IN THE INCOME TAX APPELLATE TRIBUNAL \u201cI\u201d, BENCH MUMBAI
\nBEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT
\n&
\nSHRI G. MANJUNATHA, ACCOUNTANT MEMBER
\nITA Nos.138\/Mum\/2019 to 142\/Mum\/2019
\n(Assessment Years: 2003-04 to 2007-08)
\nMr. Kamal Galani
\n801, Gym View
\n16th Road, Khar West
\nMumbai-400 052
\nVs. ACIT-23(3)
\nRoom No.104,1st Floor,
\nMatru Mandir, J.D.Road
\nTardeo
\nMumbai -400 007
\nPAN\/GIRNo.AFZPG4292G
\n(Appellant) .. (Respondent)
\n&
\nITA Nos.266 & 267\/Mum\/2019
\n(Assessment Years: 2006-07 & 2007-08)
\nACIT-23(3)
\nRoom No.104,1st Floor,
\nMatru Mandir, J.D.Road
\nTardeo
\nMumbai -400 007
\nVs. Mr. Kamal Galani
\n801, Gym View
\n16th Road, Khar West
\nMumbai-400 052
\nPAN\/GIRNo.AFZPG4292G
\n(Appellant) .. (Respondent)
\n&
\nITA Nos.286\/Mum\/2019 to 289\/Mum\/2019
\n(Assessment Years: 1999-2000 to 2002-03)
\nACIT-23(3)
\nRoom No.104,1st Floor,
\nMatru Mandir, J.D.Road
\nTardeo
\nMumbai -400 007
\nVs. Mr. Kamal Galani
\n801, Gym View
\n16th Road, Khar West
\nMumbai-400 052
\nPAN\/GIRNo.AFZPG4292G
\n(Appellant) .. (Respondent)
\n&
\n2 Shri Kamal Galani
\nCross Objection Nos.273\/Mum\/2019 to 276\/Mum\/2019
\n(Arising out of ITA Nos.286\/Mum\/2019 to 289\/Mum\/2019)
\n(Assessment Years: 1999-2000 to 2002-03)
\nMr. Kamal Galani
\n801, Gym View
\n16th Road, Khar West
\nMumbai-400 052
\nVs. ACIT-23(3)
\nRoom No.104,1st Floor,
\nMatru Mandir, J.D.Road
\nTardeo
\nMumbai -400 007
\nPAN\/GIRNo.AFZPG4292G
\n(Appellant) .. (Respondent)
\nAssessee by Shri. Madhur Agarwal, AR
\nRevenue by Shri. Avaneesh Tiwari, JCITSr.
\nDR
\nDate of Hearing 04\/08\/2020
\nDate of Pronouncement 10\/09\/2020
\n\u0906\u0926\u0947\u0936\u0947\u0936 \/ O R D E R
\nPER BENCH:
\nThis bunch of cross appeals filed by the assessee, as well
\nas the revenue and cross objections filed by the assessee for the
\nAsst.Years 1999-2000 to 2002-2003 are directed against
\nseparate, but identical orders of the Ld. Commissioner of
\nIncome Tax (Appeals)\u201334, Mumbai, dated 25\/10\/2018 and
\npertains to Assessment Years 1999-2000 to 2007-08. Since, the
\nfacts are identical and issues are common, for the sake of
\nconvenience, these appeals were heard together and are being
\ndisposed-off by this consolidated order.
\n3 Shri Kamal Galani
\n2. The assessee has more or less filed common grounds of
\nappeal for all Asst.Years. Therefore, for the sake of brevity,
\ngrounds of appeals filed for Asst.Year 2004-05 in ITA
\nNo.139\/Mum\/2009 are reproduced as under:-
\n1) On the facts and circumstances of the case and in law, the
\nassessment order date 25\/03\/2015, passed under section 147 read with
\nsection 144of the Act is invalid and bad in law as the following
\njurisdictional conditions required to assume jurisdiction under section 147
\nwere not fulfilled by the AO:
\nExistence of reason to believe;
\nSanction of appropriate authority; and
\nNotice issued beyond the expiry of period of limitation.
\n2) On the facts and circumstances of the case, the order passed by
\nthe AO and as confirmed by CIT(A), is bad in law and contrary to the
\nprincipals of natural justice, as adequate opportunity of being heard was
\nnot provided to the Appellant. The AO further erred in invoking the
\nprovisions of section 144 of the Act.
\n3) On the facts and circumstances of the case, the learned AO as
\nwell as the Commissioner of Income Tax (Appeals) has erred in
\nConfirming the following factual assumptions:
\na)The AO has incorrectly assumed that the Appellant is the owner
\nof the bank account;
\nb) The AO has erred in assuming that an investment of USD 3
\nmillion was made in order to open the account;
\nc) The alleged investment of USD 3 million was made out of
\nincome which originated from income chargeable to tax, but not
\ndisclosed in India; and
\nd)That the bank had paid interest of 17 per cent per annum.
\nThe Appellant submits that additions of Rs. 2,34,35,316\/- made
\nbased on such incorrect factual assumptions must be deleted.
\n4) The AO as well as CIT(A) has erred in relying on the base notes,
\nwithout bring any cogent material on record to establish the authenticity
\nor the veracity of the base notes. The AO has further erred in placing
\nreliance on incomplete information extracted from the HSBC Private Bank
\nwebsite to justify the authenticity of the base note.
\n5) Without prejudice to the above, the AO as well as the CIT(A) erred in
\nconfirming the additions contrary to the transactions referred to in the
\nbase note, which reflects that transactions had been entered into only
\nbetween November 2005 and February 2007.
\n4 Shri Kamal Galani
\n3. The revenue, has more or less filed common grounds of
\nappeal for all Asst.Years. Therefore, for the sake of brevity
\ngrounds of appeals filed for Asst.Year 1999-2000 in ITA
\nNo.286\/Mum\/2009 is reproduced as under:-
\n1) “On the facts and in the circumstances of the case and in law, the
\nId. CIT(A) has erred in deleting the addition made by the AO of the
\nunaccounted income, on the ground that the assessee is an Non –
\nresident Indian during the relevant, previous year without appreciating the
\nfact that income accruing or arising or deemed to accrue or arise to him
\nin India during the relevant previous year is assessable in India as per
\nprovisions of section 5(2)(b) of the income tax Act.”
\n2) “The appellant prays that the order of the CIT(A) on the above
\ngrounds be set aside and that of the Assessing Officer be restored.”
\n3) “The appellant craves leave to add, delete, alter, amend and modify
\nany or all grounds of appeal.”
\n4. The brief facts of the case extracted from ITA
\nNo.139\/Mum\/2018 for Asst.Year 2004-05 are that the assessee
\nis a Indian Citizen and was resident of United Arab Emirates
\n(UAE) from the year 1979-1991 and thereafter working at
\nVienna, Australia. The assessee was a non resident in India up
\nto Asst.Year 1999-2000 under the provisions of the I.T.Act,
\n1961. In the year 2001, the assessee came back to India for
\nsettling in India. Since, then the assessee has been filing his
\nreturn of income in India from Asst.Year 2002-03 onwards. The
\nassessment has been reopened u\/s 147 of the I.T.Act, 1961 by
\nissue of notice u\/s 148 of the Act, dated 30\/04\/2013 for the
\nreasons recorded, as per which information received from the
\nGovernment of France under the convention of avoidance of
\n5 Shri Kamal Galani
\ndouble taxation and the prevention of Fiscal Evasion with respect
\nto taxes on Income and on capital dated 28\/09\/1992. The said
\ninformation received was regarding bank accounts in HSBC
\nPrivate Bank (Suisse), SA, Geneva, Switzerland held by certain
\npersons in India. The information received from the French
\nGovernment in the form of summary sheets (hereinafter
\nreferred to as the Base Document) reveals that the assessee is
\nopened a bank account in HSBC Bank, Geneva. The information
\nfurther revealed that the assesse was a beneficiary of an
\naccount opened under code BUP 5090171854 with HSBC Bank.
\nThe account had been opened under client name \u201cDipak
\nVarandmal Galani and\/or Kamal Varandmal Galani bearing
\nAccount Number 509-4077262. The said account was opened on
\n17\/04\/1998 and was active. As per the Base Document, the
\naccount had a maximum credit balance of USD 9,40,191\/- in
\nNovember 2015, a balance of USD 4,97,198 as on December,
\n2005 and USD 3,17,080 in September, 2006. Based on said
\ninformation, the Ld. AO has recorded reasons for reopening of
\nthe assessment, on the ground that income chargeable to tax
\nhad been escaped assessment within the meaning of section 147
\nof the I.T.Act, 1961 due to non disclosure of existence of bank
\naccount in HSBC bank, Geneva. Accordingly, issued notice u\/s
\n148 and called upon the assessee to file return of income. In
\n6 Shri Kamal Galani
\nresponse, the assesse vide letter dated 20\/01\/2014 stated that
\nthe return of income filed on 01\/11\/2004 may be treated as
\nreturn filed in response to notice u\/s 148 of the I.T.Act, 1961.
\nSimultaneously, the assessee has requested for reasons for
\nreopening of the assessment and the same was supplied to the
\nassessee. The assessee has filed its objections for reopening of
\nthe assessment and the same has been disposed-off by the Ld.
\nAO.
\n5. The case has been selected for scrutiny and during the
\ncourse of assessment proceedings the Ld. AO has examined the
\nassessee personally in the statement recorded u\/s 131 on
\n22\/06\/2013. During the course of assessment proceedings, the
\nassessee was specifically asked to produce complete statement
\nof bank accounts with HSBC bank and was also asked to explain
\nas to why, the amount invested of USD 3 Million for opening the
\nbank accounts and income from the invested amount should not
\ntreated as undisclosed income and taxed accordingly in the
\nrelevant assessment years. Further, the assesee was provided
\nwith a copy of the Base Document\/information sheets received
\nfrom the French Government and snapshots of the relevant web
\npages of the HSBC bank. The assessee was once again issued
\nfinal notice u\/s 142(1), dated 12\/02\/2015 and asked to furnish
\n7 Shri Kamal Galani
\ncomplete statement of accounts duly certified by the HSBC
\nPvt.Bank, Geneva and other relevant details for opening
\naccount. In response to the above notice, the assessee furnished
\ncopy of his passport and that of his brother, Mr. Dipak Galani
\nand a copy of letter, dated 09\/03\/2015 of Dipak V. Galani
\naddressed to the Ld. AO and submitted that bank account was
\nopened by his brother Mr.Dipak V. Galani with the British Bank
\nof the Middle East in the year 1998, which was subsequently
\ntaken over by HSBC Pvt. Bank (Suisse). The assessee, further
\nstated that bank account was opened by his brother and all
\nrights, interest in the said bank account is completely belongs to
\nhis brother and his name was included as a second account
\nholder as a respect to his elder brother. The assessee further
\nstated that his brother Mr.Dipak V.Galani has owned up the
\naccount and stated that account is opened by him in the year
\n1998 and his brother name was included as a mark of respect
\nand further, his brother do not have any right in bank account.
