ITAT ruling to help tax department recover black money stashed abroad

Apart from recovery of taxes, concealment penalty of Rs 1,287 crore was slapped in more than 160 cases
The Income Tax Appellate Tribunal’s (ITAT’s) landmark ruling on July 16, directing authorities to bring Rs 196 crore belonging to NRI Renu Thikamdas Tharani within the tax net, has set a precedent.

It could pave the way for recovering money stashed abroad — including those revealed in global leaks like the HSBC Swiss account case, Panama, and Paradise papers — by the I-T department.

Tharani, an alleged beneficiary of a family trust linked to an account with HSBC Geneva, declared a paltry Rs 1,70,800 as annual income in her tax returns.

The appellate tribunal said the undisclosed balance in the Swiss bank account was tens of thousands of times the annual income of the assessee, which would have otherwise taken her 11,500 years to earn. Tharani is among the 628 individuals whose names appeared in the HSBC Swiss leaks.

This ruling will enable the tax department to recover black money stashed abroad, said a tax official. It will be applicable even when the person concerned declines to sign the “consent waiver”, which is required to access relevant information of overseas accounts.

Authorities have, so far, been unable to get a breakthrough in such matters, particularly global leaks, given the non-cooperation by foreign counterparts citing data protection and banking secrecy.

In most cases, banks in Switzerland and other tax havens — which are governed by banking secrecy laws — divulge information only after account holders give consent.

Refusing the petition filed by Tharani, the ITAT said HSBC had been indicted by several governments globally. It was not possible for the taxman to prove the existence of these accounts beyond doubt, given the non-sharing of data by the Swiss government.

The appellate also highlighted the “law on preponderance” of human probabilities. Preponderance of evidence is not clear-cut evidence in civil suits.

This matter surfaced in 2014, after the department received information regarding huge deposits in HSBC’s Swiss accounts. Based on it, re-assessment proceedings were opened, invoking the extended period of 16 years.

During the proceedings, it discovered that the said account belonged to Cayman Islands-based GWU Investments — an underlying firm of Tharani Trust.

“Viewed in the light of a factual backdrop for the case, and with respect to the above legal position, no reasonable person could accept the explanation of the assessee (Renu). The assessee is not a public personality like Mother Teresa that some unknown person, with complete anonymity, will settle a trust to give her $4 million,” the order noted.

It added that the Cayman Islands were not known for philanthropists but for an atmosphere conducive to hiding unaccounted wealth and money laundering.

“The Cayman Islands is among the few jurisdictions where public records of beneficiaries of firms like GWU Investments are not maintained, and it is only with effect from 2023 — if the promises made by the Government of Cayman Islands are believed at face value — that such public records will be maintained. That is an ideal situation, as of now, for holding unaccounted monies through a web of proxy corporate entities. It said the assessee was closely involved with the transaction, and it was unconceivable that she had no direct knowledge of the owners of the underlying company and settlors of the trust that has her 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 declined to sign the consent waiver,” the order read.

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