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Addl. CIT, Range 70, New Delhi. Vs. Shri Jatinder Mehra, C 1/36, Safdarjung Development Area, New Delhi
July, 09th 2021

BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

IN THE INCOME TAX APPELLATE TRIBUNAL
[ DELHI BENCH ―C‖: NEW DELHI ]

BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
&

SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
(Through Video Conferencing)

BMA No. 01/Del/2020

(Assessment Year: 2016-17)

Addl. CIT, Shri Jatinder Mehra,

Vs. C–1/36, Safdarjung

Range : 70, Development Area,

New Delhi – 110 016.

New Delhi. PAN : AAUPM6409M

(Appellant) (Respondent)

A N D

C. O. No. 26 (Del) of 2021

[ in BMA No. 01/Del/2020 ]

(Assessment Year: 2016-17)

Shri Jatinder Mehra, Addl. CIT,

C–1/36, Safdarjung Development Vs.

Area, Range : 70,

New Delhi – 110 016.

PAN : AAUPM6409M New Delhi.

(Appellant) (Respondent)

Assessee by : Shri S. K. Tulsiyan, Advocate;
Shri Karan Kumara, A.C.A.; &
Department by :
Date of Hearing Ms. Bhoomija Verma, Adv.
Date of pronouncement Ms. Shivani Bansal, Sr. D.R.;

07/06/2021
07/07/2021

O R D E R

PER PRASHANT MAHARISHI, A. M.

1. This appeal is filed by The Additional Commissioner Of Income Tax, Range –
70, New Delhi (the learned AO) against the order dated 16.09.2020 passed by
the Ld. Commissioner Of Income Tax (Appeals)–20, New Delhi, [ The Ld CIT (A)
] for assessment year 2016-17 wherein the appeal filed by the assessee against
the assessment order dated 29th of March 2019 passed u/s 10 (3) of under
Black Money (Undisclosed Foreign Income And Assets) And Imposition Of Tax

Page | 1
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

Act, 2015. (In short ‗The Black Money Act‘) passed by the learned AO is allowed
in favour of the assessee.
2. The learned assessing officer has made an addition of ₹ 5,66,47,000/– which is
deleted by the learned CIT – A. Therefore the learned AO is aggrieved and has
raised following grounds of appeal:-

BMA No. 01/Del/2020 :

― 1. C1T(A) has ignored the findings of the
AO formed on the basis of information
received under the provisions of 'exchange
of information Article' of India Singapore
Double Taxation avoidance agreement
(DTAA), wherein as per the account opening
form assessee was the beneficial owner of
the account. Details of his passport are
mentioned as the identification document in
the account.

2. During the assessment proceedings,
assessee was categorically asked to submit
unequivocal evidence in the form of money
belonged to the assessee's son, Sh.
Rajneesh Mehra. However, assessee has
failed to make compliance in this regard. It
is worthwhile to mention that as the account
opening form contained the name of the
assessee as beneficiary owner, onus lies on
the assessee to provide evidence to support
his claim that he was not the beneficial
owner, thus he was not the beneficial owner,
thus assessee failed to discharge his onus.

3. CIT(A) has failed to appreciate that if
the intention was to confer all the benefits to
Sh. Rajneesh Mehra, why was the name of
Sh. Rajneesh Mehra not added as beneficial
owner rather than that of the assessee.
CIT(A) has erred in not considering human
probability and circumstantial evidences in
the matter while deciding the issue.

4. CIT(A) has ignored the fact that as per
return of income for A.Y. 2010-11 to 2016-
17, the assessee has not declared any
foreign asset or account thereon despite the
fact that assessee is holding account no.
806694 as beneficiary owner. As per the

Page | 2
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

account opening form and passport details
mentioned therein, assessee is holding
foreign account in the capacity of beneficial
owner and credit entries are reflected in the
said bank account. However, assessee has
failed to disclose such income in Schedule A
& B of FA in his income tax Return. In view
of the same, assessee's undisclosed foreign
income attracts the Black Money Act and
gets covered in this section 3 & 4 of the
Black Money Act. ―

3. Assessee has also filed cross objections in C. O. No. 26/Del/2021 raising
following grounds

― 1. That the Assessment Order dated

29/03/2019 passed by the Ld. Addl. CIT,

Range-70, New Delhi Delhi (A.O.) u/s 10(3) of

The Black Money (Undisclosed Foreign Income

and Assets) and Imposition of Tax Act, 2015

(The Black Money Act, 2015) is illegal, invalid

and void ab intio and thus it is liable to be

quashed at source.

2. That the Ld. A.O. has erred in law in

computing u/s 5 r.w.s. 4(3) of the Black

Money Act, 2015, the ―total undisclosed foreign

income and asset‖ at Rs. 12,23,77,070/- in spite

of his clear admission that Rs.6,57,30,070/- is

the Returned Income u/s 139(1) of the Income

Tax Act for the A.Y. 2016-17 which could have

never formed part of the total undisclosed

foreign income and asset under The Black Money

Act, 2015.

3. That the Ld. A.O. thus erred in law in
assessing u/s 10(3) of The Black Money Act,
2015 the ―undisclosed foreign income and asset‖
at Rs.12,23,77,070/- as against the alleged
Rs.5,66,47,000/- being the alleged total
undisclosed foreign income and asset found out
by him as per his information.

4. That the Ld. A.O. further erred in law in
determining the total amount payable by the
assessee at Rs.2,66,61,977/- by imposing
Surcharge, Cess and also Interest u/s 234B of
the Income-tax Act, all of which are not
applicable to charge of tax u/s 3 of The Black
Money Act, 2015.

5. That the Ld. A.O. erred in not serving upon

Page | 3
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

the assessee the required Notice of Demand u/s
13 of The Black Money Act, 2015, in the
prescribed ―Form 1‖ (as per Rule 5).

6. That without any prejudice to the above, it is
further objected that the Ld. A.O. has filed
invalid appeal u/s 18(1) of The Black Money Act,
2015 before the Appellate Tribunal inasmuch as
the same was required to be filed in prescribed
―Form 3‖ [see Rule 7(2)] as against the ―Form
36‖ under Rule 47(1) of the I.T. Rules so filed by
the Ld. A.O. being the Appellant.

7. That the entire proceedings in the case of the
assessee carried out under The Black Money Act,
2015, being from the assessment to the appeal
before the Tribunal, are all flawed and illegal and
being all beyond the provisions of the said Act,
the entire proceedings may thus be quashed ab
initio. ―

4. Brief facts of the case shows that assessee is an individual and is earning salary

from Essar Services India Ltd. A search was conducted in case of ―Rakesh

Agarwal Group‖ Baroda. Posts such inquiries and information obtained from

foreign tax authorities under Double Taxation Avoidance Agreement, six trust

companies were found involved in the transaction. One trust ‗Rajvin Ltd‖ is
settled by the assessee is a revocable trust on 15th of April 2005 with Merrill

Lynch bank and trust company (Cayman) Ltd as a settler /trustee. The ultimate

beneficiaries of the trust include Shri Rajneesh Mehra, Mr. Vineet Mehra (Sons)

and Hans Mehra (Grandson). The trust deed was revoked on 16/12/2011 and

on revocation of the trust funds were sought to be transferred to the bank

account of Clariden Leu Ltd, Singapore, account number 806694 held in the

name of Watergate advisors Ltd, a company incorporated in British Virgin

Islands.

