Elderly Woman Ordered To Pay Penalties & Tax Over Undisclosed Swiss Bank Account Of Rs 196 Crore

A recent case of the Income-Tax Appellate Tribunal's Mumbai bench has come to light, which brought the confirmation of an undisclosed income of Rs 196 crore in a Swiss bank account in the hands of an elderly taxpayer, who was its 'beneficial' owner .

According to a Times of India report, the senior citizen now has to pay tax plus penalties on this unaccounted income. The woman, Renu Tharani, who case was heard by ITAT, is in her eighties.

The report mentions that she is the sole-discretionary-beneficiary of the Swiss bank account which is held by the Tharani family trust in HSBC Geneva. The account was opened in July 2004 in the name of GWU Investments which is an entity based in Cayman Islands. This company, in its capacity as the settlor, had transferred funds to the family trust.

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Reuters

According to a few I-T officials who spoke to TOI, "Beneficiaries of overseas trusts deny foreign bank accounts. Secondly, taxpayers change their tax status to that of a ¡®non-resident¡¯, as NRIs do not pay tax in India on overseas income. In this case, the I-T officer submitted to ITAT that unaccounted money is deposited in Swiss bank accounts through a complex web of overseas trusts, entities and use of nominee directors. The I-T department¡¯s investigation wing had got a ¡°base note¡± that Tharani was a beneficial owner of a Swiss bank account that had been opened in July 2004, and as this was not disclosed in her accounts or I-T return for the financial year 2005-06, the matter was re-opened. A notice for re-opening was served on October 31, 2014. ITAT concurred with this course of action."

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Tharani submitted an affidavit that she did not have any bank account with HSBC Geneva and was also not a shareholder or a director in GWU Investments. She also claimed to be a non-resident and contested the alleged income, and that it cannot be taxed in her hands. The ITAT bench comprised of Pramod Kumar who is the vice-president and Amarjit Singh who is a judicial member, made several pertinent observations in the detailed 55-page order.

TOI

Back in 2005-06, Tharani had declared a meagre income of Rs 1.7 lakh. She provided a Bengaluru address and had shown her status as that of a tax resident in India. The bench acknowledged the residential status as shown in the I-T return was not 'non-resident'. However, she now submitted that this was the first year of her 'non-residential' status.

Even if one goes by this submission, it is unrealistic to assume in a short period of a year, nearly Rs 200 crore at her disposal in the Swiss Bank account, reflects income earned outside India. Based on her previous income declaration, it would have taken her more than 11,500 years to earn the amount stashed in the Swiss bank account.

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TOI

¡°The taxpayer is not a public personality like Mother Teresa, that some person with complete anonymity will settle a trust to give her $ 4 million and in any case, Cayman Islands (where GWU Investments was set up) is not known for philanthropists operating from there. If Cayman Islands is known for anything relevant, it is known for an atmosphere conducive to hiding unaccounted wealth and money laundering and that does not advance the case of the taxpayer,¡± noted ITAT.

The ITAT further noted the taxpayer did not sign the consent waiver form, which would have enabled the I-T department to seek relevant information from the overseas bank. Thus, she cannot decline the correctness of the details obtained by the I-T officer.