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Monday, September 21, 2020

Precedent for black money recovery: ITAT orders woman to pay taxes on undeclared deposit in Swiss bank account

Octogenarian Renu Tikamdas Tharani was found to be the beneficiary of the account that held $3.97 crore during financial year 2005-06 after the tax department began a reassessment proceeding in 2014 for the income tax return filed in 2006, wherein she had declared an income not liable to tax.

By: ENS Economic Bureau | New Delhi | July 18, 2020 12:14:16 am
black money, black money transfer, swiss bank accounts, itat, Renu Tikamdas Tharani, black money recovery  The ITAT said the account information in HSBC clearly showed that the assessee was a beneficial owner, adding that no reasonable person can accept her explanation as she is not a public personality like Mother Teresa that some unknown person will settle a trust to give her crore. (File photo/Representational Image)

An I-T assessee from Mumbai, who featured in the HSBC account leaks and had declared only Rs 1.7 lakh as income, has been ordered by the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) to pay taxes on undeclared deposit of Rs 196.5 crore kept in the Swiss bank account at HSBC Private Bank (Suisse) SA, Geneva for the concerned assessment year. The ITAT order is being seen as significant, with the tax authorities expected to refer to it for recovering black money stashed abroad going ahead.

Octogenarian Renu Tikamdas Tharani was found to be the beneficiary of the account that held $3.97 crore (or Rs 196.5 crore according to foreign exchange rate of that time) during financial year 2005-06 after the tax department began a reassessment proceeding in 2014 for the income tax return filed in 2006, wherein she had declared an income not liable to tax.

Tharani objected to the validity of the reassessment and the proposition that she was the beneficiary of the Swiss bank account in the name of a family trust.

The tribunal, however, held that the assessee’s conduct was like “running with the hare and hunting with the hounds” as she had declined to sign a ‘consent waiver’ so as to enable the income tax (I-T) department to obtain all the necessary details from the Swiss bank. The ITAT said the account information in HSBC clearly showed that the assessee was a beneficial owner, adding that no reasonable person can accept her explanation as she is not a public personality like Mother Teresa that some unknown person will settle a trust to give her $4 crore.

“It is also inconceivable that a Rs 200 crore beneficiary in a trust will not know about who has settled that trust. Similarly, while dealing with Cayman Island entities, living in denial about beneficial ownerships, and confining to legal ownerships, is preposterous,” the ITAT order said.

Shailesh Kumar, partner, Nangia & Co LLP, said, “This decision reinforces an important principle that conduct of the taxpayer and cooperation with the authorities, seen with overall circumstances play an important role in appellate authorities/courts deciding any issue. In cases involving deposits in Swiss Bank account or tax haven companies, where the general perception is already against the taxpayer of having any undeclared income, it is important to demonstrate from conduct of the taxpayers that necessary cooperation is made and all the facts are properly disclosed to the authorities.”

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