5. For assessment year 2016 – 17 assessee has filed his return of income declaring

income of ₹ 6,57,30,070/– on 30 July 2016. On receipt of above information

from The Additional Director Of Income Tax, Investigation, unit – 6 (2), New

Delhi on 22/7/2016, an interim report was submitted to the AO for further

investigation and to take necessary action Under Black Money (Undisclosed

Foreign Income And Assets) And Imposition Of Tax Act, 2015. Consequently

notice u/s 10 (1) of the act was issued on 21/11/2016. The assessee submitted

on 7/12/2016 that assessee did not have any foreign assets and no foreign

Page | 4
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

sourced income from financial year 2009 – 10 till date. The assessee was asked
to submit the trust deed and bank details. In response to that assessee
submitted that he does not have the copy of the trust deed and Mr. Rajneesh
Mehra, son of assessee, in order to show regard and respect towards the
assessee wanted him to be a nominal settler of the trust. It was in deference to
his business and Under his instructions and as per his request, assessee has
agreed to become the nominal settler without having to invest, contribute or
settle any amount as the settlement amount of the trust. Further his Sons and
grandson are beneficiaries of the trust, did not have any bank account.
6. The learned assessing officer noted that he has received information under
provisions of Exchange Of Information article of India- Singapore Double
Taxation Avoidance Agreement that this assessee is the beneficial owner of
account number 806694 Clariden Lie Ltd (credit Suisse), Singapore. The bank
account shows that on 21 December 2011 credit of US$ 826,161.51, on 30
March 2012 credit of US$ 7712.50 and on 15/10/ 2012 credit of US$ 151.25
amounting in all to US$ 834,025.32 were made.
7. The learned assessing officer issued a show cause notice on 14 June 2018 that
why the above sum of US$ 834,025.32 amounting to ₹ 56,647,000 should not
be considered as Undisclosed Foreign Income and Assets under the Black Money
(Undisclosed Foreign Income and Assets) Act 2015.
8. On 22nd November, 2018, assessee submitted a reply stating that AO has
supplied page number 1 to 19 on 14 June 2016 being the account opening form
of Watergate advisors Ltd for opening of the bank account in Clariden Lieu Ltd
Singapore and stated that

a. None of the above documents bear any of the signature of the assessee
and assessee has neither signed the above documents and nor gone to
that bank anytime.

b. Watergate advisors Ltd belongs to the son of the assessee Mr. Rajneesh
Mehra, who is a non-resident Indian since 1998.

c. He is neither a shareholder nor a director of Watergate advisors Ltd at
any point of time.

d. Certificate of incumbency issued by the registered agents M/s Vista BVI
Ltd on 12 March 2018 according to that certificate it confirms that
Watergate advisors Ltd was incorporated in BVI on 18 March 2011 and his
son Shri Rajneesh Mehra is the director and sole shareholder of it.
Page | 5
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

e. Affidavit dated 17 August 2018 of Mr. Rajneesh Mehra confirming that
assessee has not signed any documents relating to the company and nor
did assessee received any money on any account from Watergate
advisors Ltd. Mr. Rajneesh Mehra also confirmed that he was the
beneficial owner of Watergate advisors Ltd.

In short, assessee raised several contentions and submitted that he is not
the owner of the above money but his son is i.e. Mr. Rajneesh Mehra is the
owner of the sum. Therefore, assessee contested that he was not required
to submit/disclose these assets in schedule FA in the return of income.

9. The learned assessing officer rejected the contentions of the assessee and noted
that in assessee‘s return of income for assessment year 2010 – 11 to 2016 – 17,
he has not declared foreign assets/income and has not declared any foreign
bank account. However, as per the information available with learned AO,
assessee is holding foreign account number 806694 and the beneficiary of
account is the assessee. The account opening form also shows that the
beneficiary of account is the assessee. The details of the passport of the
assessee are mentioned in the account opening form as identity proof. Thus, AO
held that it is evident that the assessee is holding foreign account and the credit
entries are reflected in the account statement. Further the assessee has not
disclosed income in schedule A and B of FA in his income tax return and
therefore the assessee has not disclosed the foreign income/assets and
therefore the provisions of the undisclosed foreign income attracts The Black
Money Act. He rejected the argument of assessee that assessee is the only
nominal settler of the trust without having to invest, contribute, or settle any
amount as the settlement amount of the trust and his son Shri Rajneesh Mehra
is the beneficiary of the trust. Ld AO was of the view that If the intention is to
confer all the benefits to Sri Rajneesh Mehra, the name of the beneficial owner
in the bank account should have been of Shri Rajneesh Mehra and not of
assessee. He held that documents show that the beneficial owner of the
account is only the assessee. He therefore referred to the provisions of Section
3 and 4 of The Black Money Act and satisfied that the assessee has not declared
foreign assets/income/accounts of ₹ 56,647,000 Under The Black Money Act and
made an addition. He passed an order u/s 10 (3) of the act on 29th of March
2019 determining the total income of the assessee at ₹ 122,377,070/– against

Page | 6
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

the returned income of ₹ 65,730,070/– wherein addition of ₹ 56,647,000/– was
made on account of credit appearing in the account of Watergate advisors Ltd in
bank account number 806694 with Clariden Leu Ltd Singapore.
10. Assessee aggrieved with the order of the learned AO preferred an appeal before
the learned CIT – A. Assessee challenged applicability of the black money act as
per ground number 2 –5, these grounds were dismissed. As per ground
number 6 – 15 assessee challenged the additions on the merits of the case. On
the merits The learned CIT – A decided as Under:-

―4.3 Ground no 6 to 15 related to the merits of the case stating
that the said account does not belong to him and that he did not
provide any money or received any money from the said account.
It is seen from the order of the AO that during the assessment
proceedings, the assessing officer had relied upon a bank account
‗opening form‘ to observe that the appellant‘s name was mentioned
as the beneficial owner of such account and was thus liable to tax
for all credits in the said account. It is not disputed that the said
account belonged to and was owned by Watergate advisors Ltd i.e.
a company incorporated in the British Virgin Islands. It is not
disputed that the sole director and shareholder of Watergate
advisors Ltd was Sri Rajneesh Mehra, who has been a non-resident
since 1996. It is also not disputed that Section 2 (2) of The Black
Money Act restricts its application only to a ‗resident‘ assessee as
defined under sections 6 of The Income Tax Act.
The contention of the appellant has been considered and the order
of the AO has been perused. At the outset, it is apparent and
undisputed that the said bank account number 806994 was owned
and belonged to Watergate advisors Ltd, which was a company,
incorporated in the British Virgin Islands. In order to charge the
credits appearing in the accounts of such company, it must satisfy
the condition for becoming a ―resident‘ as per Section 6 of The
Income Tax Act.
The provisions of Section 6 (3) as applicable for assessment year
2016 – 17 state that

(3) A company is said to be resident in India and in the
previous year, if –

Page | 7
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

(i) It is an Indian company, or
(ii) During that year, the control and management of
its affairs is situated wholly in India.

As per the certificate of incumbency available on record, the
company is incorporated in British Virgin Islands and thus does not
satisfy the provisions of Section 6 (3) (ii) as applicable for
assessment year 2016 – 17 mandated the entire management and
control of such company to be present in India for it to be
considered as an Indian resident. As per the certificate of
incumbency available on record, Shri Rajneesh Mehra is the sole
director and sole shareholder of the said company. The certificate
of incumbency as noted above has not been disputed by the
appellant or by the assessing officer. Thus, the management and
control of the said company appears to be wholly outside India.
The findings of the assessing officer do not indicate that the
appellant was wholly and exclusively engaged in the management
and control of Watergate advisors Ltd and that Sri Rajneesh Mehra
was nowhere involved in the management and control of Watergate
advisors Ltd.

