SHRI DILIP J. THAKKAR ,MUMBAI V. DCIT, CENTRAL CIRCLE -6(4), MUMBAI

ITA 6268/MUM/2024

AI Insights

The case involves Shri Dilip J. Thakkar, who appealed against the order of the CIT(A) confirming the addition of Rs. 3,38,21,732 as undisclosed income for the assessment year 2007-08. The primary contention was that the CIT(A) had relied on conjectures and surmises without concrete evidence to link the funds in an offshore account to the assessee. The Tribunal examined the facts in light of a similar case involving the same assessee for A.Y. 2006-07, where it was established that the funds did not belong to the assessee or his family. The Tribunal's decision was influenced by the findings that the source of the funds and the beneficiaries of the trust were non-residents and not connected to the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 668715 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Other Referred Cases: ITA No. 2175/Mum/2024
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UMA SHANKAR PRASAD
• Keywords: Set aside; Document seized; Peak credit; Documents seized; Period of limitation; Source of fund; Double taxation relief
• Section: 153A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER & SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No. 6268/MUM/2024 (AY : 2007-08) (Physical hearing) Shri Dilip J. Thakkar 111A Currimji Building, Mahatma Gandhi Road, Fort, Mumbai – 400023. [PAN No. AACPT9000H] Vs DCIT, Central Circle-6(4), Kautilya Bhawan, Bandra Kurla Complex, Bandra East, Mumbai – 400051. Appellant / Assessee Respondent / Revenue Assessee by Sh. Dilip Thakkar (A’s in person) Revenue by Sh. Umashankar Prasad, CIT-DR Date of hearing 23.06.2025 Date of pronouncement 24.06.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the order ofld. CIT(A) dated 07.11.2024 for A.Y. 2007-08. The assessee has raised following grounds of appeal: “1. The learned CIT(A) erred in confirming the addition of Rs. 3,38,21,732/- as undisclosed income of the appellant only on the basis of surmises and conjectures without any evidence. 2. The learned CIT(A) erred in holding that the money in the bank account of an offshore Non resident Trust with HSBC Private Bank, Geneva are the funds of the appellant without any cogent evidence, even though the account is not in the name of the appellant and notification from Swiss Government confirmed that bank accounts did not belong to appellant. 3. The learned CIT(A) has come to the erroneous conclusion that though the bank account with HSBC Private Bank, Geneva is not the account of the appellant but the money in that account is of the appellant without any cogent evidence and based only on conjectures and surmises. 4. The learned CIT(A) has mixed up three different entities to arrive at the erroneous conclusion, viz. Chhaganlal Suchak Family Trust’s beneficiaries, ITA No. 6268/Mum/2024 Shri Dilip J. Thakkar 2 legatees of the estate of late ChhaganlalSuchak who got legacy on maturity of Resurgent India Bonds (RIB) and SCS Family Trust in Singapore. 5. The learned CIT(A) erred in relying on unsigned, unauthenticated stolen data and ignoring the authentic credible data in the form of notification dated 23rd March 2015 of Swiss Federal Tax Administration FTA. 6. The learned CIT(A) erred in stating that it was not necessary to provide an opportunity to the appellant to cross examine the source of the statement/information relied upon for making huge addition. 7. The learned CIT(A) has erred in referring to papers and matters which have no connection with the appellant’s case for A.Y. 2007-08. WITHOUT PREJUDICE TO THE ABOVE GROUNDS OF APPEAL 8. The learned CIT(A) erred in not holding that the assessment order passed u/s 153A on 30th March 2015 was barred by period of limitation and failed to declare the said order as illegal and bad in law. 9. The learned CIT(A) is in error to state that the appellant has not filed original return of income.” 2. At the outset of hearing, the learned Authorised Representative (ld. AR) of the assessee submits that ground of appeal raised by assessee is covered in favour of assessee in assessee’s own case for A.Y. 2006-07 in ITA No. 2175/Mum/2024 dated 30.05.2025. The ld. AR submits that on identical set of fact, similar addition was made in A.Y. 2006-07. The assessing officer while passing the assessment order for AY 2006-07 made similar addition of Rs. 10.50 and Rs. 3.30 Crore in A.Y. 2007-8. Such facts are clearly discernible in assessment order of AY 2006-07, relevant part of assessment order is extracted in para 10 of order of Tribunal at page no. 12 to 17. The Tribunal in while deciding appeal for AY 2006-07 in para 27 of its order has clearly held that source of fund in Resurgent India Bonds (RIB) was made by Suryakant Suchak. The source of funds was never made by the assessee or his wife. ITA No. 6268/Mum/2024 Shri Dilip J. Thakkar 3 Once source of funds is neither of assessee nor his family members are beneficiary. Thus, there is no reason for adding balance in the foreign bank account as income of assessee in India. The ld. AR submits that there is no material difference in the facts of this year. The ld. AR furnished the copy of decision of Tribunal dated 30.05.2025. 