is not to be taxed unless the charging provision clearly imposed the obligation - CIT v. Ajay Products Ltd. (1965) 55 ITR 741 (SC)
8) It is for the Revenue to establish that the profit earned in a transaction is within the taxing provision and is on that account liable to be taxed as income - Janki Ram Bahadur v. CIT (1965) 57 ITR 21 (SC)
9) Appellant is following cash method of accounting Accordingly, income can be taxed only when the appellant receives the income and not on accrual basis.
10) In Remand Proceedings, CIT(A) had specifically asked AO as to whether any amount was deposited or received by the appellant during the year for which addition has been made and Is there any interest credited to the account during the year in which the addition has been made (Refer para 4.1 on page 4 of CIT(A's) Order). .
11) AO has in Remand Report kept silent on both these aspects (Refer pages 104 and 105 of paper book).
12) The income of a discretionary trust which is within the accounting year distributed and received by the beneficiary, which would be subject to tax - CIT v. Kamalini Khatau (1994) 209 ITR 101 (SC). As no income received, no amount liable to tax. ...
13) The burden of proving that the assesse received any income, gain or profit, within taxable territories is on the revenue -S. Zoraster & Co. v. CIT (1968) 68 ITR 770 (Del).16
ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016
14) Where a receipt is sought to be assessed as income received in the taxable territories, the burden is on the revenue to prove that the income was received in the taxable territories - Dalmia Dadri Cement Ltd. v. CIT (1974) 94 ITR 303
15) Without prejudice, AO has to determine the year of receipt of amounts and if relating to different years, has to spread over in different year - Fifth Avenue v. CIT319ITR132(SC)
16) Where income can be said not to have resulted at all, there is neither accrual nor receipt of income - CIT v. Shoorji Vallabhdas & Co. (1962) 46 ITR 144 (SC).
17) Hence, addition made by AO needs to be deleted.
12. At the outset, the ld. Departmental Representative pointed out that since the tribunal in assessee's own case on the same issue has confirmed the reopening as well as merits of the addition, these appeals by the assessee should be dismissed. The ld.
Departmental Representative further submitted that the issue is now pending before the Hon'ble High Court. Till date, the Hon'ble High Court has not reversed the order of ITAT. The ld. Departmental Representative further submitted that the assessee has filed a miscellaneous application against the above order of the ITAT, which has been dismissed by the ITAT. It was further pointed out that against the dismissal of the miscellaneous application, the assessee has further filed an appeal before the Hon'ble High Court.
13. The ld. Counsel of the assessee pointed out that the reopening in this case is after four years in this case. No fresh information comes into the possession of the Assessing Officer. He further submitted that in the above order of ITAT, the issue related to the amount found in the undisclosed bank accounts, while the issue in the present appeals 17 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 relate to the interest on those bank deposits estimated by the Assessing Officer. Hence, the ld. Counsel pleaded that the issue before the ITAT now is different from the above.
Hence, the above decision is not applicable.
14. In rejoinder, the ld. Departmental Representative submitted that there is no information that the amount in the bank accounts has been withdrawn. Hence, the ld.
Departmental Representative submitted that the reopening is perfectly justified. He further claimed that on merits, the Tribunal has already confirmed the addition, hence, he pleaded that no contrary view should be taken.
15. I find that this Tribunal in assessee's own case has earlier considered the issue of the same deposits in the same foreign bank accounts in ITA Nos. 3544 to 3546/Mum/2011 for the assessment year 2002-03 vide order dated 31.10.2014. The tribunal had upheld the reopening as well as the addition of the amount of deposited in the bank in the hands of the assessees. The relevant portion of the ITAT order may be gainfully referred to as under:
2.2. We have considered the rival submissions and perused the material available on record. Since identical facts/issues are involved and all the assessees are relatives, therefore, these appeals are being disposed of by this common and consolidated order. In the case of Shri Mohan Manoj Dhupelia the facts in brief are that the assessee filed return of income u/s 139(1) of the Act on 1st August 2002 showing total income of Rs.1,97,650/-. Subsequently, information was received that the assessee is a beneficiary of Ambrunova Trust, having an account in Liechtenstein Bank. The said information contained summary of bank statement as on 31/12/2001 of the said trust in which there was a balance of US $ 24,06,604.90/-. This information was not disclosed by the assessee in the original 18 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 return thus notice u/s 148 of the Act was issued on 26/03/2009. The assessee requested the revenue to treat the return already filed as having being filed in response to the notice issued and served u/s 148 of the Act. The assessee was also supplied with a copy of reasons recorded for reopening of assessment including English translation of the documents. The assessee also denied of any knowledge of trust by further claiming that he/she has not received any money. The AO found that the address/nationality, country of domicile was the same as of the assessee as mentioned in India in the return. However, the assessee did not provide any document in support of his statement that he is not connected with this trust. The AO added Rs.2,34,64,398 being 25% if his share out of Rs.11,73,31,988/-(i.e. US $ 24,06,604.90/- converted at 48.75%). We note that the assessment was reopened by the AO on the information received from LGT Bank regarding Ambrunova Trust in which the name of the assessee was appearing as a beneficiary. Before the ld. AO, it was contended by the assessee that the documents so received by the Department regarding the Trust (LGT Bank) are unauthenticated and unverified and thus reopening is incorrect. We have perused the documents. A permanent sub-committee on investigation (committee on homeland security and government affairs) was constituted by the United States Senate of which Mr. Caral Levin was the Chairman (Source: WWW.Frank-
cs.org/cms/pdfs/USA/Servile/ Senate_Tax Haven Bank_Exhibits _17.7.08.pdf). We have also perused the documents provided by the ld Senior special Counsel (Tax Haven Bank Secrecy Tricks). As per Article 14 of the Banking Act (Liechtenstein Secrecy laws) the members of the organ of the Bank and their employees as well as other persons, acting on behalf of such banks, shall be obliged to maintain secrecy of facts that they have been interested too or have been made available to them pursuant to their business relations with clients. The obligation to maintain secrecy shall not be limited in time. These documents are available at pages from 1 to 15 of the paper book filed by the ld. Special Counsel. We are reproducing hereunder the exhibit list (Hearing) on Taxhaven Bank and US tax Compliance (July 17 and 25, 2008) for ready reference and proper conclusion.
United States Senate PERMANENT SUB COMMITTEE ON INVESTIGA TIONS Committee on Homeland Security and Governmental Affairs Carl Levin, Chairman Norm Coleman, Ranking Minority Member EXHIBIT LIST Hearing On TAX HAVEN BANKS 19 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 AND U. S. TAX COMPLIANCE July 17 and 25, 2008
1. Marsh Foundations, chart prepared by the U. S. Senate Permanent Subcommittee on Investigations.
2. Wu Foundation, chart prepared by the U. S. Senate Permanent Subcommittee on Investigations.
3. Greenfield Foundation, chart prepared by the U. S. Senate Permanent Subcommittee on Investigations.
4. Laity Foundation, chart prepared by the U. S. Senate Permanent Subcommittee on Investigations.
5. a. Statement of former LGT Treuhand employee, formerly known as Henrich Kieber.
b. Liechtenstein warrant for the arrest of Henrich Richer.
DOCUMENT RELATING TO MARSH ACCOUNTS:
6. Letter of wishes, Lincol Foundation, October 15, 1985.
7. LGT receipt for US $3,310,700 cash from Lincol Fondation, dated October 15, 1985.
8. Handwritten letter signed by Shannon N. Marsh to Mr. Alvate, to give Kerry M. Marsh permission to review all documents and receipts pertaining to Lincol Foundation and Chateau Foundation, dated May 23, 1992.
9. Instructions signed by Shannon Neal Marsh, empowering Marsh family members to act as principals for Lineal Foundation, dated November 17, 1993.
10. Correspondence from James A. Marsh, Jr. to Peter Meier, LGT, dated October 4, 1994, re:
Lincol and Chateau.
11. Letter of wishes, Lincol Foundation and Foundation Chateau, October11, 2000
12. LGT Memorandum to File about Lincol and Chateau Foundations, dated February 7,2002.
13. Deed of Signature accepting appointment as Protector of the Chateau Foundation, signed by Kerry Michael Marsh, Shannon Neal Marsh, and James Aibright Marsh, Jr. and Deed of Appointment of Successors.
14. Resolution, The Foundation Board of Foundation CHATEAU, indicating the inventory of assets and liabilities at 31. December 2000 showing a total of USD 10'O15'623,50, dated September 12, 2001
15. Letter from James A. Marsh to LGT, dated November 10, 2004, granting LGT all administrational and management activities for Foundation Chateau.
16. Correspondence from Shannon Neal Marsh to Members of the Foundation Council of Chateau Foundation, dated November 4, 2004, re: appointment of 20 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 members of the Foundation Council of Chateau Foundation.
17. Excerpt from 2006 Income Tax Returns, Estate of James A. Marsh.
18. Three letters from Baker & McKenzie LLP (Marsh Family attorney) to the Internal Revenue Service, dated May 12,2008, forwarding amended returns for foreign income and foreign bank and financial accounts for calendar years 2002- 2006.
DOCUMENTS RELATING TO WU ACCOUNTS:
19. WT report on JCMA Foundation, dated June 27, 2002.
20. Declaration of Trust between Cobyrne Limited and JCMA Foundation, dated October 1,1996.
21. New York City property records, recording sale of Forest Hills, NY home of William S. Wu to TM Lung Worldwide, Ltd, dated January 21, 1997.
22. LGT Memorandum by Kim Choy regarding JCMA Foundation, dated June 26, 2002.
23. Documents regarding withdrawal of$1 00,000 by JCMA Foundation/william Wu from LGT through HSBC Hong Kong and Shanghai Banking Corp. Hong Kong, June 2002.
24. Excerpt from Resolution, The Foundation Board of JCMA Foundation, indicating statement of assets asper3l December2001 in the total amount of USD 4.283,4 73 .49. dated February 7, 2002.
25. Excerpt from Resolution, The Foundation Board of JCMA Foundation, indicating inventory of assets and liabilities at 31 December 2003 showing a total of USD 2.1 7Z145.9 7, dated March 10, 2004.
26. Excerpt from Resolution of the Foundation Board of JCMA Foundation, showing assets as per 31 December2004 amount to USD 1,202,636.25, dated February 13, 2006.
27. Excerpt from Resolution of the Foundation Board of JCMA Foundation, showing assets as per 31 December2005 amount to USD 1,188,957.64, dated March 30, 2006.
28. Excerpt from Resolution of the Foundation Board of JCMA Foundation, showing assets as per 31 December2006 amount to USD 422,249.10, dated April 18,2007.
29. WI report on Veline Foundation after a March 27, 2000, client visit.
30. Statement of asset as per 31.12.2000, Veline Foundation, dated February 5, 2001.
31. Bearer Share Certificate, Manta Company Limited, dated September 3,1997.
32. Handwritten organizational chart showing Veline Foundation ownership 21 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 of corporations and property, undated DOCUMENTS RELATED TO LOWY ACCOUNTS:
33. LGT Memorandum for the Record, dated November26, 1996, memorializing a November21, 1996, Meeting in Sydney regarding Westflelds, Adelphi, Crofton between LGT and Frank Lowy, David Lowy, David Gronski and Joshua Gelbard.
34. LGT Memorandum for the Record, dated November 27, 1996, regarding New Establishment Westfield/Lowy.
35. LGI Note for File, dated December 17, 1996, regarding telephone conversation with Frank Lowy and Joshua Gelbard regarding Westfields, Adelphi, Crofton.
36. LGT Memorandum for the Record, dated January 23, 1997, regarding January 20, 1997 meeting in Los Angeles between LGT and Frank Lowy, David Lowy, and Peer Lowy regarding Westfield/Lowy Family.
37. LGT Memorandum for the Record, dated March 4, 1997, regarding March 3, 1997, phone call with Peter Widmer regarding March 12, 1997 meeting in London with F.L. and J. Gelbert, the definitive structure as well as the asset transfer is to be discussed.
38. Correspondence from J.H. Gelbard to WI, dated March 12, 1997, regarding formation of a Foundation by the name of Luperla Foundation.
39. WI Memorandum for the file, dated March 13, 1997, regarding March 12,1997, meeting in London between LGT and Frank Lowy and Josua Gelbard.
40. LGT Memorandum for the Record, dated March 16, 1997, regarding March 12, 1997 meeting in London with F.L. regarding Luperla Foundation,
41. Regulations, Luperla Foundation, Vaduz, dated April 30, 1997.
42. LGT Memorandum for the Record, dated May 2, 1997, regarding April 30, 1997, meeting in the Hotel Savoy, Zurich between LGT and Frank Lowy and J.H. Gelbard.
43. LGT Memorandum for the File, dated May14, 1997, regarding Luperla Foundation, Valuz.
44. LGT Memorandum for the File, dated October 23,1997, regarding Luperla Foundation/Swell Service Ltd. B.V.I.
45. LGT Memorandum for the file, dated January 29, 1998, regarding January 28,1998, meeting in Bendern with Peter Widmer regarding Luperla Foundation, Vaduz ("Luperla").
46. Memorandum for the File, dated June 26, 2001, regarding Luperla Foundation.
47. Memorandum for the File, dated July 16, 2001, regarding Luperla 22 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 Foundation, Valuz.
48. Memorandum for the File, dated December 17, 2001, regarding Luperla Foundation, Valuz.
49. Memorandum for the File, dated December 18, 2001, regarding Luperla Foundation, Valuz.
50. Memorandum for the File, dated December 20,2001, regarding Luperla Foundation, Valuz.
51. Documents regarding Beverly Park Corporation.
52. IRS Information Document Requests (IDR) regarding Beverly Park Corporation.
53. State of Delaware, Division of Corporations, Entity Details for Beverly Park Corp., listing Incorporation Dates of December 17, 1991, and January 3, 1997.
DOCUMENTS RELATING TO GREENFIELD ACCOUNTS:
54. LGT Memorandum for the Record, dated March 27, 2001, memorializing a March 23, 2001 meeting regarding Maverick Foundation between LGT and Harvey and Steven David Greenfield.
55. WI Summary of Maverick Foundation as of December 31, 2001, dated January 1, 2002.,
56. LGT report on Maverick Foundation, undated.
57. LGT report on TSF Company Limited, undated.
58. LGT report on Chiu Fu (Far East) Limited, undated.
59. LGT Background Information/Profile for Maverick Foundation, dated October 12,2001.
60. LGT Background Information/Profile for TSF Company Ltd., BVI, dated December 20, 2001.
DOCUMENTS RELATING TO GONZALEZ ACCOUNTS:
61. Foundation Tragique flow chart, undated.
62. LGT report for Tragunda Foundation, dated December 3,2001.
63. LGT Background Information/Profile for Auto and Moteren [Motors] Corp. dated October 3, 2001.
64. LGT report on Asmeral Investment Anstalt.
65. LGT Memorandum for the File, dated September 11,2001, regarding Foundation Tragique.
66. Stiftung flow chart, undated.
23ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016
67. LGT Background Information/Profile for Foundation Tragique, Vaduz, dated December 18, 2001.
68. LGT Background Information/Profile for FIWA AG, Vaduz, dated December 10, 2001.
DOCUMENTS RELATING TO CHONG ACCOUNTS:
69. LGT Background Information/Profile on Yue Shing Tong Foundation.
70. Documents related to Apex.
71. Communication between Chong and Chalet [Silvan Golanti at LGT], February - March 2008, regarding disclosure of LGT accounts.
DOCUMENTS RELATING TO MISKIN ACCOUNTS:
72. Declarations of Michael Miskin, dated 2003.
73. Declarations and court pledings of Stephanie Miskin, dated 2003.
74. LGT Memorandum for the Record, dated, June 30,1 998~ regarding New Establishment Michel Misken.
75. Michael Misken Letter of Wishes with respect to the assets of Micronesia Foundation, dated July 28, 2000.
76. LGT report on Micronesia Foundation.
77. LGT/Michael Misken receipt for wire transfer of GBP 3,650,314.00, dated October 21,1998.
78. Fax from Thoams Lungkofler/LGT to Michael Misken, dated February 27,2002, regarding tax situation in the US-area. ADDITIONAL DOCUMENTS RELATING TO LGT:
79. Documents related to Sera Financial Corporation.
80. Documents related to Jaffra Development Inc.
81. Documents related to Sewell.
82. Excerpt from presentation related to LGT and the Qualified Intermediary (QI) Program.
83. Documents related to LRAB Foundation.
DOCUMENTS RELATED TO UBS:
84. Wealth Management and Business Banking, Client Advisor's Guidelines For Implementation and Management Of Discretionary Asset Management Relationship With U.S. Clients (2002).
85. Cross-Border Ban king Activities into the United States (version November2004)
86. Restrictions on Cross-Border Banking and Financial Services Activities. Country Paper USA (Effective Date June 1, 2007), prepared by UBS.
87. Excerpt of Key Clients in NAM, Business Case 2003-2005.
88. Correspondence of UBS to Clients dated November 4,2002, We are 24 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 writing to reassure you that your fear is unjustified and wish to outline only some of the reason why the protect ion of client data cannot possibly be compromised .... UBS's entire compliance with its QI obligations does not create the risk that his/her identity be shared with U.S. authorities.
89. Martin Liechti (Head of UBS Wealth Management Americas) email, January2007, regarding net new money goal and Year of the Pig.
90. Referral Campaign BU Americas, June 2002 (Swiss watch await!).
91. Overview Figures North America, prepared by UBS.
92. Case Studies Cross-Border Workshop NAM.
93. UBS Memorandum, dated November 15, 2007, re: Changes in business model for U.S. private clients.
94. Talking Points for Informing U.S. Private Clients With Securities Holdings About The Realignment Of Our Business Model Plus Q&.A. DOCUMENTS RELATED TO OLENICOFF:
95. Statement of Facts, United States of America vs. Bradley Birkenfelc4 dated 2008.
96. Plea Agreement For Defendant Igor hi Olenicoff, dated 2007.
97. Emails between Birkenfeld/Olenicoff, dated July2001, re: Meeting in California.
98. Correspondence of Igor Olenicoff, dated October2001, re: Guardian Guarantee Co. Ltd.
99. Email between Staggl/Olenicoff, dated January2002, re: Structure.
100. UBS documents related to opening of account for Guardian Guarantee Company, Ltd.
101. Emails related to Liechtenstein trust and a Danish Corporation.
102. Fax from Olenicoff to Birkenfeld, dated December 2001, re: Structure.
103. Emails dated April 2002, re: transferring U.S. securities to a Liechtenstein account.
OTHER DOCUMENTS:
104. Tax Haven Bank Secrecy Tricks, chart prepared by the U. S. Senate Permanent Subcommittee on Investigations.
105. Liechtenstein Secrecy Laws, chart prepared by the U. S. Senate Permanent Sub-committee on Investigations.
106. Letter from Baker & McKenzie LLP (Marsh Family attorney) to the Permanent Subcommittee on Investigations, dated July 15,2 008, with clarification.
107. Statement for the Record of the Australian Taxation Office. ADDITIONAL DOCUMENTS RELATED TO LOWY ACCOUNTS:
108. LGT report on Luperla Foundation.
109. LGT Background Information/Profile for Luperla Foundation, dated 25 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 December 7, 2002.
110. LGT Statement of Account for Luperla Foundation, dated December 29, 2001.
111. LGT Memorandum for the Record, dated April 10, 2002, regarding retroactive dissolution of Luperla Foundation.
112. Letter to Peter Lowy from Leon C. Janks, dated December 13, 2001, enclosing four original documents related to Beverly Park Corporation.
113. a. Contract For The Purchase And Sale of Real Estate, sale by West Park Avenue Corporation to Beverly Park Corporation, March 1997. b. Beverly Park Corporation Guest Log, Beverly Hills House and New York Condo, July 1999-May 2000.
114. Hidden Money Trail, chart prepared by the U. S. Senate Permanent Subcommittee on Investigations.
Tax Haven Bank Secrecy Tricks Code Names for Clients Pay Phones, not Business Phones . Foreign Area Codes Undeclared Accounts Encrypted Computers Transfer Companies to Cover Tracks Foreign Shell Companies Fake Charitable Trusts Straw Man Settlors Captive Trustees Anonymous Wire Transfers Disguised Business Trips Counter-Surveillance Training • Foreign Credit Cards Hold Mail Shred Files Liechtenstein Secrecy Laws Article 14 of the Banking Act: "The members of the organs of banks and their employees as well as other persons acting on behalf of such banks shall be obliged to maintain the secrecy of facts that they have been entrusted to or have been made available to them pursuant to their business relationships with clients. The obligation to maintain secrecy shall not be limited in time."
26ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 Article 11 of the Trustee Act "Trustees are obliged to secrecy on the matters entrusted to them and on the facts which they have learned in the course of their professional capacity and whose confidentiality Is in the best interest of their client. They shall have the right to such secrecy subject to the applicable rules of procedure in court proceedings and other proceedings before Government authorities."
Article 10- Data Confidentiality: 'Whoever processes data or has data processed must keep data from applications entrusted to him or made accessible to him based on his professional activities secret, notwithstanding other legal confidentiality obligations, unless lawful grounds exist for the transmission of the data entrusted or made accessible to him, Processing of Personal Data - § 1173., Art. The AB~ (General CMI Code): "The employer may not process data relating to the employee unless such data concern his or her qualification for the employment or are indispensable for the performance of the employment contract. In addition, the provisions of the Data Protection Act shall apply."
Article 8-Transhorder Data Flows: "No personal data may be transferred abroad If the personal privacy of the persons affected could be seriously endangered, in particular where there is a failure to provide protection equivalent to that provided under Liechtenstein law. This shall not apply to states which are party to the EM Agreement.; whoever wishes to transmit data abroad must notify the Data Protection Commissioner beforehand in cases where: a) there Is no legal obligation-to disclose the data and b) the persons affected have no knowledge of the transmission."
Prohibited Acts of a Foreign State -Art. 2 of the Liechtenstein State Security Law: "prohibited Acts for a Foreign State: Whoever, without being authorized, performs acts for a foreign state on Liechtenstein territory that are reserved to an authority or -an official, whoever aids and abets such acts, shall be punished by the Liechtenstein court (Landgericht) with imprisonment up to three years."
Prohibited Acts for a Foreign State -- Art. 271 of the Swiss Penal Code:
"Whoever, without being authorized, performs acts for a foreign state on Swiss territory that are reserved to an authority or an official, whoever performs such acts for a foreign party or another foreign organization, whoever aids and abets such acts, shall be punished with Imprisonment up to three years or a fine, in 27 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 serious cases with imprisonment of no less than one year."
Economic Intelligence Service (Art. 273 SPC): 'Whoever seeks out a manufacturing or business secret in order to make it accessible to a foreign official agency, a foreign organization, a private enterprise, or their agents, whoever makes a manufacturing or business secret accessible to a foreign official agency, a foreign organization, a private enterprise, or their agents, shall be punished with imprisonment upto three years or a fine, in serious cases with imprisonment of no less than one year. Imprisonment and fine can be combined."
6. The scope and impact of the LGT tax Investigation and any lessons learned Tax Office Strategy The ATO is investigating the use of Liechtenstein entities and bank accounts in collaboration with other revenue agencies. In Australia, we are conducting 20 tax audits which are likely to raise tax liabilities In excess of $100 million. Anecdotal information suggests that relatively few Australians are involved in Liechtenstein arrangements relative to citizens from other countries.
Liechtenstein -The ATO is currently reviewing the taxation affairs of Australian taxpayers who appear to have concealed income in offshore entities located hi banking secrecy jurisdictions and tax havens. ~M have a particular focus on taxpayers who have used the services of the LGT Group and Its trustee entity, LGT Treuhand Aktiengesellschaft in Vaduz. Liechtenstein (LGT.) • LGT Treuhand A.O. operates a fiduciary or trustee service and establishes and administers legal entitles such as anstalts, stiftungs (foundations) and trusts for its clients. -
LGT Bank in Liechtenstein A.G. Is the banking division of the LGT Group. It has responsibility for banking services related to the investment functions of the LGT Group.
The services provided by LGT include administration and Investment of offshore assets which appear to be beneficially owned by the client LGT acts on Instructions from a client to establish or create a Liechtenstein entity and subsidiary entitles In other tax haven jurisdictions. In the Australian examples, the parent entity Is usually a foundation or trust. In some instances, LGT appears to have been retained as an agent of the client, and ban established and administered a Liechtenstein entity acting in that capacity.
28ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 The beneficial owners of the Liechtenstein entity are commonly a natural person and their family members, however their identity and control appear to be concealed on public and bank records by the interposition of a foundation board comprising LGT officials, who exercise control of that entity on behalf of the beneficial owners. -Documents relating to a private family foundation are not recorded on the Liechtenstein pubic registry. Th. foundation Is a separate legal entity and the board members have discretion to nominate beneficiaries, so that secrecy is maintained.
The ATO-understands that In practice the foundation board members act on the wishes or instructions of the settlor or beneficial owners of the entity. In other cases the client has used a foreign attorney to give instructions to the foundation board members or has replaced the by-laws or regulations of the foundation to appoint new beneficiaries.
LGT allegedly designs client structures so that the client or beneficial owner, is unable to be connected to the Liechtenstein entity, whether that entity te a foundation, trust or anstalt. The services provided by LGT -- on the banking and secrecy laws operating hi Liechtenstein to prevent disclosure of the client's identity or information.
LGT will also arrange to open and operate a bank account for the foundation or trust It has established for its client The bank accounts are typically held hi the name of the entity, to avoid any connection with the instructing chant, and to meet the bank's anti-money laundering obligations.
Assets administered by LGT may be invested In a diverse range of managed funds and currencies. Further, safety deposit facilities can be arranged for clients to secure other valuable items such as art and jewellery which may also form part of the Investment portfolio.
Funds owned by entities that are establish d by LGT for its clients are commonly Invested with its own bank or funds management entities:
• LGT Bank in Liechtenstein;
• LGT Capital Invest Limited Grand Cayman; and • LGT Portfolio Management (Cayman) Limited.
At the clients direction, funds may be invested with a third party bank, usually operated In a banking secrecy jurisdiction.29
ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 The ATO understands that for a trust or foundation to be established by LGT, substantial funds must be settled In the trust or foundation for it to be economically viable for LGT. LGT clients are wealthy investors who typically Invest a small portion of their total wealth in a LGT structure and who do not need access to these funds to supped their domestic lifestyle.
LGT plays an active role in servicing and administering the clients Liechtenstein entity. For example the bawd members of a foundation will be LGT employees. They are responsible for administration of the entity and are the approved signatories.
The use of LGT employees as board members or trustees and in-house or 'omnibus' entities as nominee directors of Interposed entities is considered to be another means by which the beneficial owner is distanced from being connected to their Liechtenstein entity. This may facilitate the avoidance or evasion of tax on any offshore Income derived by the Liechtenstein entity by an Australian taxpayer, who is the beneficial owner.
LGT also arranges for shell entities Incorporated hi other tax haven jurisdictions (such as BVI or Panama) to be set up as Interposed entitles of the Liechtenstein entity for its clients. The ATO considers that these special purpose vehicles are used to layer the transactions and the flow of funds, and (nay be designed to prevent regulators and tax administrators from deter mining the underlying ownership and control of the entity established by LGT and Its assets and Income.
LGT allegedly recommends to clients that fund transfers be conducted through interposed entities In countries outside the client's domestic jurisdiction. The Australian experience Is-that clients have adopted this recommendation and that few International fund transfers are remitted directly between Australian residents and Liechtenstein or Switzerland as detected by our FIU.
Communication, between the ultimate beneficial owner of the foundation and LGT appears to be limited to either face to face or telephone contact LGT Instructs the ultimate beneficial owner of the foundation to avoid written correspondence with It and clients are provided with codes and passwords to maintain confidentiality and secrecy.
Intelligence held by the ATO Indicates that at July 2006 there were 14 banks operating hi Liechtenstein with funds under control-of approximately 255 billion Swiss francs. Also operating in Liechtenstein was numerous Treuhand (Trust 30 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 Service Companies). Further intelligence indicates that as at November 2006 approximately 127,000 entities were registered with the public company registry (the population of Liechtenstein Is approximately 35,000).
The ATO has employed several compliance strategies - audits, Issuing Information production notices (both domestically and off-shore), conducting formal and informal interviews, accessing premises (with or without notice) to copy documents, and exchanging information with our Tax Treaty partners.
More importantly, the sharing of intelligence between International tax agencies has provided a unique understanding of Liechtenstein financial services and entitles end will provide an opportunity to engage with Liechtenstein to achieve greater transparency and exchange of Information.
The ATO welcomes news that new laws In Liechtenstein will enhance regulation and transparency in relation to some legal entities. However, we are concerned to see the detailed law and Its proposed implementation in 2009 to determine whether there are practical changes to trustee/banking practices.
Lessons learned • Project management strategies are essential to successful audit outcomes. • Sharing of information with other revenue agencies expedites the progress of cases.
• Our compliance activities have resulted in disclosures or settlements.
2.3. We are reproducing hereunder the salient features of the Host Trust reg.
Home -The trust Reg. can be structured
like a company limited by shares or
foundations as an instrument for
commercial activities or for the
administration of assets.
Company overview -The trust reg. qualifying as private
asset structure pays an annual tax of
CHF 1,200 only
Executive Sum Company norms -Distribution to the beneficiaries as
many Liechtenstein well as profits earned are not subject
to any further tax
Trust. Reg. -The Supreme Authority is vested in
the settlor and is transferable.
Foundation Trust -The beneficial interests may be
31
ITA Nos. 5720 to 5729/Mum/2016 and
5751 & 5752/Mum/2016
assigned to persons other than the
settler
Establishing a Company in -The administration is taken care by
Liechtenstein Fees and costs the board of trustees.
Conclusion -If commercial activities are perused
or the articles make provision for
such activities an auditor must be
appointed. In this case the annual
accounts approved by the auditor
must be submitted to the
Liechtenstein tax administration.
Contact Details -In case of losses or liabilities only
the asset of the trust reg. have to be
used to cover them
Disclaimer -The minimum capital to constitute a
trust reg. is CHF 30,000
HOST Trust reg.'s mission is to advise foreign investors and to establish It 11· them - based on legal expertise - companies or trusts in Liechtenstein to enhance profits.
The Liechtenstein jurisdiction qualifies as an offshore financial centre. Foreign investors have the opportunity to establish companies or trusts ill the Principality of Liechtenstein to enjoy the advantages of our offshore financial centre due to:
A very modest tax regime with special advantages for private asset structures i.e. legal entities and trusts which do not pursue any economic activity; A company law which offers next to the ordinary kind of companies like I he company limited by shares ( Aktiengesellschaf/AG) those specifically designed to serve the needs coming along with holding of assets, namely the foundation (Stiftung) and the establishment (Anstalt); The institute of trusts shaped according to the English law trust; A high standard of secrecy laws.
Key Figures
- Foundation: 1719 AD
- Government: constitutional hereditary monarchy
- Economy (GNP): CHF 5.2 Billion (2009)
- Currency: Swiss Franc (CHF) (Possible to invest in any currency)
- Size: 160 sq meters (62 sq miles)
- Population: 36' 150 (2010)
- Member of UNO, EFTA, EEA and WTO 32 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 The Principality of Liechtenstein is a politically, economically and socially very stable country for investors.
Company
Forms
Company Establishm Trust Reg. Foundation Trust
limited by ent
shares
Company
The company limited by shares is suitable for all economic objectives, in particular for:
. international commercial transactions or . as a holding structure for subsidiary companies.
- The company limited by shares qualifying as private asset structure pays an annual tax of CHF 1 '200 only.
- The coupon tax of 4% is not any longer levied on dividends distributed from income accrued after January 1, 2011.
- The profits earned are not subject to any further tax.
- Bearer or registered shares are admissible. The minimum nominal value is not regulated. It is also possible to issue voting shares. The Liechtenstein law does not ask for any qualifying shares to be held by the directors.
- The general meeting of the shareholders is the supreme authority.
- The board of directors conducts and manages the company business.
- The auditor has to examine the annual accounts and reports to the general meeting.
- The annual accounts approved have to be submitted to the Liechtenstein tax administration.
- The minimum capital to constitute a company limited by shares is CHF 50'000. The organization of an individual establishment may be adopted to its specific needs: like a company limited by shares or a foundation, as an instrument for commercial objectives or for the administration of assets. Establishment
- The establishment qualifying as private asset structure pays an annual tax of CHF 1 '200 only.
- Distributions to the beneficiaries as well as profits earned are not subject to any further tax.33
ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016
- The supreme authority is vested in the founder (holder of the founder's rights) and is transferable.
- The beneficial interests may be assigned to persons other than the holder (s) of the founder's rights
- The administration is taken care by the board of directors.
- If commercial activities are pursued or the articles make provision for such activities an auditor must be appointed. In this case the annual accounts approved by the auditor must be submitted to the Liechtenstein tax administration.
- In case of losses or liabilities only the assets of the establishment have to be used to cover them.
- The minimum capital to constitute an establishment is CHF 30'000. Trust Reg (Trust Enterprise) The trust-reg. can be structured like a company limited by shares or foundation as an instrument for commercial activities or for the administration of assets.
- The trust reg. qualifying as private asset structure pays an annual tax of CHF 1 '200 only.
- Distribution to the beneficiaries as well as profits earned are not subject to any further tax.
- The supreme authority is vested in the settlor and is transferable.
- The beneficial interests may be assigned to persons other than the settlor.
- The administration is taken care by the board of trustees.
- If commercial activities are pursued or the articles make provision for such activities an auditor must be appointed. In this case the annual accounts approved by the auditor must be submitted to the Liechtenstein tax administration.
- In case of losses or liabilities only the assets of the trust reg. have to be used to cover them.
- The minimum capital to constitute a trust reg. is CHF 30'000. Foundation The foundation may be constituted as:
. one for private use, especially as family foundation; . charitable foundation.
- The founder endows assets for a specific purpose and regulates the beneficial interest.
- The foundation qualifying as private asset structure pays an annual tax of CHF 1 '200 only.
- Neither the endowment to the foundation nor the distributions to the beneficiaries or the profits earned are subject to any further tax,
- The supreme authority is vested in the members of board who also take care of 34 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 the administration.
- The founder may designate other bodies as e.g. protectors, collators and auditors.
- An individual as founder may by creating retained founder's rights preserve for himself the authority to revoke the foundation and to amend the foundation documents.
- Only if the foundation pursues commercial activities the annual accounts approved by the auditor must be submitted to the Liechtenstein tax administration.
- The minimum capital to constitute a foundation is CHF 30'000. The Liechtenstein trust settlement is shaped according to the English law trust. Trust (Trust Settlement)
- Trusts are used in a similar manner as the foundation.
- However, the trust is not a legal entity itself, but a kind of contractual relationship.
- The settlor transfers movable or immovable assets or rights to the trustee with the obligation to hold and make use of this trust property against third parties in his own name as independent legal owner for the benefit of one or more beneficiaries.
- The trust comes into existence with the stipulation of the trust settlement (trust deed) between the settlor and the trustee or by means of a trust letter accepted.
- The trustee must keep his personal assets strictly separate from the trust property.
- To ensure the observance of the provisions in the trust deed an auditor, a protector, a curator or a collator can be appointed.
- The keeping of annual accounts is not obligatory.
- Trusts according to foreign law can be formed in Liechtenstein.
- The assets held by the trust qualifying as private asset structure are subject to an annual tax of CHF 1 '200 only.
- The distributions to the beneficiaries as well as the profits earned are not subject to any further tax.
Reasons for establishing Liechtenstein Companies The holding of assets Assets of holding companies can be invested in any kind of property; e. g. bank accounts, publicly traded or not traded shares, participations in other companies, real estate property, art and so on.
The earnings stemming from the assets held by a holding company, be it interest on bank accounts, dividend payments from shares, earnings from participations in other companies, proceeds of sales or royalties qualify as income of the holding company which are in case of a private asset structure subject to an 35 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 annual tax of CHF 1 '200 only.
- The pursuit of business Profits stemming from business transactions of companies constituted after January 1, 2011, are subject to ordinary corporate tax with a tax rate of 12.5% on the taxable net income.
Companies pursuing business transactions and having been constituted prior to January 1, 2011, are until December 31, 2013 subject to a specific annual capital tax of 0.1 % of the assets held only, at least CHF 1 '200 per year. It is not necessary that such an offshore company sets up an office in Liechtenstein or employs people. The management of such an offshore company can be provided on a contractual basis by the Liechtenstein trustee.
- Regulation of succession/avoidance of inheritance tax Especially foundations are qualified for all purposes of estate planning as well as to avoid inheritance tax. The succession in the assets is regulated by the so-called by-laws. These are regulations setting forth who the first beneficiary of the assets is and who qualifies as second beneficiary once the first has died. As no formal change of ownership takes place in case of succession, no inheritance tax becomes payable.
- Asset protection by means of a holding company If assets - earmarked for the personal benefit only - are held by a holding company (normally a foundation) not all assets are endangered in case of losses or liabilities incurred during the course of business activities pursued by the beneficiary.
Fees and Costs in General The fees and costs involved with the constitution and administration of a Liechtenstein company or trust are approximately the following:
. For the constitution of a company/trust between CHF 5'000 and 6'000; · The court fees (costs) coming along with the constitution depend on the kind of company, normally approx. CHF 600 - I '300;
· For the local director/trustee of the company/trust an annual lump sum between CHF 5'000 and 6'000;
· For the legal representative in charge to accept services on behalf of the company an annual lump sum between CHF 500 and 600;
· Petty expenses.
- While the fees for the director and legal representative are payable in advance and cover the acceptance of the respective position by the person or company retained, further services provided by the local director and his staff are charged by the time spent according to an hourly fee rate. The fee rate normally varies between CHF 100 for administrative work to CHF 500 for management and legal work and depends on the level of sophistication involved, the assets concerned as 36 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 well as on what the parties have agreed.
- All fees are subject to 8 % V A T and are charged against the company/trust and may be deducted from the assets held by the same.
Conclusions The Liechtenstein jurisdiction qualifies as an offshore financial centre due to:
- A very modest tax regime;
- A company law which offers next to the ordinary kind of companies like the company limited by shares (AG) those specifically designed to serve the needs coming along with holding of assets, namely the foundation (Stiftung), the establishment (Anstalt) and the trust reg;
-The institute of trusts;
-A high standard of secrecy laws.
Foreign investors have the opportunity to establish companies or trusts with HOST trust reg. in the Principality of Liechtenstein to enjoy the advantages of our offshore financial centre.
Contact Details Gerhard R. Holzhacker Tel.: +423 239 66 33 Dr.iur. M.B.L.-HSG Fax: +423 239 66 44 Attorney at Law [email protected] Law firm Holzhacker www.holzhacker-lawfirm.com Josef Rheinberger Strasse 11 Tel.: +423 392 42 45 P.O.Box 656 Fax: +423 3924246 FL-9490 Vaduz host -trust [email protected] Principality of Liechtenstein www.host-trust.com 1m Duxer 4 P.O.Box 240 FL-9494 Schaan Principality of Liechtenstein
Black money: Liechtenstein joins India in stash funds fight Press Trust Of India: JakartalNew Delhi, Thu Nov 21 2013, 19:53 hrs. Liechtenstein, one of India's important partner nations in fighting overseas tax abuse and black money, on Thursday shed its secrecy cloak and joined the league of a host of other countries for automatic exchange of information and mutual assistance in tax matters.
TThe country, a landlocked jurisdiction in Central Europe, became the 62nd signatory to a worldwide convention, accepted by almost all economic 37 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 superpowers and formulated by the Paris-based Organisation for Economic Cooperation and Development (OECD), an international policy-advisory body that formulates global tax standards to fight tax evasion and concealment of illicit funds.
Switzerland, in October, had joined the same convention. "Liechtenstein and San Marino became the 62nd and 63rd signatories of the multilateral convention on mutual administrative assistance in tax matters at a ceremony marking the first day of the November 21-22 meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes," the OECD said in a statement.
A senior Finance Ministry official in Delhi said the step, announced by Liechtenstein last week, is a "boost to India's efforts to combat black money instances overseas."
Indian investigating agencies have come across a number of cases where individuals or entities from India have been detected using banking channels of Liechtenstein to hide their illegal incomes or stash funds. By joining the comity of nations, the Central European nation, Liechtenstein has virtually pulled down the wall of secrecy and will allow partner nations like India to seek information about suspect individuals and entities and provide for obtaining banking information about such people. The multilateral convention of the 0 ECD provides for all forms of mutual assistance like exchange on request, spontaneous exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection while protecting taxpayers' rights.
It also provides the option to undertake automatic exchange, requiring an agreement between the parties interested in adopting this form of assistance.
2.4. So far as, the contention of the ld. Counsel for the assessee that there is violation of principal of natural justice and reasonable opportunity was not provided to the assessee by the Assessing Officer, are concerned, we are not in agreement with this assertion of the ld. Counsel because the assessee was duly provided with the reasons of reopening of assessment and English translated copy of the documents.
2.4.1 In view of the above, we find no substance in the assertion of the assessee that the reopening of assessment was bad, without following the due process of law or violation of principle of natural justice, more specifically when sanction was granted by the Additional Commissioner after considering the facts and due application of process of law. The Assessing Officer vide letter dated 13/5/2009 provided the reasons for reopening of the assessment wherein it was specified that 38 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 a tax-evasion petition (TEP) has been received from CBDT. As per the information contained in the said TEP the assessee is a beneficiary of Ambrunova Trust and Merlyn Management SA. In the return of income the assessee neither offered any income with reference to the trust nor disclosed any details to the effect that the appellant was a beneficiary of the said trust. The Assessing Officer, from the, summary of the trust account in LTG Bank, found credit balance of US $ 24,06,604 as on 31/12/2001 (Rs.11,60,99,390/- @ 48.242 per USD) interest accrued of USD 13500 (equivalent to Rs.6,51,267/-) was credited to the said account. As the same was not reflected in the return of income thus, the Assessing Officer correctly presumed that income has escaped assessment. Even vide letter dated 23/9/2009 the Assessing Officer showed details (a) information of trust, (b) details of settler of the trust, (c) purpose of creating trust, (d) copy of trust deed,
(e) asset and bank accounts held by the trust in India and abroad and (f) benefit received by the appellant during the financial years relevant to Assessment Year 2002-03 to 2007-08 (page 21 ). The assessee vide letter dated 14/10/2009 denied the allegation of the Assessing Officer (page-22). The assessee also informed that she/they had not received any benefit from the trust or for that matter in any other Assessment Years. Vide letter dated 26/10/2009 the Assessing Officer furnished the copies of documents (pages 24 to 28) which formed the basis for initiating proceedings u/s. 148/147 of the Act. The Assessing Officer vide letter dated 8/12/2009 informed that he has information that the assessee deposited USD 24,06 604.90 in the name of Ambrusova trust in LTG Bank (pg-31). The assessee was asked to explain as to why it may not be treated as investment out of undisclosed sources and added to the income (pg-34). The assessee vide letter date 18/12/2009 informed the Assessing Officer that the evidences furnished by him in no way showed that the assessee deposited the said amount in the name of the said trust during the year (pg-35 para-1). The Assessing Officer was again requested to furnish the evidence of such deposit by the assessee and the person who deposited the amount (pg-36). Vide para-13 of the said letter it was claimed that she had not received any benefit from the said trust (pg-39). Identical plea was raised before the ld. CIT(A) also regarding non-supply of material or opportunity to the assessee which has been dealt with by the ld. CIT(A) as under which is worth quoting (page-15) which reads as under :-
"The appellant has wrongly alleged that complete material was neither given nor opportunity to cross examine was given. The Assessing Officer has handed over complete set of documents received by him to the appellant during the course of assessment proceedings. Further, as a part of the remand report, the Assessing Officer had called the appellant and opportunity to cross examine the Assessing Officer 39 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 himself was available to the appellant, however, the appellant chose not to appear and hence cannot raise the bogey of cross examination here. Further, the right to cross examine is available when the department has already recorded the statement and is being used against the appellant. In the instant case, no such thing was done by the department or the AO. It is pertinent to note that the information passed to the Assessing Officer had been received as a part of the tax information exchange treaty and therefore, there could not have been any cross examination."
2.4.2 So far as the contention of the assessee that enough opportunity was not provided to the assessee is concerned we find no merit in this assertion as is evident from para-28 (pg-14) of the order of the ld. CIT(A) (ITA No.3546/M/11) wherein un-controverted finding is that the assessee chose not to use the same when it was provided . Therefore, from this angle also the assessee is having no case. The totality of the facts clearly indicates that the Assessing Officer rightly assumed jurisdiction to reopen the assessment. Thus, this ground of the assessee in the respective appeal is dismissed.
3. The next ground pertains to confirming the addition of Rs.2,34,64,398/- on account of alleged undisclosed income. The crux of argument advanced on behalf of the assessee is that the addition was made by the AO without appreciating the fact that the alleged trust was discretionary trust and neither the amount was accrued/credited nor the name of the assessee appeared as beneficiary of Ambrunova Trust. On the other hand, the ld. Special Counsel brought to our notice certain documents evidencing that the names of all the assessees were appearing, who are beneficiaries of the said trust. 3.1 We note that (Pg-14 of the document filed by the ld. Spl. Counsel) the trust was established on 21/3/1997 and the status of the account is "active". On 21st Nov. 2013, Liechtenstein joined India as important partner in fighting overseas tax abuse and black money and shed its secrecy cloak and joined the league of a host of other countries for automatic exchange of information and mutual assistance in tax matters. Thus, became 62nd signatory to a world- wide convention, accepted by almost by all economic super powers and formulated by Paris based Organization for Economic Co-operation and Development (OECD), an international policy advisory body which formulates global tax standard to fight tax evasion and concealment of illicit funds. Switzerland joined the same convention in October, 2013. The ld. Spl. Counsel showed the bench a confidential list containing the names of the present assessee as trustee/beneficiaries of the trust. It was requested that since the investigation is in 40 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 progress, therefore, at this stage it will hamper the investigation if the document is made public as the same list is containing the names of other beneficiaries also. On going through the bank summary in respect of Ambrunova's trust account in LTG Bank Liechtenstein, we find that there is a credit balance of USD 24,06,605 (equivalent to Rs.11,60,99,390/-).It is worth mentioning the observation/conclusion made/drawn by Hon'ble Justice Krishna Iyer, (the Hon'ble Apex Court) in the case of Chairman Board of Mining Examination & Ors. Vs Ramjee (1977 AIR 1965) (SC) order dated 3rd February 1977. HELD (1 ) Law is meant to serve the living and does no beat its abstract wings in the jural void. Its functional fulfillment as 'social engineering' depends on its scrutinized response to situation, subject-matter and the complex of realities which require ordered control. A holistic understanding is simple justice to the meaning of all legislations. Fragmentary grasp of rules can, n misfire or even backfire, as in this case. [906 H, 907 A] (2) The judicial key to construction is the composite perception of the daha and the dahi of the provision. To be literal in meaning is to see the skin and miss the soul of the Regulation. [909 A-B].
(3) Over-judicialisation can be subversive of the justice of the law. To invalidate the Board's order because the Regional Inspector did not suspend the certificate is fallacy. The Board's power is independent and is ignited by 905 the report, which exists in this case, of the Regional Inspector. There is an overall duty of oversight vested in the board to enforce observance of rules of safety. [909 D] (4)To set aside the order on the ground that the Regional Inspector had no power to recommend but only to suspend and report that his recommendation influenced the Board's order is to enthrone a processual nicety do dethrone plain justice. Suspension, on an enquiry, predicates a prior prima-facie finding of guilt and to make that known to the Board implicitly conveys a recommendation. The difference between suspension plus report and recommendatory report is little more than between Tweedledum and Tweedledee Recommendations are not binding but are merely raw materials for consideration. Where there is no surrender of judgment by the Board to the recommending Regional Inspector, there is no contravention of the cannons of natural justice.
(5) Natural justice is no unruly horse, no lurking landmine, nor a judicial cure- all. If fairness is shown by the decision-maker to the man proceeded against, the form features and the fundamentals of such essential processual propriety being conditioned by the facts and circumstances of each situation. no breach of 41 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 natural justice can be complained of. Unnatural expansion of natural justice. without reference to the administrative realities and other factors of a given case, can be exasperating.
Courts cannot look at law in the abstract or natural justice as a mere artifact. Nor can the), fit into a rigid mould the concept of reasonable opportunity. If the totality of circumstances satisfies the Court that the party visited with gelverse order has not suffered from denial of reasonable opportunity the Court will decline to be punctilious or fanatical as if the rules of natural justice were sacred scriptures. In the instant case, the Board cannot be anath-ematised as condemning the man without being heard. The respondent has, in the form of an appeal against the report of the Regional Inspector, sent his explanation to the Chairman of the Board. He has thus been heard dad compliance with Regulation 26 in the circumstances is complete. [909G-H, 910A-G] Tereaesai's case [1970] 1 S.C.R 251; Management of DTU[1973] 2 S.C.R. 114:
Tandon's case [1974] 4 SCC 374 referred to.
Observations: Sensitive occupations demand stern juristic principles to reach at scapegraces, high and low, and not mere long drawn-out commissions whose verdicts often provedilatory 'shelter' for the men in whom Parliament his entrusted plenary management. Any sensitive jurisprudence of colliery management must make it cardinal to pt nish the Board vicariously for any major violations and dreadful disasters, on macro considerations of responsibility to the community. The Board must quit, as a legal pendry, if any dreadful deviation, deficiency, default or negligence anywhere in the mine occurs. This is a good case for new principles of liability, based on wider rules of sociological jurisprudence to tighten up the law of omission and commission at the highest levels. Responsibility and penalty must be the concomitants of highly- paid power vested in the top-brass. Any deviance on the part of these high- powered authorities must be visited with tortious or criminal liabilities. [908 F-H, 907 D-FI (The Court emphasized the need for evolving a code of strict liability calling to utmost care not only the crowd of workers and others but the few shall care or quit so that subterranean occupations necessary for the nation are made as risk-
proof as technology and human vigilance permit).
3.2 So far as the contention of the ld. Counsel for the assessee that such documents were not provided to the assessee is also incorrect as we have discussed in earlier paras of this order that not only the documents rather the English translated copy of such documents was also provided. Therefore, this 42 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 assertion of the assessee is also without any basis. Another assertion made by the assessee was that the information was unvouched and not corroborated with any evidence. We note that the said documents were received officially by the Government pursuant to an investigation made by permanent sub-committee on investigation of United States Senate. The copy of exhibit list regarding tax haven banks has already been reproduced by us in earlier part of this order. As we have reproduced in earlier part of this order (host trust reg.), the distribution to the beneficiaries as well as profits earned are not subject to any further tax and, further, the supreme authority is vested in the settler and is transferable. It can be concluded that the Liechtenstein jurisdiction qualifies as an off shore financial centre due to a very modest tax regime, high standard of secrecy laws and further foreign investors had the opportunity to establish companies or trust with "HOST trust reg." in the principality of Liechtenstein to enjoy the advantages of off-shore financial centre. As per the report Indian Investigating Agencies came across a number of cases where individual or entities from India were detected using banking channels of Liechtenstein to hide their illegal income or stash funds and it was only possible when India became signatory to a world-wide convention formulated by OECD an international policy advisory body which formulated global tax standards to fight tax evasion and concealment of illicit funds. It also provided option to undertake automatic exchange of information. It is a common knowledge that discretionary trusts are created for the benefit of particular persons and those persons need not necessarily control the affairs of the trust. Still the fact remains that they are the sole beneficiaries of the trust. Thus totality of facts clearly indicate that the deposit made in the bank account of the trust represents unaccounted income of the assessee, as the same was not disclosed by the these assessees in their respective returns in India, consequently, the addition was rightly made by the Assessing Officer and confirmed by the ld. CIT(A).
4. Finally, the all the appeals of the assessee stand dismissed.'
16. From the above, I find that the tribunal's order as above has held that the assessee is a beneficiary of beneficiary of Ambrunova Trust, Vaduz. The amount of deposit has already been added in the hands of the assessee. Once it is settled that the assessee is having sums deposited in the foreign bank account, it was incumbent upon the assessee to disclose the interest thereon in subsequent years, unless the assessee produces 43 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 necessary evidence that the aforesaid deposit has been liquidated. Thus, once the assessing officer has come into possession of information that assessee is beneficial owner of deposits in foreign bank accounts and from the return of income filed by the assessee the assessing officer notices that the interest from the said deposits in accounts have not been disclosed in the return of income, the reopening of the case is duly justified. The ld. CIT(A) has very elaborately dealt with the issue. His order is well reasoned and the case laws referred by him are quite germane here. Hence, I uphold the same. Further in this regard, I may refer to the decision of Hon'ble Apex Court in the case of CIT(A) Vs. Rajesh Jhaveri Stock Brokers P. Ltd, 291 ITR 500 as under:-
"Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to lax if he has reason to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the AO has cause or justification to know or suppose (hat income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the AO should have finally ascertained the fact by legal statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Managnese Ore Co, ltd. v. ITO(1991) 191 ITR 662, for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is "reason to believe", but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the AO is within the realm of subjective satisfaction ITO v. Selected Dalurband Coal Co, (P.) Ltd. (1996) 217 ITR 597 (Supreme Court): Raymond Woollen Mills Ltd. v. ITO (1999) 236 ITR 34 (Supreme Court)."44
ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016
17. The above Hon'ble Apex Court decision duly complements the validity of reopening in this case. The assessee's claim that the said deposits do not belong to the assessee or they have no information about the same has already been decided against the assessee by the tribunal in the order as above. Furthermore, I find that in the present case, from the employee of the said foreign bank, sovereign government of Germany comes into possession of documents relating to the deposit in the said bank. These deposit and detail give the name and address, date of birth, passport copy and all relevant particulars of the assessee. Then the sovereign government of Germany passes on this information to the sovereign government of India. Thereafter, the said document and information comes into the possession of Central Board of Direct Taxes and, thereafter, to the assessing officer. In this scenario, the assessee claim that the assessee has no information about the said bank deposit is totally unsustainable. That assessee's name and address, date of birth, passport copy and other particulars were planted in those documents to the prejudice of the assessee by some unknown person is totally an unbelievable story. That some good Samaritan deposited that huge amount for the benefit of the assessee in the said foreign bank account and gave all the names and address and particulars of the assessee without any information to the assessee, is equally an unbelievable story.
18. In terms of the extant secrecy provisions of liechestein, no further information from the said bank can be obtained by the assessing officer. The assessee is clearly 45 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 trying to get benefit under this provision and denying the existence of the said bank account. This as per the facts discussed hereinabove is a self serving statement not at all sustainable. In the background of the above discussion, the onus now is clearly on the assessee to prove that the assessee has no beneficial interest in the said bank account or that the said bank account is a fictitious story, which the assessee has failed to discharge. Hence, the impugned addition in the hands of the assessee are justified and I uphold the same.
19. As regards reference of the learned counsel of the assessee for the tax treatment of the discretionary trust is concerned, it is noted that the said trust is in Liechestein.
The tax laws of government of India do not apply. Hence, reference to cases which are in the Indian context are not at all applicable. Some of the salient features of trust in liechestein are already mentioned in the above said tribunal order. Hence, reference by the ld. Counsel of the assessee to apply Indian case laws to that governed by law of Liechestein is bereft of cogency.
20. In the background of aforesaid discussion and precedent, I uphold the reopening as well as additions in these cases.
21. In the result, all the appeals by the assessee stand allowed.
Order pronounced in the open court on 23.10.2017 Sd/-
(Shamim Yahya) लेखा सद य / Accountant Member मंब ु ई Mumbai; दनांक Dated :23.10.2017 46 ITA Nos. 5720 to 5729/Mum/2016 and 5751 & 5752/Mum/2016 व. न.स./Roshani, Sr. PS आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आयु त(अपील) / The CIT(A)
4. आयकर आयु त / CIT - concerned
5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR, ITAT, Mumbai
6. गाड फाईल / Guard File आदे शानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मंब ु ई / ITAT, Mumbai