MRS. RENU TIKAMDAS THARANI,MUMBAI vs. DCIT (IT)-4(2)(1), MUMBAI

O R D E R Per Pramod Kumar, VP: This appeal, filed by the assessee, calls into question correctness of order dated 17th 1. January 2018, passed by the learned CIT (Appeals) in the matter of assessment under section 143(3) r.w.s. 147 of the Income Tax Act, 1961, for the assessment year 2006-07. Issues requiring our adjudication in this appeal: 2. The assessee has raised as many as nineteen grounds of appeal, but, as the learned representatives fairly agree, all that we are required to adjudicate upon, in this appeal, is: (a) whether, on the facts and in the circumstances of this case, learned CIT(A) was justified in upholding the validity of reassessment proceedings, and, in the event of our holding this issue against the assessee, (b) whether or not the learned CIT(A) was justified in upholding the addition in the hands of the assessee for Rs 196,46,79,146, being an amount equivalent to US $ 3,97,38,122 at the relevant point of time, held by HSBC Private Bank, Geneva, Switzerland, in the name of Tharani Family Trust, of which the assessee was a beneficiary.

Assessment year: 2006-07 Page 3 of 55 To this we would like to submit that the assessee has not maintained any bank account with HSBC Bank in Geneva, hence information you have got is completely erroneous. The assessee is not the owner of the said bank account; hence there is no reason why the above case should be re-opened u/s 148. Without prejudice to above, we would like to submit that the residential status of the assessee during the above said Assessment year is Non resident as defined in section 6(1) of the Income Tax Act, 1961. We enclose herewith a copy of the passport of the Assessee, wherein the dates of departures & arrivals in India are stated therein. From the dates of arrivals in India & departures from India, you would be able to see that the Assessee has not stayed hi India for more than 182 days in any of the financial years starting from 1st April 2001 to 31st March 2005. Moreover, the total number of days which he has stayed in India during the previous 4 (four) financial years preceding the financial year ended 31st March 2006 is less than 365 days and finally during the previous year relevant to the above mentioned assessment the assessee has stayed in India for less than 60 -days, hence all the conditions as specified in section 6(1) of the Income Tax Act 1961 has been complied with, wherein it concludes that the Assessee is a Non- Resident. As per the provisions of section 9(1) of the Income Tax Act 1961, the Non- Resident is chargeable to tax only on income which accrues or arises in India, hence, the income which accrues or arises out of India, the same is not chargeable to tax in the hands of the Assessee. In lieu of the above said facts & circumstances of the case, any income which accrues & arises out of India, which includes the income- deposited in HSBC Bank Geneva is not liable to be taxed in the hands of the Assessee as per the provisions of section 9(1) of the Income Tax Apt 1961. Finally we would like to submit that the assessee has filed its Return of Income for the above mentioned Assessment Year on 29th July 2006, which was enclosed in our letter dated 14/11/2014 as the returned income was below the threshold limit; hence no tax was liable to be paid. Thus, as the information received to you is incorrect (and) there is no reason why the case should be re-opened, hence, we request you to kindly drop the re- opening proceedings & oblige.

6. These objections, however, did not impress the Assessing Officer. He rejected the objections taken by the assessee and proceeded to frame the assessment under section 143(3) r.w.s. 147 of the Income Tax Act, 1961. Aggrieved, assessee carried the matter in appeal before the CIT(A), inter alia, on the ground that the reassessment proceedings were bad in law, but without any success. Learned also, inter alia, CIT(A) upheld the validity of reassessment proceedings and declined to interfere in the matter. The assessee is not satisfied and is in further appeal before us.

Assessment year: 2006-07 Page 4 of 55 Submissions of the parties:

Assessment year: 2006-07 Page 7 of 55 Our analysis: 8. As we have given our careful consideration to the rival contentions and the material on record in the light of applicable legal position, we have also taken of the factual matrix of this case. Here is an assessee who files her return of income, disclosing a meagre income of Rs 1,70,800, giving a Bangalore address and files the income tax return a ward which was meant for resident assessees. Going by the facts placed by the assessee on record, which are also set out in the paper-book, the Bangalore property was sold in the year ended March 2003, but yet income tax return continued to be filed at that address. It is not clear as to what was the basis of filing the income tax return at Bangalore but then let‟s leave it at that for the time being. The income tax return filed by the assessee, a copy of which is placed before us at page 62 of assessee‟s paper-book, does not at all tick the status as “non-resident”, but there is a clearly visible mark in the status as “resident”. On these facts, the Assessing Officer, to whom this case was transferred as a result of order under section 127, notices that the assessee has a bank account, as per information in his possession, with HSBC Private Bank Geneva, bearing a number BUP_SIFIC_PER_ID- 5090178411 with a peak credit, during the relevant period, of a sum of more than US $3.97 crores equivalent to around Rs 200 crores at that point of time. The base note, a copy of which is placed at pages 3 to 12 of assessee‟s paper-book, clearly shows “Tharani Renu Tikamdas” as “beneficial owner/ beneficiary” of this account, that her date and place of birth are10th May 1934 and Hyderabad (Pakistan) respectively, and that the account was opened on 28th July 2004. This note also shows, under the heading “personnes liees aux profile client” (which as simple google translation would show as meaning “people linked to customer profile”), GWU Investments Limited as with “power of administration”. The overall “patrimoine max constaté sur la period” (which as simple google translation would show as meaning “max wealth observed during the period”) on 02/2007 as US $ 5,62,47,590, but then that aspect of the matter is not relevant for this year. Suffice to note that the residential status of the assessee as shown in the income tax return was “resident”, and definitely not “non-resident”, that the peak credit at her disposal in this Swiss Bank account was over 11,500 times of her annual income, and that the assessee had admittedly not taken into account this account in her return of income. The claim of the assessee regarding her having a non-resident status in the relevant previous year came much after the reasons recorded, and, quite contrary to this claim, as our perusal of records shows, the assessee herself had claimed the residential status as “resident” in the income tax return. The Assessing Officer has to record his satisfaction about income escaping assessment as on the basis of material in his possession and on record as on the time of recording the reasons for reopening the assessment. A subsequent claim, which was not on record at the time of the reasons being recorded, cannot affect the correctness of these reasons, even though once this claim is made in the assessment proceedings, it will have to be examined on merits and it will have to be adjudicated as such in the outcome of the assessment proceedings. Nothing, therefore, turns on the facts not on record before the Assessing Officer as on the stage of recording the reasons of reopening the assessment. In any case, when the assessee herself is making an incorrect claim in the income tax return, she cannot claim that because the Assessing Officer believed the claim so made, and took initial steps on that basis, the Assessing Officer was in error in taking that path. Of course, all this does not affect the question of determination of her residential status on merits, but that is not the question as on now. The question is whether the Assessing Officer had reasons to believe income escaping the assessment, or not. It is also important to bear in mind the fact that at the stage of issuance of notice, the Assessing Officer is to only form a prima facie view. Explaining this principle, Hon‟ble jurisdictional High Court, in the case of Assessment year: 2006-07 Page 8 of 55 Multi Commodity Exchange of India Ltd Vs DCIT [(2018) 91 taxmann.com 265 (Bom )] [SLP dismissed as reported in (2019) 101 taxmann.com 13 (SC)], has observed that “We find that the power of the Assessing Officer to reopen an assessment under Section 147/148 of the Act on the basis of reasonable belief is not fettled or circumscribed, to be formed only on material found during a tax audit or with material found during examining a case of tax evasion. In fact the basis of fresh tangible material is unqualified i.e. the source of the material could be from any place, however, the only pre-condition is that on the basis of the material so found/obtained by the Assessing Officer, he himself must form a reasonable belief that income chargeable to tax has escaped assessment before issuing a notice for reopening. In fact the Apex Court has observed in Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 161 Taxman 316/291 ITR 500 has observed that if the Assessing Officer for whatever reasons (material) has reason to believe that income chargeable to tax has escaped assessment then jurisdiction is conferred upon the Assessing Officer to reopen the assessment”. As held by Hon‟ble jurisdictional High Court, in the case of Multiscreen Media Pvt Ltd Vs CIT [(2010) 324 ITR 54 (Bom)], “the expression "reason to believe" must obviously be that of a prudent person and it is on the basis of the reasons recorded by the Assessing Officer that the question as to whether there was a reason to believe that income has escaped assessment, has to be determined. At the same time, the sufficiency of the reasons for reopening an assessment does not fall for determination, at the stage of a reopening of assessment”. In the light of this legal position, in our considered view, based on the facts above i.e. credible information about existence of her account with HSBC Private Bank Geneva with a peak credit of around Rs 200 crores in the relevant financial year- which is far disproportionate to her reported annual income and which is not taken into account in her return of income, the Assessing Officer was perfectly justified in holding the view that the income has escaped assessment.

Challenge to addition of Rs 196.46 crores to the returned income 12. We now turn to the question as to whether or not the learned CIT(A) was justified in upholding the addition in the hands of the assessee for Rs 196,46,79,146, being an amount equivalent to US $ 3,97,38,122 at the relevant point of time, held by HSBC Private Bank, Geneva, Switzerland, in the name of Tharani Family Trust, of which the assessee was a beneficiary.

The relevant material facts: 13. To adjudicate on this question, facts of the case, in detail, need to be taken note of. The assessee before us is an individual. The assessee had filed her income tax return, on 29th July 2006, disclosing an income of Rs 1,70,800 for the relevant previous year, but subsequently the investigation wing of the income tax department, as noted in the earlier part of this order, received information that the assessee is having a bank account with HSBC Private Bank (Suisse) SA Geneva. Based on this information, a copy of which is placed before us at pages 3 to 12 of the assessee‟s paper-book, this case was reopened for fresh assessment on 30th October 2014. When the assessee was confronted with the information so received by the Assessing Officer, the assessee‟s representative, vide letter dated 9th January 2015 (wrongly stated to be letter dated 9th January 2014 in the paper-book; copy placed at pages 37 onwards in the assessee‟s paper-book), wrote to the Assessing Officer that Assessment year: 2006-07 Page 10 of 55 “enclosed please find herewith a letter dated 14th November 2015 and 5th September 2011, which confirms that Mrs Renu Tharani has neither been an account holder of HSBC nor a beneficial owner of any assets deposited in account with HSBC Private Bank (Suisse) SA, Switzerland, during the last 10 years”. It was further stated that HSBC Private Bank (Suisse) SA has also “confirmed that GWU Investments Ltd was holder of the account number 1414771, and, according to their records, GWU Investments Limited used to be an underlying company of Tharani Family Trust for which Mrs Renu Tharani was a discretionary beneficiary” and that “(t)he Tharani Family Trust was terminated and none of the assets deposited with them were distributed to Mrs Renu Tharani”. It was further stated that “with this letter, as an evidence, it is now very clear that Mrs Renu Tharani does not hold any account with HSBC Private Bank (Suisse) SA, either in Geneva or any other place in Switzerland, hence the base note issued by you is inaccurate as she does not have any account with HSBC Bank Geneva bearing number BUP_SIFIC_PER_ID_5090178411 or any other number”. Copies of HSBC Private Bank (Suisse) SA‟s letters dated 5th January 2015 from to one Mr Mahesh Tharani in China, and dated 5th September 2011, copies of which were also placed on record at pages 39 and 40 of assessee‟s paper-book, were also furnished to the Assessing Officer. In a subsequent communication dated 16th February 2015- a copy of which is placed before us at paper-book pages 41 onwards, the Assessing Officer was further, inter alia, informed as follows: In the letter dated 5th January (2015) received from HSBC Private Bank (Suisse) SA in Zurich also confirms the fact that account number 1414771 which is started in your base note belongs to GWU Investments Ltd, having its address at Avalon Management Limited, Landmark Square, 1st floor, Earth Close 64, West Bet Beach South, Grand Cayman, (PO Box No 715, KY1-1107), and it does not belong to Mrs Renu Tikamdas Tharani. The bank further clarifies that as per their records GWU Investments Ltd used to be an underlying company of Tharani Family Trusts for Mrs Renu Tharani was a discretionary beneficiary The HSBC Bank in Geneva may have asked GWU Investments Ltd the proof of identity as well as proof of address of all the beneficiaries. The company may have provided my passport as proof of her identity and proof of address. As the address mentioned in the passport is that of Mumbai, hence the base note showed the account of GWU Investments Ltd along-with my Mumbai address. As the address does not maintain any bank account with HSBC Private Bank (Suisse) SA in Switzerland, the question of explaining any source of deposit does not arise. Without prejudice to above, the HSBC Private Bank (Suisse) SA also confirms the fact, in their letter dated 5th January 2015, that according to their best of knowledge, Tharani Family Trust (GWU Investments Limited) has been terminated and none of the assets deposited with HSC Bank Private Bank (Suisse) SA were distributed to Mrs Renu Tharani A copy of the assessee affidavit dated 12th February 2015 and notarized at China, was 14. also filed before the Assessing Officer. A copy of this affidavit was also placed before us at pages 44 and 45 of the paper-book, and this affidavit stated as follows: I, Mrs Renu Tikamdas Tharani aged 81 years, residing in 6, Country Club lane, Florham Park, New Jersey 07932, do solemnly affirm as under;- Assessment year: 2006-07 Page 11 of 55 1) I am an Indian Citizen till date & I holding an Indian Passport number ZI871970. At present the address mentioned in my Indian passport is 1 Prabhat building, ground floor, 'B" Road, Church Gate, Mumbai 400020, 2) I have a Permanent Account Number AAXPT4838Q. 3) I am a Permanent Resident of United States of America Since 23rd March, .2004. I neither have nor ever had any business connections in India nor was I doing any business when I was staying in India. 4) I have already submitted you a copy of my Passport from 24th May, 2001 onwards till date which proves the fact that I am a Non-Resident during the financial year ended 31/03/2006 & thereafter 5) A Letter from "HSBC Private" Bank (Suisse) SA dated 5th January 2015 confirms the fact that no payment was made to me either as a beneficiary or as a beneficial owner by GWU Investments Limited who has its registered office at: address: C/o Avalon Management, Limited, Landmark Square 1st floor, Earth close 64, West pat Beach South, Grand Cayman, P.O.Box 715, KY1-1107, Cayman Islands (CYM). 6) I have received a notice under section 148 of the Income Tax Act 1961 dated 3151 October, 2014 for the Assessment Year 2006-2007 as well as for Assessment Year 2007-2008 under the pretext that I maintain a bank account with HSBC Bank in Geneva Switzerland bearing number BLIP_SIFIC_PER_ID_5090178411 & that I have maintained a peak balance of USD $ 3,97,38,122/- during the financial year relevant to the Assessment Year 2006-2007 & a peak balance of USD $ 23,55,851.60 during the financial year relevant to Assessment year 2007-2008. To this, I solemnly affirm under oath that I do not maintain nor I had any account with HSBC in Geneva in my name, hence the question of being the owner of the above said funds does not arise. A certificate from HSBC Private Bank (Suisse) SA dated 05th January 2015 & 5th September, 2011 confirms the fact that I do not have or maintain any bank account in HSBC Geneva hence the question of mentioning you the source of deposits in HSBC Geneva does not arise. 7) Subsequently I received a base note from the Deputy Director of Income Tax (International Taxation) -1 (1), Room No. 117, Scindia House, Ballard Estate, N. M. Road, Mumbai-400 038 which is neither signed or sealed by the Income Tax Department alleging that the account number BLIP_SIFIC_PER_ID_5090178411 is in the name of GWU INVESTMENTS LTD wherein it is said that I am the beneficial owner or the beneficiary. To this I would like to solemnly affirm that I have not received any amount from the above said company, either as a beneficiary or as a beneficial owner. 8) The bank account stated in the base note belongs to GWU Investments Ltd and does not belong to me. The HSBC Bank in Geneva may have asked from the GWU Investments Ltd the proof of identity & proof of address of all the potential beneficiary's & beneficial owners. The company might have provided my passport as a proof of identity & proof of address. As the address mentioned Assessment year: 2006-07 Page 12 of 55 in my Indian passport is that of Mumbai hence the base note states the same address. 9) I personally had a residential property in Bangalore which was sold by, me during the financial year ended 31.3.2003. The sale proceeds of this property were deposited into my account with Syndicate Bank in Bangalore. The question of depositing the Sale proceeds of any asset in HSBC Geneva Account does not arise.

