DEEPAK B. SHAH, MUMBAI V. ASST CIT 16(2), MUMBAI

ITA 6065/MUM/2014

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4300 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-08-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 29-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ROSHAN SHAH
• Keywords: Double taxation relief; Peak credit; Onus to prove
• Section: 143(3); 5(2); 133A; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI C N PRASAD, JUDICIAL MEMBER & SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NOS.6065 & 6066/MUM/2014 ASSESSMENT YEARS : 2006 2007 & 2007-08 DEEPAK B SHAH 61-A, 6 TH FLOOR, LAXMI VILAS, 87 NEPEAN SEA ROAD, MUMBAI 400 006. PAN AACPS0199L VS. ACIT 16(2) MUMBAI (APPELLANT) RESPONDENT) ITA NOS.6067 & 6068/MUM/2014 ASSESSMENT YEARS : 2006 2007 & 2007-08 KUNAL N SHAH, 501, GITANJALI GARDEN, 68E, NEPEAN SEA ROAD, RUNGATA LANE, MUMBAI 400 006 VS. ACIT 16(2) MUMBAI (APPELLANT) RESPONDENT) APPELLANTS BY : SHRI ROSHAN SHAH RESPONDENT BY : MS NEHA THAKUR DATE OF HEARING :09.10.2018 DATE OF PRONOUNCEMENT : 30.10.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER THESE FOUR APPEALS BY TWO DIFFERENT ASSESSEES ARE D IRECTED AGAINST THE TWO DIFFERENT ORDERS OF COMMISSIONER OF INCOME TAX(APPEALS)- 27 M UMBAI {(HEREINAFTER CALLED CIT(A)} EVEN DATED 01.08.2014 WHICH ARE IN TURN ARO SE OUT OF THE ASSESSMENT ORDERS OF ASSISTANT COMMISSIONER OF INCOME TAX , CI RCLE-16(2) (HEREINAFTER CALLED ITA NO.6065, 6066, 6067 & 6068/MUM/2014 DEEPAK B SHAH & KUNAL N SHAH 2 THE AO) PASSED U/S 143(3) 147 OF THE ACT DATED 18.0 3.2014 . 2. BOTH THE APPELLANTS HAVE CHALLENGED THE ORDERS OF THE LD. COMMISSIONER OF INCOME TAX(APPEALS) (HEREINAFTER CIT(A)) BASICALLY ON TWO COMMON ISSUES IN VARIOUS GROUNDS OF APPEAL. THE FIRST ISSUE IS AGAINST UPHOL DING OF RE-ASSESSMENT PROCEEDINGS U/S. 147 OF THE ACT AND SECOND ISSUE CH ALLENGED BY THE ASSESSEES IN UPHOLDING THE ADDITION TO THE TUNE OF RS.3,06,54,92 2/- IN AY 2006-07 AND RS. 2,74,007/- IN AY 2007-08 U/S. 69A OF INCOME TAX ACT EACH ON ACCOUNT OF DEPOSIT IN HSBC BANK, GENEVA. 3. AT THE TIME OF HEARING THE ASSESSEE DID NOT PRES S FOR THE GROUND ON RE- OPENING OF ASSESSMENT U/S 147 OF THE ACT. THUS THI S GROUND IS DISMISSED AS NOT PRESSED. 4. WITH REGARD TO SECOND ISSUE CHALLENGING THE ORDE R OF LD. CIT(A) CONFIRMING THE ADDITION TO THE TUNE OF RS.3,06,54,9 22/- AND RS. 2,74,007/- IN AY 2006-07 AND 2007-08 U/S. 69A OF THE ACT IN BOTH THE CASES OF THESE APPELLANTS, THE BRIEF FACTS ARE THAT BOTH ASSESSEES HAVE FIL ED THEIR RESPECTIVE INCOME TAX RETURNS FOR BOTH THE ASSESSMENT YEARS I.E. 2006-07 AND 2007-08 WHICH WERE PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUE NTLY NOTICES U/S 148 WAS ISSUED FOR REOPENING THE ASSESSMENT STATING THAT INCOME HA D ESCAPED ASSESSMENTS. THE ASSESSEES IN RESPONSE TO THE SAID NOTICE FILED LETT ERS REQUESTING TO TREAT THE RETURNS FILED ORIGINALLY TREATED AS RETURNS FILED IN RESPONSE TO NOTICES U/ S. 148 OF THE ACT. THE CASE OF BOTH THE ASSESSEES WERE RE-OPENED WHEN INFORMATION WAS RECEIVED BY GOVT. OF INDIA FROM FRENCH GOVERNMENT UNDER DTAA IN EXERCISE OF ITS SOVEREIGN ITA NO.6065, 6066, 6067 & 6068/MUM/2014 DEEPAK B SHAH & KUNAL N SHAH 3 POWERS THAT SOME INDIAN NATIONALS AND RESIDENTS HAV E FOREIGN BANK ACCOUNTS IN HSBC BANK, GENEVA, SWITZERLAND WHICH WERE NOT DISCL OSED TO THE INDIAN TAXATION DEPARTMENT. THE SAID INFORMATION WAS RECEIVED IN TH E FORM OF A DOCUMENT KNOWN AS BASE NOTE WHEREIN VARIOUS PERSONAL DETAILS OF ACC OUNT HOLDERS SUCH AS NAME, DATE OF BIRTH, PLACE OF BIRTH, SEX/GENDER, RESIDENTIAL A DDRESS, PROFESSION, NATIONALITY, DATE OF OPENING OF BANK ACCOUNT IN HSBC BANK, GENEVA AND BALANCES IN CERTAIN YEARS ETC. WERE MENTIONED. IN 2011 AFTER RECEIVING BASE NOTE WITH THE DETAILS AS MENTIONED ABOVE AS A PART OF SWISS LEAKS, THE INVESTIGATION W ING OF INCOME TAX DEPARTMENT CONDUCTED A SURVEY U/S. 133A OF THE ACT ON 30.09.20 11 AT THE PREMISES OF M/S. KANUBHAI B. SHAH AND CO. DURING THE COURSE OF SURVE Y PROCEEDINGS THE BASE NOTE WAS SHOWN TO THE ASSESSEES AND IT WAS INDICATED THA T THE REVENUE WAS OF THE VIEW THAT BOTH THE ASSESSEES HAVE FOREIGN BANK ACCOUNT. BOTH THE ASSESSEES DENIED HAVING ANY KNOWLEDGE OF ANY FOREIGN BANK ACCOUNT WI TH HSBC, GENEVA DURING THE COURSE OF SURVEY PROCEEDING ITSELF. BESIDES NO INCR IMINATING MATERIAL WAS FOUND DURING THE COURSE OF SURVEY. AS A MATTER OF FACT TH E SAID ACCOUNT WITH HSBC BANK, GENEVA WAS OPENED IN 1997 BY AN OVERSEAS DISCRETION ARY TRUST KNOWN AS BALSUN TRUST SET UP BY