Mumbai’s Income Tax Appellate Tribunal has stepped in to resolve an issue that many NRI families might have faced when sending money from abroad: a husband working overseas sending money home to help buy a house, and the tax department later disputing where the money came from.
The case involved a Dubai-based NRI, who purchased a residential flat in Mumbai for Rs 1,40,00,000 in the financial year relevant to Assessment Year 2016-17. Years later, the purchase caught the attention of the CBDT’s Risk Management Strategy system, which flagged it through the Insight Portal after cross-checking Sub-Registrar records and TDS statements on property purchases.
Since the assessee (spouse of an NRI) had not filed a return of income for that year, the tax department initiated proceedings under section 148A and eventually issued a notice under section 148 before she filed her return.
Section 148 mandates the Assessing Officer to send a show cause notice to the assessee to explain why a notice under section 148 should not be issued, if taxable income has escaped assessment for a particular assessment year.
Out of the total consideration of Rs 1,40,00,000, the Assessing Officer accepted Rs 58,50,000 without dispute as this amount was traceable directly through her own bank account. But the remaining Rs 80,00,000 became the point of contention.
The assessee explained this portion was sent directly by her husband, who lives and works in Dubai, to the property seller, routed through a Dubai exchange bureau in two instalments of Rs 40,00,000 each.
Why the tax department wasn’t convinced
Although the seller’s bank statement showed two credits of Rs 40,00,000 each, the narration simply stated the name of the sender. The Assessing Officer held that this wasn’t enough to prove the money had actually come from the husband; there were no remittance advices, exchange bureau records, or transfer instructions showing the debit from his account.
As a result, the officer treated the entire Rs 80,00,000 as unexplained investment under section 69 of the Income Tax Act. A further Rs 10,000, the residual gap after all calculations, was added on the same grounds, taking the total addition to Rs 80,10,000.
Section 69 addresses ‘unexplained investments’, indicating that if an assessee makes investments not documented in their financial records, those investments may be considered as income for that financial year.
When the assessee appealed to the CIT(A), National Faceless Appeal Centre, the outcome was still not in favour of the NRI. The CIT(A) agreed with the Assessing Officer’s reasoning that the bank narration wasn’t conclusive proof of either the remitter’s identity or the source of funds.
How ITAT Looked at the Case
Before the Tribunal, the assessee laid out a complete, line-by-line reconciliation of the entire Rs 1,40,00,000:
Rs 80,00,000 — paid directly by husband to the seller
Rs 40,00,000 — from sale proceeds of her earlier property
Rs 18,50,000 — from a gift given by her husband
Rs 10,000 — paid via a pay order from Jammu and Kashmir Bank
Rs 1,40,000 — TDS, already accounted for
Supporting this, she submitted her husband’s passport and residency documents, his income tax returns, the seller’s bank statement, the sale deed of her earlier property, the pay order copy, an affidavit from her husband confirming the payment, a gift deed, and a bank confirmation naming him as remitter.
The Tribunal’s bench noted something crucial: neither the Assessing Officer nor the CIT(A) had disputed the husband’s identity, his financial capacity, the receipt of money in the seller’s account, the gift deed, the affidavit, or the genuineness of the sale itself. No document was ever called fake or fabricated.
“Suspicion, however strong, cannot substitute evidence, particularly when the surrounding facts and documentary material overwhelmingly support the explanation furnished by the assessee,” the Tribunal observed, adding that the Revenue had not conducted any inquiry with the seller or the bank, nor brought any material to suggest the funds were the assessee’s own undisclosed money routed through an accommodation entry.
The final word
The Tribunal also held that the assessee had fully discharged the burden cast upon her under section 69 by establishing the identity of the contributor, his financial capacity, the source of funds and the actual utilisation towards acquisition of the property. Once the entire investment stands explained by documentary evidence and the Revenue has failed to bring any material to the contrary, the impugned addition cannot survive, was the Tribunal’s observation.
Holding that the assessee had fully discharged her burden of proof under section 69, by establishing the contributor’s identity, his financial capacity, and the actual use of funds, the ITAT set aside the CIT(A)’s order and directed the Assessing Officer to delete the entire addition of Rs 80,10,000.
Note for NRIs
Property transactions can be reopened by tax authorities years later; a 2015 purchase was scrutinised for AY 2016-17 and only resolved in 2026. NRIs would do well to retain remittance records for at least 10 years, ideally indefinitely. They should be using NRE/NRO account transfers, SWIFT wires, or RBI-recognised remittance channels to establish a clearer and more permanent audit trail.
Disclaimer: This article is intended for general informational purposes only. It should not be construed as legal or tax advice. Tax laws and their interpretation are subject to change, and outcomes in individual cases depend on specific facts and evidence. Readers are advised to consult a qualified chartered accountant or tax professional before drawing any conclusions applicable to their own situation. Financial Express Digital does not assume responsibility for any decision taken by readers based solely on this article.