It is further noticed that the AO‘s only claim in this regard is the
mention of the appellant‘s name as the beneficial owner in the
account opening form. Even if, to some extent, the AO‘s claim is to
be considered to the extent of the appellant‘s involvement in the
management and control of Watergate advisors Ltd, the
involvement of Shri Rajneesh Mehra in the management and
control of the said company has not been denied. Thus, even if
management and control was partly in India and partly outside
India, the said company does not qualify as an Indian resident as
per provisions of Section 6 (3) of the Income Tax Act. Thus,
Watergate advisors Ltd being a foreign company is not liable to tax
in India or under the Black Money Act.

Having examined the above, it is necessary to examine the
purported beneficial ownership of Said bank account by the
appellant. As The Black Money Act does not define ‗beneficial

Page | 8
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

ownership‘, reference is drawn from explanation 4 to Section 139
(1) of The Income Tax Act, 1961 which defines a beneficial owner
as follows:-

―Explanation 4 – for the purposes of this Section,
beneficial owner in respect of an asset means an
individual who has provided, directly or indirectly,
consideration for the assets for the immediate or
future benefit, direct or indirect, of himself or any
other person.‖

Thus, the underlying nexus for a person to be defined as a
‗beneficial owner‘ is the infusion of funds into the said asset. In
the given case, it is observed that the only external credit arising in
the said account was from Rajvin Ltd. The appellant has placed
reliance on a Memorandum of Family Arrangement that was
submitted before the AO and has not been denied or rejected by
the AO. In fact, vide remand report dated 19/11/2019, the AO has
confirmed the submission of the said document during the
assessment proceedings. The brief constituents of the said
Memorandum of Family Arrangement are reproduced below-

 that it was created by Shri Rajneesh Mehra and signed by
his family members

 that as per the memorandum, a trust was to be created
by him for furtherance of education/vocational/technical
skills, promoting hygiene and research on Hindu
Scriptures

 that as per the said memorandum, Shri Rajneesh Mehra
himself had to contribute a sum of US$ 50,000 and raise
the remaining US$ 2 lakhs from like-minded friends,
associates and affiliates

 that the said memorandum clearly mentions that it would
incorporate a company and that the management and
control of such trust and such underlying company would
solely rest with Shri Rajneesh Mehra

Page | 9
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

 that the appellant and his wife would not be involved in
the functioning, management or control of the trust or the
company

 that Shri Rajneesh Mehra will out of love and respect
appoints his father i.e. the appellant as the nominal
settler

 that neither the appellant being the nominal settler, the
beneficiaries or Shri Rajneesh in my himself shall draw
any fees, remuneration or benefit from the trust or the
company

 that the creation, management, control, revocation of
the trust and the underlying company was solely the
responsibility of Shri Rajneesh Mehra

 that upon revocation , the funds remaining with the
company or the trust would not be distributed among the
settler or beneficiaries but shall be passed on to any other
trust engaged in pursuing similar objects.

The above statement emanates from the Memorandum of Family
Arrangement that was also submitted before the AO during the
assessment proceedings. A perusal of the assessment order shows
that such document has not been denied or rejected by the AO.
During the assessment proceedings and before the undersigned,
the appellant has stated that he was unaware that his son had
named him as the beneficial owner in the account opening form.
This also reflects from the fact that the account opening form does
not have any signatures of the appellant.

The appellant‘s claim that no investment was made by him also
appears to be correct as the credits in the said account came from
Rajvin Ltd trust, which is as per the Memorandum of Family
Arrangement created solely by Sri Rajneesh Mehra. This also
reflects from the certificate of incumbency of Watergate advisors
Ltd wherein Shri Rajneesh Mehra is the sole shareholder and
director. The appellant‘s claim that he did not receive any funds
from Watergate advisors Ltd also appears to be correct as per the

Page | 10
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

confirmation from Matthew G Stock and G S Impex Pte Ltd stating
that some business activities/share transactions have been
undertaken by them with Shri Rajneesh Mehra in the last 20 years
and on such account some US dollar 1,50,000 was still receivable
by them from Rajvin limited. These confirmations have also not
been denied or rejected by the AO. The appellant has also
submitted and relied on an affidavit executed by Shri Rajneesh
Mehra confirming the above facts, which was also placed before the
AO during the assessment proceedings. The AO has not rejected or
denied the contents of the said affidavit.

Therefore, in light of the above discussion, as the definition of
‗beneficial owner‘ requires a nexus of consideration being provided
to acquire an asset, the mere mention of the appellant‘s name out
of love and respect is insufficient to classify him as a ‗beneficial
owner‘ of the bank account of Watergate advisors Ltd for the
purposes of Black Money Act. Moreover, the primary ownership of
the said bank account by Watergate advisors Ltd and the existence
of Shri Rajneesh Mehra as the sole director and the shareholder has
not been denied by the assessing officer. In the absence of such a
denial and in the existence of the name of Rajneesh Mehra as the
sole director and shareholder of Watergate advisors Ltd, the
ownership of the bank account clearly rests with the company. The
AO has not brought on record any evidence to show that the
appellant owned Watergate advisors Ltd was solely responsible for
its management and control. It is well known that a company
belongs to its shareholders and is run by the directors. The
underlying test of ownership is that in the event of liquidation of
the company, the assets and liabilities rest with the shareholders.
In the given case, such ownership of bank account of Watergate
advisors Ltd and of Rajvin Ltd clearly rests with Mr. Rajneesh
Mehra and has not been denied by the AO. There is no other
evidence brought on record by the assessing officer to reject the
ownership by Shri Rajneesh Mehra.

Page | 11
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

In the light of the above, the appellant‘s contention that the
underlying bank account number 806994 held in Clariden Leu Ltd
belonged to Watergate advisors Ltd and did not belong to the
appellant is found to be correct. Thus, the additions of ₹
57,445,180/– equivalent to US dollar 8,34,025.32 being the credits
in the said account made in the hands of the appellant are hereby
deleted. These grounds of appeal stands allowed.‖

11. Thus, the learned assessing officer is aggrieved with the order of the learned CIT
– A and preferred this appeal against this order before us on 14/12/2020
whereas the order of the learned CIT – A was communicated to The Principal
Commissioner Of Income Tax, Delhi – 15, New Delhi on 1/10/2020. The learned
AO filed an appeal in form No. 36 [ As per the Income tax Rules 1962 ] along
with the authorization of the Ld CIT, Delhi – 15 New Delhi. The assessee has
also filed a cross objection in form No. 4 according to rule 7 (2) of Black Money
and Imposition of Tax Rules, 2015.