SHRI DIPENDU BAPALAL SHAH AN NRI SI NCE 1979 AND A NON-RESIDENT U/S. 6 OF THE INCONE TAX ACT. SHRI DEEPAK SHAH AND SHRI KUNAL SHAH THE TWO APPELLANTS BEFORE US WITH INDIAN RESIDENCY WERE NA MED AS DISCRETIONARY BENEFICIARIES OF THE SAID TRUST. SHRI DIPENDU BAPAL AL SHAH FURNISHED AN AFFIDAVIT DATED 13/10/2011 DULY SWORN IN BEFORE UAE AUTHORITY IN WHICH HE STATED ON OATH :- (I) HE HAD SETTLED ON AN OFFSHORE DISCRETIONARY TRUST W ITH HIS INITIAL CONTRIBUTION; (II) NONE OF THE DISCRETIONARY BENEFICIARIES HAVE CONTRI BUTED ANY FUNDS TO THE TRUST; ITA NO.6065, 6066, 6067 & 6068/MUM/2014 DEEPAK B SHAH & KUNAL N SHAH 4 (III) NONE OF THE BENEFICIARIES HAVE RECEIVED ANY DISTRIB UTION FROM THE TRUST. THEREAFTER SHRI DEEPAK SHAH AND SHRI KUNAL SHAH, TH E APPELLANTS ALSO FURNISHED SWORN IN AFFIDAVITS DATED 05/11/2011 STATING THAT T HEY WERE NOT AWARE OF THE EXISTENCE OF ANY THE ACCOUNTS IN HSBC, GENEVA, SWIT ZERLAND NOR KNOWN ABOUT THE MENTION OF THEIR NAMES IN THE SAID ACCOUNTS. THEY FURTHER STATED THAT THEY HAD NOT CARRIED OUT ANY TRANSACTIONS IN RELATION TO THE SAI D ACCOUNT NOR RECEIVED ANY BENEFIT FROM THE SAID ACCOUNT OR DISCRETIONARY TRUST, BESID ES AFFIRMING THAT THEY HAVE NOT SIGNED ANY DOCUMENT IN RELATION TO OPENING OR OPERA TING OF THE SAID BANK ACCOUNT. IN ADDITION THE ASSESSEES SUBMITTED A CLARIFICATORY LETTER FROM HSBC BANK, GENEVA STATING THAT BOTH THE ASSESSEES HAVE NEITHER VISITE D NOR OPENED OR OPERATED THE SAID BANK ACCOUNT AND THAT NO PAYMENTS HAVE BEEN RECEIVE D OR MADE IN RELATION TO THE SAID ACCOUNT. HOWEVER NOT CONVINCED WITH THE SUBMIS SIONS OF THE ASSESSEE, THE ASSESSING OFFICER AFTER INITIATING THE PROCEEDINGS U/S. 147 OF THE ACT AND ADDED PEAK BALANCE I.E. IN THE HANDS OF BOTH THE APPELLAN TS AT RS. 6,13,09,845/- AND RS. 5,99,75,370/- FOR ASSESSMENT YEAR 2006-07 AND 2007- 08 RESPECTIVELY BY FRAMING ASSESSMENTS U/S 143(3) R.W.S. 147 OF THE ACT. THUS THE SAME ADDITIONS WERE MADE IN THE HANDS OF TWO ASSESSEES. IT IS ALSO PERTINENT TO NOTE THAT SAME ADDITIONS WERE ALSO MADE IN THE HANDS OF SHRI DIPENDU BAPALAL SHAH WHO CREATED THE PRIVATE DISCRETIONARY TRUST KNOWN AS BALSUN TRUST. SO THE SAME ADDITIONS WERE MADE IN THE HANDS OF THREE ASSESSEE. 5. IN THE APPELLATE PROCEEDINGS THE LD. COMMISSIONE R OF INCOME TAX(APPEALS) [CIT(A)] AFFIRMED THE ADDITION TO THE TUNE OF HALF OF THE PEAK BALANCE IN THE HANDS OF BOTH THE ASSESSEES/APPELLANTS TO AVOID DOUBLE TA XATION AND NOW THE APPELLANTS ITA NO.6065, 6066, 6067 & 6068/MUM/2014 DEEPAK B SHAH & KUNAL N SHAH 5 HAVE CHALLENGED THE IMPUGNED ORDER OF THE LD. CIT(A ) QUA THE ADDITION SUSTAINED EQUAL TO 50% OF PEAK BALANCE. IT IS PERTINENT TO ME NTION THAT IN THE HANDS OF SHRI DIPENDU BAPALAL SHAH THE REVENUE ADDED THE SAME PEA K BALANCE VIDE ASSESSMENT ORDER DATED 03/03/2015 FOR ASSESSMENT YEARS 2006-0 7 AND 2007-08. AS A RESULT, THE PEAK BALANCES WERE ADDED THRICE BY REVENUE IN T HE HANDS OF BOTH THE APPELLANTS IN TWO SUCCESSIVE ASSESSMENT YEARS AND ALSO IN THE CASE OF SHRI DIPENDU BAPALAL SHAH IN THE SAME YEARS. IN THE APPELLATE PROCEEDING S OF SHRI DIPENDU BAPALAL SHAH, THE LD. CIT(A) VIDE ORDER DATED 28/3/2016 SET ASIDE THE ADDITION ON THE BASIS THAT AS AN NRI, NONE OF HIS BUSINESS MONIES EARNED OUTSIDE INDIA COULD BE BROUGHT TO TAX IN INDIA UNLESS THEY ARE SHOWN TO HAVE ARISEN OR AC CRUED IN INDIA. HE ALSO HELD THAT THERE WAS NO LINKAGE OF THE AMOUNTS TO INDIA AND TH E REVENUE HAS NOT DISCHARGED ITS DUTY ON THIS ISSUE . THE SAID ORDER OF CIT(A) I N THE CASE OF SHRI DIPENDU BAPALAL SHAH WAS ALSO UPHELD BY TRIBUNAL IN ITA NO. 4751 & 4752/MUM/2016 AY 2006-07 & 2007-08 DATED 19.06.2018. THE HONBLE TRIBUNAL U PHELD THE ORDER OF THE LD. CIT(A) IN THE CASE OF SHRI DIPENDU BAPALAL SHAH, ON THE GROUND THAT CONTENTS OF THE AFFIDAVIT DATED 13.10.2011 WERE NOT DENIED OR PROV ED TO BE NOT TRUE BY THE ASSESSING OFFICER. FURTHER, IT WAS HELD THAT THE B ANK ACCOUNT OF HSBC BANK, GENEVA IS OUTSIDE THE PURVIEW OF THE IT ACT, AS SHRI DIPEN DU BAPALAL SHAH IS A NON RESIDENT INDIAN. 6. AT PRESENT THE APPEALS OF TWO ASSESSEES BEFORE US VIZ. SHRI DEEPAK B SHAH & SHRI KUNAL N SHAH, ARE BEING DEALT BY US FOR A.YS 2 006-07 AND 2007-08, WHEREAS THE APPEALS OF SHRI DIPENDU BAPALAL SHAH HAS BEEN D ECIDED BY THE TRIBUNAL, AS STATED ABOVE. AS STATED EARLIER, THERE WAS A PEAK CREDIT OF RS. 6,13,09,845/- IN A.Y. ITA NO.6065, 6066, 6067 & 6068/MUM/2014 DEEPAK B SHAH & KUNAL N SHAH 6 2006-07 AND RS. 5,99,75,370/- IN A.Y. 2007-08, WHIC H WERE IN THE CASE EACH OF THREE DIFFERENT ASSESSEES VIZ. SHRI DIPENDU BAPALAL SHAH, SHRI DEEPAK B SHAH & SHRI KUNAL N SHAH. IN THE CASE OF SHRI DIPENDU BAPALAL SHAH, THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE CIT(A) AND SUCH DECISION HAS ALSO BEEN UPHELD BY THE TRIBUNAL. HOWEVER, IN THE CASE OF PR ESENT APPELLANTS, THE AMOUNTS HAVE BEEN REDUCED TO RS. 3,06,54,923/- AND RS. 2 ,74,007/- FOR A.YS 2006-07 AND 2007-08 RESPECTIVELY IN THE CASE OF THESE ASSESSEES BY THE LD CIT(A). 7. THE LEARNED AR VEHEMENTLY SUBMITTED BEFORE US TH AT THE ORDER OF THE CIT(A) IS FACTUALLY INCORRECT AND AGAINST THE SETTLED POSI TION OF LAW IN AS MUCH AS IN SUSTAINING PART OF THE PEAK BALANCE IN THE ACCOUNT OF BALSUN TRUST, AN OVERSEAS DISCRETIONARY TRUST, WITH HSBC, GENEVA, WHICH WAS C REATED BY SHRI DIPENDU BAPALAL SHAH, WHO IS AN NRI SINCE 1979, AND A NON-RESIDENT UNDER SECTION 6 OF THE INCOME TAX ACT, 1961. THE LEARNED COUNSEL ARGUED THAT SHR I DEEPAK B SHAH AND SHRI KUNAL N SHAH ARE INDIAN RESIDENTS AND HAVE BEEN NAMED AS DISCRETIONARY BENEFICIARIES OF THE SAID TRUST. THIS FACT HAS BEEN CORROBORATED B Y SWORN IN AFFIDAVIT DATED 13.10.2011 BEFORE THE UAE AUTHORITY OF SHRI DIPEND U BAPALAL SHAH, ASSERTING THAT (I) HE HAD SETTLED AN OFFSHORE DISCRETIONARY TRUST WITH HIS INITIAL CONTRIBUTION; (II) NONE OF THE DISCRETIONARY BENEFICIARIES HAVE CONTRI BUTED ANY FUNDS TO THE TRUST AND (III) NONE OF THE BENEFICIARIES HAVE RECEIVED ANY D ISTRIBUTION FROM THE TRUST. THE LEARNED COUNSEL FURTHER SUBMITTED THAT PEAK BALANCE S IN TWO YEARS IN THE HSBC ACCOUNT OF BALSUN TRUST, CREATED BY SHRI DIPENDU BA PALAL SHAH OF RS. 6,13,09,8745/- AND RS. 5,99,75,370/- WERE ADDED IN THE ASSESSMENT YEARS 2006-07 AND 2007-08 OF THE SAID NRI BUT WERE DELETED BY T HE CIT(A) ON THE GROUND THAT HE ITA NO.6065, 6066, 6067 & 6068/MUM/2014 DEEPAK B SHAH & KUNAL N SHAH 7 IS A NON-RESIDENT UNDER SECTION 6 OF THE INCOME TAX ACT, 1961 AND SUCH DECISION OF CIT(A) HAS ALSO BEEN UPHELD BY THE TRIBUNAL VIDE OR DER DATED 19.06.2018. THE LEARNED COUNSEL ARGUED THAT THE PEAK BALANCES IN T WO YEARS IN THE HSBC ACCOUNT HAVE ALREADY BEEN HELD TO BE IN THE OWNERSHIP OF S HRI DIPENDU BAPALAL SHAH AND WAS NOT TAXABLE IN HIS HANDS ON ACCOUNT OF HIS NRI STATUS. HE FURTHER CONTENTED THAT, IN ANY CASE, IN THE ABSENCE OF ANY PROVEN LIN KAGE OF THE AMOUNTS TO INDIA THE AMOUNTS CANNOT BE ADDED AND TAXED IN THE HANDS OF P RESENT APPELLANTS. FURTHER, THE LEARNED AR ARGUED THAT THERE IS A CLEAR ASSERTI ON BY SHRI DIPENDU BAPALAL SHAH THAT THE MONEY LYING IN HSBC ACCOUNT BELONGED TO HI M AND THE DEPARTMENT HAS FAILED TO PROVE THE SAID ASSERTION TO THE CONTRARY BY BRINING ANY COGENT EVIDENCE ON RECORD. THEREFORE, HE CONTENDED THAT THERE IS NO R EASON AS TO WHY AND HOW THE SAID AMOUNTS CAN BE TAXED IN THE HANDS OF THE PRESE NT APPELLANTS. HE FURTHER SUBMITTED THAT IT IS A WELL SETTLED POSITION OF LAW THAT DECISION OF CO-ORDINATE BENCHES OF THE TRIBUNAL ARE BINDING ON OTHER CO-ORD INATE BENCHES BY RELYING ON THE DECISION IN THE CASE OF S. I. ROOPLAL AND ORS. VS. LTD. GOVERNOR THROUGH CHIEF SECRETARY, DELHI AND ORS (2000) (1 SCC 644) AND HAT KESH CO-OP. HSG. SOCIETY LTD VS ASSTT. COMMISSIONER OF INCOME TAX CIRCLE21(2), M UMBAI ITA NO. 328 OF 2014. THE LEARNED AR SUBMITTED THAT IN THE PRESENT CASE, THE CO-ORDINATE BENCH HAS HELD THAT SHRI DIPENDU BAPALAL SHAH IS THE OWNER OF THE FUNDS IN QUESTION AND HE BEING A NON-RESIDENT, THE SAID AMOUNTS CANNOT BE BOUGHT TO TAX IN INDIA UNDER SECTIONS 5 AND 9 OF THE INCOME TAX ACT. HE, THEREFORE, CONTEN DED THAT THE SAID FUNDS IN THE HSBC ACCOUNT ARE BEYOND THE PURVIEW OF INCOME TAX A CT. ON THE SAME ANALOGY, THE LEARNED AR SUBMITTED THAT IN VIEW OF THESE FIND INGS RENDERED BY THE CO-ORDINATE ITA NO.6065, 6066, 6067 & 6068/MUM/2014 DEEPAK B SHAH & KUNAL N SHAH 8 BENCH OF THE TRIBUNAL IN THE CASE OF SHRI DIPENDU B APALAL SHAH, THE AMOUNT IN QUESTION CANNOT BE BROUGHT TO TAX IN THE HANDS OF P RESENT APPELLANTS. 