This story is from November 19, 2017

Pay tax on Liechtenstein secret stash: I-T tribunal

Holds such funds and interest to be their undisclosed income
Pay tax on Liechtenstein secret stash: I-T tribunal
MUMBAI: It was three-odd years ago, at the end of April 2014, that the Centre released the names of 18 individuals to the Supreme Court for allegedly stashing black money with LGT Bank in Liechtenstein.
The curtains on a long-drawn tax litigation appear to be drawing to a close for four such individuals- Hasmukh I Gandhi, who also represents the late Nirav Gandhi as his legal heir, Madhu H Gandhi and Chintan H Gandhi.
They were beneficiaries of the offshore Marnichi Trust, which held funds in LGT Bank. In simple terms, a beneficiary is a person for whom a trust is created and who receives benefits from it via income or asset distribution.
In its recent order, the Income-tax Appellate Tribunal's (ITAT) Mumbai bench has held deposits in LGT Bank as their undisclosed income and dismissed their appeals. In addition, ITAT has upheld re-opening of the tax assessments, addition of their share of the amount of bank deposits and interest to the income of these beneficiaries.
The ITAT order encompasses various financial years, including 2001-02, in which the opening balance in Marnichi Trust was added to the beneficiaries' income. As the issues being contested by the beneficiaries were the same, the appeals were heard and disposed of together.
According to information received by tax authorities, a summary of the bank statement as of December 31, 2001, showed an opening balance of $309,154. Since this information was not disclosed by the beneficiaries in the tax returns, the assessment was reopened. Each taxpayer's share at 25%, which worked out to Rs 37.7 lakh, was added to his total income. The tax official also added the proportionate share in interest for subsequent years . ITAT has now upheld such additions.

For now, this order brings a sigh of relief to I-T sleuths. An appeal in a similar case (of Mohan Manoj Dhupelia), which was decided earlier, is pending before the Bombay high court though. It is likely that an appeal may also be filed against this ITAT order by beneficiaries of Marnichi Trust, say sources closely tracking these developments.
The genesis of this case dates back to 2008 when one of the employees of LGT Bank sold incriminating data of secret bank accounts and account holders to German tax authorities. The German authorities shared this information with their counterparts worldwide, including India.
The counsel for the beneficiaries (that is, the taxpayers) who appealed before ITAT had pointed out that the data was stolen by a bank employee and this was not the case of a whistleblower. "How this affects the veracity of information has not been spelt out," stated ITAT in its order and held the evidence available with I-T authorities as "cogent and sufficient".
ITAT added that the beneficiaries' claim of having no information of the bank account was totally unsustainable. "That some Good Samaritan deposited that huge amount for the benefit of the taxpayer in the said foreign bank account and gave all the names and address and particulars of the taxpayer without any information to the taxpayer, is equally an unbelievable story," it wryly stated in its order. By denying any knowledge of the existence of the bank account, the taxpayers are trying to take advantage of the secrecy provisions in Liechtenstein, as the tax officials could not gather any more information from LGT Bank, it noted.
It has also set aside the contention that Marnichi Trust was a discretionary trust and that only trustees and not beneficiaries can be taxed. "As this trust is in Liechestein, the tax laws of the Government of India do not apply, and reference to cases which are in the Indian context are not at all applicable," it held.
Government sources pointed out that post the worldwide outcry, Liechtenstein has taken steps to be more transparent. In November 2013, it signed an automatic exchange of information agreement with India, which now enables Indian tax authorities to seek information about suspected individuals and bank accounts.
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