In a landmark judgment, ITAT orders payment of tax on Rs 196 crore stashed abroad

A Swiss bank account holder, with a declared annual income of Rs 1.70 lakhs will now have to pay taxes on Rs 196 crores stashed abroad.

On Wednesday, Income Tax Appellate Tribunal (ITAT) Mumbai, in a crucial ruling, directed that over Rs 196 crores lying in an individual’s Swiss foreign account be brought to the tax.

The assessee, at this rate, would have taken, 15000 years to earn what was found in the trust,” it observed.

The ITAT dismissed an appeal filed by Renu T Tharani and confirmed the addition in respect of her account with HSBC Private Bank (Suisse), SA Geneva.

It recorded that assessee Renu T Tharani “is not a public a personality like Mother Teresa that some unknown person, with complete anonymity will settle a trust to give her US $ 4 million”

Further, it observed that the Cayman Islands is not known for philanthropists operating from there; if Cayman islands are known for anything relevant, it is known for an atmosphere conducive to hiding unaccounted wealth and money laundering.”

And, “this is a jurisdiction which has double the number of companies than residents, most of which remain only on paper and it will be naive to believe that these companies are located here, in a country with around 65,000 residents, for bonafide core activities, rather than the benefits of anonymity, secrecy and liberal tax laws,” the tribunal noted

It stated that “assessee is closely involved with the transaction and it is inconceivable that the assessee will have no direct knowledge of the owners of the underlying company and settlers of the trust which has her, as she herself puts it as the beneficiary of such a huge amount. This inference is all the more justified when we take into account the fact that the assessee has been non-cooperative and has declined to sign the consent waiver.”

Earlier, in response to the notice issued by the department of income tax, the assessee had denied ownership of the foreign account and objected to reopening of assessment.

The department of income tax recorded that the income to the the extent of UDD 3,97,38,122 has escaped assessment and under section 148 of the income tax act issued her a show-cause notice.

In 2006, the assessee filed her income and had declared an annual income of around Rs 1.70 lakhs.

The department, in 2014, decided to reopen the assessment.

Meanwhile, according to the tribunal, “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.”

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 the underlying company being removed from the name of Registrar of Companies in Cayman Islands, right from assessee’s living in complete denial about any knowledge about HSBC Private Bank account in her name to her lack of information about the company which is holding the US $ 4 million for her, and, despite assessed 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..The assessee is a beneficial owner of GWU investment Ltd, Cayman Islands”, the ITAT concluded.

A top official with direct knowledge of the matter said, this landmark decision would guide the revenue and government in unearthing the black money lying in tax havens.

And, assessee, will not be able to take refuge in technical pleas of not sharing the information etc, as presumption shall be drawn against the person and adverse inference would be drawn by the authorities, he said.

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