8. FURTHER, THE AR SUBMITTED THAT THE PROVISIONS OF SECTION 69A OF THE IT ACT HAVE WRONGLY BEEN INVOKED BY THE AO AND CONFIRMED B Y THE LEARNED CIT(A). IT IS SUBMITTED THAT IT IS SINE QUA NON FOR THE INVOCATI ON OF SECTION 69A OF THE IT ACT THAT THE ASSESSEE MUST BE FOUND TO BE THE OWNER OF THE M ONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLES BUT IN THE PRESENT CASE THE RE IS NOTHING OF THE SORT. THE LEARNED AR FURTHER RELIED ON THE FOLLOWING DECISION S IN DEFENCE OF HIS ARGUMENTS : CIT VS. K CHINNATHAMBAN [2007] 162 TAXMAN 459 (SC) DURGA KAMAL RICE MILLS V. CIT [2003] 130 TAXMAN 553 (CAL) CIT VS. KTMS MOHAMOOD [1997] 92 TAXMAN 169 (MADRAS) IT IS UNDISPUTED THAT THE MONEY LYING IN THE FOREIG N BANK ACCOUNT WITH HSBC, GENEVA, BELONGS TO SHRI DIPENDU BAPALAL SHAH , WHO HAS AGREED THAT THE APPELLANTS ARE DISCRETIONARY BENEFICIARIES AND IT WAS HE WHO C REATED THE TRUST WITH HIS INITIAL CONTRIBUTION. HE ALSO CONFIRMED THAT THE TWO BENEF ICIARIES VIZ. THE APPELLANTS BEFORE US, HAVE NOT CONTRIBUTED ANYTHING TO THE SAID TRUST NOR DID THEY RECEIVE ANY MONEY BY WAY OF DISTRIBUTION DURING THE YEAR. THE SAID U NDISPUTED FACT THAT SHRI DIPENDU BAPALAL SHAH IS OWNER OF MONEY LYING IN THE HSBC ACCOUNT, GENEVA, LEADS TO T HE POSITIVE INFERENCE THAT THE APPELLANTS ARE NOT OWNE RS OF THE BANK ACCOUNT AND, THEREFORE, ADDITION MADE U/S. 69A IS NOT SUSTAINABL E. THE LEARNED COUNSEL SUBMITTED THAT EVEN THE ITAT VIDE ORDER DATED 19.06 .2018 HELD THAT THE MONEY LYING IN THE HSBC ACCOUNT, GENEVA, IS OUTSIDE THE PURVIEW OF THE I.T ACT, AND, ITA NO.6065, 6066, 6067 & 6068/MUM/2014 DEEPAK B SHAH & KUNAL N SHAH 9 THEREFORE, THE SAID MONEY HELD BY A NON- RESIDENT IN A FOREIGN BANK ACCOUNT CANNOT BE TAXED IN THE HANDS OF THE TWO APPELLANTS, AS THE APPELLANTS IN THEIR RESPECTIVE AFFIDAVITS DENIED THE OWNERSHIP OF THE SAID MONEY. 9. THE LEARNED AR FURTHER SUBMITTED THAT NO TAX CAN BE LEVIED IN THE HANDS OF THE PRESENT APPELLANTS, WHO ARE DISCRETIONARY BENEF ICIARIES OF THE SAID TRUST AND HAVE NOT RECEIVED ANY DISTRIBUTION FROM THE SAID TRUST. THE LEARNED AR FURTHER STATED THAT IT IS SETTLED PRINCIPLE OF THE TAXATION OF TRUSTS THAT THE BENEFICIARY OF A DISCRETIONARY TRUST IS NOT LIABLE TO TAX IN RESPECT OF INCOME OF THE TRUST UNLESS IT IS DISTRIBUTED TO SUCH BENEFICIARY. HE, THEREFORE, PL ACED RELIANCE ON THE FOLLOWING: CIT VS. SMT. KAMALINI KHATAU 74 TAXMAN 392 (SC) CWT RAJKOT VS. ESTATE OF HMM VIKRAMSINHJI OF GONDAL 45 TAXMANN.COM 552 (SC) HE FURTHER SUBMITTED THAT IN VIEW OF THE RATIO LAID DOWN IN BOTH THESE DECISIONS, IT IS THE TRUSTEE WHO IS THE REPRESENTATIVE ASSESSEE OF A TRUST AND IN WHOSE HANDS THE INCOME OF THE TRUST IS TO BE ASSESSED. A DISCRETIO NARY BENEFICIARY CAN NEVER BE TAXED UNTIL AND UNLESS HE HAS RECEIVED A DISTRIBUTION FRO M THE TRUST, AND EVEN THEN, SUCH BENEFICIARY CAN ONLY BE TAXED TO THE EXTENT OF SUCH ACTUAL DISTRIBUTION. THE LEARNED AR FURTHER SUBMITTED THAT IT IS WELL SETTLE D THAT A CHARGING PROVISION UNDER A TAXING STATUTE MUST BE STRICTLY INTERPRETED AND THERE CAN BE NO IMPOSITION OF TAX BY IMPLICATION. THE LEARNED AR IN SUPPORT OF HIS CONTENTIONS RELIED ON THE FOLLOWING DECISIONS : CWT VS. ELLIS BRIDGE GYMKHANA [1998] (1 SCC 384) A.V FERNANDEZ VS. STATE OF KERALA [AIR 1957 SC 657 ] CIT VS. KASTURI & SONS LTD. [3 SCC 346] ITA NO.6065, 6066, 6067 & 6068/MUM/2014 DEEPAK B SHAH & KUNAL N SHAH 10 HE FURTHER CONTENDED THAT AS PER THE PROVISIONS OF SECTION 5 AND 9 READ WITH SECTIONS 160- 166 OF THE I T ACT, QUA A TRUST, THE STATUTE CLEARL Y PRESCRIBES A LIABILITY OF TAX IN THE HANDS OF THE TRUS TEE, AND STIPULATES THAT A DISCRETIONARY BENEFICIAR Y HAVING RECEIVED NO DISTRIBUTION WILL NOT BE LIABLE TO TAX. AS SUCH THE PROVISIONS REQUIRE TO BE READ STRICTLY AND NO TAX LIABILITY CA N BE IMPUTED TO THE APPELLANTS AS DISCRETIONARY BENEFICIARIES WHEN TH E STATUTE SPECIFICALLY PROVIDES OTHERWISE. THEREFORE, IN VIEW OF THE FACT THAT AMOUNTS LYING I N THE HSBC ACCOUNT, GENEVA BELONGED TO SHRI DIPENDU BAPALAL SHAH, THE ADDITION OF PEAK BALANCES IN THE HANDS OF THE APPELLANTS IN A.Y. 2006-07 AND 2007-08 SHOUL D BE DELETED. 10. THE LEARNED COUNSEL ALSO CONTENDED THAT IT IS WELL SETTLED PROPOSITION OF LAW THAT THE ONUS TO PROVE THE TAXABILITY OF PARTICULAR INCOME IS HEAVILY ON THE DEPARTMENT. THE LD COUNSEL CONTENDED THAT THE REVENUE OUGHT TO HAVE DISCHARGED ITS BURDEN OF PROOF TO PROVE THE OWNERSHIP QUA THE APPELLANTS AND COULD NOT HAVE SHIFTED THE ONUS OF PROOF ON THE ASSESSE ES UNDER THE I T ACT. HE FURTHER STATED WHERE THE LEGISLATURE SPECIFICALLY INTENDED TO SHIF T THE BURDEN OF PROOF UNDER THE IT ACT TO THE ASSESSEE, SPECIFIC PROVISIONS U/S 278D, 278E AND 292C OF THE ACT HAVE BEEN ENACTED. IN VIEW OF THE SAID PROVISIONS, THE LEARNED COUNSEL SUBMITTED THAT SHIFTING OF THE ONUS OF PROOF UNDER THE IT ACT IS O NLY ENVISAGE D ONLY IN RESPECT OF SPECIFIC PROVISIONS AND CANNOT BE PRESSED INTO PLAY IN ANY OTHER SITUATION. IN THE PRESENT CASE, THE REVENUE IS PLACING AN IMPOSSIBLE BURDEN ON THE APPELLANTS TO PROVE A NEGATIVE THAT THE ACCOUNT HAS NOT BEEN OPE NED BY THE APPELLANTS AND THAT THEY HAVE NOT RECEIVED ANY DISTRIBUTION FROM THE SA ID A CCOUNT, WHICH IS CONTRARY TO VARIOUS PRECEDENTS WHICH HAVE CLEARLY HELD THAT NO SUCH BURDEN OF PROOF CAN BE ITA NO.6065, 6066, 6067 & 6068/MUM/2014 DEEPAK B SHAH & KUNAL N SHAH 11 PLACED ON AN ASSESSEE UNDER A TAXING STATUTE. THE ASSESSEE RELIED HEAVILY ON TWO DECISIONS VIZ., K P VARGHESE VS. ITO 4 SCC 137 AND ADVANI OERLIKON LTD. AND ANR. VS. UOI AND ORS [1981 ELT 432] . IN THE PRESENT CASES, THE APPELLANTS HAVE CLEARL Y STATED THAT THEY ARE NOT THE OWNERS OF THE BANK ACC OUNT AND ALSO TIME AND AGAIN CONFIRMED BY WAY OF SWORN IN AFFIDAVITS THAT BANK ACCOUNT DOES N OT BELONG TO THEM NOR DID THEY ENTER INTO ANY TRANSACTION IN RELATION TO THE SAID ACCOUNT NOR RECEIVED ANY BENEFIT FROM THE SAID ACCOUNT. ADDITIONALLY, IT WAS ALSO SUBMITTED THAT APPELLANTS HAVE NOT EXEC UTED OR SIGNED ANY DOCUMENTS IN RELATION TO OPENING OR OPERATING THE ACCOUNT. IT IS NOTEWORTHY THAT THE S URVEY U/S. 133A OF THE ACT AT THE KBS PREMISES DID NOT YIELD ANY INCRIMINATING EVIDENCE QUA THE APPELLANTS. THE LEARNED COUNSEL FINALLY SUBMITTED THAT THE PRESUMPT ION SOUGHT TO BE RAISED BY THE REVENUE STANDS REBUTTED BY THE CONSISTENT, CLEAR AN D UNEQUIVOCAL STATEMENTS OF THE APPELLANTS AFFIRMING THAT THE FUNDS IN THE BANK ACC OUNT BELONG TO THE NON- RESIDENT SHRI DIPENDU BAPALAL SHAH AND NO DISTRIBUTI ON HAS BEEN MADE TO THE APPELLANTS. THE LEARNED AR FINALLY SUBMITTED THAT IN VIEW OF TH E TOTALITY OF FACTS AND RATIO LAID DOWN BY VARIOUS COURTS, THE ADDITION AS SUSTAINED B Y THE CIT(A) DESERVES TO BE DELETED. 11. THE LEARNED DR, ON THE OTHER HAND, RELIED HEAVILY ON THE ORDER OF CIT(A) BY SUBMITTING THAT THE CLAIM OF THE AR THAT THE SAM E AMOUNT HAS BEEN ASSESSED THRICE IN THE HANDS OF THREE INDIVIDUALS IS WRONG A S THE LEARNED CIT(A) HAS VERY FAIRLY REDUCED THE ADDITIONS OF THE PEAK BALANCES T O HAL F OF THE PEAK. THE LD DR FURTHER STATED THAT THE AFFIDAVITS FILED BY BOTH TH E APPELLANTS ARE SELF SERVING DOCUMENTS WITHOUT ANY CORROBORATIVE OR EVIDENTIARY VALUE. HE SUBMITTED THAT IN THE ITA NO.6065, 6066, 6067 & 6068/MUM/2014 DEEPAK B SHAH & KUNAL N SHAH 12 AFFIDAVIT OF SHRI DIPENDU BAPALAL SHAH THERE WAS NO DETAILS OF FAMILY MEMBERS OF THE DEPONENT AND, THEREFORE, SAID DOCUMENT IS SELF SERVING WITHO UT ANY EVIDENTIARY VALUE. THE LEARNED DR REFERRING TO PAGE 11 OF THE PAPER- BOOK, WHICH IS A CONFIRMATION SUBMITTED BY THE BANK SUBMITTED THAT H SBC BANK HAS CONFI RMED THE NAME OF DEEPAK B SHAH AND KUNAL N SHAH (THE ASSESSE ES). HE ALSO SUBMITTED THAT THE NAME OF THE ASSESSEES HAVE BEEN MENTIONED IN T HE INFORMATION RECEIVED BY GOVERNMENT OF INDIA AS A PART OF SWISS LEAKS IN RELATION TO HSBC BANK, GENEVA, BY WAY OF BASE NOTE BY REFERRING TO PAGE 1 OF THE PAPE R- BOOK. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS REFUSED TO SIGN ANY CONSENT P APER, WHICH CLEARLY SHOWED THAT THE SAID TRANSACTIONS ARE PROVED BEYOND DOUBT THAT THESE TWO ASSESSES HAV E CONNECTION WITH THE SAID BANK ACCOUNT. FURTHER, BO TH THE ASSESSEES DID NOT CO- OPERATE AT ANY STAG E OF THE PROCEEDINGS. HE FURTHER SUBMITTED THAT TH E FIRST APPELLATE AUTHORITY HAS VERY CLEARLY HELD THAT IN SUCH CLANDESTINE OPERATIONS AND TRANSACTIONS, IT IS IMPOSSIBLE TO HAVE DIRECT EVIDE NCES OR DEMONSTRATIVE PROOFS OF EVERY MOVE OF THE ASSESSEE . THE INCOME TAX LIABILITY IS TO BE ASSESSED ON TH E BASIS OF PARAMETERS, WHICH ARE GATHERED FROM THE INQUIRIE S DURING THE COURSE OF ASSESSMENT. THEREFORE, HE CONFIRMED THAT THE AO HA S NO CHOICE BUT TO TAKE RECOURSE ON THE MATERIAL AVAILABLE ON RECORD. FINALLY, THE LD DR PRAYED BEFORE THE BENCH THAT THE ORDER OF CIT(A) SHOULD BE UPHELD. 12. WE HAVE HEARD RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE RELEVANT RECORDS AS PLACED BEFORE US INCLUDING VARIOUS DEC ISIONS CITED BY THE LD. AR DURING THE COURSE OF HEARING. THE UNDISPUTED FACTS ARE THA T THE AFTER RECEIVING BASE NOTE IN 2011 AS APART OF SWISS LEAKS, THE INVESTIGATIO N WING OF THE INCOME-TAX ITA NO.6065, 6066, 6067 & 6068/MUM/2014 DEEPAK B SHAH & KUNAL N SHAH 13 DEPARTMENT CONDUCTED A SURVEY U/S 133A OF THE IT AC T THE PREMISES OF KANUBHAI B. SHAH & CO. ON 30/09/2011. DURING THE COURSE OF SURV EY, THE BASE NOTE WAS SHOWN TO THE APPELLANTS NAMELY DEEPAK B SHAH & KUNAL N. S HAH AND TOLD THE ASSESSEES THAT THE INCOME TAX DEPARTMENT HAS REASONABLE BELIE F ON THE BASIS OF INFORMATION RECEIVED IN THE BASE NOTE THAT FOREIGN BANK ACCOUNT IS HELD BY THE APPELLANTS. THE APPELLANTS DENIED THE KNOWLEDGE OF ANY SUCH BANK AC COUNT IN HSBC, GENEVA DURING THE COURSE OF SURVEY PROCEEDINGS ITSELF AND IT IS A LSO FACT THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SURVEY. THE FACTS AS ARE CULLING OUT FROM THE RECORD SHOW THAT A PERSON NAMED MR. DIPENDU BAP ALAL SHAH CREATED AND CONSTITUTED AN OVERSEAS DISCRETIONARY TRUST KNOWN AS BALSUN TRUST BY MAKING CONTRIBUTION TO THE SAID TRUST FROM HIS OWN FUND/ S OURCES WITH DISCRETIONARY BENEFICIARY OF THE SAID TRUST SHRI DEEPAK B. SHAH A ND SHRI KUNAL N. SHAH. IT IS PERTINENT TO STATE THAT DURING THE YEAR UNDER CONSI DERATION BOTH THE APPELLANTS DID NOT RECEIVE ANY DISTRIBUTION OF INCOME FROM THE SA ID TRUST AS NO SUCH DISTRIBUTION DONE BY THE TRUST DURING THESE YEARS. MR. DIPENDU BAPALAL SHAH IS A FOREIGN RESIDENT SINCE 1979 AND IS A NON- RESIDENT UNDER SE CTION 6 OF THE IT ACT, 1961. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS MR. DIPENDU BAPALAL SHAH AND BOTH THE APPELLANTS IN THEIR RESPECTIVE ASSESSMENT PROCEEDINGS FILED THEIR SWORN IN AFFIDAVITS. THE AFFIDAVIT OF MR. DIPENDU BAPALAL SH AH WAS SWORN IN BEFORE THE UAE AUTHORITY STATING ON OATH AS UNDER: I) HE HAD SETTLED AN OFFSHORE DISCRETIONARY TRUST W ITH HIS INITIAL CONTRIBUTION II) NONE OF THE DISCRETIONARY BENEFICIARIES HAVE CO NTRIBUTED ANY FUNDS TO THE TRUST III) NONE OF THE BENEFICIARIES HAVE RECEIVED ANY DI STRIBUTION FROM THE TRUST. ITA NO.6065, 6066, 6067 & 6068/MUM/2014 DEEPAK B SHAH & KUNAL N SHAH 14 13. THE APPELLANTS ALSO FILED SWORN AFFIDAVIT DATED 5/11/2011 STATING THAT THEY WERE NOT AWARE OF THE EXISTENCE OF ANY OF THE ACCOU NTS IN HSBC, GENEVA. THEY FURTHER STATED THAT THEY NEVER CARRIED OUT ANY TRAN SACTIONS IN RELATION TO THE SAID ACCOUNT WITH HSBC BANK, GENEVA NOR RECEIVED ANY BEN EFIT FROM THE SAID ACCOUNT. IT IS ALSO FOUND THAT THEY HAVE NOT SIGNED ANY DOCUMEN TS NOR OPERATED THE SAID BANK ACCOUNT. IT IS ALSO TRUE THAT BOTH THE APPELLANTS ALSO FILED A CLARIFICATORY LETTER FROM HSBC BANK, GENEVA STATING THAT BOTH THE APPELLANTS HAVE NEITHER VISITED NOR OPENED OR OPERATED THE BANK ACCOUNTS AND THAT NO PAYMENTS HAVE BEEN RECEIVED FROM THEM OR MADE TO THEM IN RELATION TO THE SAID ACCOUNT. TH E PEAKS DURING TWO YEARS IN THE SAID ACCOUNT WITH HSBC, GENEVA WERE ADDED IN THE H ANDS OF ALL THREE PERSONS THE MR. DIPENDU BAPALAL SHAH AND TWO APPELLANTS PRESENT LY BEFORE US IN AY 2006-07 AND 2007-08. IN THE CASE OF MR. DIPENDU BAPALAL SH AH, THE LD. CIT(A) VIDE ORDER DATED 28/03/2016 DELETED THE ADDITION BY HOLDING T HAT MR. DIPENDU BAPALAL SHAH IS AN NRI, AND NONE OF HIS MONIES OUTSIDE INDIA COULD BE BROUGHT TO TAX IN INDIA UNLESS THEY WOULD SHOWN TO HAVE ARISEN OR ACCRUED I N INDIA. THE SAID ORDER OF THE LD. CIT(A) WAS ALSO UPHELD BY THE COORDINATE BENCH OF THE TRIBUNAL VIDE ORDER DATED 19/06/2018 BY HOLDING THAT CONTENTS OF THE AFFIDAVI T DATED 13/10/2011 OF THE MR. DIPENDU BAPALAL SHAH WERE NOT DECLINED OR HELD TO BE NOT TRUE BY THE AO. THE RELEVANT OPERATIVE EXTRACTS ARE AS UNDER:- 14. UNDER SECTION 5(2) THE INCOME ACCRUING OR ARISI NG OUTSIDE INDIA IS NOT TAXABLE UNLESS IT IS RECEIVED IN INDIA. SIMILARLY, IF ANY INCOME IS ALREADY RECEIVED OUTSIDE INDIA, THE SAME CANNOT BE TAXED IN INDIA MERELY ON THE GROUND THAT IT IS BROUGHT IN INDIA BY WAY OF REMITT ANCES. WE ALSO FOUND THAT THE ASSESSEE IN HIS AFFIDAVIT DATED 13 OCTOBER 2011 HAS CLEARLY STATED THAT THE HE WAS A SETTLOR OF A TRUST OUTSIDE INDIA WHICH HE HAD CREATED FOR THE BENEFIT OF HIS FAMILY MEMBERS WITH HIS INITIAL CONT RIBUTION. FURTHER, HE HAS ALSO STATED THAT NONE OF THE DISCRETIONARY BENEFICIARIES HAVE CONTRIBUTED ANY FUNDS ITA NO.6065, 6066, 6067 & 6068/MUM/2014 DEEPAK B SHAH & KUNAL N SHAH 15 TO THE SAID TRUST. HOWEVER, THE CONTENT OF THIS AFF IDAVIT WAS NOWHERE DECLINED BY THE AO NOR WAS HELD TO BE NOT TRUE.IN VIEW OF TH E ABOVE, THE ASSESSEE BEING A NON-RESIDENT, HAVING MONEY IN A FOREIGN COU NTRY CANNOT BE CALLED UPON TO PAY INCOME TAX ON THAT MONEY IN INDIA UNLES S IT SATISFIES THE TESTS OF TAXABILITY OF NON-RESIDENT UNDER THE PROVISIONS OF THE ACT, WHICH IN THE INSTANT CASE IS NOT GETTING SATISFIED IN THE CASE OF THE AS SESSEE. THUS, THE BANK ACCOUNT OF HSBC BANK, GENEVA IS OUTSIDE THE PREVIEW OF THIS ACT. 15. WE FOUND THAT CIT(A) AS DEALT WITH THE ISSUE TH READBARE AND AFTER APPLYING JUDICIAL PRONOUNCEMENT LAID DOWN BY HIGH C OURT AND SUPREME COURT REACHED TO THE CONCLUSION THAT ASSESSEE BEING NON-R ESIDENT IS NOT LIABLE IN RESPECT OF MONEY LYING IN THE FOREIGN COUNTRY UNLES S AO BRING SOMETHING ON RECORD TO SHOW THAT ASSESSEE HAS NOT FULFILLED THE TEST OF TAXABILITY OF NON- RESIDENT UNDER THE PROVISIONS OF THE ACT. THE DETAI LED FINDING SO