Appeals window opens for HSBC Geneva 'a/c holders'

After a silence of almost three years, the income tax machinery has begun moving on the secret HSBC Geneva accounts of Indians who were long left wondering about the outcome of their tussle with the revenue authority.

Since Sunday evening, hundreds of individuals across the country have received emails from the offices of the Commissioner of Income Tax (Appeals), the first appellate authority, followed by text messages alerting them about the dates of hearing of their appeals.

Most of the notices were issued in Mumbai, Delhi and Bengaluru. A large number of notices, pertaining to assessment years 2006-07 and 2007-08, were served on Indians whose names figured in the list as clients of the Swiss private banking arm of HSBC. The HSBC list, along with a list of 'account holders' of LGT Bank of Liechtenstein, sparked investigation, search and seizures in 2011-12, and tax demands running into thousands of crores.


But for reasons best known to the tax office and the government, the hearings on most of the appeals were not completed and in cases where the hearings were over, the orders were not issued. "Now, the I-T department has intimated that the window has been enabled for communication for cases pending before CIT (Appeals). It seems the department now wants to expedite the matter and finally complete the proceedings pending for more than 3 years," said Rajesh Shah, partner at Jayantilal Thakkar and Co, a Mumbai-based CA firm.

Tax Office has 'Set Internal Targets'
"Now, we expect orders to be issued soon to all pending matters, specifically those relating to overseas assets," Shah said.

According to another tax professional, it was observed in a forum that since in many cases CsIT(A) have not issued the initial notice, the appellants were not able to submit any requests to CIT(A). NFAC (National Faceless Appeal Centre) is said to have been approached by taxpayers for opening of the communication window so that requests for early disposals and other requests can be made to CsIT(A). Once CIT(A) issues a notice (following an appeal), the appellant can file to incorporate additional grounds in its defence or seek early hearing. The question, however, is why various offices of CIT(A) did not issue notices so far.

It's understood that the tax authorities, prodded by the finance ministry, have set internal targets to take various cases, particularly those relating to undisclosed foreign assets, to a logical conclusion.

Tax practitioners would be closely tracking the developments as the appellate body's views on multiple issues would come to the fore. "There has been litigation around various aspects like admissibility and evidentiary value of the information in possession of the tax department, whether additions could be made in the hands of individuals who are at best discretionary class beneficiaries of offshore trusts who may have only a hope that a distribution will happen in their favour. There are a number of other legal and technical issues like in a search case, did the department find any incriminating material in possession of the taxpayers, if not, there are a number of rulings where in absence of any incriminating material, no adverse inference (can be) drawn against the taxpayers," said Ashish Mehta, partner at law firm Khaitan & Co.

The assesses and their counsels have been pointing out Supreme Court rulings where a trust beneficiary cannot be taxed unless the trust has made a payout in her favour; also, they questioned the efficacy of tax demand on the back of information that was originally 'stolen' by an employee of the Swiss bank.

The finance minister had told the Lok Sabha in July that in the cases related to deposits made in unreported HSBC accounts, undisclosed income of more than Rs 8,468 crore has been brought to tax and a penalty of over Rs 1,294 crore has been levied. Some of the ongoing appeals may relate to these matters.