12. The learned senior departmental representative vehemently supported the order
of the learned assessing officer and submitted that
a. name of the assessee is clearly reflected in the column of beneficiary
owner of account in the account opening form,
b. Details of his passport is mentioned as the identification document in the
account and therefore the contention of the assessee cannot be accepted
that he has not signed any document and account is not maintained by
him.
c. Though the learned assessing officer has not denied that son of the
assessee Mr. Rajneesh Mehra is doing some business activities in Rajvin
Ltd in last 20 years but it does not prove that account number 806694 is
not maintained by the assessee and the owner of the account is Mr.
Rajneesh Mehra.
d. Return of the assessee does not show the disclosure of the above
account.
e. Account number 806694 is held in the name of Watergate advisors Ltd
and Jatinder Mehra, but assessee is the beneficial owner of that account,
if the assessee was merely a nominal settler of the trust, then the name

Page | 12
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

of the beneficial owner on the bank account should not have been shown
of the assessee.
f. Definition of undisclosed asset located outside India as per Section 2 (11)
of Black Money (Undisclosed Foreign Income And Assets) And Imposition
Of Tax Act, 2015 means any asset, which is including a financial interest
in any entity located outside India held by the assessee in his name or in
respect of which he is a beneficial owner and he has no explanation
about the source of such investment or the explanation given by him is
not satisfactory, in the opinion of the assessing officer, then such income
is required to be taxed according to the provisions of the law. Therefore,
she submitted that as the assessee is the beneficial owner of the bank
account, which is in the name of Watergate advisors Ltd, the learned
assessing officer has correctly charged the above sum to the tax in
accordance with the provisions of the act.
g. Order of the learned CIT – A in view of the findings of the learned
assessing officer, unsustainable and deserves to be set-aside.
13. Coming to CO and Appeal of Ld AO , The learned authorised representative first
challenged the assessment order on the ground that it suffers from invalidity for
following reasons:-

i. At the outset, before going on the merits of the case of the Assessee,
it is the first and foremost contention of the Assessee, as raised in the
Cross Objection filed by the Assessee vide Grounds 1 to 5, that the
very Assessment Order dated 29/03/2019 passed by the Ld. A.O. u/s
10(3) of The Black Money Act, 2015 is illegal, invalid and void ab intio
in as much as the Ld. A.O. in computing u/s 5 r.w.s. 4(3) of the Black
Money Act, 2015, the ―total undisclosed foreign income and asset” at
Rs.12,23,77,070/- included in it Rs.6,57,30,070/- which was the
Returned Income u/s 139(1) of the Act of the Assessee for the
A.Y.2016-17 which could have never formed part of the total
undisclosed foreign income and asset under the Black Money Act,
2015. The Ld. A.O. accordingly, based on such erroneous and invalid
computation of the assessed total undisclosed foreign income at
Rs.12,23,77,070/-, raised the erroneous demand payable at
Rs.2,66,61,977/- by imposing tax on the said amount and also by
imposing Surcharge, Cess and also interest u/s 234B of the I.T. Act,
Page | 13
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

all of which are not applicable to charge of tax u/s 3 of the Black
Money Act, 2015. Thus, on jurisdiction, it is contention of the
Assessee that the Assessment Order and the subsequent Demand
both being invalid being beyond the provisions of the Black Money
Act, 2015 may accordingly be quashed at source.

ii. Ld. A.O. after determining the alleged undeclared foreign
assets/account of Rs. 5,74,45,180/-, he went on to recompute and
assess u/s 5 r.w.s 10(3) of the Black Money Act, the total income of
the Assessee as under:

Returned Income (as filed u/s 139(1)

of the IT Act) : Rs.6,57,30,030/-

Add: undisclosed foreign asset

(under Black Money Act) : Rs.5,66,47,000/-

Assessed Income Rs.12,23,77,070/-

Based on the above, the Ld. A.O. computed the total amount payable
by the Assessee at Rs. 2,66,61,977/- by imposing tax on the said
total income of Rs. 12,23,77,070/-Surcharge, Cess and interest u/s
234B of the Income Tax Act, on the said total sum, all of which are
not applicable to charge of tax u/s 3 of the Black Money Act, 2015.

iii. Action of the Ld. A.O. in the case of the Assessee whereby in his
assessment u/s 10(3) of the Black Money Act, he has included the
income returned under the income tax act, is grossly ultra vires the
Act and thus the Assessment Order dated 29/03/2019 is void ab initio
and thus liable to be quashed.

iv. Ld. A.O. imposed tax on addition as well as returned income and by
imposing Surcharge, Cess and interest u/s 234B of the I.T. Act, not all

Page | 14
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

of which are applicable to charge of tax u/s 3 of the Black Money Act,
2015. According to section 3 of the Black Money Act it clearly lays
down that under the Black Money Act the charge of tax shall be 30%
of the total undisclosed foreign asset and income. There is no
surcharge, cess and any interest to be levied on the same.

v. On jurisdictional grounds, it is the contention of the Assessee that the
Assessment Order passed u/s 10(3) of the Black Money Act, 2015,
and the subsequent Demand Notice both being invalid and being
beyond the provisions of the Black Money Act, 2015 should
accordingly be quashed at source.

vi. He further objected that the Ld. A.O. has filed invalid appeal u/s 18(1)
of the Black Money Act before the Appellate Tribunal in as much as
the same was required to be filed in prescribed ―Form 3‖ (see Rule
7(2)) as against the ―Form 36‖ under Rule 47(1) of the IT Rules so
filed by the ld. A.O. being the Appellant.

14. On the merits of the addition, he submitted that on the facts and circumstances
of the case, the assessee does not have any foreign income or assets and
therefore no addition can be made. He submitted that :-

i. The bank account number 806694 is solely in the name of a

foreign company Watergate advisors Ltd who sole shareholder

and director as the son of the assessee Shri Rajneesh Mehra a

non-resident Indian. Assessee has not at all invested or

contributed any sum in the bank account. He referred to page

number 174 – 191 of the paper book wherein the details of the

bank account is placed.

ii. He also referred to the certificate of Incumbency dated 12 March

2018 wherein Shri Rajneesh Mehra is shown to be the sole

shareholder and director of the Watergate advisors Ltd. He

Page | 15
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

submitted that in case of a company only the shows shareholder

could only be the contributor as well as the beneficiary of that

account.

iii. That mention of the beneficial owner as the assessee in the

above bank account in column number 4.3 of the account

opening form placed at page number 183 of the paper book out

of the gratitude in respect the assessee is named as beneficial

owner by his son. He referred to the affidavit of the son of the

assessee for this purpose.

iv. The Account Opening Form is nowhere signed by the Assessee.

v. He referred to the provisions of Section 2 (11) of the black

money act where undisclosed assets located outside India is

defined and submitted that on the facts and circumstances of the

case the assessee is not a beneficial owner, he referred to the

order of the learned and CIT appeal, wherein the assessee has

also disclosed the source of such investment in such bank

account even otherwise and his explanation is not found to be

incorrect by the assessing officer and still the AO has taxed the

above amount in the hence of the assessee Under the black

money act. He vehemently denied that assessee has provided

the sources of the funds directly or indirectly for the immediate

or future benefit of the assessee or any other person. He

submitted that the source of the funds has been correctly

explained by the learned and CIT – A which has not been

disputed by the AO is not emanating from the assessee. He

submitted that on 21/12/2011 credit of US dollars 8,26,161.57

emanated from Rajvin Ltd trust has been accepted by the

assessee which has been also explained by the submitting the

confirmation that the source of the fund emanating in Rajvin Ltd

is on account of business transactions and therefore the source

of the fund in the bank account of Watergate advisors Ltd is fully

explained.

vi. He also referred to the memorandum of family arrangement

submitted before the assessing officer as well as before the

learned CIT – A placed at page number 125 to 129 of the paper

Page | 16
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

book which clearly shows that Rajvin limited is created by son of

the assessee and assessee has not provided any funds in the

trust. He also referred to the various clauses of the

memorandum as well as the fund flow emanating from that

Rajvin trust.

vii. He also referred to the copy of the confirmation of G S Impex Pte

Ltd, Singapore listed page number 124 of the paper book

wherein it is evident that Sri Rajneesh Mehra was carrying on

business and investment in Rajvin Ltd is emanating from

Rajneesh Mehra. He also referred to the confirmation of Mr

Matthew G stock who confirmed that he had a business

relationship with Mr Rajneesh Mehra and he invested US$

950,000 in Raja been between 2005 – 2008. This conformation

also speaks about the details of the repayment of the above

sum. He therefore submitted that all the funds in RajVin Ltd has

emanated from Mr Rajneesh Mehra, the bank account owned by

Rajneesh Mehra, the beneficiary is Mr Rajneesh Mehra. In

addition, assessee has no concern with those funds as well as

those accounts.

viii. That The Ld. AO has nowhere at any point disputed that

Watergate Advisors Limited, a company fully owned by Shri

Rajneesh Mehra was the account holder of the impugned Bank

Account.

ix. That Ld. A.O. has simply disregarded all the evidences without

providing any basis for the same. The Ld. A.O. has not brought

on record any evidence to show that the bank account was not

owned by Shri Rajneesh Mehra and that the Assessee had any

beneficial interest in the same. The ld. A.O. simply went on to

make additions in the hands of the Assessee on pure suspicious

and surmises.

x. He further relied on the decision of the coordinate bench in ITA

Nos. 138/Mum/2019 to 142/Mum/2019 in the case of Kamal

Galani Vs. ACIT dated 10/09/2020 wherein the issue is on the

similar facts decided in favour of the assessee.

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BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

xi. Thus in view of all the facts of the Assessee and in the light of
xii. the judicial decision as relied upon above, it therefore stands to
xiii. be the case of the Assesee that, based on all the evidences duly
furnished by the Assessee and accepted in totality by the A.O.
without any rebuttal, it is the fact of the Assessee that the Bank
A/c No. 806694 was in the name of and clearly belonged the
Company WAL of which the sole shareholder thus the sole owner
was Shri Rajneesh Mehra. Thus, the Assessee can under no
circumstances be held to the owner of the said Bank Account.
He submitted that it is a settled legal principle that taxation
would arise either on account of contribution of assets or funds
or on receipt of any distribution or benefit from such
trust/structures/entities. In absence of either contribution of
receipt on income that would be no implication for merely being
named is a beneficiary in a bank account as all that a beneficiary
of such an account has is a hope that the distribution will be
made in his favour at the time of resolution. For this proposition,
he relied on the decision of the honourable Supreme Court in
case of Commissioner of wealth tax versus estate of HMM
Vikramsinhji of Gondal. (2014) 225 taxman 166 (SC).
He further submitted that the provisions of the black money act
has come into effect and is applicable from 1 July 2015 and
therefore the money which is deposited in the bank account of
Watergate advisors Ltd in financial year 2011 – 12 – 13 cannot
be taxed when there was no act. He submitted that challenge to
the applicability of the black money act retrospectively is pending
before the honourable Supreme Court and therefore it cannot be
taxed.

15. Therefore he requested that the above addition made by the learned assessing
officer is incorrect and correctly deleted by the learned CIT – A. Thus he
submitted that the order of the learned assessing officer suffers from serious the
validity as well as the appeal filed is not in order, learned DR could not find any
infirmity in the order of the learned and CIT – A, the order of the AO deserves to
be quashed and the order of the learned and CIT – A should be applied.

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BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

16. We have carefully considered rival contentions and perused orders of lower
authorities. Controversy in this case is that, based on the facts of the case of
the Assessee and the allegations of the Ld. A.O., sole issue under appeal is
regarding the Account Opening form of the Foreign Account A/c No. 806694
maintained in the ―Clariden Leu Ltd. Bank‖ (Presently Credit Suisse) belonging
to ‗Watergate Advisors Ltd.‘ (WAL), a foreign company incorporated in the
British Virgin Islands (BVI). Undisputedly sole Director and Shareholder of that
company is Shri Rajneesh Mehra, being the NRI son of the Assessee. It is also a
fact that assessee is named as the ‗beneficial owner‖ and the passport details of
the Assessee was mentioned in account opening form of that account. It was on
this sole allegation Therefore, ld AO held at para 7.2, page 12 of his Order
that the Assessee could not disprove that the name of the Assessee was
reflected in the column of beneficiary owner of the account and could not prove
that his son, Shri Rajneesh Mehra was the sole owner of the account. Hence,
ld. A.O. held that the Assessee was the only beneficiary of the account, and by
not disclosing such foreign asset in his Income Tax Return, assessee is covered
by the Provision of The Black Money Act, 2015. So total credits as appearing in
bank account no. 806694 maintained in the ―Clariden Leu Ltd. Bank‖ (Presently
Credit Suisse) belonging to ‗Watergate Advisors Ltd.‘ (WAL), being USD
8,34,025.32 amounting to Rs.5,66,47,000 (1 USD = 67.92 @rate as on Dec
2016) was held to be the Black Money of the Assessee and order was passed.
The learned CIT – A deleted the addition holding that the assessee is not the
beneficial owner of the bank account and further the source of the fund in that
bank account is emanating from Rajvin Limited trust in which the business
receipts are credited belonging to the business dealings of son of the assessee
Mr. Rajneesh Mehra . The bank account of Rajvin Ltd is also opened by the son
of the assessee; the assessee has not provided any contribution/investment in
the bank account of the Rajvin Ltd or Watergate advisors Ltd. He also
considered the remand report of the learned assessing officer as well as the
memorandum of family understanding, affidavits of the son of the assessee,
information of two different parties. Therefore, the addition came to be deleted.

17. The Black Money Undisclosed Foreign Income And Assets) And Imposition Of Tax
Act, 2015 is enacted on 26th of May, 2015 by act number 22 of 2015 and which
came into force with effect from first day of April, 2016. The charge of tax is
provided Under Section 3 of the act in respect of total undisclosed foreign
Page | 19
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

income and assets of the previous year of the assessee at the rate of 30% of
undisclosed income and assets to be charged on its value in the previous year in
which such assets comes to the notice of the assessing officer. U/s 2 (2)
assessee is defined to mean a person being a resident other than NOR in India
as defined in clause (6) of Section 6 of the income tax act. U/s 2 (12)
undisclosed foreign income and assets is defined to mean the total amount of
undisclosed income of an assessee from a source located outside India and the
value of an undisclosed asset located outside India referred to in Section 4 and
computer in the manner laid down in Section 5 of the act. U/s 2 (11)
undisclosed asset located outside India means an asset including any financial
interest in any entity located outside India held by the assessee in his name or
in respect of which he is a beneficial owner and he has no explanation about the
source of investment in such a set or the explanation given by him is in the
opinion of the assessing officer unsatisfactory. Section 4 deals with the scope of
total undisclosed foreign income and assets and Section 5 deals with the
computation of total undisclosed foreign income and asset. Thus on careful look
at Section 3 of the act it provides that irrespective of the year of investment, the
undisclosed asset located outside India shall be charged to tax on its value in
the previous year in which such asset comes to the notice of the assessing
officer. Therefore, the year of chargeability of such undisclosed assets located
outside India shall be the previous year when it comes to the notice of the
assessing officer. Provisions of Section 10 of the act deals with the assessment
of the undisclosed foreign income and assets and the sum payable by the
assessee. There is no provision of charging of any interest over and above the
tax at the rate of 30% provided u/s 3 of the act. Provisions of Section 5 (1) (ii)
provides for exclusion of the income already charged to tax Under the income
tax act from the value of the undisclosed assets located outside India and
furnishing of the evidence by the assessee to the satisfaction of the assessing
officer. Provisions of Section 4 (3) provide that the income included in the total
undisclosed foreign income and assets under this act shall not farm part of the
total income under the income tax act. Thus it can be stated that provisions of
Section 10 (1) of the act provides that an assessing Officer can issue a notice in
the year in which he discovers an undisclosed foreign asset or receives
information about an undisclosed foreign asset/income provisions of Section 72
(C) which provides that a foreign asset shall be deemed to have been acquired