RECORDED BY CIT(A) ARE AS PER MATERIAL ON RECORD AND DO NOT REQ UIRE ANY INTERFERENCE ON OUR PART. 14. FURTHER, THE BANK ACCOUNT OF HSBC BANK, GENEVA IS OUT OF THE PURVIEW OF THE I T ACT, AS MR.DIPENDU BAPALAL SHAH IS A NON-RE SIDENT INDIAN SINCE 1979. IN THE CASE OF THE TWO APPELLANTS BEFORE US, THE SAME AMOU NT WAS ADDED IN AY 2006-07 AND 2007-08 WHICH WAS REDUCED BY LD. CIT(A) TO ONE HALF OF THE TOTAL ADDITIONS TO AVOID ANY DOUBLE TAXATION AFFIRMING THE ADDITIONS TO THAT EXTENT. LOOKING TO THE DECISION OF THE CO-ORDINATE BENCH HOLDING THAT THE MONEY BELONGED TO THE MR. DIPENDU B SHAH WHO IS NON-RESIDENT AND THE INCOME OF THE NON-RESIDENT HELD ABROAD IS NOT ASSESSABLE IN INDIA UNLESS IT IS SHO WN TO HAVE ARISEN OR ACCRUED IN INDIA. SINCE IT IS HELD BY THE ITAT THAT THE AMOUN T IN HSBC ACCOUNT IN GENEVA IS OWNED BY MR. DIPENDU BAPALAL SHAH WHO IS NON-RESI DENT WE DO NOT FIND ANY JUSTIFICATION OR REASONS TO SUSTAIN THE ORDER OF L D. CIT(A) WHEN THE REVENUE HAS COMPLETELY FAILED TO SHOW ANY LINKAGE WITH FOREIGN BANK ACCOUNT WITH INDIAN MONEY. WE FIND THAT ADDITION HAS BEEN MADE BY THE A O U/S 69A OF THE ACT TO JUSTIFY THE ADDITION ON ACCOUNT OF PEAK BALANCE. WE AGREE W ITH THE CONTENTIONS OF THE LD. AR THAT IT IS SINE QUA NON FOR INVOKING SECTION 69A OF THE IT ACT., THE ASSESS EE MUST BE FOUND TO BE THE OWNER OF MONEY, BULLION, JEWELLE RY OR OTHER VALUABLE ARTICLES AND ITA NO.6065, 6066, 6067 & 6068/MUM/2014 DEEPAK B SHAH & KUNAL N SHAH 16 WHEREAS IN THE PRESENT CASE THE MONEY IS OWNED AND HELD BY MR. DIPENDU BAPALAL SHAH A FOREIGN RESIDENT IN AN ACCOUNT HSBC, GENEVA AND ALSO ADMITTED THAT HE IS THE OWNER OF THE MONEY IN THE HSBC ACCOUNT GENEVA. 15. IN THE CASE OF CIT VS K. CHINNATHAMBAN (SUPRA) THE HONBLE APEX COURT HAS HELD THAT WHEN A DEPOSIT STANDS IN THE NAME OF THI RD PERSON AND THAT PERSON IS RELATED TO THE ASSESSEE IN A SUCH CASE THE PROPER C OURSE WOULD BE TO CALL UPON THE PERSON IN WHOSE BOOKS THE DEPOSIT APPEARS OR THE PE RSON IN WHOSE NAME THE DEPOSIT STANDS TO EXPLAIN SUCH DEPOSIT. IN THE PRES ENT CASE THE MONEY IS HELD IN THE NAME OF MR. DIPENDU BAPALAL SHAH WHO VEHEMENTLY CLA IMED TO BE OWNER OF THE SAID DEPOSITS FROM HIS OWN FUND /SOURCES AND THE REVENUE HAS FAILED TO BRING ANY COGENT AND CONVINCING MATERIALS ON RECORD WHICH PROVED T HAT THE TWO APPELLANTS ARE OWNERS OF THE MONEY IN HSBC ACCOUNT. 16. IN THE CASE OF DURGA KAMAL RICE MILLS VS. CIT (SUPRA) IT WAS OBSERVED BY THE HONBLE KOLKATA HIGH COURT THAT OWNERSHIP IS ONE OF THE CONSIDERATIONS WHEN THE MATTER COMES U/S 69A. SIMILARLY IN THE CASE OF CIT VS. K.T.M.S. MOHAMOOD SUPRA IN ORDER TO MAKE AN ASSESSMENT UNDER SECTION 69A FOR U NDISCLOSED INCOME, THE ASSESSEE MUST NOT ONLY BE THE PERSON WHO IS IN POSS ESSION OF THE UNDISCLOSED INCOME BUT HE SHOULD ALSO BE THE OWNER OF THE SAME. 17. IN THE PRESENT CASE, UNDISPUTEDLY MR. DIPENDU BAPALAL SHAH IS OWNER OF HSBC BANK ACCOUNT, GENEVA AND THE APPELLANTS ARE DI SCRETIONARY BENEFICIARIES WHICH LEADS TO POSITIVE INFERENCE THAT THE APPELLANTS ARE NOT THE OWNERS OF THE SAID BANK ACCOUNT AND HENCE THE ADDITIONS UNDER SECTION 69A C ANNOT BE SUSTAINED. IN THE PRESENT CASE BEFORE US, ADMITTEDLY BOTH THE APPELLA NTS NAMELY DEEPAK B. SHAH AND ITA NO.6065, 6066, 6067 & 6068/MUM/2014 DEEPAK B SHAH & KUNAL N SHAH 17 KUNAL N. SHAH ARE DISCRETIONARY BENEFICIARIES OF T HE BALSUN TRUST CREATED BY MR. DIPENDU BAPALAL SHAH AND THE TWO APPELLANTS HAVE NO T MADE ANY CONTRIBUTION NOR DONE ANY TRANSACTION WITH SAID TRUST AT ALL. IN OUR OPINION IN THE CASE OF DISCRETIONARY TRUST, THE INCOME OF THE TRUST COULD NOT ONLY BE AD DED IN THE HAND OF BENEFICIARY BUT THE TRUSTEES ARE THE REPRESENTATIVE ASSESSEES WHO A RE LIABLE TO BE TAXED FOR THE INCOME OF THE TRUST. IF THE DISCRETIONARY TRUST HAS MADE SOME DISTRIBUTION OF INCOME DURING THE YEAR IN FAVOUR OF THE DISCRETIONARY BENE FICIARIES ONLY THEN THE DISTRIBUTED INCOME IS TAXABLE IN THE HANDS OF THE BENEFICIARIES BUT NOTHING OF THE SORT HAS HAPPENED NOR TWO APPELLANTS HAVE RECEIVED ANY MONE Y AS DISTRIBUTION OF INCOME BY THE DISCRETIONARY TRUST. SO LONG AS THE MONEY IS NOT DISTRIBUTED BY THE DISCRETIONARY TRUST, THE SAME CANNOT TAXED BE IN TH E HANDS OF THE BENEFICIARIES. SIMILARLY, THE PRESENT CASE FOR US, THE DEPOSITS HE LD IN HSBC, GENEVA ACCOUNT CANNOT BE TAXED IN THE HAND OF BENEFICIARIES/ APPE LLANTS AT ALL. 18. THE CASE OF THE ASSESSEE FIND SUPPORTS FROM DE CISION OF THE APEX COURT IN THE CASE OF CIT VS SMT. KAMILINI KHATAU SUPRA AND COMMISSIONER OF WEALTH TAX, RAJKOT VS. ESTATE OF HMM