\n6. The Ld. AO after considering relevant submissions of the
\nassessee and also by taken note of base documents observed
\nthat although, the assessee claims that account is belongs to his
\nbrother, but failed to file any evidences to prove that he was not
\nthe owner of funds\/assets held in bank account. The Ld. AO,
\n8 Shri Kamal Galani
\nfurther noted that instead of furnishing complete details of bank
\naccounts, the assessee merely filed a letter from his brother to
\nsupport his claim. Therefore, he opined that in absence of any
\ncorroborative evidences to prove his claim that account is
\nbelongs to his brother, an adverse inference could be drawn
\nagainst the assessee, if he had suppressed the documents and
\nevidence, which was exclusively within his knowledge. Therefore
\nby taking note of various facts and also, by taking support from
\ncertain judicial precedents held that by virtue of a second holder
\nin the bank account, the assessee is vested with
\nrights\/obligations connected with the accounts and therefore, it
\nis incorrect on the part of the assessee to claim that he is not
\nowner of the bank account. Accordingly, he was of the opinion
\nthat the assessee is beneficial owner of the bank account
\nopened a HSBC Bank account, Geneva. The Ld. AO, further
\nnoted that by taking note of requirement of opening a bank
\naccount and minimum deposits needs to be kept, which is as per
\nthe Ld. AO is at USD 3 Million, he has made additions of USD 3
\nMillion for Asst.Year 1999-2000 and thereafter, estimated return
\nof investments @ 17% P.A, year on year for subsequent
\nAsst.Years and added to the total income. The relevant findings
\nof the Ld. AO are as under:-
\n9 Shri Kamal Galani
\n15. In sum, the information received contained address\/nationality,
\ncountry of domicile as that of the assessee as mentioned in his Indian
\nPassport. The assessee was duty provided with the copy of the document
\nreceived containing the above information. As per the information
\ncontained in the said document the assessee was the account holder of
\nthe numbered account with HSBC Private (Suise) Bank, Geneva. In the
\nreturn of income the assessee had neither offered any income with
\nreference to the bank account nor disclosed any details to the effect that
\nthe he was a beneficiary of the said account. Under the General
\nConditions of the Bank when two or more persons are holders of an
\naccount, each of the account holders is vested with the totality of the
\nrights and obligations connected with the account; that each of the
\naccount holders is authorized to accomplish alone or jointly in
\naccordance with relevant power of signature all transactions without any
\nlimitation whatsoever; that the other account holder is jointly and
\nseverally bound thereby and designated attorney legally binds all the
\naccount holders; and that if the Account several accounts at one or more
\nbranches of the Bank these accounts are deemed to constitute one
\nentity and whatever the currency and the heading of the accounts may be
\nthe Bank may combine the balances in these accounts individually or set
\nthem off wholly or in part after effecting the necessary conversions into
\nthe currency of its choice
\n15.2 Thus in terms of the above condition of the Bank as the account
\nholder the assessee is vested with the totality of the rights and obligations
\nconnected with the Numbered account number 509-4077262; is
\nauthorized to accomplish alone or jointly in accordance with relevant
\npower of signature all transactions through the a;,-;*^mentioned
\nnumbered account without any limitation whatsoever; and all the current
\naccounts connected with that account are deemed to constitute one entity
\nand whatever the currency and the name or the heading of the accounts
\nmight be the Bank combined the balances in these accounts individually
\nor set them off wholly or in part after effecting the necessary conversions
\ninto the currency of its choice and so reflected as maximum balance
\nbetween November 2005 to February 2007 in the Base Document.
\n15.3 I am, therefore, constrained to observe that despite the rights and
\nobligations cast on him as the owner of the Numbered Client Account
\n4077262 the assessee has not co-operated and remained evasive so far.
\nThe assessee has chosen to defy the request to produce statements of
\naccounts to buttress his case. His claim of having no connection with the
\nabove account carries no weight without corroborative materials. The
\nassessee has been consistently defiant in complying with the legal
\nrequirement, The assessee has failed to comply with full terms of the
\nnotices issued u\/s 142(1) from time to time. I am left with no option but to
\nexercise powers u\/s 144 income tax Act of resorting to best judgment and
\ncomplete the assessment based on the materials available on record.
\nQUNTIFICATION OF INCOME
\n16. In view of the discussions made above, I hold that that the assessee
\ncould open the bank account with HSBC Bank on 17-04-1998 only after
\nmaking deposit of not less than USD 3 Million. It is seen that the Base
\n10 Shri Kamal Galani
\nDocument shows balance in the “bank account from 2005-06 to 2006-07
\nrelevant to A.Yrs.2006-07 to 2007-08. Therefore, I hold that the assessee
\nhas maintained the initial deposit of USD 3 million throughout 1998-99 to
\n2004-05 relevant to A.Yrs 1999-00 to 2005-06. I observe that the there
\nhas been accretion to value of investments made in various classes of
\nassets as revealed from the details of such investments found in the
\nAnnexure to the Base Document scanned supra. The funds were
\ndeployed in various assets like loans & advances, bonds and fiduciary
\ndeposits. They show the return on investment in 5 months is almost
\n7.1%. If the same is annualized the annual return comes to 17%. In the
\nabsence of any details forthcoming in this regard in me assessment year
\nunder consideration, a return is estimated @ 17% annually on investment
\nmade by the assessee on USD 3 Million. This works out to USD Rs.
\n45.31per USD] for 2003-04 relevant to assessment year under
\nconsideration. Therefore, Rs.2,31,08,100\/- is added in the income of the
\nassesee for the year under consideration being income earned on his
\ninvestment of USD 3 Million with the HSBC Bank Geneva.
\n(Addition:Rs.2,31,08,100)
\n7. Being aggrieved by the assessment order, the assesee
\npreferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A),
\nthe assesee has challenged reopening of assessment on various
\ngrounds, including validity of reasons recorded for reopening of
\nassessment. The assessee has also, challenged additions made
\nby the Ld. AO towards bank account in the name of assessee
\nand is brother and estimation of annual returns on said
\ninvestments @17%. During the course of appellate proceedings,
\nthe assessee has filed various additional evidences to justify his
\nstands that account is not belongs to him, nor does he have any
\ninterest in the bank account. During the course of appellate
\nproceedings, the Ld.CIT (A) has called for remand report from
\nthe Ld. AO on various averments made by the assessee. In
\nresponse, the Ld. AO vide remand report, dated 13\/03\/2018 and
\n11 Shri Kamal Galani
\n17\/08\/2018 has commented upon various averments made by
\nthe assessee on ownership of bank account, as well as return on
\ninvestments estimated @17% on total initial deposits stated to
\nbe made by the assessee. The Ld.CIT(A) after considering
\nrelevant submissions of the assessee and also taken note of
\nremand report of the Ld. AO rejected legal grounds taken by the
\nassessee challenging validity of reassessment proceedings, on
\nthe ground that the Ld. AO has initiated and completed
\nreassessment proceedings as per law. The relevant findings of
\nthe Ld.CIT(A) are as under:-
\nv. Conclusion on the grounds related to re-opening of assessment:
\ni I have considered the submission of the Appellant and do not find merit in the
\nsame. The appellant has stated that the reasons to form the belief about income
\nescaping assessment had not been recorded by the AO, who had issued notice
\nu\/s 148, but instead the reasons were furnished to the Appellant under the seal
\nand signature of the new incumbent. On perusal of all the facts available on
\nrecord, it appears that this issue is without basis, and the reasons have been
\nduly recorded by the concerned assessing officer, and there appears to be no
\nflaw in the same. Further the objection of Appellant that the copy of snapshot of
\nweb page, which is part of reasons have not been furnished to him, is also
\nincorrect as the same has been furnished and forms part of the assessment
\norders for AY 2004-05 to 2006-07. There is no merit in the appellant’s
\nsubmissions and the same are therefore rejected.
\nii The appellant’s challenge to the authenticity of the Base Note is baseless
\nsince the same has been received from the Government of France under the
\nconvention for Avoidance of Double Taxation and Prevention of Fiscal Evasion
\ndated’ 28th September, 1992. The authenticity and veracity stand established. In
\nany case the appellant has himself admitted to holding the account with his
\nbrother, which establishes the credibility of the information available with the
\nAO. Further the argument of the appellant that data in summary sheets are for
\nthe period November 2005 to February 2007 and therefore reasons recorded for
\nincome escaping assessment for years other than the period November 2005 to
\nFebruary 2007 is also not acceptable. The Base Note clearly mentions the date
\nof opening account with HSBC Bank as 17-04-1998 and the appellant also
\nadmits the same. Consequently all the years beginning 17\/04\/1998 fall within
\nthe purview of jurisdiction for the purpose of forming reason to believe for
\nincome escaping assessment.
\n12 Shri Kamal Galani
\niii. The appellant has further urged that the reliance placed by the assessing
\nofficer1 on .the information contained in the web site of HSBC Private Bank,
\nregarding minimum opening balance of USD 3 Million, is incorrect. However,
\nthis information has been used only to form a belief that income beyond the
\nthresh hold level has escaped assessment. Similarly the rate of return at 17% is
\nalso an estimate to ascertain the likely quantum of income escaping
\nescapement above the threshold and not the determination of actual income,
\nwhich is the subject matter of the assessment proceedings to be undertaken
\nsubsequently.
\niv. The arguments of the appellant regarding incorrect residential status being
\nmentioned for AYrs. 1999-2000, 2000-01, 2001-02, 2002-03 and non obtaining
\nof sanction from the appropriate authority i.e. the Principal CIT, are also delving
\nupon mere technicalities to take the attention off, the main issue on hand. The
\nsame are liable to be rejected. The contention that notice u\/s 148 is issued
\nbeyond period of limitation also fails. The provisions of section 149 clearly states
\nthat no notice under section 148 of the act shall be issued for an assessment
\nyear if:
\na) four years have elapsed from the end of the assessment year; or
\nb) if four years but not more than six years have elapsed from the
\nend of
\nthe relevant assessment year unless the income chargeable to .tax which
\nhas escaped assessment amounts to or is likely to amount to Rs. 1 lakh
\nor more for that year; or
\nc) if four years, but not more than 16 years, have elapsed from the end of
\nrelevant assessment your unless the income in relation to any asset
\n(including financial interest in any entity) located outside India,
\nchargeable to tax, has escaped assessment.”
\nv) In the instant case the appellant is found to be owner of a Bank account \/
\nasset outside India and hence the extended time limit of 16 years would apply.
\nThe notice u\/s 148 are clearly within the time limit of 16 years. Further, it is also
\nto be kept in mind that the AO is not required to make a foolproof case for
\nreopening of the assessment. Once, there are prima-facie reasons to believe
\nthat the income has escaped assessment, it is sufficient to invoke the provisions
\nfor reopening the assessment. In the present case, all these criteria have been
\nfulfilled.
\nvi. After due application of rind, jurisdictional Addl. CIT and the AO had reasons
\nto believe that income of more than Rs, 1 lakh has escaped assessment during
\nthe year due to failure on the part of the appellant to furnish fully and truly all
\nfacts in the return of income for respective years.
\nvii It is pertinent to mention here that nothing could be construed from the
\nperusal of return of Income that full disclosure of material fact has been
\nfurnished. The appellant has not disclosed the foreign Bank account nor
\ndisclosed the income earned from holding such bank account.