Page | 20
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

or made in the year in which a notice u/s 10 is issued by the assessing officer
and the provisions of this act apply accordingly. Wherein undisclosed foreign
asset was acquired or offshore income earned prior to the date of coming into
effect of the act and it is not taxed Under the income tax act, still Under the
black money act, tax at the rate of 30% and penalty at the rate of 90% of the
value of the asset can be recovered from such taxpayer. Over and above, the
taxpayer may also be liable for prosecution. Provisions of Section 81 of the act
provide that no assessment, notice, summons or other proceedings, made or
issued or taken or purported to have been taken made or issued or taken in
pursuance of any of the provisions of the act shall be invalid or shall be deemed
to be invalid merely by reason of any mistake, defect or omission in such
assessment, notice, summons or other proceedings, if such assessment, notice,
summons or other proceedings is in substance and effect in conformity with or
according to the intent and purposes of this act.
18. coming to the jurisdictional aspects raised by the assessee in the cross objection
stating that the

a. learned assessing officer has made an addition to the regular income of
the assessee of the alleged foreign assets and thereafter framed
assessment order computing the total income of the assessee including
the returned income of the assessee as per the income tax act, as per
ground number 2 of the CO

b. charging of interest u/s 234B, surcharge and cess thereon etc as per
ground number 4 of the CO

c. issue of demand notice along with interest charged not served on the
assessee in the required format in form number 1 u/s 13 of the black
money at 2015

Would all not make any difference to the validity of the assessment made in
view of the provisions of Section 81 of the act. In view of this, we dismiss
ground number 2, 4 and 5 of the cross objection of the assessee.

19. Coming to the ground number 6 of the cross objection where the learned
assessing officer has filed the appeal in form number 36 as prescribed Under the
Income Tax Rules 1962 instead of in form number 3 as prescribed Under rule 7
(1) of The Black Money (Undisclosed Foreign Income And Assets) And
Imposition Of Tax Rules, 2015. The assessee has challenged that appeal filed

Page | 21
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

by the assessee is an invalid appeal u/s 18 (1) of the Black Money Act 2015.
We have carefully perused form number 3 as per rule 7 (1) of that rules. We
find that almost all the columns of this form are similar to the columns
prescribed in form number 36 of IT Rules 962. Even the notes to the form are
also similar and manner of verification is same. The only defect is that learned
AO has to file appeal in form number 3 of respective rule of The Black Money
Act but instead of that, it has been filed in form number 36 as per Income tax
Rules 1962. However looking to the substance of the matter, we do not find any
difference in the requisite information required by both these forms. Therefore,
we do not find any merit in ground number 6 of the CO. At the time of hearing,
the learned AR himself withdrew this ground and therefore it is dismissed.
20. Ground number 1, 3 and 7 are general in nature, these grounds support the
other issues raised in the CO with respect to the invalidity of the appeal filed by
the learned AO, no specific arguments were advanced on these three grounds,
and therefore those are dismissed.
21. Now coming to the appeal of the ld AO, facts of the bank account shows that
The Bank Account A/c No. 806694 maintained in the ―Clariden Leu Ltd. Bank‖
(Presently Credit Suisse) is in the name of the foreign company ‗Watergate
Advisors Ltd.‘ (WAL), whose sole shareholder and director is the son of the
Assessee, Shri Rajneesh Mehra, who has been stated to be a non resident since
1998. The Bank Account Opening Form enclosed at pages 174-191 of the paper
book, reveals at page 176 that the account stood in the sole name of the
Company ‗Watergate Advisors Limited.‖ Assessee has submitted a certificate
of incumbency dated 12/03/2018 issued by the registered agent of WAL which
was also submitted before the A.O., shows that the company WAL was
incorporated in BVI on 18/03/2011 and that Shri Rajneesh Mehra was the sole
shareholder and director of the said Company. Thus according to this certificate
the ownership of the account rests exclusively with Shri Rajneesh Mehra as in
case of liquidation or winding up of a company, all its assets and liabilities are
distributed amongst its shareholders only. However, it is also stated by the
assessee that Shri Rajneesh Mehra being the sole owner of the bank account,
out of love and respect, mentioned the name of the Assessee, Jatinder Mehra,
as the ―Beneficial Owner‖ at column 4.3 of the Form, which is placed at page
183 of the paper book. The claim of the assessee is that Shri Jatinder Mehra,
appellant/respondent being the father of the Assessee, out of gratitude and

Page | 22
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

respect was merely named as the Beneficial Owner. For this proposition
assessee submitted affidavit of shri Rajneesh Mehra dated 17/08/2018, wherein
he clearly confirmed that the name of the Assessee, his father, was shown as
the nominal beneficial owner in the Form out of respect and that the Assessee
never received any money on account of the company WAL and that the
Assessee did not ever sign any documents relating to the Company including the
said Account Opening Form of the bank account of the company.
22. In view of these facts it is necessary to determine that Under what
circumstances the undisclosed asset located outside India can be taxed in the
hence of the assessee Under The Black Money (Undisclosed Foreign Income And
Assets) And Imposition Of Tax Act 2015. Section 2 (11) defines undisclosed
assets located outside India as Under:-

(11) ―undisclosed asset located outside India‖ means an asset (including
financial interest in any entity) located outside India, held by the assessee
in his name or in respect of which he is a beneficial owner, and he has no
explanation about the source of investment in such asset or the
explanation given by him is in the opinion of the assessing officer
unsatisfactory
23. On careful analysis of the above provision it clearly says that there has to be an
‗asset located outside India'. It can also be any financial interest of an assessee
in any entity. These assets must be held in the name of the assessee. It can
also be held by assessee as its beneficial owner. These assets can be charged
to tax if assessee has no explanation about the source of investment in such
asset or if the assessee provides an explanation which is in the opinion of the
assessing officer is unsatisfactory then such asset can be charged to tax in the
hands of an assessee Under the provisions of Section 3 of this act.
24. Undoubtedly, in this case there is an asset located outside India. It is in the
form of a bank account number 806994 of a company Watergate advisors Ltd
with Clariden Leu Ltd (Presently Credit Suisse) wherein $ 834,025.32 has been
credited. Therefore, naturally the first text of having an asset located outside
India is satisfied. The second condition whether this bank account as held by
the assessee in his own name or not is not satisfied as it is held by the
Watergate advisors Ltd a company who shareholder is Mr. Rajneesh Mehra, son
of the assessee. Mr. Rajneesh Mehra is also the director of that company. The
third condition that now required to be tested is whether the assessee is the

