A Dubai-based NRI who bought a ₹2 crore flat in Mumbai without filing an ITR in India received a tax notice treating the investment as unexplained money. The Income Tax Department reopened the case under Section 147 and added ₹2 crore under Section 69. However, the Income Tax Appellate Tribunal (ITAT) ruled in his favour after he proved that the funds came from foreign salary savings remitted through proper banking channels.
NRI bought Rs 2 crore Mumbai flat, got tax notice for ‘unexplained money’ — ITAT clarifies tax rule on foreign income (Image: AI generated)
A Dubai-based NRI invested ₹2 crore in a Mumbai property but did not file an Income Tax Return (ITR) in India for that year, as he had no taxable income here. The Income Tax Department treated the investment as “unexplained money” and reopened his case.
However, the Income Tax Appellate Tribunal (ITAT), Mumbai, ruled in his favour, making it an important case study for NRIs investing in India.
This case highlights a simple but critical principle: foreign salary savings remitted through proper banking channels cannot be treated as unexplained income in India merely because no ITR was filed.
What was the case about?
As highlighted by tax advisory platform TaxBuddy on social media platform X, the matter revolved around an NRI, Mr. Ostwal, who had been working in Dubai since 2001.
Key facts:
Purchased a residential property in Mumbai
Paid ₹2 crore during FY 2015–16
Total property value: ₹3.25 crore
Did not file ITR in India that year as he had no Indian income
The Income Tax Department reopened the assessment under Section 147 and added ₹2 crore as unexplained investment under Section 69.
Why did the tax department issue a notice?
The trigger was simple:
No ITR filed + ₹2 crore property purchase = suspicion.
Since he had not filed a return in India for that financial year, the department assumed that the investment represented unexplained money and reopened the case.
The entire ₹2 crore was added to his income under Section 69 of the Income Tax Act, which deals with unexplained investments.
Where did the money actually come from?
The NRI had been working in Dubai for over a decade.
Salary details:
Monthly salary: AED 24,500
Long-term employment since 2001
Funds movement trail:
Withdrawn from Dubai bank (RAK Bank): AED 12,00,000
Remitted to India: AED 11,65,000
Credited to NRE account in India: ₹2,00,52,630
Property payment made from this NRE account
In simple terms, the money moved from:
Foreign salary → Dubai bank → Remittance to India → NRE account → Property purchase
What proofs did he submit?
The taxpayer provided a complete documentary trail, including:
Foreign bank statements
Remittance certificates
Employment contract
Salary records
UAE residence visa
Employer details
This established a clear link between his foreign earnings and the property investment in India.
What did ITAT Mumbai say?
The Income Tax Appellate Tribunal ruled in favour of the NRI and deleted the ₹2 crore addition.
Tribunal’s key observations:
The taxpayer was an NRI with no income arising in India.
The funds came from foreign salary savings.
Money was transferred through proper banking channels.
The department had no evidence to prove that the money was unexplained.
The tribunal noted that the department’s doubts were based on suspicion rather than concrete evidence.
Important tax principle clarified for NRIs
This case reinforces a basic rule under Indian tax law:
For NRIs, income is taxable in India only if it is:
Received in India, or
Accrued or arises in India
Foreign salary earned and taxed abroad does not become taxable in India merely because it is later remitted to an NRE account.
In short: Foreign savings sent legally to India cannot automatically be treated as unexplained income.
Final outcome
-₹2 crore addition deleted
-Case decided in favour of the taxpayer
-ITAT ruled that there was no basis to treat the funds as unexplained
What NRIs investing in India should learn
This case is a reminder that documentation is everything.
If you are an NRI investing in India, always maintain:
Foreign salary records
Employment contracts
Overseas bank statements
Remittance certificates
Clear NRE account trail
Even legitimate money can attract notices if the documentation is weak or incomplete.
For NRIs buying property or making large investments in India, this ruling serves as an important safeguard — but only if you can prove the source of funds clearly and transparently.
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