3. On the other hand, learned Commissioner of Income Tax – Departmental Representative (CIT-DR) for the revenue supported the order of lower authorities. The ld. CIT-DR submits that assessee failed to explain incremental increase in the bank account. 4. We have considered the rival submissions of both the parties and carefully perused the record of the case. On careful perusal of facts of this year vis-à- vis, A.Y. 2006-07, we find that grounds of appeal raised by assessee is in fact covered in favour of the assessee and against the revenue. The relevant part of order of Tribunal in A.Y. 2006-07 is extracted below: ”21. We have heard both the parties at length, perused the relevant finding and the observation given by the ld. AO and ld. CIT (A) and also various materials referred to at the time of hearing. By and large, we have captured all the relevant observations of the ld. AO and ld. CIT (A) which was incorporated in the tabular form in paragraph 13 wherein assessee has given his reply / rebuttal qua each of the observations. 22. The core issue involved here is, whether the addition of Rs. 10,50,41,824/- being the peak amount standing for F.Y. 2005- 06 of USD 2361551.79 in the bank account belonging to ChagganlalSuchak Family Trust (CSFT) in the various bank accounts of HSBC Bank, Geneva can be added in the hands of the assessee. The entire thrust of the department has been that; firstly, there were certain seized documents from the possession of the assessee during the search that assessee was managing the affairs of the trust and was one of the trustees in CSFT. Secondly, the ITA No. 6268/Mum/2024 Shri Dilip J. Thakkar 4 trust was found in Mumbai wherein assessee and his wife were mentioned as trustees. Thirdly, certain transactions were undertaken in the said bank account under the instructions of the assessee and in the ‘base note’, the bank accounts have been mentioned in the name of the assessee as the trustees of ChagganlalSuchak Family Trust. 23. To tax any deposits or amount in the foreign bank account especially, if the account is opened in the name of any beneficiary trust or family trust in the hands of an Indian Tax Payer, what is most relevant is, firstly, what is the nature and source of the funds deposited in the bank account or if the source of the deposits are not known then ostensibly onus is on the individual to rebut with proper evidence; and secondly, who are the actual beneficiaries of the trust and who has ultimately received the funds from the said bank account. Any trustee if in his fiduciary capacity is managing the affairs of the trust or his name is mentioned as trustee cannot be per se held to be the legal or beneficial owner of the bank account or beneficiary of the trust fund. Now whether the amount deposited in the impugned foreign bank account is liable to be taxed in the hands of the assessee, which we will discuss in light of facts and material brought on record in forthcoming paras. 24. First of all, from the perusal of the trust deed, the copy of which are appearing from pages 112 to 118, it is seen that deed of trust was made as ChhaganlalSuchak Trust on 24/05/2001; and Mrs. KantabenChhaganlalSuchak is the ‘settler’; and trustees of the trust are; (i) KantabenChhaganlalSuchak (ii) SuryakantChhaganlalSuchak (iii) ShirishChhaganlalSuchak and (iv) MadhuChhaganlalSuchak. It has been declared by the settler that her late husband Mr. ChhaganlalMuljiSuchak has set aside before his death in June 1999 certain sums of money for the benefit of beneficiaries named in Schedule 1 to be utilized for the benefit at any time in future which sum of money was invested in the said bank of State Bank of India’s Resurgent India Bonds which will mature on 01/10/2003. The lists of 13 beneficiaries have already been incorporated above. Even in the trust deed neither assessee nor his wife Indira D Thakkar are in the list of beneficiaries. The source of fund in the trust we have already discussed in the earlier part of the order that Mr. SuryakantSuchak who was a non-resident Indian settled in UK alongwith his parents since several decades had applied for resurgent Indian bonds in 1998 which was issued on 31/10/1998 and they got matured on 01/10/2003. After the formation of CSFT on 24/05/2001, settlement of maturity proceeds were credited to CSFT and later on this fund was ITA No. 6268/Mum/2024 Shri Dilip J. Thakkar 5 distributed to the beneficiaries to all non-Indian resident beneficiaries residing outside India on 08/08/2011. The sources of funds have been clearly detailed in para 4. The relevant documents have also been placed in the paper book from pages 92-130. From perusal of the documents and material on record, it is quite evident that, firstly, neither assessee nor his wife Mrs. Indira D Thakkar was part of the list of beneficiaries in the trust. Secondly, the source of funds also came through inheritance of Mr. ChagganlalSuchak who was a UK Citizen (non-resident Indian) settled in UK till his death in June 1999. The main trustees of the trust as well as the beneficiaries were all foreign citizens. Late Shri ChagganlalSuchak and his wife Mrs. KantebenChagganlalSuchak had one daughter Mrs. Indira Thakkar who was married to assessee are only Indian citizens and their three sons Mr. SirishSuchak, SuryakantSuchak and MadhuSuchak are all settled abroad and are citizens of UK and Canada. There is no dispute of these facts. 25. From the ‘Base Note’ forwarded by the Investigation wing, it has been informed that in ChagganlalSuchak Family Trust which had bank accounts in HSBC Bank, Geneva, Mr. Dilip Thakkar and his wife Mrs. India Thakkar had been mentioned as trustees; and secondly, certain documents were found to show that assessee was somehow managing the affairs of the trust and also involved and instructions being given to the bank for investment purpose. First of all, simply being a trustee that does not mean that either assessee or his wife are the beneficiaries of the trust or managing the affairs of the trust as relatives of the trustees in fiduciary capacity can infer that the funds belong to the assessee when nothing has been found that the source of the funds has been routed through assessee or assessee was beneficial owner of the fund. We have already discussed the source of funds in the trust and who all were the ultimate beneficiaries of the fund. Then how a conjectural linkage can be drawn implicating the assessee without any nexus substantiating such presumption that amount deposited in the foreign bank account belongs to the assessee. 26. In any event, the department, invoking the provisions of Article 26 of India-Swiss DTAA pertaining to exchange of information, solicited details from the Swiss Federal Authorities. In response, the Swiss Authorities duly furnished the bank statements. However, in an unambiguous and unequivocal clarification, they have asserted upon being queried regarding the presence of beneficiaries of the bank accounts, have stated that beneficiaries are third parties resident of Canada and England and secondly, more significantly Swiss Authorities have categorically affirmed that neither Mr. DilipChagganlal Thakkarnor Mrs. Indira Dilip Thakkar hold ITA No. 6268/Mum/2024 Shri Dilip J. Thakkar 6 any beneficial interest with these accounts or are the beneficiaries of ChagganlalSuchak Family Trust. It thus defies logic and strains credulity that, in the face of such information, the department would still persist that the aforementioned bank accounts belong to the assessee and they are ultimately beneficiaries of the fund and treat it as undisclosed income of the assessee. This vital piece of information and clarification by a Sovereign Authority clinches the issue in favour of the assessee that neither he nor his wife is the legal or beneficial owner of the bank account or the fund. Simply because there is a foreign bank account in the name of the trust and assessee is linked in the fiduciary capacity, how can addition be made once there are other facts and material on record that neither the source of the funds nor the ultimately destination of the fund has any direct or indirect link with the assessee. In none of the material found from the possession of the assessee which has been referred extensively by the ld. AO and ld. CIT (A) in their respective orders, there is any evidence that assessee had made investment through an undisclosed sources in the foreign bank account or had received the money at any point of time upto the date of search. 27. Both the authorities have ignored the trust deed, list of beneficiaries, letter by the Swiss Federal Tax authorities which department itself has sought from the Swiss Government and the affidavit of Mr. SurykantChagganlalSuchak who has clarified the source of beneficiaries of the fund and has categorically stated that the trust account in Geneva was closed in before2012 and all the three brothers were principal beneficiaries of the CSFT and neither Mr. Dilip Thakkar nor Mrs. Indira Thakkar or their two daughters and the families have received any amount. He has given another affidavit and this SCS Family Trust was secured by his mother for the benefit of himself and his immediate family members and the funds which were received from ChagganlalSuchak Family Trust was invested in mutual funds as directed by him in that trust, he and his wife were the trustees, however, the said bank account also was closed and the entire funds were deposited to the beneficiaries for his wife Mrs. Dina SuryakantSuchak and his daughter Ms. DeepaJaitha and another daughter Mrs. Anika and son Mr. Anish S Suchak. Another important fact which is that, there is ITAT order for A.Y. 1998-99 in the case of SuryakantSuchak who was UK citizen wherein the Tribunal while dealing with the issue of investment of Rs.1.5 million GBP in State Bank of India’s Resurgent India Bonds in October 1998, the Tribunal held that the assessee was a non- resident residing outside India since several decades, therefore, he qualifies the primary condition of being NRI individual for making the investment. Thus, it clearly shows that the source of funds in RIB was ITA No. 6268/Mum/2024 Shri Dilip J. Thakkar 7 made by Mr. SuryakantSuchak. Accordingly, the source of funds was never made by the assessee or his wife. Once the source of funds is neither by the assessee nor he or his family were beneficiaries, we do not find any reason to hold that the peak balance in the foreign bank account should be added as taxable income of the assessee in India. 