\nviii. It is worth noting that the Full Bench of Hon’ble High Court of Delhi in the
\ncase of CIT- VI, New Delhi Vs. Usha International Ltd. (2O12) 25
\ntaxmann.com 200 ((Delhi) (FB) has held that the reasons must be relevant to
\nsubjective opinion and not conclusive findings. The relevant extract is
\nreproduced hereunder :
\n13 Shri Kamal Galani
\n“As recorded above, the reasons recorded or the documents available must
\nshow nexus that in fact they are germane and relevant to the subjective opinion
\nformed by the Assessing Officer regarding escapement of income. At the same
\ntime, it is not the requirement that the Assessing Officer should have finally
\nascertained escapement of income by recording conclusive findings. The final
\nascertainment takes place when the final or reassessment order is passed. It is
\nenough if the Assessing Officer can show tentatively or prima facie on the basis
\nof the reasons recorded and with reference to the documents available on
\nrecord that income has escaped assessment.”
\nix. The above decision of the Hon’ble High Court of Delhi has been authoritative
\nin saying that there should be nexus in the material available, which should be
\ngermane and relevant to form a subjective opinion. Besides, it also clearly
\nstates, that it is enough to show tentatively or prima facie that income has
\nescaped assessment. A plain reading of the reasons recorded by the assessing
\nofficer, shows that there was enough material before him, to form a prima facie
\nbelief that income beyond the threshold level had escaped assessment. He was
\nnot required to arrive at a conclusive finding of fact regarding escapement of
\nincome. ‘
\nx The Hon’ble Supreme Court in ACIT V\/s Rajesh Jhaveri Stock Brokers
\nPut. Ltd. (291 ITR 500 at 511) while dealing with the question regarding the
\nvalidity of issue of notice under section 148 of the Act has held as under:
\n“The word ‘reason.’ in the phrase ‘reason to believe’ would mean cause or
\njustification, if the A.O. has cause or justification to know or suppose that income
\nhad escaped assessment, it can be said to have reason to believe that an
\nincome had escaped assessment. The expression cannot be read to mean that
\nthe A.O. should have finally ascertained the fact by legal evidence or
\nconclusion. The function of the A.O. is to administer the statute with, solicitude
\nfor the public exchequer with an inbuilt idea of fairness to taxpayers. As
\nobserved by the Supreme Court in Central Provinces Manganese Ore Co. Ltd.
\nVs. ITO [1991] 191 ITR 662 (59 Taxman 17), for initiation of action under section
\n, 147(a) (as the provision stood at the relevant time) fulfillment of the two
\nrequisite conditions in that regard is essential. At that stage, the final outcome of
\nthe proceeding is not relevant. In other words, at the initiation stage, what is
\nrequired is ‘reason to believe’, but not the established fact of escapement of
\nincome. At the stage of issue of notice the question is whether there was
\nrelevant material on which a reasonable person could have formed a requsiite
\nbelief whether the materials would conclusively prove the escapement is not the
\nconcern at that stage. This is so because the formation of belief by the A.O. is
\nwithin the realm of subjective satisfaction (see ITO v. selected Dalurhand
\nCoal Co. (P) Ltd. (1996) 217 ITR 597 (SC) Raymond Woollen Mills Ltd.v.
\nITO (1999) 236 ITR 34 (SC)\u201d
\n*
\nxi. As can be seen from the above, the settled legal position, at the
\nstage of issue of notice under section 148 of the Act is that, what is
\nrequired on the part of assessing officer is the existence of ‘reasonable
\nbelief and not conclusive evidence to support escapement of income.
\nNotwithstanding anything stated above, it is the prerogative of the
\nAO\/Revenue to reopen the assessment if the AO has found in the course of
\ntime that certain amounts which should have been brought to tax have ,
\n14 Shri Kamal Galani
\nescaped assessment. These powers have been clearly provided u\/s. 149
\nr.w.s, 151 of the ‘Act. As per these provisions, what the AO’ is supposed to
\nsee is whether there is enough material to form a prima facie belief that
\nincome has escaped assessment, and whether it is within four years or
\nbeyond four years of the relevant assessment year, and further, whether
\nthe original assessment had been carried out u\/s 143(1) or 143(3} so as to -of*1*
\ntake approval from the appropriate senior officer as required. Once the AO tote*
\nfulfills these requirements he can then reopen the assessment by recording
\nhis reasons for forming a belief regarding escapement of income. The
\nAO will be acting within the powers conferred on him, to reopen any
\nassessment, and his action in such situation cannot be subject to
\nchallenge.
\n. ,
\nxii. Reliance is further placed on the decision in the case of Mohan Manoj
\nDhupelia vs. Dy.CIT, Central Circle (52 tajcrnctnn.com 146) and the decision
\nin the case of Ambrish Manoj Dhupelia (87 taxmaim.com 195) wherein it is
\nheld that the assessee being the beneficial owner of deposits in foreign bank
\naccounts failed to disclose interest from said deposits in its. return of income,
\nreopening of assessment in case of assessee was justified.
\nxiii. In view of the above, the grounds of appeal challenging the invoking of
\njurisdiction u\/s 147, are rejected.
\n8. As regards, additions made by the Ld. AO towards balance
\nin bank account and return on investments for subsequent
\nyears, the Ld.CIT(A) observed that as per the facts brought on
\nrecord by the Ld. AO, the assessee was an account holder along
\nwith his brother Mr. Dipak V.Galani. Although, the assessee
\nclaims that account belongs to his brother, but evidences
\nbrought on record by the Ld. AO clearly proves that the
\nassessee is a joint holder of bank account and he is having a
\nbeneficial interest in said account. Once, the fact of having
\naccount jointly with his brother is established, the onus clearly
\nshifts on the assessee that he was not the actual owner. Since,
\nthe assesee has not brought on record any evidences to prove
\nhis claim, there is no error in the findings recorded by the Ld.
\n15 Shri Kamal Galani
\nAO to conclude that the assessee is the beneficial owner of the
\nbank account and accordingly, the additions made in the hands
\nof the assessee is in accordance with law. As regards, taxability
\nof initial deposits of 3 US Million Dollars, the Ld.CIT(A) observed
\nthat since appellant is NRI and NOR, there is no question of
\ntaxability of income, which was accrued or arisen outside India
\nand thus additions made by the Ld. AO for the Asst.Year 1999-
\n2000 on account of initial deposits of USD 3 Million and return
\non investments @17% for Asst.Year 2001-02 & 2002-03 are
\nincorrect and hence deleted. As regards additions made for
\nAsst.Year 2003-04 to 2007-08 towards return on investments
\n@17% PA, the Ld.CIT(A) observed that estimating return on
\ninvestments @17% PA is reasonable, because the assessee has
\nnot filed any evidences despite various opportunities are given in
\nmaking the Ld. AO to ascertain the correct rate of return.
\nTherefore, he opined that the assessee has clearly failed to
\ndischarge onus cast upon by brining on record to substantiate its
\nclaims that he had not earned 17% return of income on
\ninvestments. Therefore, he opined that there is no reason to
\ndeviate from the findings of the Ld. AO and hold that the
\nadditions made on return on investments for Asst.Year 2003-04
\nto Asst.Year 2007-08 is in accordance with law. As regards,
\nadditions towards peak credit balance lying in bank account for
\n16 Shri Kamal Galani
\nAsst.Year 2006-07 and 2007-08, the Ld.CIT(A) noted that the
\nLd. AO has not brought on record, which would even remotely
\nsuggest that the entire balance of USD 3 millions and interest
\nearned there on was appropriated on a date prior to November,
\n2005, thus a balance of USD 9,40,191 being less than USD 3
\nMillion cannot be separately added as peak credit in the hands of
\nthe assessee. Therefore, he opined that an addition made
\ntowards peak balance is uncalled for and un-sustainable. The
\nrelevant findings of the Ld.CIT(A) are as under;-
\niv. Conclusion on the initial deposit
\nI have considered the submissions made by the appellant. The assessment
\ncarried out and the contentions raised by the appellant raise two issues for
\nadjudication.
\na. What was the initial amount deposited at the time of opening of account
\non 17.04.1998.
\nb. Whether such amount should be taxed in the hands of the appellant for
\nthe assessment year 1999-2000.
\na. Initial amount deposited at the time of opening of account
\ni. The first issue is regarding the validity of the evidence available with the
\nassessing officer to arrive at the view that the initial deposit must have been
\nUSD 3 Million. The assessing officer has relied on the information contained in
\nthe web site of HSBC Private Bank in the year 2013, to arrive at the finding
\nabout initial deposit of USD 3 Million. He has also referred to the balances
\nmaintained by two other assessees, namely Ms Janki Mukhi, and Mr Kanu Bhai
\nPatel which exceed the figure of USD 3 Million.
\nii. On the other hand the appellant has questioned the same on the grounds that
\nthe said information about USD 3 Million contained in the web site of the bank
\npertains to the year 2013, and that it has since been raised to USD 5 Million.
\nThe account was opened on 17.04.1998, and that it was opened with the British
\nBank of Middle East. The HSBC Private bank came into existence in the Year
\n1999, i.e subsequent to the opening of the impugned account. The appellant
\nhas also questioned the evidentiary value of the bank account details of other
\nsimilar account holders, in his case.
\niii. The Appellant has stated that it is not clear how the balances maintained by
\nMs Janki Mukhi and Mr Kanu Bhai Patel, are relevant in arriving at the finding
\nthat the appellant had made an initial deposit of USD 3 Million. The bank
\nbalances and other investments maintained by any person are a factor of his net
\nworth, his investment profile and his personal preference. Further, the balances
\nin the case of these two individuals also do not throw light on the fact, whether
\nthese were initial deposits or accretion over the years. In any case, the balances
\n17 Shri Kamal Galani
\nmaintained by the two individuals are no evidence of mandatory initial deposit
\namounts and the balances in these accounts cannot be the basis to affix liability
\non the appellant. The appellant also stated that the assessing officer has been
\nunable to counter the valid objections raised by him regarding the gap of over 15
\nyears between the opening of the account and the web site information relied
\nupon, the fact that the account was opened with an entirely different bank which
\nlater merged with the HSBC Bank, and that the requirement of mandatory
\nminimum balance has been increasing from year to year.
\niv. I have perused the assessment order, the remand reports, as well as
\nsubmissions made by the appellant. It is not denied that account was opened on
\n17-04-1998, Secondly, the base document, relied upon gives monthly balances
\nfor a period commencing from November 2005 and hence does not throw light
\non the initial deposit or the balance in the account up to November 2005. The
\nAssessing Officer has been able to bring on record, evidence in the form of
\ninformation contained in the HSBC website, which mentions a figure of USD 3
\nMillion as a minimum requirement to open a bank account with the HSBC
\nPrivate Bank, As has been discussed earlier, the appellant is an account holder
\nwith HSBC Bank, and the burden of proof rest upon him to counter the claim of
\nthe assessing officer, regarding the initial deposit of USD 3 Million. This
\ncontention of the Assessing officer could have been easily countered by bringing
\non record, the statement of the impugned bank account which would have
\nclarified not only the initial amount deposited, but also the balance in the
\naccount up to 2005. The Appellant being the account holder, is the person of
\nthis information, and the rules of evidence clearly casts a burden upon him to
\nlead evidence in his support. I am of the view that the appellant for reasons best
\nknown to him, has failed to discharge this liability cast upon him, and hence I am
\nupholding the action of the assessing officer in computing the amount of initial
\ndeposit at the time of opening of account on 17-04-1998 at USD 3 Million.
\nFurther, there is nothing on record which would lead to formation of belief, that
\nthe balance in such account was less than USD 3 Million up to 33\/10\/2005, and
\nhence in the absence of any evidence provided by the appellant, I am of the
\nview that from the date of opening of account till 31-10-2005 the balance in the
\nimpugned account shall have to be considered as USD 3 Million. From
\nNovember 2005 onwards, the Base document itself provides complete details of
\nthe balances maintained in this account, and hence no further presumptions are
\ncalled for.
\nb. Whether such amount should be taxed in the hands of the appellant
\nfor the A.Y.I999-2000
\nThe second issue is regarding taxability of this initial deposit of USD 3 Million in
\nthe assessment year 1999-2000 in the hands of the appellant. It is an
\nundisputed fact that the appellant was a non resident in India, for tax purposes,
\nin the assessment year 1999-2000 and the years prior to it. There is nothing on
\nrecord to suggest that the balances in the impugned account reflect income
\nwhich was earned in India or accrued or arose in India. In fact there is not even
\na whiff of such suggestion in the assessment order or any report furnished by
\nthe assessing officer. In view of the same no addition on account of initial
\ndeposit in the bank account can be made in the hands of the appellant for the
\nassessment year 1999-2000.
\nIII. Determination of return on investment @ 17% per annum, year on
\nyear.
\ni. The appellant has contested the additions made in all the Assessment
\nYears i.e from A.Yrs. 1999-2000 to 2007-2008, based on an
\n18 Shri Kamal Galani
\nestimated return of 17% per annum on the balance in the account. For
\nthis purpose, the balance has been assumed at USD 3 Million as
\ndiscussed earlier. The appellant has argued that the rate of return @
\n17% annually in bank account with HSBC Bank is arbitrary and based
\non assumption without any basis or evidence against the appellant.
\nii. The appellant has contended that in the assessment year 1999-2000, his
\nresidential status was that of a NRI. Consequently, the Scope of income
\nchargeable to tax for Non-Resident is governed by section 5(2) of the Income
\nTax Act and income of a Non resident is only that income which is received or is
\ndeemed to be received in India or accrues or arises or is deemed to accrue or
\narise in India. The alleged initial deposit of USD 3 Million and interest earned at
\n17% on same in AY 1999-2000 therefore clearly is outside the purview of
\ncharging section for a Non resident assessee.
\nii. Similarly the Appellant is a Resident but not Ordinarily Resident for the
\nAY 2000-01, 2001-02 and 2002-03. The scope of income chargeable
\nto tax for a resident but not ordinary resident (NOR) is governed by
\nproviso to section 5(1) of the Income Tax Act which reads as under :
\n“Provided that, in. the case of a person not ordinarily resident in India within the
\nmeaning of subsection (6) of section 6, the income which accrues or arises to
\nhim outside India shall not be so included unless it is derived from a business
\ncontrolled in or profession set up in India”
\nThe Appellant therefore submits that the interest income as assessed at 17% for
\nthe AYrs. 2000-01, 2001-02 and 2002-03 are also income which have accrued
\nor have arisen to him outside India. Hence there cannot be any assessment of
\nincome from bank account held in HSBC for these years as well.
\nAs regards the residential status of the appellant for the A.Yrs.2003-04 to 2007-
\n08, the AO has enclosed a factual report in his remand report dated 13.08.2018
\nregarding the stay of appellant in India on the basis of passport and immigration
\ndetails. It is evident from the chart enclosed that the appellant is Ordinary
\nResident from the A.Yrs.2003-04 to 2007-08.
\niv.. Further, with respect to the years in which the appellant is ordinary
\nresident, it has been contended as follows:
\n“the assumed rate of return is applied on assumed amount of Investment of
\nUSD
\n3 Million,. There is no evidence brought on record by AO. Further, in western
\ndeveloped economies the yield \/ return of 17% is unheard of in the past 15-20
\nyears and is an impossibility. We enclose herewith the copy of Yield chart of US
\ndollar denominated bonds and Swiss Government Bond Yields. The same are in
\nrange of 3 to 4 %. In fact in Switzerland the yields are negative. We therefore
\nplead that assumed addition of 17% return on USD 3 Million amounting to USD
\n5,10,000\/- in each of the years may be deleted*’.
\nv. A remand report was called for from the A.O. vide letter No. CIT(A)-
\n34\/Remand report\/2018-19 dated 12\/07\/2018 regarding the above submissions
\nof the appellant. The AO in his remand report has stated as follows :
\n19 Shri Kamal Galani
\nI further hold that the deposit resulted in accretion by way of interest income
\nchargeable to tax in all the years. In this regard the details of deployment of fund
\nby HSBC Bank out of the funds invested by Ms. Janki N Mukhi show that the
\nfunds were deployed in various assets such as fiduciary deposits, shares, liquid
\nassets, mutual funds, stock, structured products etc on month to month basis.
\nAs illustration I scan below the Table giving details of investment in her
\nindividual active account which is annexed to her Base Document:
\nThe above document is enough evidence to rate the growth of the funds of the
\nassessee being deployed in various assets like loans & advances, bonds and
\nfiduciary deposits. From the chart mentioned above it is clear that the amount of
\n$ 10,92,629.39 In the month of November 2005 increases to $11,70,268.31 by
\nthe month of March 2006. Thus, there is a growth of $ 77568,92 in the period of
\n5 months. This growth comes to 7. 1 % for 5 Months, and when annualized this
\nrate . . comes to effectively 17% annualized returns. Thus, in the absence of any
\ndetails forthcoming in this regard In the assessment year under consideration, a
\nreturn was correctly estimated @ 77% annually on investment made by the
\nassessee on USD 3 Million. In view of the facts and circumstances as
\nenumerated above by the AO In his assessment order for the A.Y.2004-05 to
\n2007-08, you ere requested to uphold the action of the AO”.
\nvi The appellant was furnished with the copy of Remand Report of the AO
\nin response to which the A.R. of the appellant submitted as under:
\n\u201cReturn on Investment computed @17% :-
\nYour Honour, again the A. 0. has annexed \/ scanned the Investment details of
\nsome other account holder ‘Ms. Janki Mukhi’ to calculate that return of 17% p.a.
\nis earned uniformly on investment made on USD 3 Million. Your Honour, we
\nreiterate that such statement lacks evidentiary value for reasons stated in
\naforesaid paragraph. Further, this assumption also suffers from a lot of
\nInfirmities as stated below;-
\na) The asset of so called Janki Mukhi comprises of various classes such es
\nFiduciary Deposits, shares, Liquid Assets, Mutual Funds, Stocks and Structured
\nproducts, etc. which cannot have uniform returns for obvious reasons due to
\ndifference in the asset class per-se,
\nb) The asset class alleged to have been owned by Appellant are different than
\nthat of Ms. Janki Mukhi.
\nc) The accretion to assets need cannot be solely attributed to any interest
\nincome but also can be due to new investments or withdrawals also, which is
\ntotally ignored. Any increase need not be only due to income.
\nd) The Risk profile of persons are different and cannot be same.
\ne) The Return cannot be uniform 17% for a period of a years altogether(9
\nyears to be specific).
\nWe, therefore, submit that reliance of A. 0. to estimate return @17% for purpose
\nof reopening the assessment U\/s. 147 is absolutely on incorrect basis and same
\nneeds to be quashed.
\nvii. Conclusion on determination of return on investment @ 17% per
\nannum
\nI have considered the submission of the Appellant, and the report submitted by
\nthe assessing officer. The issues that arise for adjudication are as follows;
\na) what is the amount of balance investment in the account of the appellant,
\nfor the period covered by A.Yrs 1999-2000 to 2007-08, on which income has
\nbeen earned by the appellant
\n20 Shri Kamal Galani
\nb) whether such income is taxable for all the assessment years under
\nappeal.
\nc) what is the rate of return on the investments \/ balances held by the
\nappellant, which shall form income of the year
\nd) whether the entire amount of return should be taxed in the hands of the
\nappellant
\na. The first issue, has been decided in preceding para wherein it has been
\nheld that on the basis of evidence brought on record, the only view
\nsustainable is that the initial deposit on 17-04-1998 was USD 3 Million.
\nb.
\nc. The second issue is with regard to taxability of such return on investment
\nin each assessment year between 1999-2000 to 2007-08. As has been
\ndiscussed and decide in preceding para, the residential status of the
\nappellant was Non Resident in the assessment year 1999-2000. This fact
\nis undisputed. Hence, in view of the provisions of section 5(2) of the Act,
\nsuch income is outside the scope of the Indian Taxing Statute. Similarly,
\nthe residential status of the appellant for the AYrs 2000-01, 2001-02 and
\n2002-03, is Resident but Not Ordinarily Resident (NOR). The return on
\nbalances in the account cannot be subjected to tax in the hands of the
\nappellant for these assessment years in view of the provisions of section
\n5(1) of the Act.
\nc. The third issue is rate of return on the investments \/ balances reflected in the
\nimpugned account. The assessing officer has adopted a rate of 17% per annum
\nbased on data contained in the base document received in the case of Ms Janki
\nMukhi, where the facts of the case are reasonably similar. As far as the
\nargument of similarity with the case of Janki Mukhi is concerned, the appeal has
\nnot been decided on this issue. Rather, the appeal has been decided on the
\nbasis of residential status being NRI\/NOR. I am willing to agree to the view that
\nthe return on investment in any case shall depend on the nature of investments
\nmade, which itself shall depend on the bouquet of investments made by any
\nperson. However, the onus of furnishing evidence regarding return received and
\nincome earned from the impugned account rests on the appellant. He is the
\naccount holder and hence the responsibility lies on him to lead evidence which
\nshall help in the exact determination of income from such account. He has
\nprovided no assistance in making such evidence available, and hence he cannot
\nbe given the benefit of such stone walling. On the other hand the assessing
\nofficer has been able to bring on record evidence which gives rise to a
\nreasonable belief that returns on investments held in and managed by HSBC
\nBank during the relevant period, were yielding high returns in the region of 17%.
\nI am hence of the view that estimating return on investment \/ balance @ 17%
\nper annum is reasonable keeping in view the facts of the case. Thus, the
\naddition of Rs.2,31,08,100\/- for the A.Y.2004-05, Rs.2,24,91,000\/- for the
\nA.Y.2005-06, Rs.2,31,03,000\/- for the A.Y.2006-07 and Rs.2,10,83,400\/- for the
\nA.Y.2007-08 are confirmed.
\nd. Finally, the issue to be considered is whether the entire amount of return on
\ninvestments \/ balances reflected in the impugned account should be taxed in the
\nhands of the appellant. It is an undisputed that the account is jointly held by the
\nappellant and his brother Deepak Galani. The onus was on the appellant to
\nexplain the beneficial ownership, actual depositor and ultimately the share of the
\nappellant in the joint account. Had the appellant submitted complete set of bank
\nstatement, probably many of the dispute would have been settled. The appellant
\n21 Shri Kamal Galani
\nhas chosen not to respond and submit relevant specific evidences. The
\nappellant has, therefore, clearly failed to discharge the onus cast upon him. The
\nAO has elaborated and analysed as to how the appellant had enjoyed the right
\nbeing a joint account holder. Hence, I do not find any .reason to deviate from the
\nfindings of the AO and hold that the addition of Rs.2,31,08,100\/- for the
\nA.Y.2004-05, Rs.2,24,91,000\/- for the A.Y.2005-06, Rs.2,31,03,000\/- for the
\nA.Y.2006-07 and Rs.2,10,83,400\/- for the A.Y.2007-08 made by the AO on
\naccount of return of 17% per annum on investment are confirmed.
\nIV) Challenging the Assessment of Peak credit in the AY 2006-07 (USD
\n9,40,191 and USD 3,17,080 for AY 2007-08
\nI t
\nI. The appellant has argued that the addition on account of peak balance in
\nA.Y. 2006-07 (USD 9,40,191) and in A.Y.2007-08 (USD 3,17,080) is
\ncontradictory in as itself is USD 3 Million. Hence there cannot be a
\npeak figure lesser than the higher figure of initial deposit. Further, the
\nappellant has also contended that the assessing officer has added
\nsubstantial amounts as income from year to year on account of
\ninterest allegedly received, and such income in aggregate exceeds
\nthe so called peak available in November 2005. Hence, in all manner
\nthe addition on account of peak deposit is without any basis in fact
\nand in logic and amounts to double taxation.
\nii. This issue is consequential to the decisions taken by me, in respect of initial
\ndeposit and income earned on balances lying in the account. As discussed
\nearlier, the initial deposit has been held to be a figure of USD 3 Million. Further,
\nto such initial deposit, a return of 17% per annum has been estimated from year
\nto year which has been held as taxable in the hands of the appellant for the
\nyears when he was Resident in India. Further, nothing is on record which would
\neven remotely suggest that the entire balance of USD 3 Million, and interest
\nearned thereon was dissipated on a date prior to November 2005. Thus, a
\nbalance of USD 940,191\/- being less than USD 3 Million cannot be separately
\nadded as peak credit in the hands of the Appellant. In light of the above facts,
\nfurther addition on account of peak balance in November 2005, and less than
\npeak balance in September 2006 is uncalled for and unsustainable. Thus, the
\naddition on account of peak credit for A.Yrs. 2006-07 and 2007-08 is
\nunsustainable.
\n9. The Ld. AR for the assessee submitted that the Ld.CIT(A)
\nwas erred in confirming additions made by the Ld. AO towards
\nreturn on investments on purported initial deposits made by the
\nassessee to open account at HSBC bank, Geneva, even though,
\nthe assesee has clearly established with fact that account is
\nneither belongs to him, nor he is having any interest in money
\nlying with bank account. The Ld. AR, further submitted that the
\n22 Shri Kamal Galani
\nassessee has right from the day one made it very clear that
\naccount was opened by his brother in the year 1998 with the
\nBritish Bank of the Middle East, UAE and said bank has been
\nsubsequently taken over by HSBC bank, Geneva and account
\nopened in British Bank of the Middle East by his brother is solely
\nowned by him, for which brother has filed letter before the Ld.
\nAO along with affidavit and owned up account. But, the Ld. AO
\nhas discarded all evidences filed by the assessee and made
\nadditions in the hands of the assessee only on the ground the
\nbase note received from French Government contains name and
\naddress of the assessee. He, further submitted that the assessee
\nnever disputed fact that bank account is not opened by his
\nbrother with joint name, however he made it very clear that the
\nbank account was completely operated by his brother Mr. Dipak.
\nV. Galani and whatever money lying in bank account is belong to
\nhim. The Ld. AR for the assessee, further referring to various
\ndocuments submitted that unless, the Ld. AO brought on record
\nnecessary evidences to prove ownership of bank account in the
\nname of assessee, he cannot make additions only on the basis
\nof base note, when the assessee has categorically denied of
\nhaving any link to bank account. Further, the Ld. AO has
\ndisregarded all the evidences filed by the assessee and made
\nadditions, only on the basis of base note on pure assumptions
\n23 Shri Kamal Galani
\nthat since, the assessee is second holder of bank account and he
\nis vested with rights and obligations connected with the account
\nand a signatory, either jointly \/ allow without any limitations and
\nhas designated by all the account holders. Therefore, he finally
\nconcluded that the assessee is a beneficial owner of the account,
\ndespite fact that assessee has denied all allegations. In this
\nregard, he relied upon certain judicial precedents, including the
\ndecision of Hon\u2019ble Delhi High court, in the case of CIT vs
\nShivaprakash Aggarwal (2008) 306 ITR 324.
\n10. The Ld. DR, on the other hand submitted that the Ld. AO, as
\nwell as the Ld.CIT(A) has brought out clear facts to the effect
\nthat the assessee is a beneficial owner of bank account held in
\njoint name with his brother Mr. Dipak.v.Galani in HSBC Bank
\naccount, Geneva and also brought various evidences to prove
\nthat the assessee has earned 17% rate of return on investments
\nalong with certain comparables cases. Therefore, there is no
\nmerit in the arguments of the assessee that the account is
\nbelongs to his brother and he is not having right or interest in
\nsaid bank account. The Ld. DR has filed detailed written
\nsubmissions on the issue, which has been reproduced as under:-
\n24 Shri Kamal Galani
\nI. Issue of Jurisdiction:
\nYour honours in these cases common issue raised by the appellant are issue of
\njurisdiction whereby validity of Re-assessment proceedings are challenged. The
\nappellant challenged the jurisdiction primarily on the grounds that there was
\nnon-recording of reason to believe; there is absence of reasons to believe about
\nincome escaping assessment; there is absence of valid sanction u\/s 151 of the
\nIncome Tax Act, 1961 (hereinafter, the Act) for issuance of notice u\/s 148 of the
\nAct and the notice for reopening u\/s 148 of the Act are issued beyond the period
\nof limitation.
\nYour honours may appreciate that as far as issue of non-recording of
\nreason to believe is concerned it is abundantly clear from the Assessment
\nOrders which clearly states that reasons for reopening was recorded and
\nwere supplied to the appellant. Further the Ld. CIT (A) has disposed off the
\nsame in the order and held that reasons were duly recorded. Further your
\nhonours on perusal of the case records and the paper book of appellant, it is
\nseen that for the AY 2004-05 to AY 2007-08 the AO has recorded reasons
\nand sought approval from the JCIT which was granted by the JCIT after
\nrecording satisfaction, subsequently, the AO issued the notice u\/s 148 of
\nthe Act on 30\/04\/2013. Likewise for AY 1999-00 AY 2003-04 the AO
\nrecorded the reason and sought approval from the JCIT and after
\nreceiving the approval issued the notices on 30\/3\/2015. Furthermore,
\nimportant aspect requiring kind attention of your good selves is that during the
\nAYs 1999-2000 to 2003-04 the appellant has also filed the objections to the
\nreasons recorded and these were disposed off by speaking order. Therefore
\nyour honour in my humble opinion it is not correct to argue that no reasons were
\nrecorded when the appellant objected to the reasons recorded during the
\nassessment proceedings and which were duly disposed by the AO.
\nOverall it may be kindly appreciated your honours that considering the various
\nfacts discussed previously it appears to have no infirmity in the reopening
\nproceedings so far as reasons were recorded by the AO and approval was
\ngranted by the JCIT after recording satisfaction and this was prior to the
\nissuance of the notice u\/s 148 of the Act.
\nThe kind attention of your honours is invited to the landmark judgement of
\nHon’ble Supreme Court in GKN Driveshafts (India) Ltd vs ITO (2003) 259 ITR
\n19 Hon’ble Court has held thathowever,
\nwe clarify that when a notice under Section 148 of the Income tax Act
\nis issued, the proper course of action for the notice is to file return and if he so
\ndesires, to seek reasons for issuing notices (emphasis supplied). The assessing
\nofficer is bound to furnish reasons within a reasonable time. On receipt of
\nreasons, the notice is entitled to file objections to issuance of notice and the
\nassessing officer is bound to dispose of the same by passing a speaking order.
\nIn the instant case, as the reasons have been disclosed in these proceedings,
\nthe assessing officer has to dispose of the objections, if filed, (emphasis
\nsupplied) by passing a speaking Order before proceeding with the assessment.
\n25 Shri Kamal Galani
\nTherefore your honours may appreciate that from the ratio laid down in
\nthe Judgement supra it follows that AO is required to dispose of the objections if
\nsuch objection is raised by the assessee. The AO can not presuppose that the
\nassessee is having any objections. Hence your honours may consider the fact
\nthat in the instant cases as discussed the AO disposed of the objections during
\nAYs 1999-2000 to 2003-04 whereas for AY 2004-05 to AY 2007-08 it
\nemerges that no such objection is raised by the appellant this fact is also
\nmentioned in the remand report dated 12\/3\/2018 which forms part of the
\norder of Ld. CIT (A). Your honours are humbly requested to consider these
\nfacts.
\nOn issue of valid sanction u\/s!51 of the Act the kind attention of your
\nhonours is invited to the order of the Ld C1T(A) in AYs it is held by Ld. CIT (A) in
\nhis order of Ays 1999-2000 to 2002-03 held that- After due application of mind;
\nthe jurisdictional Addl. CIT and the AO had reasons to believe that income of
\nmore than Rs 1 lakh has escaped assessment during the year due to failure on
\nthe part of appellant to furnish fully and truly all facts in the return of income for
\nrespective years. The facts are clearly mentioned in the remand report dated
\n12\/03\/2018 the provision u\/s 151 of the Act as applicable is reproduced for the
\nready reference;
\nSanction for issue of notice.
\n151. (1) In a case where an assessment under sub-section (3) of section 143 or
\nsection 147has been made for the relevant assessment year, no notice shall be
\nissued under section 148 [by an Assessing Officer, who is below the rank of
\nAssistant Commissioner [or Deputy Commissioner], unless the [Joint]
\nCommissioner is satisfied on the reasons recorded by such Assessing Officer
\nthat it is a fit case for the issue of such notice] :
\nProvided that, after the expiry of four years from the end of the relevant
\nassessment year, no such notice shall he issued unless the [Principal Chief
\nCommissioner or] Chief Commissioner or [Principal Commissioner or]
\nCommissioner is satisfied, on the reasons recorded by the Assessing Officer
\naforesaid, that it is a fit case for the issue of such notice.
\n(2) In a case other than a case falling under sub-section (I), no notice shall
\nbe issued under section 148 by an Assessing Officer, who is below the
\nrank of [Joint] Commissioner, after the expiry of four years from the end of
\nthe relevant assessment year, unless the \/Joint\/ Commissioner is
\nsatisfied, on the reasons recorded by such Assessing Officer, that it is a fit
\ncase for the issue of such notice.]
\n[Explanation.\u2014For the removal of doubts, it is hereby declared that the
\nJoint Commissioner, the [Principal Commissioner or\/ Commissioner or the
\n[Principal Chief Commissioner or] Chief Commissioner, as the case may
\nbe, being satisfied on the reasons recorded by the Assessing Officer
\nabout fitness of a case for the issue of notice under section 148, need not
\nissue such notice himself.](emphasis supplied)
\nYour honours will appreciate that clearly the provision of subsection 2 of
\nsection 151 of the Act is applicable in the instant case where the Assessing
\nOfficer who recorded the reason to believe to reopen the case is Assistant
\nCommissioner of Income Tax and Deputy Commissioner of Income Tax, further
\nthe case was reopened beyond four years therefore the provision is squarely
\napplicable in the instant case.
\n26 Shri Kamal Galani
\nThe kind attention of your honours is also invited to the fact that the
\nWrit Petition was filed by the appellant before Hon’ble Bombay High Court.
\nThis petition was withdrawn by the appellant. Your honours kind attention
\nis warranted on this fact that the withdrawal of Writ Petition was without
\nany liberty. The kind attention of your honours is invited to the order of the
\nCIT(A) on this issue.
\nYour Honours without prejudice to the foregoing paragraphs Hon’ble High
\nCourt of Madras in Home Finders Housing Ltd. V ITO [2018] 303 CTR 269 has
\nheld that ‘we therefore make the position clear that non compliance of the
\nprocedure indicated in the GKN Driveshafts (India) Ltd., would not make the
\norder void or non est. Such a violation in the matter of procedure is only an
\nirregularity which could be cured by remitting the matter to the authority. The
\nfirst issue is accordingly answered against the appellant’. Hon’ble High Court in
\npara 19 of the judgement supra has mentioned that ‘the core question is as to
\nwhether non compliance of a procedural provision would ipso facto make the
\nassessment order bad in law and non-est. The further question is whether it
\nwould be permissible to comply with the procedural requirement later and pass
\nafresh order on merits’. This order of Hon\u2019ble High Court of Madras was
\nchallenged before Hon\u2019ble Supreme Court in Special Leave Petition, Hon’ble
\nSupreme Court dismissed the SLP vide Petition(s) for Special Leave to Appeal
\n(C) No(s). 12721\/2018 on 18\/05\/2018.
\nIn the light of the discussion in previous paragraph it is prayed from
\nyour good selves to consider the submission that the defect if any is a
\ncurable defect and would not make the Assessment Order bad-in-law and
\nnon est.
\nOn the question of issuance of notice u\/s 148 of the Act beyond limitation
\nis concerned Ld. CIT (A) has mentioned in his order that the provisions of
\nsection 149 of the Act has extended the time limit for reopening of the case as
\nthe appellant was found to be owner of bank account\/asset located outside India
\nand income has escaped assessment. As has been mentioned previously that in
\ncase of bank account\/asset located outside and the income has escaped
\nassessment then the deeming provision gets attracted. Hence your honors it is
\nhumbly submitted there is no merit in the contention that the notices were issued
\nbeyond limitation.
\nII. Issues of invoking provision under section 144, Reliance on the Base
\ndocuments and Ownership of Bank Account: Your honours another common
\nissue raised by the appellant is that the AO erred in invoking provision of section
\n144 of the Act. The appellant claimed that he has filed submission on numerous
\noccasion and also stated that account was opened by the brother of appellant
\nDeepak Galani with the British Bank of Middle East in 1998 (the bank was
\nsubsequently taken over by HSBC further that the name of appellant is named
\nas a second account holder for the purpose of nomination and for the sake of
\nconvenience moreover all the money along with the transactions belonged to
\nthe appellants brother only. The appellant also contented your honours that in
\norder to cooperate with the Income Tax Department the appellant also furnished
\nthe consent waiver letter as required by the department. Further that the brother
\nof the appellant also furnished a letter claiming the beneficial ownership of the
\naccount held with the HSBC Bank Geneva. The appellant also argued to have
\nfully discharged the onus during the assessment proceedings it self. Moreover
\nthe appellant argued that the reliance of the AO on the base document which is
\n27 Shri Kamal Galani
\ncompiled out of stolen data and modified by the ex-cmploycc is itself an
\ninadmissible evidence for the purpose of of any tax proceedings in India. The
\nappellant also argued that he is not the owner of the bank account, he claimed
\nthat he is the second holder of the bank account for the purpose of nomination
\nonly and for the sake of convenience and ownership of the account lies with his
\nbrother Dccpak Galani.
\nOn the issues mentioned above your honours it is humbly submitted that
\nit is evident from the case records that the AO consistently queried the appellant
\nto furnish details relating to the bank account such as bank account statements,
\ntransactions in the bank accounts, name and address of the account holders,
\nbeneficial owners, correspondence between account holders and bank and
\nother similar documents. Your honours will appreciate that the existence of
\naccount is not in dispute also it is not in dispute that the bank account jointly
\nheld by appellant and his brother. However, your honours despite of the fact that
\nappellant is one of the account holder along with his brother the appellant
\ncompletely failed to discharge the onus cast upon him to provide bank account
\nstatements and other details which were called from him vide various notices u\/s
\n142(1) issued during the assessment proceedings in all the years. Only
\nrequirement your honours was to furnish the documents as required by the AO.\\
\nYour honours the appellant claimed to have signed the consent waiver
\nform and thus he has discharged the onus. In this regard it is humbly submitted
\nthat it is correct that the appellant has provided the consent waiver form.
\nHowever it is not appropriate to argue that onus was discharged because
\nonus is not discharged by signing the consent waiver form rather that
\ncould have been discharged only by the production of those documents
\nand evidences which were called for from the appellant in the notices u\/s
\n142(1).
\nYour honours will appreciate that the consent waiver form is neither
\na statutory requirement nor a procedural one. It was only a facilitation
\nmechanism for the benefit of the assessee vis-a-vis HSBC Switzerland.
\nFurther, the format of consent waiver form was prescribed by HSBC
\nSwitzerland and not by Income Tax Department. In fact it raises further a
\ndoubt on the appellant that despite signing the consent waiver from the
\nappellant has not produced the various details which were required during
\nthe assessment proceedings. This is so because in as many as three
\ncases of the different assessees the AO received the bank account
\nstatements and other details from them after they signed consent waiver
\nform. Your honours are requested to grant kind attention on the issues in
\nforegoing paragraph.
\nFurthermore your honours kind attention is invited to the contents and
\nfeatures of Consent Waiver Form. Some of the important feature of the Form
\nare as undera)
\nConsent Waiver form is a form where the person (account
\nholder\/beneficial owner\/ authorized signatory\/trustee) request the HSBC
\nBank to provide the bank account statement and other documents. It is
\nbetween account holder (or other person referred before) and the Bank.
\n28 Shri Kamal Galani
\nThe Consent Waiver Form is addressed to the officials of the HSBC Bank
\nand is signed by the account holder etc. Therefore your honour is is humbly
\nsubmitted that there is no question of discharging onus before Income Tax
\nauthorities in India under the Act.
\nb) The account holder declares that he\/she is cooperating with the
\nIncome Tax Department and is providing a copy of the waiver to Income Tax
\nDepartment Government of India.
\nOnly the copy of the form is provided it is not the case that the Income
\nTax Department is to procure the account statements and other details on the
\nbasis of this form your honours.
\nc) Account holder waives all protections provided under the data
\nprotection, privacy and\/or bank secrecy laws of Switzerland.
\nYour honours may consider the fact that the Swiss laws and banks were
\nrather infamous for their secrecy laws this waiver from protection is important to
\nenable the bank to provide requested details at the address of the account
\nholder. Hence it is between bank and the account holder by no means the
\nappellant can claim to have discharged the onus by signing the form and not
\nproviding the required details like account statements etc.
\nd) Account holder instructs the HSBC Private Bank (Suisse) SA to follow
\nthese instructions until revoked by the account holder.
\ne) Further the account holder instructs the HSBC Bank that
\ndocumentation is to be provided in both paper and electronic to the above
\nmentioned address (at the address mentioned by him) and also mentions
\nagain that he\/she expressly waives the protections offered by the Swiss
\nbanking secrecy and data protection rules accordingly.
\nThe kind attention of your honours is drawn to the fact that
\nfrom the consent waiver form it is clear that it is addressed to the HSBC Bank
\nauthorities to provide the bank account statement and other documents to the
\naccount holder waiving the secrecy laws at the address of the account holder
\nand subject to the revocation of consent so waived. Overall consent waiver form
\nwaives the right of account holders on account of banking secrecy and privacy
\nlaws of Switzerland and gives the authority to Bank to provide the bank account
\nstatements of the account holder. Even this is also subject to the subsequent
\nrevocation.
\nYour honours are requested to pay attention to the very fact that the
\nAssessing Officer vide notice u\/s 142(1) of the Act dated 12\/01\/2015 again
\nraised specific query that despite of the appellant filing the consent waiver
\nno bank account statements were provided by the appellant before him. In
\nthe notice supra the AO also mentioned that the of similarly placed
\nassessees who gave consent waiver have produced the desired bank
\naccount statements and other documents from HSBC Bank. In response to
\nthe specific query raised the appellant has not filed the detailed response or the
\ndetails which were required. Therefore your honours humble submission is that
\nthe appellant during the proceedings was largely evasive in so far as production
\nof bank accounts and other documents are concerned.
\n29 Shri Kamal Galani
\nAnother important aspect warranting attention of your good selves is that
\nit is undisputed fact that the appellant is joint account holder of the HSBC
\nBank account. This fact is mentioned in the base note, in submission of
\nhis brother and also appellant never denied of it. Therefore there is no
\nreason why the bank account must not have been provided to the
\nappellant by the HSBC Bank. In such a scenario your honours would
\nappreciate that three possibilities emerge which are that the appellant has
\nnot given the consent waiver to the HSBC Bank or the appellant received
\nthe bank accounts and other documents from the HSBC Bank but has
\ndecided to not to share them with the Income Tax authorities in India or
\nthe appellant has revoked the conditions laid down in consent waiver form
\ndated 23\/07\/2013. In any case your honours the appellant has not discharged
\nthe onus to produce the details relating to bank account asked from him vide
\nstatutory notices.
\nAs far as base note is concerned it was officially received by Government
\nof India from government of France as a part of the Tax Information Exchange
\nTreaty (TIET) under the DTAA between France and India so your honours there
\nis hardly any dispute about the veracity and authenticity of the Base note.
\nFurther in the instant case the name of the appellant is found on the base note
\nand both the appellant and his brother has accepted to be the joint holder of the
\nbank account mentioned in the note.
\nAnother issue raised by the appellant your honours is that the appellants
\nbrother Shri Deepak Galani is the owner\/beneficial owner of funds\/investments
\nin the bank account. In this regard a letter has also been filed by Shri Deepak
\nGalani some important aspects of the letter is that in this letter brother of
\nappellant states that he had opened an account with HSBC Bank Geneva with
\nclient account number 4077262 in 1998 for the purpose of investments in bonds
\nand securities out of my own funds. He also states that he had opened the
\naccount with his brother Kamal Galani as a joint second name out of
\nconvenience and also has a mark of respect for his elder brother. The brother of
\nappellant further states that he is the sole beneficial owner of the funds and
\nKamal Galani (appellant) does not own any funds\/investments\/ asset accretion
\nout of this account also that the appellant does not have any right title and
\ninterest in the funds etc.
\nOn the issue of the ownership of funds it is to be mentioned here your
\nhonours and attention is invited to the fact that the AO vide notice u\/s 142(1)
\ndated 1\/10\/14 clearly stated that since the name of appellant is appearing as
\nsecond owner hence clearly the appellant is also the second owner. More
\nimportantly the AO in the notice u\/s 142(1) dated 12\/01\/2015 also gave the
\nGeneral Conditions of the bank which was finally named HSBC Private Bank
\n(Suisse) SA these General conditions has various clauses which define relations
\nbetween bank and the customers. On going through these general conditions
\nit is clear that the customers keep on receiving bank account statements
\nfrom bank from time to time therefore in order to discharge the onus the
\nappellant ought to have furnished the bank account statements and other
\ndocuments. Another important clause of General Conditions is clause 4
\nthis clause is regarding the Several holders and joint account. The clause
\n4 of General Conditions clearly grants equal rights to the two or more joint
\naccount holders, it states that When two or more persons are holders of
\nan account, each of (he account holders shall be vested with the totality of
\nrights and obligations connected with the account. Further that Each of the
\n30 Shri Kamal Galani
\naccount holders is authorized to accomplish, alone or jointly, in
\naccordance with his relevant powers of signature, all transactions without
\nany limitation whatsoever. In light of these clause your honours it is amply
\nclear in my humble submission that in case of joint account holder both the
\naccount holder have equal rights and privileges hence the letter of Deepak
\nGalani brother of appellant is of not much value. The rights and
\nobligations of both the account holders arc same and both the account
\nholders are jointly and severally bound. The letter by brother of appellant
\nis not material to the case as even in this letter the brother of the appellant
\nhas not attached the bank account statements and other documents which
\ncould establish the preposition forwarded in his letter. It is the appellant
\nwho is the assesee and hence the assessment was made on the available
\ninformation so there is no infirmity in the order of the AO.
\nYour honours humble attention is invited to the order of the AO who in
\nhis Assessment order the has also mentioned various details such as ‘The
\nIdentification of the Beneficial Owner’ this is also in the case of similarly
\nplaced facts in two different cases. In the instant case neither the
\nappellant nor his brother has furnished the identification of beneficial
\nowner form.
\nIn light of the above facts and other facts mentioned in the Assessment
\nOrder and the Order of the CIT (A) it is prayed from your honours to kindly treat
\nthe letter filed by the brother of the appellant as a self serving document.
\nIll Issue of quantification of Investment and interest\/return on investment
\nand the residential status and taxing rights:
\nDuring the proceedings before your honours the appellant also raised objection
\non the issue of quantification of investment and the rate of interest earned,
\nwhereas revenue challenged the order of the Ld. CIT (A) on the relief granted by
\nhim in the appellate order on the ground of the residential status.
\nOn the issue of quantification it is important to mention your goodselves
\nthat no evidence pertaining to bank account statements and other documents
\nwere provided by the appellant to the AO. The appellant and even his brother
\naccepted that the appellant is a joint holder of the account. The appellant has
\nfailed even to submit the basic form which is ‘The Identification of the Beneficial
\nOwner’ to prove that he is not the beneficial owner of the account. This despite
\nof the fact that two different assessees have provided such form, these
\nassessees whose names were also mentioned in the information received from
\nthe French Government and also their respective base notes were received and
\nthey also have accounts in the HSBC Bank Geneva during the period in which
\nthe appellant was having the bank account.
\nYour honours kind attention is also invited to the fact that on basis of
\nenquiries conducted by the AO from the internet and also analyzing the bank
\naccounts statements and other facts of similarly placed assessees, the AO
\narrived at the fact that initial investment of 3 Million USD was made. The AO
\nraised specific query in this regard long before passing the assessment orders.
\nFinally in Assessment order AO relied upon the contents in the website of the
\nHSBC Pvt Bank and also on the information received by him in the cases of
\nother assessees. Hence on the entire factual matrix AO has made the best
\n31 Shri Kamal Galani
\nquantification of investment possible. Likewise the computation of interest is
\nmade on the rational basis mentioned in the assessment order. The appellant is
\nmaking a claim without producing the bank account statements and other
\ndocuments to prove otherwise.
\nFinally on the issue of the residential status during AY 1999-
\n2000 to AY 2002-2003 and the issue of taxing right the reliance is placed
\nupon the cases of Renu Tharani vs DCIT IT A No. 2333\/Mum\/2018
\ndated 16(h July 2020 the operative part of the decision is reproduced as
\nunder:
\nConsidering the facts of this case, the decision of the Hon “ble IT AT, Mumbai in
\nthe case of Mohan Manoj Dhupelia and other in ITA no. 3544\/Mum\/ 2011 etc, is
\ndirectly applicable to this case. In this case, the assessee is a beneficiary of
\nAmbrunova Trust having an account in Liechtenstein Bank which is another tax
\njurisdiction known for its secrecy law and modest tax regime. In fact, in the order
\nof the IT AT, it has been concluded that Liechtenstein jurisdiction qualifies as an
\noff shore financial centre due to a very modest tax regime, high standard of
\nsecrecy laws and further foreign investors had the opportunity to establish
\ncompanies or trust in the principality of Liechtenstein to the enjoy the
\nadvantages of off-shore financial centre The ground of appeal before the
\nHon’ble IT AT in this case was as follows: “The Id. Commissioner of Income tax
\n(Appeals), erred in confirming the order of the Assessing Officer making an
\naddition of Rs.2,34,64,398\/- on account of alleged undisclosed income, without
\nappreciating the fact that the alleged trust was discretionary trust as neither the
\namount was accrued nor credited to the Appellant’s name, hence addition
\ncannot be made in the hands of the Appellant”. ITA No. 2333\/Mum\/2018
\nAssessment year: 2006-07 Page 14 of 55 The Hon’ble Mumbai ITAT dismissed
\nthis ground of appeal raised by the assesse and held that discretionary trusts
\nare created for the benefit of particular persons and those persons need not
\nnecessarily control the affairs of the trust. The bank account of the trust
\nrepresents unaccounted money of the beneficiaries even though no benefit were
\ntransferred to them. 13.1 Considering the facts of the case and the decision of
\nthe Hon\u2019ble Mumbai IT AT as cited above it can be concluded that the bank
\naccount of the trust represents unaccounted money of the assesse. Considering
\nthe fact that the assessee is an Indian having interests and assets in India that
\nno details were given to show the source of money deposited in the HSBC
\naccount leads to the circumstances that this unaccounted money is sourced
\nfrom India. In absence of anything contrary, the only logical conclusion that can
\nbe inferred is that that the amounts deposited are unaccounted deposits
\nsourced from India and therefore taxable in India. This presumption is as per the
\nprovisions of section 114 of The Indian Evidence Act, 1872 which reads as
\nfollows: “Section 114. Court may presume existence of certain facts. The Court
\nmay presume the existence of any fact which it thinks likely to have happened,
\nregard being had to the common course of natural events, human conduct and
\npublic and private business, in their relation to the facts of the particulars case.
\nThe Court may presume- …… (g) That evidence which could be and is not
\nproduced would, if produced be unfavrorable to the person who withhold it…. ”
\nSection 114(g) of The Indian Evidence Act, 1872, thus clearly says that the
\nCourts can presume existence of certain facts if the person liable to produce
\nevidence which could be and is not produced, which if produced would have
\nbeen unfavorable to the person who withhold it. 13.2 Further, the provision of
\nSection 5(2) of the Act is reproduced as under:-” Subject to the provisions of this
\n32 Shri Kamal Galani
\nAct, the total income of any previous year of a person who is a non-resident
\nincluded all income from whatever source derived which- (a) Is received or is
\ndeemed to be received in India in such year by or on behalf of such person, or
\n(b) Accrues or arises or is deemed to accrue or arise to him in India during such
\nyear. ” During the assessment proceedings and as can be seen from the facts of
\nthe case that the assesse has not made out a case that the deposits in the
\nabove mentioned accounts in HSBC, Geneva do not all within the ambit of this
\nprovision of law. ] 3.3 As the assesse has chosen not to produce the details of
\nhis HSBC bank accounts and the source of deposits thereof, even though he
\ncould have been obtained all the details\/evidences for the same, the only
\ncorollary that could be drawn is that the assesse has decided to withhold the
\ninformation as if producing ITA No. 2333\/Mum\/2018 Assessment year: 2006-07
\nPage 15 of 55 it would have gone against him. Thus, as per the provisions of
\nSection 114 of The Indian Evidence Act, 1872 also, it need to be held at this
\nstage that the information\/details not furnished were unfavorable to the assesse
\nand that the source of the money deposited in the IISBC account is undisclosed
\nand sourcedfrom India. Nova Promoters and Fin\/ease (P) Ltd. 342 ITR 169
\n(Del), highlighting the legal effect of section 68 of the Act, the Division Bench
\nhas observed in para 32 that The tribunal also erred in law in holding Assessing
\nOfficer ought to have proved that the monies emanated from the coffers of the
\nassesse company and came back as share capital. Section 68 permits the
\nAssessing Officer to add the credit appearing in the books of account of the
\nassesse if the latter offers and explanation regarding the nature and source of
\nthe creditor the explanation offered is not satisfactory. It placed no duty upon
\nhim to point to the source from ‘which the money was received by the assessee.
\nIn the light of the facts and judicial precedents discussed above it is
\nrequested to kindly consider the written submission uphold the order of the AO
\ndismiss the grounds of appeals of the appellant and allow the appeals of
\nrevenue.
\n11. We have heard both the parties, perused the material
\navailable on record and gone through orders of the authorities
\nbelow along with case laws relied upon by Ld. Counsel for the
\nassessee. The Ld. AO has made additions towards money lying
\nin HSBC bank account, Geneva, on the basis of base note
\nreceived from French Government by Government of India in
\naccordance with double taxation avoidance Agreement and
\nopined that the assessee is a beneficial owner of joint account
\nheld in the name of his brother. The Ld. AO has also made
\n33 Shri Kamal Galani
\nadditions towards return on investments on initial deposits
\nclaimed to have made by the assesee to open bank account
\n@17% on the basis of some comparable cases of similar nature.
\nThe Ld. AO has analyzed the facts of the case in light of base
\nnote and concluded that the assessee is the owner of bank
\naccount and whatever money lying in bank account is
\nundisclosed income of the assessee for income tax purpose. It
\nwas contention of the assessee before the Ld. AO, as well as the
\nLd.CIT(A) that bank account was opened by his brother Mr.
\nDipak Galani in the year 1998 and his name was included in the
\nbank account for convenience and as a mark of respect to his
\nelder brother, but he is neither owner of the bank account, nor
\nhad any interest or right in money lying in bank account. To
\njustify his arguments, and prove his claim filed passport and
\nother details, including bank account details and argued that the
\naccount was opened by giving address of his brother situated at
\noutside India and also, a letter from his brother addressed to the
\nLd. AO and claimed that he is the owner of the bank account
\nlying in HSBC Bank, Geneva.
\n12. The Ld. AO has made additions towards amount lying in
\nHSBC bank account, on the sole ground that the assessee is
\nowner of the bank account and he is having beneficial interest in
\n34 Shri Kamal Galani
\nmoney lying in said bank account. Although, the Ld. AO has not
\nspecifically referred provisions of section 69\/69A of the Act, but
\nhe has invoked section 69\/69A to bring amount lying in HSBC
\nbank account as unexplained money of the assessee. Therefore,
\nin order to examine, whether money lying in HSBC bank account
\nin the name of the assesee and his brother is a unexplained
\nmoney, which can be taxed u\/s 69A of the I.T.Act, 1961 needs
\nto be examined. As per section 69A, where in any financial year
\nthe assesee is found to be the owner of any money, bullion,
\njewellery or other valuable articles and such money, bullion,
\njewellery or valuable articles is not recorded in the books of
\naccounts, if any maintained by him for any source of income
\nand assessee offers no explanation about the nature and source
\nof acquisition of money, bullion, jewellery and other valuable
\narticles or the explanation offered by him is not, in the opinion
\nof the ld. AO, satisfactory, the money and the value of the
\nbullion, jewellery and other valuable articles may be deemed to
\nbe the income of the assessee of such financial year. A close
\nlook at the provisions of section 69A of the I.T.Act, 1961, it is
\nabundantly clear that in order to bring any money or other
\nvaluable articles within the ambit of said section, the Ld. AO has
\nto prove that the money is belong to the assessee. Of course,
\nthe initial burden is on the assessee to prove that the money or
\n35 Shri Kamal Galani
\nother valuable articles found in his position is not belongs to
\nhim. But, once, the assessee filed necessary evidences to prove
\nthat said unexplained money is not belongs to him, then, onus
\nshift to the revenue to prove that unexplained money is in fact
\nbelongs to the assessee. Unless, the Ld. AO proves that
\nunexplained money is belongs to the person, he cannot make
\nany addition in the hands of the assessee.