VIRASINHJI OF GONDAL SUPRA . IN THE FIRST CASE, THE HONBLE APEX COURT HAS HELD AS UNDER: - COMMISSIONER OF INCOME-TAX VS. SMT. KAMALINI KHATAU [1994] 74 TAXMAN 392 (SC) 25. [] SECTION 166 IS CLEARLY CLARIFICATORY. IT DOE S NOT EMPOWER ANY ASSESSMENT OR RECOVERY BY ITSELF. IT ONLY MAKES IT CLEAR THAT SECTIONS 160 TO 165 TO NOT BAR THE DIRECT ASSESSMENT OF THE PERSON ON WHOSE BEHALF OR FOR WHOSE BENEFIT THE INCOME IS RECEIVABLE OR THE RECOV ERY FROM SUCH PERSON OF THE TAX PAYABLE THEREOF, PROVIDED THAT IS PERMISSIB LE UNDER ANY OTHER PROVISIONS OF THE ACT. EVEN SO, SINCE THE WORD USED IN SECTION 166 IS RECEIVABLE IT CANNOT APPLY TO A DISCRETIONARY TRU ST FOR IT CANNOT BE SAID THAT THE INCOME THEREON IS RECEIVABLE FOR ONE OR MORE BENEFICIARIES, IT BEING LEFT TO THE DISCRETION OF THE TRUSTEES WHETHER OR NOT THE I NCOME SHOULD BE DISTRIBUTED ITA NO.6065, 6066, 6067 & 6068/MUM/2014 DEEPAK B SHAH & KUNAL N SHAH 18 TO ONE OR MORE OF THE BENEFICIARIES OR NOT AT ALL. BUT THAT IS NOT TO SAY THAT THE BENEFICIARY OF A DISCRETIONARY TRUST, BECAUSE HE DO ES NOT FALL WITHIN THE AMBIT OF SECTION 166, MAY NOT BE ASSESSED UPON INCOME REC EIVED BY HIM AND TAX RECOVERED FROM HIM THEREON IF THAT IS PERMISSIBLE U NDER ANY OTHER PROVISIONS OF THE ACT. SECTION 5 DEFINES THE TOTAL INCOME OF ANY PERSON TO INCLUDE INCOME RECEIVED BY HIM OR RECEIVED ON HIS BEHALF OR WHICH ACCRUES O R ARISES TO HIM. A PERSON MAY BE DIRECTLY ASSESSED IN RESPECT OF SUCH INCOME. THE INCOME OF A DISCRETIONARY TRUST WHICH IS WITHIN THE ACCOUNTING YEAR DISTRIBUTED TO AND RECEIVED BY THE BENEFICIARY WOULD, THEREFORE, BE SU BJECT TO ASSESSMENT IN HIS HANDS AND TAX THEREON WOULD BE RECOVERABLE FROM HIM . SUCH INCOME WOULD SQUARELY FALL WITHIN THE BROAD SWEEP OF TOTAL INCOM E UNDER SECTION 5 AND THE BENEFICIARY WOULD BE LIABLE TO ASSESSMENT AND RECOV ERY OF TAX THEREOF UNDER SECTION 4 IN THE SECOND CASE THE HONBLE APEX COURT HAS HELD AS UNDER: - COMMISSIONER OF WEALTH TAX, RAJKOT VS. ESTATE OF H MM VIKRAMSINHJI OF GONDAL [2014] 45 TAXMANN.COM 552 (SC) 18. A DISCRETIONARY TRUST IS ONE WHICH GIVES A BENE FICIARY NO RIGHT TO ANY PART OF THE INCOME OF THE TRUST PROPERTY, BUT V ESTS IN THE TRUSTEES A DISCRETIONARY POWER TO PAY HIM, OR APPLY FOR HIS BE NEFIT, SUCH PART OF THE INCOME AS THEY THINK FIT. THE TRUSTEES MUST EXE RCISE THEIR DISCRETION AS AND WHEN THE INCOME BECOMES AVAILABLE, BUT IF TH EY FAIL TO DISTRIBUTE IN DUE TIME, THE POWER IS NOT EXTINGUISHED TO SO TH AT THEY CAN DISTRIBUTE LATER. THEY HAVE NO POWER TO BIND THEMSELVES FOR TH E FUTURE. THE BENEFICIARY THUS HAS NO MORE THAN A HOPE THAT THE D ISCRETION WILL BE EXERCISED IN HIS FAVOUR. [ SNELLS PRINCIPLES OF EQ UITY, 28THE EDITION, PAGE 138] SO APPLYING THE RATIO LAID DOWN BY THE HONBLE APEX CURT IN THE ABOVE SAID TWO DECISIONS, WE ARE OF THE CONSIDERED VIEW THAT THE A DDITIONS CANNOT BE MADE AND SUSTAINED IN THE HANDS OF THE APPELLANTS AS THE BA LSUN TRUST IS A DISCRETIONARY TRUST CREATED BY THE MR. DIPENDU BAPALAL SHAH AND SAID TR UST HAS NEITHER MADE ANY DISTRIBUTION OF INCOME NOR DID THE TWO BENEFICIARI ES/APPELLANTS RECEIVE ANY MONEY BY WAY OF DISTRIBUTION. WHILE THE DEPARTMENT HAS F AILED TO BRING ANY CONCLUSIVE EVIDENCE TO ESTABLISH NEXUS BETWEEN THESE TWO APPEL LANTS AND BANK ACCOUNT IN HSBC, GENEVA AND MORE SO WHEN THE MR. DIPENDU BAPAL AL SHAH HAS OWNED THE ITA NO.6065, 6066, 6067 & 6068/MUM/2014 DEEPAK B SHAH & KUNAL N SHAH 19 BALANCE IN THE HSBC, GENEVA BANK ACCOUNT , WE ARE NOT IN AGREEMENT WITH THE CONCLUSIONS OF THE CIT(A) IN SUSTAINING THE ADDITI ONS EQUAL TO FIFTY PERCENT OF THE PEAK BALANCE IN THE HANDS OF BOTH THE APPELLANTS. C ONSIDERING THE FACTS OF THE TWO APPELLANTS IN VIEW OF VARIOUS DECISIONS AS DISCUSSE D HEREINABOVE WE HOLD THAT ORDER OF CIT(A) IS WRONG IN ASSUMING THAT THE SAID MONEY MAY BELONGS THESE TWO APPELLANTS AND SUCH CONCLUSION IS AGAINST THE FACTS ON RECORD AND BASED ON SURMISES AND PRESUMPTIONS. ACCORDINGLY WE SET ASID E THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITIONS MADE U/S 69A IN RESPECT OF HSBC BANK ACCOUNT FOR ASSESSMENT YEARS 2006-07 AND 2007-08 IN THE CAS E OF BOTH THE APPELLANTS BEFORE US. 19. IN THE RESULT THE APPEALS OF THE ASSESSEE ARE A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 30 TH OCTOBER, 2018. SD/- SD/- (C N PRASAD) (RAJE SH KUMAR) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI, DATED : 30 TH OCTOBER, 2018 * TIRUMALESH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. THE CIT 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI