Decided on October 31,2014

Mohan Manoj Dhupelia Appellant


Joginder Singh, Member - (1.) THESE three appeals are by different assessee, who are relatives, challenging the impugned order all dated 25/02/2011, passed by the ld. First Appellate Authority, raising identical revised grounds of appeals which are summarized as under :- 1. Reopening of assessment is bad in law (Original Ground no. 1 to 3) The ld. Commissioner of Income Tax (Appeals), erred in confirming the reopening of the Assessment which was completed by the Assessing officer without following the due process of the laws hence the order of reassessment is bad in law, as the principal of the natural justice is violated, sanction was given by the Additional Commissioner without application of mind, objection of the reopening was not deal with, the purported reasons recorded were served beyond limitation period, hence the notice is bad etc.
(2.) ADDITION on account of alleged undisclosed income -Rs. 2,34,64,398/- (original Ground no. 4) The ld. Commissioner of Income Tax (Appeals), erred in confirming the order of the Assessing Officer making an addition of Rs. 2,34,64,398/- on account of alleged undisclosed income, without appreciating the fact that the alleged trust was discretionary trust as neither the amount was accrued nor credited to Appellant's name, hence addition cannot be made in the hands of the Appellant. Not adjudicating the alternative ground regarding taxability of income only (Original Ground no. 4). Without prejudice to the above, the learned CIT(A) erred on facts and in law in not adjudicating the alternative grounds regarding the taxability of income only of US $ 13,500/- earned by the alleged trust and not the amount outstanding of US $24,06,604.90/- as at 31st December, 2001.
(3.) ORIGINAL Ground no. 5 The above grounds of appeal are without prejudice to one another and the appellant craves leave to add, alter, amend, delete or modify any of the above grounds of appeal. 2. At the time of hearing, we have heard Dr. K. Shivaram alongwith Shri S.R. Parikh ld. Counsel for the assessee and Shri Girish Dave ld. Special Counsel for the Revenue. Dr. Shivaram, through ground no. 1, challenged confirmation of reopening of assessment by asserting that due process of law was not followed by the Department, therefore, the reassessment proceedings are bad in law, being, violation of principle of natural justice, without application of mind, the objections raised by the assessee for reopening were not dealt with and further the purported reasons, recorded by the Revenue, were served beyond the limitation period. It was pointed out that the assessee received the notice issued u/s. 148 on 30th March 2009 and the assessee requested the AO to furnish the reasons for reopening the assessment. Again vide letter dated 17th April 2009 the AO was informed that the assessee has filed the return on 31st July 2002. The AO vide letter dated 13th May 2009 furnished the reasons for reopening of assessment. It was contended that the assessee vide letter dt. 14th October 2009 denied the allegations and the details sought from the assessee vide letter of the AO dated 23/09/2009. Our attention was also invited to pages 22 and 24 of Paper book informing the AO that no benefit from the trust were received by the assessee. It was asserted by the ld. Counsel that the name of the assessee did not appear in the list of beneficiary of the trust thus no amount could be taxed of the income lying in the name of the trust. The crux of the argument is that neither the name of the assessee is appearing in the list of beneficiary of the trust nor any benefit was received. 2.1. On the other hand, the ld. Special Counsel Shri Girish Dave defended the reopening of the assessment by submitting that objections can be raised only after filing of return, notice u/s. 148 of the Act was issued on 26/03/2009 and the AO on 13th May 2009, provided the reasons for reopening of assessment. Our attention was invited to page 7 (Tax Haven Bank Secrecy tricks) and other pages showing the transactions. It was empathetically contended that even the English translation of the document was provided to the assessee. The ld. Special Counsel filed certain documents which will be discussed in the later part of this order. It was contended that the assessee was made aware about the names of the beneficiaries, bank account. Our attention was invited to section 106 of the Evidence Act (burden of proving fact) by contending that the department got these authenticated documents which were provided to the assessee also, therefore, reopening is valid. It was pointed out that the assessee was summoned by the Revenue authorities but she/they did not appear before the AO and even sought adjournment during remand proceedings which was granted, convenient date was fixed and even on that date the assessees did not appear. It was submitted that money was arranged by the beneficiaries to the local jurisdiction because distribution of assets was not liable for further taxation at that place (where account of the trust was opened) but liable for taxation in India. 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 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 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 Tax haven Bank and US tax Compliance (July 17 and 25, 2008) for ready reference and proper conclusion. United States Senate PERMANENT SUB COMMITTEE ON INVESTIGATIONS Committee on Homeland Security and Governmental Affairs Carl Levin, Chairman Norm Coleman, Ranking Minority Member EXHIBIT LIST Hearing On TAX HAVEN BANKS 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.;

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