\n13. In the light of above factual and legal background, if you
\nsee the facts of the present case, one has to see, whether the
\nmoney found in HSBC bank account is belongs to the assessee
\nor his brother. In this case, the assessee right from beginning
\nhas made it very clear that the bank account belongs to his
\nbrother and he was named only as a second holder for the
\npurpose of nomination and for the sake of convenience. To
\njustify his claim, the assessee has filed a letter and affidavit
\nfrom his brother stating that his brother Mr.Dipak V. Galani is
\nthe owner of the bank account and he was opened a bank
\naccount in his capacity as a non resident in the year 1998. From
\nthe above, it is very clear that the bank account was opened by
\nhis brother as a first account holder and the assessee was
\nincluded in the bank account as a second account holder, which
\nis very clear from the base documents relied upon by the Ld.
\n36 Shri Kamal Galani
\nAO, where the assessee name appears as a second account
\nholder. Further, as stated above, the bank account was opened
\nin the year 1998 and at the time of opening bank account, the
\nassessee, as well as his brother both are NRI residing outside
\nIndia. Further, the base documents itself clearly states the
\ncreation of identity of the assessee as date of 19\/06\/2003, and
\nit is clearly stated therein that assessee account holder No.2.
\nThe passport detail of assessee as per base documents clearly
\nshows him to be residing at Vienna (as place of having
\nestablishment) with place of birth as Baroda. The copy of same
\npassport has been filed on record and considered by the Ld. AO
\nin assessment year, clearly shows that passport is issued in
\nVienna and renewed through the Embassy of India since, 1993.
\nThe legal address in base documents is taken from the birth
\nplace mentioned in the passport as permanent address,
\notherwise the address of the assessee in Vienna is also
\nmentioned in passport as taken is present address. From the
\nabove, it is very clear that the bank account in the name of
\nassessee and is brother and his brother as account holder No.1
\nis clearly established the fact that bank account is belongs to his
\nbrother, but not to the assessee and this fact has been further
\nstrengthened by the letter of the assessee\u2019s brother, dated
\n09\/03\/2015, where he has categorically accepted the ownership
\n37 Shri Kamal Galani
\nof bank account and money lying in said bank account. These
\nfacts have been disregarded by the Ld. AO without providing any
\nbasis for the same. The Ld. AO has also not disputed that Mr.
\nDipak Galani is account holder and the principle holder of the
\nbank account , but went on to make additions in the hands of
\nthe assessee on pure suspicious and surmises by invoking
\nprovisions of general clause Act, and further being a second
\naccount holder, the assessee is vested with rights and
\nobligations connected with the account and therefore, he is a
\nbeneficial owner of the bank account. However, at the same
\ntime, the Ld. AO has failed to appreciate that Mr. Dipak Galani
\nby virtue of being a first account holder is also vested with some
\nrights and therefore, the same principle \/ logic even applies to
\nhim. Therefore, we are of the considered view that the
\nconclusion drawn by the Ld. AO that assessee is a beneficial
\nowner and Mr.Dipak Galani is not the beneficial owner on the
\nbasis of above arguments is highly incorrect.
\n14. Further, it is the case of the Ld. AO that account with HSBC
\nbank , Geneva is opened by resident Indian and black money
\nearned by such resident Indian has been stashed abroad without
\npaying taxes\/disclosing income in India. But, fact remains that
\nin the instant case, the account was opened in 1998, when the
\n38 Shri Kamal Galani
\nassessee himself and Mr. Dipak Galani permanently resided in
\noutside India for 30 years and had no intention to come to India
\nat that time. Further, both of them have no source of income in
\nIndia, during the course of their residence abroad. Therefore, we
\nare of the view that entire motive as presented by the Ld. AO
\ndefines all logic of opening of a secret bank account in Geneva,
\nby NRI to stash unaccounted income taxable in India fails. The
\nld. AO mechanically disregarding all explanations furnished by
\nthe assessee as to the ownership of the account along with the
\ncorroborative materials is contrary to the settled position of law,
\nbecause, once assessee has provided a reasonable explanation
\nabout ownership, then the onus was on the Ld. AO to establish
\nthat account belongs to the assessee. This legal principle is
\nfortified by the decision of Hon\u2019ble Delhi High court in the case
\nof CIT vs Shivaprakash Agarwal (supra), where the Hon\u2019ble High
\ncourt after observed that the assessee had time and again
\nsubmitted before the revenue authorities that the documents
\nbelongs to his father and whatever additions have to be made in
\nthe hands of the father. The father of the assessee had owned
\nup to the documents seized during the course of search and had
\nalso filed affidavit to this effect. In these circumstances, the
\ncourt held that the additions could not be sustained in the hands
\nof the assessee on the base of seized documents. This principle
\n39 Shri Kamal Galani
\nis further supported by the decision of Hon\u2019ble Calcutta High
\ncourt in the case of CIT vs United Commercial and Industrial
\nCompany Limited (1991) 187 ITR 596, where it was held that
\nwhere prima-facie inference on facts is that the assessee
\nexplanation is probable, the onus will shift to the revenue.
\n15. In this case, on perusal of details available on record, it is
\nvery clear that the assesse right from day one has disowned the
\nbank account. Further, the brother of the assesee has filed a
\nletter to the Ld. AO along with affidavit and claimed that the
\nbank account is opened by him in his capacity as NRI and
\nwhatever money lying in bank account is belongs to him.
\nTherefore, we are of the considered view that under these
\ncircumstances, the Ld. AO was erred in making additions
\ntowards amount lying in bank account as unexplained money of
\nthe assessee.
\n16. Insofar as, additions made towards return on investments
\n@17% PA on year basis, once, it was established that bank
\naccount was not belongs to assessee and he was not a
\nbeneficial owner, then further additions towards estimated
\nreturn of income on said unexplained money is arbitrary. As
\nstated above, the account was opened by the Appellant’s
\n40 Shri Kamal Galani
\nbrother with the British Bank of Middle East. Therefore, the
\nreliance placed by the AO on the account opening information
\nappearing on the website of HSBC Bank cannot be relied upon.
\nFurther, the account was opened by the Appellant’s brother in
\n1998, whereas the website information sought to be relied upon
\nby the AO pertains to accounts sought to be opened at about the
\ntime of the assessment proceedings, i.e. around 2013. Such
\nreliance on website information is impermissible as the same is
\nmerely based on fanciful presumptions. The AO has not brought
\nany material on record to justify the use of account opening
\ninformation as at time of assessments to presume and arrive at
\nthe conclusion that the same would be applicable to an account
\nalleged to have been opened by the Appellant 15 years earlier.
\nIt may be pertinent to point out that since the assessment was
\nmade, the account opening requirements have been revised to
\nrequire an investment or borrowing to be made amounting to an
\nequivalent of USD 5 million. This goes to show that the account
\nopening requirement undergo changes from time to time and
\nthe presumption that the account opening requirements stated
\nat the time of the assessment would have been the same as
\nthose prevailing when the account was opened 15 years earlier,
\nin 1998, is fallacious and cannot be sustained. The AO failed to
\nappreciate that account was opened in The British Bank of
\n41 Shri Kamal Galani
\nMiddle East, UAE. The same was subsequently merged \/
\nacquired by HSBC Private Bank. Hence assumption of USD 3
\nmillion is unjustified. Further, the AO has failed to appreciate
\nthat the appellant is nonresident in the year 1998 i.e. in the year
\nof opening the account, residing out of India for past more than
\n20 years. Further, owning the bank account and the investment
\nby Non Resident out of sources of funds available abroad is still
\nnot taxable in India. The AO has failed to point out any iota of
\nevidence to prove that the funds of USD 3 million invested in
\nopening bank account represent income from undisclosed
\nsources earned\/ accrued to appellant in 1998. The Appellant
\nhas no sources of income in India up to 2002 and the same has
\nalready been assessed on record in assessment proceedings
\nearlier. The statement of Assets and liabilities and Income has
\nbeen filed on record. Refer Page 66 to 66 We therefore are of
\nthe considred view that, having established that Appellant is
\nNON-RESIDENT in AY 1999-2000 and complete absence of any
\nsource of taxable income in India, the addition u\/s 69 made by
\nAO in AY 1999-2000 on account of investment of USD 3 million
\nin opening the bank account with HSBC and consequent
\nestimation of return of investment @ 17% PA as Unexplained
\nInvestment is highly unjustified.
\n42 Shri Kamal Galani
\n17. Considering the facts and circumstances of this case, we are
\nof the considered view that the Ld. AO, as well as the Ld.CIT(A)
\nwere erred in not appreciating the fact in right perspective, even
\nthough the assessee has filed necessary evidences to prove that
\nthe bank account was not belongs to him. Therefore, we are of
\nthe considered view that an addition made towards bank
\naccount in the name of the assessee is incorrect. Accordingly,
\nwe direct the Ld. AO to delete additions made towards amount
\nlying in bank account. Similarly addition made towards
\nestimated return of investments @17% on said additions is also
\nincorrect. Accordingly, we direct the Ld. AO to delete additions
\nmade towards estimated return of investments for all
\nassessment years.
\n18. In the result appeal filed by the assesee for Asst.Years
\n2003-04 to 2007-08 are allowed and appeals filed by the
\nrevenue for Asst.Years 2006-07 & 2007-08 and 1999-2000
\nto 2002-03 are dismissed. Similarly cross objections filed by
\nthe assessee for assessment years 1999-2000 to 2002-03
\nare also dismissed.
\nOrder pronounced in the open court on this: 10\/09\/2020
\nSd\/-
\n(MAHAVIR SINGH)
\nSd\/-
\n(G. MANJUNATHA)
\nVICE PRESIDENT ACCOUNTANT MEMBER
\nMumbai; Dated: 10\/09\/2020
\n43 Shri Kamal Galani
\nSelf Typed
\nCopy of the Order forwarded to :
\nBY ORDER,
\n(Asstt. Registrar)
\nITAT, Mumbai
\n1. The Appellant
\n2. The Respondent.
\n3. The CIT(A), Mumbai.
\n4. CIT
\n5. DR, ITAT, Mumbai
\n6. Guard file.\u0001\u0002\u0003\u0004\u0005 \u0006\u0003\u0005 \/\/True Copy\/\/<\/p>\n","protected":false},"excerpt":{"rendered":"
It is the case of the Ld. AO that account with HSBC bank , Geneva is opened by resident Indian and black money earned by such resident Indian has been stashed abroad without paying taxes\/disclosing income in India. But, fact remains that in the instant case, the account was opened in 1998, when the assessee himself and Mr. Dipak Galani permanently resided in outside India for 30 years and had no intention to come to India at that time. Further, both of them have no source of income in India, during the course of their residence abroad. Therefore, we are of the view that entire motive as presented by the Ld. AO defines all logic of opening of a secret bank account in Geneva, by NRI to stash unaccounted income taxable in India fails. The ld. AO mechanically disregarding all explanations furnished by the assessee as to the ownership of the account along with the corroborative materials is contrary to the settled position of law, because, once assessee has provided a reasonable explanation about ownership, then the onus was on the Ld. AO to establish that account belongs to the assessee.<\/p>\n