28. Thus, on perusal of facts and the evidentiary materials placed on record, incontrovertibly demonstrates that the bank accounts in question, held under the aegis of Chagganlal Family Trust were opened by non- residents, ostensibly and explicitly for the benefit of non-residents and the source of funds is irrefutably traced to non-residents and ultimately the accrual and aggregation of funds were repository/ credited in the accounts of non-residents. Hence no part of such deposits or peak balance can be taxed in the hands of the assessee in India. Accordingly, the addition of Rs.10,50,41,824/- made in the hands of the assessee is deleted. 29. Now coming to the issue of addition of Rs. 57,00,000/- in respect of payment made to Mr. Jehil Ashok Thakkar, it has been stated that these funds were given to the nephew of the assessee towards compensation of value of flat as one of the flat belonging to the mother of the assessee which she was equally bequeathed to assessee and his brother Ashok Thakkar. The assessee has paid 50% of the value of the flat from his bank account through cheque, the source of which was duly explained. It has been stated that, this transaction was purely between family arrangements on account of inheritance. The ld. AO has brushed aside the explanation of the assessee on the ground that source of the payment was unexplained. Even the ld. CIT(A) has confirmed the addition holding that assessee has furnished fund flow statement to explain the source of the funds and the payments but in absence of bank account statement to support the source of funds, same cannot be accepted. He heldthat, just because the payment has been made through cheque, it cannot be treated as explained. 30. From the perusal of the facts and material on record, we find that assessee’s mother, Late Mrs. SnehilaJayantilal Thakkar in her will dated 01/11/2000 bequeathed her only residential flat in Mumbai equally to her two grand children, Mrs. MitaliRohitLakhanpal (daughter of assessee) and Jehil Ashok Thakkar (son of assessee’s brother). The deceased mother’s estate was bequeathed to HUF of DilipJayantilal Thakkar and HUF of Ashok Jayantilal Thakkar. This is clear from the contents of the ‘will’ given in the paper book at pages 145-147. Her ‘will’ also stated that either of her two grand children can acquire one half of the share as per the valuation of the flat at the time of her death. After her death on 03/02/2005, flat was ITA No. 6268/Mum/2024 Shri Dilip J. Thakkar 8 valued by the Approved Valuer at Rs.1,10,00,000/- and half of it (Rs. 55,00,000/- ) plus compensation for late payment aggregated to Rs.57,00,000/- which was paid to Ashok Jayantilal Thakkar through from DilipJayantilal Thakkar HUF in his mother’s bank account and there by paid by cheque as legacy to Jehil Ashok Thakkar. Thus, it was submitted that the payment was made from the bank account of the assessee as Karta of HUF through declared sources hence it could be held that the payment made was from undisclosed sources. The complete fund flow has been given at page 148 of the paper book which is reproduced hereunder:- 31. The assessee had also filed an affidavit of Mr. Jayhil Ashok Thakkar before the authorities below about the payment of Rs.57,00,000/-. Once assessee has given the source of funds as given above from his bank account, we fail to understand how the payment of Rs.57,00,000/- remain unexplained. Accordingly, the addition made by the ld. AO is deleted. 32. The other grounds which have been raised by the assessee have been rendered purely academic and infructuous because on merits only these are two additions challenged before us havealready been deleted. Other legal grounds raised that the assessment is time barred is also treated as academic and dismissed as infructuous. ITA No. 6268/Mum/2024 Shri Dilip J. Thakkar 9 33. In the result, appeal of the assessee is allowed on merits.” 5. Considering the aforesaid categorical finding of coordinate bench of Tribunal on similar set of fact wherein the assessee is allowed relief on merit on similar addition. Therefore, respectfully following the decision of co-ordinate bench in A.Y. 2006-07, the grounds of appeal raised by assessee is allowed with similar observation. In the result, the grounds of appeal raised by the assessee are allowed. 6. In the result, the appeal of assesseeis allowed. Order pronounced in the open Court on 24/06/2025. Sd/- PRABHASH SHANKAR ACCOUNTANT MEMBER Sd/- PAWAN SINGH JUDICIAL MEMBER MUMBAI, Dated: 24/06/2025 Biswajit Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai "