|CORAM:||Joginder Singh (JM), N. K. Billaiya (AM)|
|CATCH WORDS:||Black Money, discretionary trust, foreign bank account|
|COUNSEL:||Dr. K. Shivram|
|DATE:||October 31, 2014 (Date of pronouncement)|
|DATE:||November 10, 2014 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|Information received by the AO that the assessee is a beneficary in a "discretionary" trust set up in Liechtenstein can form the basis of assessment of undisclosed income in the assessee's hands. Argument that the trust is "discretionary" and that the amount has not "accrued" to him or that the documents are "not corroborated" is not acceptable|
(i) There is 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. The assessment was reopened because a tax-evasion petition (TEP) has been received from CBDT that 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 AO, from the, summary of the trust account in LTG Bank found credit balance of US $ 24,06,604 (Rs.11,60,99,390) was credited to the said account. As the same was not reflected in the return of income thus, the AO correctly presumed that income has escaped assessment. The AO 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 AYs 2002-03 to 2007-08. Accordingly, the AO rightly assumed jurisdiction to reopen the assessment.
(ii) As regards the addition of Rs.2,34,64,398 on account of alleged undisclosed income, the argument of the assessee that the alleged trust was a discretionary trust and neither the amount was accrued/credited nor the name of the assessee appeared as beneficiary of Ambrunova Trust is not acceptable because the ld. Special Counsel brought to our notice certain documents evidencing that the names of all the assessees were appearing as beneficiaries of the said trust. 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 worldwide 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 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).
(iii) The contention of the assessee that such documents were not provided to him is also incorrect. The assertion that the information was unvouched and not corroborated with any evidence is also not accepted because the said documents were received officially by the Government pursuant to an investigation made by permanent subcommittee on investigation of United States Senate. 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 AO and confirmed by the CIT(A).