Page | 23
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

beneficial owner in respect of such asset. The term ―beneficial owner‖ is not
defined under the black money act. However, the income tax act defines this
term with respect to the requirement of the filing of the return of income u/s
139 of the income tax act. The proviso to Section 139 of the income tax act
provides that a person, being a resident other than not ordinarily resident in
India within the meaning of clause (6) of Section 6, who is not required to
furnish a return Under the provisions of Section 139 (1) of the act and who at
any time during the previous year holds as a beneficial owner or otherwise, any
asset located outside India or has assigning authority in any account located
outside India or is a beneficiary of any asset located outside India, shall furnish
the return of income verified and in prescribed manner. Thus, the income tax
act casts a burden on specified assesse, if he holds as a beneficial owner any
asset located outside India or has assigning authority in any account located
outside India to file his return of income. The explanation 4 of that Section
provides that for the purpose of this Section beneficial owner in respect of an
asset means an individual who has provided, directly or indirectly, consideration
for the asset for the immediate or future benefit, direct or indirect, of himself or
any other person. Therefore, to identify a beneficial owner of an asset, the said
person should have nexus, direct or indirect to the source of the asset and he
must have provided funds for the said asset. Thus, in order to identify a
beneficial owner, one must verify the source of the asset. Now on perusal of
said Bank Statement reveals as per the show cause notice that the total credits
in the account was as under:

Date Credit Balance (USD) Particulars
(USD)
21/12/2011 8,26,161.57 8,26,161.57 From ‗Rajvin Ltd.‘ –Trust
30/03/2012 7,712.50 3,18,580.07 From Interest
25/10/2012 Deposited for closing
151.25 0 account
Total
8,34,025.32

- Thus, it is seen that the credit to the said bank account and thus the source of

the said account, was by way transfer made from the Trust Company ―Rajvin

Ltd.‖. Therefore now it is imperative to examine that where from Rajvin Limited

has received the fund which are transferred on 21st of December 2011 into the

account of Watergate advisors Ltd. Assessee has explained with the help of
Page | 24
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

memorandum of family understanding placed at page number 125 – 129 of the
paper book that ―Rajvin Ltd‘ was a Trust formed by the son of the Assessee, Shri
Rajneesh Mehra. The said Trust was conceived vide the ―Memorandum of
Family Arrangement‖ (MOA) dated 01/11/2003 entered into between the family
members of the Assessee, being himself, his wife and his two sons. The said
MOA, which was signed by the Assessee as one of the parties, was duly laid out
before the ld. A.O. for his perusal. Salient terms of The MOA‘s provides that
Shri Rajneesh Mehra, an NRI, was to form a Trust in any tax free jurisdiction
and the father of Sh. Rajneesh Mehra i.e. assessee would be made the nominal
settler for the said Trust out of love and respect. No settling amount or any
other sum was to be contributed by the Assessee in the said Trust. Purpose of
the Trust would be the furtherance of education/vocation/technical skills and for
the furtherance of research on Hindu scriptures. Total Corpus of the Trust would
be USD 250,000, out of which USD 50,000 was to be contributed by Shri
Rajneesh Mehra and the balance USD 200,000 was to be raised from friends,
associates, and affiliates. Beneficial ownership of the Trust, it was clearly laid
out vide Clause V that the Assessee would merely be the Settler and the
ultimate beneficiaries of the Trust would be the two sons of the Assessee and
their grandsons. The Assessee clearly had no beneficial ownership in the said
Trust. Function of the Trust, it was laid out in the said MOA vide Clause IV that
the management and control of the Trust and all its earnings solely rested with
the Shri Rajneesh Mehra, Further, it was laid out that the Trust would not have
any bank account and all sums raised from prospective investors would be
deposited directly in a Bank Account which would be opened in the name of a
Company which would be set up by Shri Rajneesh Mehra. Thus it was provided
that the control of the trust would be with Shri Rajneesh Mehra and revocation
of such trust was also at the sole discretion of Shri Rajneesh Mehra was
provided. Company formed in accordance therewith was ―Watergate Advisors
Limited‖; it was laid out that such company being formed by Shri Rajneesh
Mehra would solely be run by the Shri Rajneesh Mehra directly or indirectly. The
Bank Account (here now being the A/C No. 806694) to be opened in the name
of the Company would directly receive all the Trust funds and all sums raised
would be invested by the Company on the directions of Shri Rajneesh Mehra.
Further, it was provided that assessee and his wife would expressed not be
involved in any of the affairs, day to day functioning and the management and

Page | 25
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

control of the Company. At the time of revocation of the trust, the funds would
not be distributed between the settler or any of the beneficiaries but would pass
on to any other trust carrying on similar objects. With respect to the credits in
the account were also explained and stated that those were all on account of
business transactions of the Rajvin Trust. This was also demonstrated by
submitting Confirmation of GS Impex Pte Ltd, Singapore, which shows that
confirming party had business relation with Mr. Rajneesh Mehra and it had
invested a total of USD 2,00,000 in Rajvin Ltd and out of the said sum, a total of
USD 1,50,000 was yet due from Rajvin Ltd. assessee also submitted a
confirmation of Mathew G Stock, a UK Resident, which shows that for the past
20 years and that he had business relationship with Mr. Rajneesh Mehra and
wherein he invested a total of about 9,50,000 USD in his Company ―Rajvin Ltd.‖
between the years 2005 to 2008. He also stated that out of the said investments
so made, a total sum of USD 8,18,580 was received back on 30/03/2012 from
Rajneesh Mehra, out of which USD 3,18,580 was received from the bank
account No.806694 of Watergate Advisors Limited (WAL) and the balance USD
500,000 was received in the form of certain securities. Thus from the above
statement it was demonstrated that there is no involvement of the assessee
either in Rajvin Limited or in Watergate advisor private limited in providing any
fund directly or indirectly in any of the above entities.

25. However, as the entity involved where the money is found credited, it needs to
be examined whether the assessee has ‗beneficial ownership‘ on these
companies/entities. As stated earlier The Black Money Act 2015 does not define
the term ‗beneficial ownership‘ and The Income Tax Act 1961 explanation 4 to
Section 139 (1) defines the same. However, it is not necessary that to examine
the provisions of The Black Money Act only the definition provided Under the
Income Tax Act is required to be seen. According to provisions of Section 84 of
The Black Money Act, only certain provisions of The Income Tax Act are made
applicable to the black money act. This Section does not include the provisions
of Section 139 (1) of The Income Tax Act. Therefore, the beneficial ownership is
required to be understood with respect to its dictionary meaning and also other
provisions of other statute also keeping in mind the nature of the object and
purposes of the Black Money Act.

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BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

26. In Black‘s law dictionary the beneficial ownership is defined as ‗one recognized

in equity as the owner of something because use and title belonged to that

person, even though legal title may belong to someone else, esp one for whom

property is held in trust.‘

27. Similarly the Webster‘s dictionary also defines beneficial owner as ‗one who is

entitled to receive the income of an estate without its title, custody or control.‖

28. The beneficial ownership concept is also dealt with extensively in the corporate

laws such as The Companies Act and various circulars issued by SEBI. The

Companies ‘ Act 2013 prescribes maintenance of a register of beneficial

ownership. Section 90(1) of The Companies Act 2013 states that :-

90. (1) Every individual, who acting alone or together, or through one or more

persons or trust, including a trust and persons resident outside India, holds

beneficial interests, of not less than twenty-five per cent or such other

percentage as may be prescribed, in shares of a company or the right to

exercise, or the actual exercising of significant influence or control as defined in

clause (27) of section 2, over the company (herein referred to as "significant

beneficial owner"), shall make a declaration to the company, specifying the

nature of his interest and other particulars, in such manner and within such

period of acquisition of the beneficial interest or rights and any change thereof,

as may be prescribed:

29. "Beneficial interest" has been defined under section 89(10) of the Companies

Act as follows

(10) For the purposes of this section and section 90, beneficial interest in a

share includes, directly or indirectly, through any contract, arrangement or

otherwise, the right or entitlement of a person alone or together with any other

person to—

(i) exercise or cause to be exercised any or all of the

rights attached to such share; or

(ii) receive or participate in any dividend or other

distribution in respect of such share.]

30. Section 2 (27) of The Companies Act says that

(27) "control" shall include the right to appoint majority of the
directors or to control the management or policy decisions

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BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

exercisable by a person or persons acting individually or in
concert, directly or indirectly, including by virtue of their
shareholding or management rights or shareholders
agreements or voting agreements or in any other manner

31. From the above the criteria to be considered for an individual to be considered
as a beneficial owner where such person either by himself or in conjunction with
others holds the
a) Specified beneficial interest;
b) has the right to exercise or exercises significant influence or control.

32. Testing the case before us on the above parameters laid down by The
Companies‘ Act it is apparent that there is no any arrangement, contract et
cetera between Watergate advisors private limited or Mr. Rajneesh Mehra with
the assessee. There is no demonstration by the revenue that assessee exercises
any control as a shareholder of Watergate advisors limited over that company.
There is no evidence that assessee has received any interest. It is not also
demonstrated that assessee exercises any control to appoint directors or control
the management or policy decision of that company. This is also adequately
narrated by the learned CIT – A. Thus, the test of beneficial ownership as per
the criteria laid down Under The Companies‘ Act 2013 does not satisfy that
assessee is a beneficial owner of the bank account owned by Watergate advisors
Limited.

33. Another law, which deals with the beneficial ownership, is The Benami Property
(Prohibition) Act 1988. Section 2(12) The Benami Property (Prohibition) Act,
1988 defines beneficial owner to mean a person, whether his identity is known
or not, for whose benefit the benami property is held by a benamidar. Benami
property has been defined to mean any property, which is the subject matter of
a benami transaction and also includes the proceeds from such property.
Further, a "benami transaction" (subject to exceptions provided therein) means,

(A) a transaction or an arrangement—

(a) where a property is transferred to, or is held by, a person, and the
consideration for such property has been provided, or paid by, another

person; and

(b) the property is held for the immediate or future benefit, direct or

indirect, of the person who has provided the consideration, with

specified exceptions

Page | 28
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

(B) a transaction or an arrangement in respect of a property carried out
or made in a fictitious name; or

(C) a transaction or an arrangement in respect of a property where the
owner of the property is not aware of, or, denies knowledge of,
such ownership;

(D) a transaction or an arrangement in respect of a property where the
person providing the consideration is not traceable or is fictitious

34. Considering the definition of beneficial owner read with benami transaction, the
primary conditions for a person to be considered as a beneficial owner under the
Benami Act, may be summarized as under:

(a) Could cover ‗any person‘
(b) The consideration has been provided by such person other than the

person holding/owning the property and such other person also hold
the property.
(c) Property of any kind
35. 'Beneficial owner' has been defined as "an individual who ultimately owns or
controls a client of a reporting entity or the person on whose behalf a
transaction is being conducted and includes a person who exercises ultimate
effective control over a juridical person".
36. Testing the above facts with respect to this law, here there is no evidence that
the consideration has been provided by the assessee of the sum deposited in the
bank account of Watergate advisors Limited. Contrary to that assessee has
shown that above funds have been transferred from Rajvin Limited, which is
owned and controlled by the son of the assessee. Similar to the provisions of
the Companies act here also it is not demonstrated that assessee enjoys and
exercises any control the Watergate advisors Limited or the owner of the
Watergate advisors Limited.
37. It is also required to be tested the test of beneficial ownership in the context of
Prevention Of Money Laundering Act where reference is made to the
ultimate ownership or control of the entity. Provisions of Rule 9(3) of The
Prevention of Money Laundering (Maintenance of Records) Rules, 2005 provides
that :
In the case of a company, "the beneficial owner is the natural person(s), who,
whether acting alone or together, or through one or more juridical persons,
has/have a controlling ownership interest or who exercise control through other
means.

Page | 29
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

Explanation- For the purpose of this sub-clause

1. "Controlling ownership interest

―means ownership of/entitlement to more than 25 per cent of

the shares or capital or profits of the company.

2. "Control" shall include the right to appoint majority of the
directors or to control the management or policy decisions
including by virtue of their shareholding or management rights
or shareholders agreements or voting agreements

38. Thus the above losses that the primary conditions for a person to be considered
as an ultimate beneficial owner under the PMLA, may be summarized as under:

(a) Covers an individual

(b) Owns a client of the reporting entity, which should be more than 25%
of the shares or capital of profits of the company/ 15% in the case of
client other than a company

(c) Controls a client by virtue of shareholding or management rights or
shareholder /voting agreements

(d) Shares in a company or interest in an entity other than a corporate

39. Testing the transactions before us it is apparent that assessee does not own any
share capital in case of Watergate advisors Limited as well as it also does not
controls the above company as he does not have any shareholding or
management rights in that company.

40. With respect to the mention of the name of the assessee in the account opening
form as beneficial owner, assessee has relied upon the decision of the
coordinate bench in case of Mr. Kamal Galani V ACIT in ITA number
138/Mum/2019 dated 10 September 2020 wherein in para number 13 onwards
the coordinate bench has held that merely mentioning the name of the assessee
in the account opening form which is rebutted by the assessee by filing an
affidavit and complete details of the ownership of the bank account, the
assessee cannot be held the beneficial owner of such sum. Therefore, such
solitary fact cannot lead to addition in the hence of the assessee where there is

Page | 30
BMA. 01 (Del) of 2020
AND CO. 26 (Del) of 2021.

no other evidence available with respect to the ownership or beneficial
ownership over such bank account. In view of this it is apparent that the mere
account opening form where the assessee is mentioned as the beneficial owner
of the account mentioning is details of his passport as an identification
document, does not necessarily, in absence of any other corroborative evidence
of the beneficial ownership of the assessee over that for an asset cannot lead to
taxability in the hands of the assessee Under the Black Money Act.
41. In view of above facts, we hold that assessee does not have beneficial
ownership of the amount deposited in Watergate advisors Limited, assessee also
do not held that asset. The learned CIT – A has also held so giving the detailed
reasons as reproduced above. The learned departmental representative could
not show us any evidence that assessee is the owner or beneficial owner of the
sum lying in the bank account of Watergate advisors Limited. The assessee has
given an overwhelming evidence of the fact that money belong to the son of the
assessee which were not at all controverted by the learned assessing officer. In
view of this we hold that the learned CIT – A is correct in deleting the addition of
₹ 56,647,000/– in the hands of the assessee. Accordingly, we confirm the order
of the learned CIT appeal and all the 4 grounds stated in the appeal of the
learned assessing officer are dismissed.
42. Accordingly appeal of the learned AO in BMA 1/Del/2020 and cross objection of
the assessee Co NO. 26/Del/2021 are dismissed.

Order pronounced in the open court on 07/07/2021

-Sd/- -Sd/-
(SUDHANSHU SRIVASTAVA) (PRASHANT MAHARISHI)

JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated:07/07/2021 ASSISTANT REGISTRAR
ITAT, New Delhi
*MEHTA*

Copy forwarded to

1. Appellant
2. Respondent
3. CIT
4. CIT (Appeals)
5. DR: ITAT

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