It was, vide letter dated 25th February 2015, contended that the assessee has duly 15. discharged the onus “by getting a clarification from the HSBC Private Bank (Suisse) SA that GWU Investments Ltd is an underlying company of Tharani Family Trust and she is only a discretionary beneficiary”. A reference was then made to Hon‟ble Supreme Court‟s judgment in the case of Commissioner of Wealth Tax, Rajkot v. Estate of HMM Vikramsinhji of Gonda (2014) 45 taxmann.com 552 (SC) in support of the proposition that in the case of beneficiary of a discretionary trust, income can only be taxed when the income is actually received, but then in the present case, the assessee has not received any money in the capacity of beneficiary. It was submitted that “in the light of the above said facts, there is no reason as to why you should insist in asking the assessee to provide you the details of the account standing in the name of GWU Investments Ltd, as she is in no position to provide you the details for the reasons mentioned in the above para”.

Assessment year: 2006-07 Page 14 of 55 The Hon'ble Mumbai ITAT dismissed this ground of appeal raised by the assesse and held that discretionary trusts are created for the benefit of particular persons and those persons need not necessarily control the affairs of the trust. The bank account of the trust represents unaccounted money of the beneficiaries even though no benefit were transferred to them. 13.1 Considering the facts of the case and the decision of the Hon‟ble Mumbai ITAT as cited above it can be concluded that the bank account of the trust represents unaccounted money of the assesse. Considering the fact that the assessee is an Indian having interests and assets in India that no details were given to show the source of money deposited in the HSBC account leads to the circumstances that this unaccounted money is sourced from India. In absence of anything contrary, the only logical conclusion that can be inferred is that that the amounts deposited are unaccounted deposits sourced from India and therefore taxable in India. This presumption is as per the provisions of section 114 of The Indian Evidence Act, 1872 which reads as follows: “Section 114. Court may presume existence of certain facts- The Court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particulars case. The Court may presume- ……(g) That evidence which could be and is not produced would, if produced be unfavrorable to the person who withhold it….” Section 114(g) of The Indian Evidence Act, 1872, thus clearly says that the Courts can presume existence of certain facts if the person liable to produce evidence which could be and is not produced, which if produced would have been unfavorable to the person who withhold it. 13.2 Further, the provision of Section 5(2) of the Act is reproduced as under:- “ Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident included all income from whatever source derived which- (a) Is received or is deemed to be received in India in such year by or on behalf of such person, or (b) Accrues or arises or is deemed to accrue or arise to him in India during such year.” During the assessment proceedings and as can be seen from the facts of the case that the assesse has not made out a case that the deposits in the above mentioned accounts in HSBC, Geneva do not all within the ambit of this provision of law. 13.3 As the assesse has chosen not to produce the details of his HSBC bank accounts and the source of deposits thereof, even though he could have been obtained all the details/evidences for the same, the only corollary that could be drawn is that the assesse has decided to withhold the information as if producing Assessment year: 2006-07 Page 15 of 55 it would have gone against him. Thus, as per the provisions of Section 114 of The Indian Evidence Act, 1872 also, it need to be held at this stage that the information/details not furnished were unfavorable to the assesse and that the source of the money deposited in the HSBC account is undisclosed and sourced from India. Nova Promoters and Finlease (P) Ltd. 342 ITR 169 (Del), highlighting the legal effect of section 68 of the Act, the Division Bench has observed in para 32 that “ The tribunal also erred in law in holding Assessing Officer ought to have proved that the monies emanated from the coffers of the assesse company and came back as share capital. Section 68 permits the Assessing Officer to add the credit appearing in the books of account of the assesse if the latter offers and explanation regarding the nature and source of the creditor the explanation offered is not satisfactory. It placed no duty upon him to point to the source from which the money was received by the assessee. 13.4 The Hon'ble Supreme Court in the case of Sumati Dayal Vs. Commissioner of Income Tax (1995) 214 ITR 801 (SC) held that income tax proceedings are civil proceedings and the degree of proof required is to be judged by preponderance of probabilities. The Hon‟ble Supreme Court, in the case of CIT v Durga Prasad More [1971] 82 ITR 540 (SC), has held that "the taxing authorities were not required to put on blinkers while looking at the documents produced before them they were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents....The apparent must be considered as real only it is shown that there are reasons to believe that the apparent is not the real and that too taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probability.... Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and tribunals have to judge the evidence before them by applying the test of human probabilities. The Hon'ble Punjab and Haryana High Court, in the case of Som Nath Maini v CIT [2008]306 ITR 414 (Punj.&Har.), has held that "the assessing officer is to apply the test of human probabilities for deciding genuineness or otherwise of a particular transaction. Mere leading of the evidence that the transaction was genuine, cannot be conclusive. Any such evidence is required to be assessed by the assessing officer in a reasonable way. Genuineness of the transaction can be rejected in case the assessee needs evidence, which is not trustworthy, and the Department does not need any evidence on such an issue. In case of Smt. Vasantibai Shah 213 ITR 805 (Bom) the court observed that The Income tax Officer is entitled to take into consideration the totality of the facts and circumstances of the case and to draw his own inference on the basis thereof. Circumstantial evidence in such cases is not impermissible. Incases like this it is only the circumstantial evidence which will be available. No direct evidence can be expected......" In case of JS Parker 94 ITR 616 (Bom) it was held that" the tax liability under the Income tax Act is of civil nature. To fasten a tax payer with such a liability it is not necessary that the evidence should be in the nature of "beyond doubt" as is required to fix a criminal liability. Tax liability can be fastened on the basis of preponderance of probabilities.”

Assessment year: 2006-07 Page 19 of 55 The same is seen in this case. It is more denials and shifting of responsibility to Assessing Officer in place of hard facts were the ones that the appellant was to produce before him.

irrespective of whether a remand report is received or not and rebutted or not. The matter has been addressed when ground was adjudicated earlier in this order. b. The trust deed states that assessee is not settler of trust or shareholder or director of GWU Investment Ltd; This does not affect the issue. We are concerned with the Beneficial Ownership of the trust asset which is sole in the a beneficiary of the assets/income under consideration of Assessing Officer without the authorization of the appellant. c. Indian address given is passport address and should not be viewed adversely. On this matter, this in not to be viewed in isolation but considering totality of circumstances, consideration of vital information brought before IT authorities and lack of information from side of appellant, These were the determining factors in the decision in this order d. There was interim remand report. The appellant seeks the same: As this is not considered in my decision making since it contained no meaningful comments and is basically for seeking extension of time, the same is not provided. No prejudice is caused to assessee. e. Certain information from foreign tax jurisdiction is still due: As these have not been received there is no case of drawing any inference. Some information is to come from foreign jurisdiction like Cayman Islands, and receipt is uncertain and appellate proceedings cannot be held in abeyance indefinitely under uncertain circumstances. f. Reasons for not signing consent waiver: In para 12.9 some reasons are stated. It is that the account does not pertain to the appellant and hence not signed. If there is nothing to hide, the same could be provided and the Assessing Officer or the foreign tax agency, in accordance with provisions of tax treaty will decide whether to provide the information or not. The reasons adduced is unconvincing and unacceptable.

27. This is a case were the decision was to be made by Assessing Officer and the undersigned where information flow for taking decision appellant. It is more not inadequate form side of on producing case decisions, denials and providing alternate Correct decision comes when correct input is presented. The following questions were recurring in course of hearing and stood unanswered.

Assessment year: 2006-07 Page 20 of 55 (a) if Renu Tharani denies the ownership or any connection with the account in individual capacity or as a trustee or as a beneficiary in any form, has it been notified to HSBC Geneva? (b) Did she or the trust or any other person or beneficiary report income which accrued or arisen from the account after she came to notice the existence of account at least to Indian IT authorities or authorities in any other tax jurisdiction? (c) What is the status of the account now? Does the asset exist now? If not the appellant, who received the same? (d) Who operates the account now? Who has control over the account? If not the appellant, who has authorised the transactions in the account? None of them could be answered with documentary evidence. These are strong background factors which goes against the appellant and cements the case against her.

29. The Appellant relied on many case decisions. In none of the cases the combination of facts brought out in this case applies. Hence they are not considered. Also produced is order of CIT(Appeals) -56, Mumbai circumstances. I find that the fact brought out in this case is different and far more and same which according to Appellant is on identical cannot be adopted as such. Only when facts and circumstances are identical rules of precedence is followed. That is not the case here. The layering/structure of entities, information on the case etc are different. Hence they were not considered.

A. Analysis of the Assessment Order Para & Page AO‟s Observations Remarks no. Pg 1, Para 1 Reopening has been done on the basis of the This information cannot be a information received that there are various basis for reopening of individuals having Foreign Bank Account in Assessment in the case of Non- HSBC Pvt. Bank which were not disclosed Resident to Indian Taxation Department. (i) as there is no prohibition for non-resident to have a foreign bank account. (ii) there is no requirement for non-resident to disclose foreign bank account to Indian Taxation Department. Pg 1, Para 2 In this para it has been stated by the AO This statement by the AO is that according to the base note received, the factually incorrect as the base assessee is holding an account in HSBC Pvt. note received is not that of the Bank. assessee but of GWU Investments Ltd. Further, assumption by the AO that base note is a bank account is factually incorrect as is evident from the base note which is not a bank account but just a statement of investment. Thus, it is a mistaken belief of the AO that the base note is a bank account. Pg 2, Para 2 & AO has drawn adverse inference on the On going through the base 3 basis of the base note assuming that the note there is no such amount stated therein is the taxable income information that the amount arisen in India which has escaped stated is the income and such assessment income has arisen in India and that too in the year under consideration. The AO conveniently ignored the facts stated therein. In this base note the name of the company GWU Investment Ltd and its Director, Mr. Tharani Haresh Tikam and his address at New Jersey, United States of America is clearly stated. Thus, by no stretch of imagination it can be assumed that the base note pertains to Assessment year: 2006-07 Page 23 of 55 assessee and what is stated therein is the income that has arisen in India and that too in the Financial Year 2005-06 i.e. Assessment Year 2006-07. Pg 4, Para 5 AO has stated that assessee has not This assertion by the AO in provided Bank Account Statement. this para contradicts his own assertion in Para 2, Page 1 where he has stated that the base note received is the bank account. In case the AO has received the bank statement where was the need for AO to ask the assessee to give bank statement. Further, the assessee has categorically stated that she does not have any bank account and as such there was no way she could have provided her statement. Pg 7, Para 12 AO has alleged in this para that assessee has The allegation by the AO is not stated that the source of deposit in incorrect. Assessee has filed HSBC account is not from India. an Affidavit placed at Paper Book Page 41-46 where in she has categorically stated that the bank account does not belong to her. Having stated so on oath the onus was on AO to bring material that there is a bank account in the name of the assessee or the deposits in the bank account are out of the income earned from India. It was also stated that the assessee does not have any business connection in India and hence, there is no business income which is earned in India. Thus, there was a categorical assertion that source of deposit in the bank account is not from India. Further, after receipt of the assessment order and in order to remove any apprehension the assessee filed another affidavit before the CIT(A) on which remand report was also called by the CIT(A) from the AO. In this affidavit, in para 4 it was categorically stated "4.

Assessment year: 2006-07 Page 24 of 55 That I never had any bank account with HSBC Bank, Geneva.

5. That I never been a signatory to any bank account with HSBC Bank, Geneva.

Assessment year: 2006-07 Page 25 of 55 Pg 8& 9, Para AO has ignored the judgment of the Hon'ble It is submitted that judgment 13 Supreme Court in the case of Commissioner of ITAT in the case of Mohan of Wealth Tax, Rajkot Vs. Estate of Late Manoj Dhupelia was that of a HMM Vikramsinhji of Gondal reported in resident not non-resident. [2014] 363 ITR 679 and has preferred to Further, judgment of rely upon judgment of ITAT in the case of Supreme Court was delivered Mohan Manoj Dhupelia 16.04.2014 and was not 3544/Mum/2011 considered in the case of Mohan Manoj Dhupelia which was delivered on 31.10.2014. Further, the judgment of the Supreme Court in the case of Vikramsinhji has been now considered in following cases whereby it has been held that in the case of discretionary trust income arises in the hands of the beneficiary only at the time of distribution only. 1 .Shri Harshad Ramaniklal Mehta Versus DCIT in ITA No. 7307/Mum/2011 dated 04.09.2019 It may be relevant to point out that in this case there were four beneficiaries of the trust out of which two were non- resident. The proceeding against two persons were dropped by the AO itself as these two persons were nonresidents and the dispute before the 1TAT was with respect to resident only. This fact has been captured in para 9 of the Order which is a Synopsis filed by the Revenue in the course of the hearing before the bench.

B. Analysis of the CIT(A) Order CIT (A) order The CIT(A) has rejected the contention of The CIT(A) has arbitrarily Page 5, Para 11 reopening by stating that information was rejected the contention of the received from authentic source and at the assessee without even time of reopening the residential status of addressing the issue raised by the assessee was not known. the assessee was not known. the fact that the status of the assessee is that of non- resident. This status is admitted by the AO in the Assessment Order. The CIT(A) has ignored the aspect that once the assessee has filed objection and brought on record his status as non- resident and which was not disputed by the AO, the AO ought to have closed the reassessment proceedings. This is exactly what has been stated by the Supreme Court in the case of GKN Driveshafts (India) Ltd. vs ITO and others 259 ITR 19 (SC). The AO could not have continued the proceedings for verification as assessment can be opened only when there are reason to believe that income has escaped assessment and not for making out a case to find out whether income has escaped assessment or not. The AO in the Order rejecting the objection has accepted that she is non-resident but has gone further to observe that assessee must show with Assessment year: 2006-07 Page 29 of 55 material that no amount so deposited in the HSBC account are from any source in India. Thus, the AO has admitted that there was no material with him to show that the amount in HSBC account is from any source in India. In the absence of any such material re-opening of assessment of a non-resident in respect of deposit in bank outside India is bad in law. As per provision of section 139(1), every person being a person other than a company or a firm, if his total income during the previous year exceeded the maximum amount which is not chargeable to tax is required to file the return. Thus, the obligation to file the return is only when income chargeable to tax exceeds the maximum amount not chargeable to tax. In order to expand the scope of filing return, the Finance Act, 2012 has inserted 4th Proviso below section 139(1) making it mandatory for a person who is a resident to furnish a return in case at any time during the previous year, he has held a foreign asset including financial asset in any entity located outside India. Further, income tax return form was amended by inserting foreign asset schedule called FA applicable only for resident and not for non-resident. Thus, there is no requirement for a non- resident to furnish a return in case his income does not exceed the maximum amount not chargeable to tax. Further, in case the income of non-resident exceed the maximum amount not chargeable to tax and he is required to file the return then there is no requirement Assessment year: 2006-07 Page 30 of 55 to furnish the details of the foreign assets (including financial interest in any entity) located outside India. Further, it is important to point out that for the Assessment Year under consideration 2006-07 there was no such condition and there was no column in the tax return to disclose foreign assets even by a resident. It was only Finance Act, 2012 which inserted 4th Proviso to section 139(1) and consequent thereto tax returns form were amended providing a schedule for disclosure of foreign assets by resident. This requirement was applicable only for resident as is evident from the instructions attached to the return form whereby it has been stated "a resident having any assets (including financial interest in any entity) located outside India or signing authority in any account located outside India shall fill out schedule FA (Foreign Assets). Pg 8 Para 17 CIT(A) has held that undoubtedly the The findings of the CIT(A) are CIT(A) Order appellant is non-resident and income contrary to the provision of taxable is governed by section 5(2) r.w.s. 9. the law and hence, legally The CIT(A) has held that it is impossible to untenable. Under the Indian hold that asset/income under Tax Law, taxability is not on consideration does not fall in jurisdiction of the basis of citizenship but on Indian Tax Authorities. Assessee is a citizen the basis of residential status. of Indian and the address provided for the Thus, the findings recorded by foreign asset is located in India. the CIT(A) on the basis of Indian citizen are contrary to law. CIT(A) had admitted the fact that 'undoubtedly the appellant is nonresident and income taxable is governed by section 5(2)" read with section 9.' Having held so there was no reason to uphold the addition merely on the basis of the address stated in the base note. Section 5(2) read with section 6 nowhere says that status of an assessee will be determined on the basis of Assessment year: 2006-07 Page 31 of 55 address. Further, section 5(2) nowhere says that income shall be assessed on the basis of the address in a document like base note. Section 5(2) is very clear that income is taxable in the hands of non- resident when such income has arisen or has been received in India. In the absence of any material or evidence that income has arisen or received in India, the addition cannot be sustained. Pg 8 Para 18 The CIT(A) in this para has referred to This finding of the CIT(A) in section 9(1 )(i) and has admitted that it has this para is in favour of the never been the case of the AO that assessee. The CIT(A) has held assessment has been made as a result of that section 68 is not business connection. applicable. The CIT(A) has also held that assessee does not have a business connection in India and section 9(1}(i) is not applicable. If that be the case, the addition is absolutely untenable and he ought to have deleted it. Pg 8 to 12 Para The CIT(A) in these paras has referred to The CIT(A) relied on the 19 to 21 the beneficial ownership of the assessee judgment of ITAT in the case stating that the assessee has right to receive of Mohan Manoj Dhupelia. It directly or indirectly a mandatory is submitted that judgment of distribution or may receive directly or ITAT in the case of Mohan indirectly discretionary distribution from Manoj Dhupelia was that of a the trust. resident not non-resident. Further, judgment of Supreme Court was delivered on 16.04.2014 and was not considered in the case of Mohan Manoj Dhupelia which was delivered on 31.10.2014. Further, the judgment of the Supreme Court in the case of Vikramsinhji has been now considered in following cases whereby it has been held that in the case of discretionary trust income arises in the hands of the beneficiary only at the time of distribution only. Further, the reliance is placed on the following decisions: I.Shri Harshad Ramaniklal Mehta Versus DCIT in ITA No.

Assessment year: 2006-07 Page 32 of 55 7307/Mum/2011 dated 04.09.2019 It may be relevant to point out that in this case there were four beneficiaries of the trust out of which two were non- resident. The proceeding against two persons were dropped by the AO itself as these two persons were nonresidents and the dispute before the ITAT was with respect to resident only. This fact has been captured in para 9 of the Order which is a Synopsis filed by the Revenue in the course of the hearing before the bench.

2. Deepak B Shah and Kunal N Shah Versus ACIT in dated 30.10.2018 3. Shri Dwarka Prasad Agarwal Versus ITO in ITA No. 4591/Mum/2016 dated 05.10.2017 Accordingly, even if the assessee was beneficiary no income can be imputed to her till the time the same is distributed. In the present case, there is no dispute to the fact that the assessee was not the settler of the trust and the trust was discretionary trust as per the information collected by the AO himself and forming part of the remand report. Pg 12 to 13, The CIT(A) has held that the assessee has It is submitted that it is a trite Para 22 not given the consent waiver form. law that the assessee cannot be asked to do what is impossible. It may be relevant to mention here that the assessee during the assessment proceedings have denied of having the bank account and also that she is not the signatory in the said bank account. The assessee has further filed an affidavit during the both assessment Assessment year: 2006-07 Page 33 of 55 and appellate proceedings confirming the above facts Pg 13, Para 23 The CIT(A) has held that the trust has only It is submitted that the one beneficiary i.e. the assessee. statement of the CIT(A) is factually incorrect. The trust has the beneficiaries mentioned in Schedule 2 of the Trust Deed wherein the beneficiaries include the settler as well. Thus, the additions in the hands of the assessee treating it to be the sole beneficiary is untenable and bad in law. Pg 14. Para 24 The CIT(A) has held that the assessee has The CIT(A) has put a negative failed to discharge the onus of explaining onus on the assessee. It is an the source of income. admitted fact that the assessee is a non-resident and accordingly only such income as has accrued or arisen or received or deemed to be received in India is chargeable to tax. The money is not in India as per the allegation itself. Thus, it was for the AO/CIT(A) to show that the money has accrued or arisen in India or was received in India. In fact, AO is ignoring the facts and the explanation of the assesses that she has been a non-resident all along and has no business connection whatsoever in India. The assessee having stated these facts and the same having not been rebutted or found false, the assessee has discharged its onus. It was for AO to demonstrate that the amount fall within the ambit of Indian Tax Law. Pg 14.Para 25 The CIT(A) has relied upon the judgment The CIT(A) has ignored the of Bombay High Court in the case of fact that this judgment was in Soignee R Kothari vs. DCIT a writ petition where the High Court has refused to invoke its extra ordinary jurisdiction under article 226. Further in this judgment in para 1. Further in this judgment in Assessment year: 2006-07 Page 34 of 55 para 15 it has been clearly stated that the court is not expressing any opinion on merits and the parties are entitled to raise all contentions available to it in law before the Authorities. Pg 14, Para 26 The CIT(A) on considering the remand This CIT(A) has himself report has held that admitted that the assessee is • the structure is that there cannot not the settler of the trust or be beneficiary of assets/income under the Shareholder or Director of consideration of AO without GWU Investment Ltd.. It was authorization of appellant. submitted that in order to • The CIT(A) again in this para has remove any apprehension the upheld the order of the AO on the assessee filed another affidavit reasoning that assessee is a citizen of before the CIT(A) on which India and has provided Indian Address. remand report was also called by the CIT(A) from the AO. In this affidavit, in para 4 it was categorically stated "4. That I never had any bank account with HSBC Bank, Geneva.

5. That I never been a signatory to any bank account with HSBC Bank, Geneva.

6. That I am neither a Director nor a Shareholder of GWU investment Ltd. in para 4 the source of deposits made in HSBC Bank in Geneva has no source in India." As discussed hereinabove under the Indian Tax Law income is chargeable to tax on the basis of the residential status and not on the basis of citizenship and the address. Pg 14, Para 27 The CIT(A) has rejected the affidavit filed This affidavit was filed as a to rebut the allegation of the AO in the matter of abundant caution Assessment Order that assessee has not filed since AO in the Assessment affidavit that the amount in HSBC Account Order in para 8.2 on page 8 of has not accrued or arisen in India. the Assessment order has stated that assessee is not above to commit in sworn affidavit that the source of deposits have no source in India. The CIT(A) has forwarded this affidavit to the AO and a remand report was also called for. This affidavit and even the earlier affidavit categorically stated that the Assessment year: 2006-07 Page 35 of 55 source of deposit in HSBC account have no source in India. The affidavit has been rejected arbitrarily ignoring the Mehta Parikh & Co. vs. CIT 30 ITR 181 (SC).

Assessment year: 2006-07 Page 36 of 55 22. In brief rejoinder, learned counsel submits that these sweeping generalizations have no relevance to the facts before us. The hard reality is that the account does not belong to the assessee, that there is no direct or indirect evidence to support that inference, that the assessee was only a beneficiary of a trust but the taxability in her hands must, at best, be confined to the monies actually received from the trust, that admittedly GWU Investments Ltd was owner of the account- in which neither the assessee is a director or a shareholder, and that, in any case, nothing remains in the account as the same stands closed now. It is then reiterated that the assessee is a non-resident and she cannot be taxed in respect of monies credited, even if that be so, in her accounts outside India. He once again reiterates that there is no evidence whatsoever of the assessee having account abroad, that whatever evidence has been given to the assessee is successfully controverted by the assessee, that assessee is a non-resident and her taxability is confined to the incomes sourced in India, and that, for the detailed reasons advanced by him, the impugned addition of Rs 196,46,79,146 in respect of assessee‟s alleged and non-existent bank account in HSBC Private Bank (Suisse) SA, Geneva, must be deleted. Our analysis on the merits of the impugned addition of Rs 196,46,79,146 in respect of assessee‟s account with HSBC Private Bank (Suisse) SA, Geneva. A: The backdrop 23. It is also important to recall the backdrop in which the information about assessee‟s account with the HSBC Private Bank (Suisse) SA was received by the Government of India. That will also refresh memories, and certain undisputed facts, about the “HSBC Private Bank Geneva scandal” as it is often referred to. In 2006, after a whistle-blower named Herve Falciani, an employee of HSBC Private Bank (Suisse) SA, Geneva, walked out with information on thousands of accounts, involving wealth hidden from taxmen, the bank came under the glare of multiple regulators for helping wealthy individuals hide millions. The employee fled to France, and in June 2011, the French government had shared the data on Swiss bank accounts with countries such as India, the US, UK, Canada and Australia”. That‟s how Government of India got the information about a large number of cases and this HSBC Bank scandal, involving unaccounted monies stashed away in Swiss Bank accounts, was also subject matter of Special Investigation Team set up under the chairmanship of former Supreme Court judge, Hon‟ble Justice M B Shah. The following BBC report about Herve Falciani, former HSBC Geneva employee, can perhaps throw some more light on the backdrop: Revelations that HSBC, one of the world's largest banks, helped some of its wealthy clients evade hundreds of millions of dollars worth of tax have made headlines across the world, but who is the man who lifted the lid on the scandal? On 22 December 2008, police in Switzerland detained Herve Falciani in Geneva. They interrogated the computer systems analyst for several hours, before releasing him under strict instructions to return the following morning. Mr Falciani, however, rented a car, collected his wife and two daughters and made a beeline for the French border. He telephoned the Swiss police from southern France, telling them he wanted to spend Christmas with his family in France, but that he would return in the new year.

Assessment year: 2006-07 Page 37 of 55 The then-36-year-old dual French-Italian national did not make good on this promise, however, and Swiss authorities have been trying to get their hands on him ever since, thus far to no avail. Depending on who you believe, Herve Falciani is either a courageous whistleblower responsible for exposing industrial-scale fraud at one of the world's largest banks that deprived governments in dozens of countries of many millions of pounds, or a cynical, calculating criminal who maliciously stole sensitive data on tens of thousands of clients with the intention of lining his own pockets. Lebanon trip Herve Falciani grew up in Monaco, which, he says, made going into the financial sector an "obvious choice". In 2000 he joined HSBC in the principality, before transferring to HSBC Private Bank (Suisse) in Geneva, Switzerland six years later. Between 2006 and 2007, he collected confidential data on more than 106,000 of the bank's customers from more than 200 countries, pertaining to more than 300,000 private accounts. Many of them belonged to prominent figures in business, film, music, sport, and even the heads of royal families. Thousands of pages pertaining to the accounts were obtained by French newspaper Le Monde and shared with the BBC and more than 50 other international media outlets. The publication of their findings has raised questions as to why HSBC did not do more to prevent tax evasion via its Swiss subsidiary. In early 2008, Herve Falciani flew to Lebanon with a colleague, Georgina Mikhael. She says the pair were lovers, and that he had confessed to her that he had joined HSBC in the first instance with the intention of obtaining sensitive client data to sell on to third parties. Herve Falciani transferred to HSBC Private Bank (Suisse) in 2006, having joined the company in his native Monaco six years earlier He denies any romantic connection between the pair, and says Ms Mikhael's involvement came about after men claiming to be agents of the Israeli intelligence agency Mossad instructed him to visit Lebanese banks and inform them of security breaches at HSBC Private Bank in order to dissuade clients from using clandestine money to fund terrorist activity. The pair set up meetings with four Lebanese bank managers, and while Herve Falciani used a pseudonym, Georgina Mikhael used her real name, and was promptly put under surveillance by Swiss authorities. She was subsequently questioned by police and gave Mr Falciani up, precipitating his arrest and flight from the country. Upon arrival in France, he downloaded confidential data on HSBC Private Bank accounts from remote servers and passed on five disks to French authorities, Assessment year: 2006-07 Page 38 of 55 who could not send him back to Switzerland because of laws preventing the extradition of French citizens. 'Speak the truth' The French government, through then-Finance Minister Christine Lagarde, who now heads the International Monetary Fund, in turn shared the data Mr Falciani had passed to them with other governments' tax bodies, leading to a number of prosecutions and orders for payment of outstanding taxes amounting to hundreds of millions of dollars. Mr Falciani was arrested on a Swiss arrest warrant and detained for more than five months in Spain in 2012. However, the Spanish government refused to extradite him to Switzerland the following year, saying violation of banking secrecy was not a crime in Spain, with the state prosecutor praising the former HSBC man as a whistleblower. In December 2014, the Office of the Attorney General of Switzerland levelled several charges against Herve Falciani, accusing him of qualified industrial espionage, unauthorised obtaining of data, and violation of banking secrecy, noting that "several bank customers" whose data he leaked were also involved as private claimants. As to his own motivations, Mr Falciani, who has a security detail provided by the French government due to concerns about his personal safety, says he feels a kinship with Edward Snowden, whose revelations about the snooping activity of the US National Security Agency sent shockwaves around the world in 2012. Mr Falciani says it's crucial that there are people who, "speak the truth and point out systemic problems," and believes that banks such as his former employer HSBC, "have created a system for making themselves rich at the expense of society, by assisting in tax evasion and money laundering. https://www.bbc.com/news/world-europe-31296007 24. One more BBC report, which could throw some light on the backdrop of this case, is also worth a look. This is as follows: India will investigate a new list containing names of Indians suspected to have parked untaxed wealth in a foreign bank, Finance Minister Arun Jaitley has said. Secret documents leaked from HSBC's private bank in Switzerland have revealed that it helped thousands of customers to evade taxes. The names of nearly 1,200 people from India feature in these papers. It is estimated that these Indians held $4bn (£2.63bn) in their accounts.

Assessment year: 2006-07 Page 39 of 55 India says illegal funds are often sent to tax havens, including Mauritius, Switzerland, Liechtenstein and the British Virgin Islands, and the new government has said "unearthing black money is an important issue" for them. Experts estimate that Indians hold $500bn (£297bn) in overseas tax havens. In June, India set up a special task force to find "black money", in one of the first decisions taken by the new Prime Minister, Narendra Modi. In October, the government gave a list of 627 names of Indians suspected of concealing wealth kept in HSBC from income tax authorities to the Supreme Court. The top court forwarded the list to the special investigation team (SIT) which is inquiring into the issue of illegal funds. On Monday, The Indian Express newspaper revealed the names of 1,195 Indians who held bank accounts with a total balance of $4bn in Switzerland with HSBC between 2006 and 2007. The list includes names of some politicians and powerful businessmen. Mr Jaitley said on Monday that all names will be investigated, but he also cautioned that some accounts might be legitimate. "Some new names have been revealed whose veracity would be checked by authorities," he said. The Indian names are part of a global list of account holders in HSBC's Swiss private banking arm and their balances for the year 2006-07. They include people from over 200 countries with a total balance of more than $100bn. HSBC has admitted that some individuals took advantage of the bank's secrecy clause to hold undeclared accounts. But it said it has now "fundamentally changed". The documents, stolen in 2007 by a computer expert working for HSBC in Geneva, contain details of more than 100,000 clients from around the world. Offshore accounts are not illegal, but many people use them to hide cash from the tax authorities. And while tax avoidance is perfectly legal, deliberately hiding money to evade tax is not. https://www.bbc.com/news/world-asia-india-31282677 25. These actions of the HSBC Private Bank (Suisse) SA have not gone unnoticed so far as law enforcement agencies. It had to face criminal investigations in several parts of the globe, and had to pay millions of dollars in settlement for its lapses. A rather recent press release dated 10th December 2019 from the US Department of Justice, which indicates the nature of aftermath it had to face and the collusion it had in systematic tax evasion by unscrupulous taxpayers from different parts of the world, is as follows:

Assessment year: 2006-07 Page 40 of 55 Department of Justice Office of Public Affairs FOR IMMEDIATE RELEASE Tuesday, December 10, 2019 Justice Department Announces Deferred Prosecution Agreement with HSBC Private Bank (Suisse) SA Bank Admits to Helping U.S. Taxpayers Conceal Income and Assets from the United States; Agrees to Pay $192.35 Million Penalty HSBC Private Bank (Suisse) SA (HSBC Switzerland), a private bank headquartered in Geneva, has entered into a deferred prosecution agreement (DPA) with the Department of Justice today in the U.S. District Court for the Southern District of Florida, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Department of Justice’s Tax Division, United States Attorney for the Southern District of Florida Ariana Fajardo Orshan, and Chief Don Fort for Internal Revenue Service (IRS), Criminal Investigation. HSBC Switzerland admitted to conspiring with U.S. taxpayers to evade taxes and, as part of the agreement, HSBC Switzerland will pay $192.35 million in penalties. “HSBC Switzerland conspired with U.S. accountholders to conceal assets abroad and evade taxes that every American must pay,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Department of Justice’s Tax Division. “Banks, asset managers and other financial firms enable such crimes – and we will hold these institutions to account, right along with the taxpayers that use them to facilitate and disguise illegal activities.” “Financial institutions that conspire with U.S. accountholders to hide income in undeclared bank accounts abroad, to avoid being held accountable for tax obligations and augment corporate profit, face substantial criminal and civil penalties for their illicit conduct,” said U. S. Attorney Fajardo Orshan for the Southern District of Florida. “In this case, HSBC Switzerland will pay a total civil and criminal fine of more than $192 million, to include a civil forfeiture of $71.8 million, for proceeds illegally derived from their conduct. We remain committed to the investigation and prosecution of individuals who evade their taxes and the financial institutions that assist them in doing so.” “Taxpayers and financial institutions each have the most basic responsibilities to pay taxes and report suspicious activity regarding financial transactions. When financial institutions devise a massive tax evasion scheme and actually facilitate the activity, they not only must be held accountable, they must take actions to ensure this behavior will not happen again,” said Don Fort, Chief, IRS Criminal Investigation. “The integrity of our nation’s tax system depends on voluntary compliance and fair, consistent enforcement of the law. We owe it to all Americans to hold financial institutions accountable just as we would hold individual taxpayers accountable. Today’s DPA shows that engaging in this type of behavior has consequences.” According to court documents, HSBC Switzerland admits that between 2000 and 2010 it conspired with its employees, third-party and wholly owned fiduciaries, and U.S. clients to: 1) defraud the United States with respect to taxes; 2) commit tax evasion; and 3) file false federal tax returns. In 2002, the bank had approximately 720 undeclared U.S. client relationships, with an aggregate value of more than $800 million. When the bank’s undeclared assets under management reached their peak in 2007, HSBC Switzerland held approximately $1.26 billion in undeclared assets for U.S. clients. According to the terms of the DPA, HSBC Switzerland will cooperate fully with the Tax Division and the IRS. The DPA also requires HSBC Switzerland to affirmatively disclose information it may later uncover regarding U.S.-related accounts, as well as to disclose Assessment year: 2006-07 Page 41 of 55 information consistent with the department’s Swiss Bank Program relating to accounts closed between Jan. 1, 2009 and Dec. 31, 2017. Under the DPA, prosecution against the bank for conspiracy will be deferred for an initial period of three years to allow HSBC Switzerland to demonstrate good conduct. The agreement provides no protection for any individuals. The $192.35 million penalty against HSBC Switzerland has three parts. First, HSBC Switzerland has agreed to pay $60,600,000 in restitution to the IRS, which represents the unpaid taxes resulting from HSBC Switzerland’s participation in the conspiracy. Second, HSBC Switzerland agreed to forfeit $71,850,000 to the United States, which represents gross fees (not profits) that the bank earned on its undeclared accounts between 2000 and 2010. Finally, HSBC Switzerland agreed to pay a penalty of $59,900,000. This penalty amount takes into consideration that HSBC Switzerland self-reported its conduct, conducted a thorough internal investigation, provided client identifying information to the Tax Division, and extensively cooperated in a series of investigations and prosecutions, as well as implemented remedial measures to protect against the use of its services for tax evasion in the future. According to court documents filed as part of the DPA, the bank assisted U.S. clients in concealing their offshore assets and income from U.S. taxing authorities. To conceal its clients’ assets and income from the IRS, HSBC Switzerland employed a variety of methods, including relying on Swiss bank secrecy to prevent disclosure to U.S. authorities, using code-name and numbered accounts and hold-mail agreements, and maintaining accounts in the names of nominee entities established in tax haven jurisdictions, such as the British Virgin Islands, Liechtenstein, and Panama, that concealed the client’s beneficial ownership of the accounts. In an effort to attract new U.S. clients, and maintain existing relationships with U.S. clients, HSBC Switzerland bankers took trips to the United States. Between 2005 and 2007, at least four HSBC Switzerland bankers traveled to the United States to meet at least 25 different clients. One banker also attended Design Miami, a major annual arts and design event in Miami, Florida, in an effort to recruit new U.S. clients to open undeclared accounts with HSBC Switzerland. In early 2008, in response to a public U.S. criminal investigation into UBS AG, the largest bank in Switzerland, for tax and securities violations in connection with its maintaining undeclared accounts for U.S. clients, HSBC Switzerland began a series of policy changes to restrict its cross-border business with U.S. persons, but the bank did not immediately cease that business. In fact, some HSBC Switzerland bankers assisted clients in closing their accounts in a manner that continued to conceal their offshore assets, such as withdrawing the contents of their accounts in cash. Acting Deputy Assistant Attorney General Goldberg, U.S. Attorney Fajardo Orshan, and Chief Fort commended special agents of IRS-Criminal Investigation, who investigated this case, as well as Senior Litigation Counsel Mark F. Daly, Assistant Chief Jason H. Poole, and Trial Attorney Grace E. Albinson of the Tax Division, who prosecuted this case. Acting Deputy Assistant Attorney General Goldberg also thanked Assistant U.S. Attorneys Thomas P. Lanigan and Danielle N. Croke of the Southern District of Florida, Assistant U.S. Attorney Gordon Kromberg of the Eastern District of Virginia, and agents with the U.S. Postal Service for their assistance in this case. Topic(s): Financial Fraud Tax Component(s): Tax Division USAO - Florida, Southern Press Release Number: 19-1368 Assessment year: 2006-07 Page 42 of 55 https://www.justice.gov/opa/pr/justice-department-announces-deferred-prosecution- agreement-hsbc-private-bank-suisse-sa [Emphasis, by underlining and by using bold letters, supplied by us] 26. As we refer to the above press reports, this is just to set the backdrop in which the present case is set out, and, as we go along, we will see relevance of this backdrop. B: Trust structures employed by HSBC Private Bank 27. Since a lot has been said about the assessee being a discretionary beneficiary of a trsut which is said to have the account with HSBC Private Bank (Suisse) SA Geneva, it may also be of some use to understand the nature of trust services offered by HSBC Private Bank, as stated on their website even today. Some of the relevant extracts are as follows:

Why consider trust and fiduciary services?

Trusts, foundations and other wealth structures help manage complex family wealth scenarios. They help to protect your family business and manage your wealth privately and independently, whilst providing continuity, preserving capital and helping family members enjoy financial benefits across generations.

Our trusts and other solutions are designed to suit your particular needs and ambitions, giving you a global structure for managing your wealth. Choosing a trustee Determining who will administer your structure is as important as your succession plan and the decision to create the structure itself. Trustees ultimately accept personal responsibility and legal liability for the financial Assessment year: 2006-07 Page 43 of 55 welfare of the trust fund, so selecting a responsible trustee to protect, manage and distribute the assets is a key decision that will have lasting implications. It is essential to have a trustee with professional legal knowledge and financial expertise, as the set up may involve generations of work, detailed record- keeping and co-ordination with lawyers, accountants and other advisers. Trusts and other structures involve complex management, in addition to often challenging financial and investment decisions. Basics of a trust A trust is a private arrangement whereby you, as the settlor, transfer the legal ownership of your assets (which then become the trust assets) to the trustee, who manages and holds the assets for the benefit of the beneficiaries. The beneficiaries may include you and your family. The benefits of using Private Wealth Solutions HSBC Private Wealth Solutions is one of the leading international private client trust businesses, with a history of more than 70 years. Our team is based across the globe and includes accountants, lawyers, bankers and trust specialists, whose skills and experience form the basis of the service we provide. These capabilities will help you develop and implement solutions that comply fully with all legal and regulatory requirements. We offer a full range of solutions and can hold a wide range of assets, within structures that are often designed to span generations of one family. While we are proud to be part of one of the most strongly capitalised banks in the world, we are happy to work with your preferred advisers and managers (and with other private banks). https://www.hsbcprivatebank.com/en/plan/wealth-planning/trust-administration 28. What is essentially implies that so far as the trust structures are concerned, it is a structure, to use the words of the HSBC Private Bank- parent company of the HSBC Private Bank (Suisse) SA Geneva, “whereby you, as the settlor, transfer the legal ownership of your assets (which then become the trust assets) to the trustee, who manages and holds the assets for the benefit of the beneficiaries. The beneficiaries may include you and your family”. The legal owner of the assets in a trust situation, even going by the HSBC Bank- as indeed a common knowledge, is a trustee in a fiduciary capacity and not the one who de facto owns the trust monies. It is also important to note that these trustees are sometimes provided by the HSBC Private Bank itself as the HSBC Private Bank takes pride in stating that their “team is based across the globe and includes accountants, lawyers, bankers and trust specialists, whose skills and experience form the basis of the service we provide”. It is also a common knowledge that trustees are often corporate entities based in the jurisdictions in which secrecy laws are very strict. B: The asesseee‟s conduct- Running with the hare and hunting with the hounds:

Assessment year: 2006-07 Page 44 of 55

Assessment year: 2006-07 Page 47 of 55

Profils client lies a la personne (Customer profiles linked to the person) Nom du profil client : GWU Investments Limited (customer profile name) Code profil client : 5091414771 (customer profile code) Date création du proifil : 26-07-2004 (creation date of profile) Date de clôture du profil non référence : (closure date of profile) (no reference) Statut de profil : Actif (profile status) (Active) nature de profil : Nominatif (profile nature) (nominative, or nominal) Type de client ; société domiciliée (Profile type) (domiciled company) Lien personne/ profil client : Beneficial owner (Person / customer profile link) Détails du lien ; BENEFICIAL OWNERSHIP/ BENEFICIARY (link details) Info Signatures : non référence (Signature Information) (no reference) Correspondance : envoyée au client (Correspondence) (sent to client) ……………………………………………………………….. ……………………………………………………………….

Assessment year: 2006-07 Page 48 of 55 personnes légales liées (related legal persons) nom-structure juridique : THE THARANI FAMILY SETTLEMENT (code BUP) (5090278408) (name- legal structure) lieu de domiciliation : non référence (place of domicile) (No reference) date de creation : non référence (creation date) (No reference) Date de cloture : non référence (closure date) (No reference) Adresses : non référence (Address) (No reference) [The information given above in italics, in the smaller font size, is English translation of text- as obtained through google translation tool] F: The factual position emerging in the light of the foregoing position, and our consideration to the stand of the assessee 39. The above base note also, under the heading „autres personnes liés aux profils clients‟, information about “other people linked to customer profiles” which includes information about two other family trusts, namely „Visions for the future‟ and „The Children Hope Foundation‟, and HSBC International Trustees Limited, Cayman Islands branch, as also some other individuals- apparently family members. However, one common thread in all these seven persons linked to the customer profile, is GWU Investments Limited, as “profil clients concernés” (i.e. relevant customer profile).

Assessment year: 2006-07 Page 49 of 55

Assessment year: 2006-07 Page 53 of 55 46. While we have noted the claim of the assessee that she is a discretionary beneficiary of Tharani Family Trust, that fact does not find mention in the base note. As we have clearly analyzed above, the base note shows that the assessee was beneficial owner or beneficiary of GWU Investments Ltd. We may add that in the remand report filed by the Assessing Officer, there is a reference to some unsigned draft copy of the trust deed having been filed before him but neither this deed is authentic nor is it placed before us in the paper-book. The assessee has not submitted the trust deed or any related papers but merely referred to a somewhat tentative claim made in a letter between one Mahesh Tharani, apparently a relative of the assessee and the HSBC Private Bank (Suisse) SA- an organization with a globally established track record of hoodwinking tax authorities worldwide. All that this letter, addressed to one Mahesh Tharani, states is “As per the request of director, we hereby confirm that, GWU Investments Ltd was holder of the account 1414771. According to our records GWU Investments Ltd. Used to be an underlying company of the Tharani Family Trust for which Mrs. Renu Tharani was a discretionary beneficiary. To the best of our knowledge, The Tharani Family Trust was terminated and none of the assets deposited with HSBC Private Bank (Suisse) SA were distributed to Mrs. Renu Tharani”. It is not clear as to how is the director, and of which company; if Mahesh Tharani was a director of GWU Investments Ltd, when he could share this letter, he could have as well shared the information. If he is not the director, he would have at least known the director because director requested the Bank to provide this information to Tharani. Nothing is clear, nor does the assessee throw any light on the same. Be that as it may, this letter does not show deny, nor show any material to controvert, what is stated in the base note i.e. GWU Investments Ltd and the assessee are linked as beneficial owner. There is no dispute that account was in the nominal name of GSW Investments Ltd but the question is who is the natural person beneficial owner thereof. As for the Trust, there is no corroborative evidence about the statement, but nothing turns thereon as well. The assessee being discretionary beneficiary owner of the trust, and beneficial owner of the underlying company, is not mutually exclusive anyway but the claim of the assessee being a discretionary beneficiary of the trust is without even minimal evidence. There is another letter from HSBC Private Bank (Suisse) SA to the assessee which states that “Further to your request, we hereby confirm that you, Mrs Renu Tharani, are not the holder nor, to the best of our knowledge, the beneficial owner of any account opened in the books of HSBC Private Bank (Suisse) SA. However, you are a discretionary beneficiary of a trust called the Tharani family Trust for which HSBC Guyerzeller Trust Company, acts as trustee. No bank account is maintained in the name of the trustee, and we confirm that you are not, nor have your even been, an authorized signatory on the bank account held in the name of the trust‟s underlying company”. As for the first statement made in this letter, it does not show why the base note records assessee as the beneficial owner of the company, and how does the bank reconcile these two conflicting positions taken. As regards the assessee being a discretionary beneficiary, nothing turns on it anyway for the reasons we have discussed earlier in this paragraph. As for assessee not being authorised signatory for GWU Investments Ltd, that is not even the case of the assessee or the position taken in the base note. An HSBC entity, i.e, HSBC Guyerzeller Trust Company, being a trustee for Tharani Family Trust shows that if it was indeed desired by the assessee, trust deed would have been available with the HSBC entity. It‟s a also a coincidence that with all this available information, neither the assessee asks for the trust deed nor does the HSBC share the same. On the contrary, assessee, in one of the communications to the Assessing Officer, specifically states her inability to furnish the same. What these letters state may have some truth- half truth or technical truth, but then these qualified truths are only different forms of falsehood in entirety. There is something seriously amiss in all this; something is rotten in the State of Assessment year: 2006-07 Page 54 of 55 Denmark. There is a series of coincidences, right from the HSBC account being closed after the information contained in the base note coming out and to the underlying company being removed from the name of Register of Companies in Cayman Island, right from assessee living in complete denial about any knowledge about a HSBC Private Bank (Suisse) SA account in her name to her lack of information about the company which is holding US $ 4 million for her, and, despite assessee being purportedly so clean in her affairs, her thwarting any efforts of the income tax department to get at the truth by declining to sign the consent waiver form. It is wholly un-understandable as to how can assessee, on one hand, seek to treat a cleverly worded private letter from HSBC Private Bank (Suisse) SA as gospel truth, and, on the other hand, effectively stall, by declining consent waiver and by stating half truths- even if her statements have an element of truth, the Assessing Officer obtaining direct information from the same organization. There is no meeting ground in this approach. In any case, for the reasons set out above and as evident from the base note, the assessee is beneficial owner of GWU Investments Ltd, Cayman Islands. There is nothing to controvert this fact stated in the base note, and since the assessee has declined consent waiver in this case, the assessee cannot decline correctness of the details obtained from the HSBC Private Bank (Suisse) SA.

Assessment year: 2006-07 Page 55 of 55 49. As we part with the matter, we have a couple of observations to make. The first observation is that we must add that though the hearing in this case was concluded on 28th January 2020, in view of Covid-19 lockdown in Mumbai city- which is, for all practical purposes, still continuing, with limited functionality of our office, the order is being pronouncement today on 16th July 2020. However, in the light of a coordinate bench decision in the case of DCIT Vs JSW Limited, and vice versa [(2020) 116 taxmann.com 565 (Mum)], the period of lockdown is to be excluded in computation of 90 days period. As further noted in the said order, Hon‟ble Bombay High Court has observed that “while calculating the time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly” and the said order continued to operate till 15th July 2020. Viewed thus, this order is being passed within the permissible time limit in terms of Hon‟ble High Court‟s directions. The second point is that this decision cannot be an authority for the proposition that wherever name of the assessee figures in a base note from HSBC Private Bank (Suisse) SA Geneva, an addition will be justified in each case. The mere fact of an account in HSBC Private Bank (Suisse) SA Geneva, by itself, cannot mean that the monies in the account are unaccounted, illegitimate or illegal. The conduct of the assessee, actual facts of each case and the surrounding circumstances are to be examined, on merits, and then a call is to be taken about as to whether the explanation of the assessee merits acceptance or not. There cannot be a short cut and one size fits all approach to this exercise. Our conclusions on correctness of addition of Rs 196.46 crores in relation to HSBC Private Bank (Suisse) SA, Geneva 50. In view of the above discussions, and for the detailed reasons set out above, we approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. The impugned addition of Rs 196,46,79,146, in respect of assessee‟s account with HSBC Private Bank (Suisse) SA, Geneva, is thus confirmed. Outcome of the appeal 51. In the result, the appeal is dismissed. Pronounced in the open court today on the 16th day of July, 2020.