An NRI faced a tax addition of ₹56.15 lakh after buying property in India when the tax department questioned the source of funds. However, the ITAT Ahmedabad deleted the addition after verifying that the money came from overseas earnings routed through proper banking channels.
NRI buys property in India, Tax Dept flags Rs 56.15 lakh as ‘unexplained investment’ — what ITAT finds next (AI-generated image)
Buying property in India while living abroad can sometimes attract tax scrutiny, especially if the source of funds is not clearly explained. In one such case, an NRI who purchased a property in India faced a tax addition of Rs 56.15 lakh after the Income Tax Department treated the amount as unexplained investment.
According to a social media thread shared by tax advisory platform TaxBuddy, the matter eventually reached the Income Tax Appellate Tribunal (ITAT) Ahmedabad, which examined the fund trail and granted relief to the taxpayer.
Why the tax department questioned the investment
The case involved Vashdev Darianomal Kalwani, an NRI whose case was picked up for scrutiny by the tax authorities in connection with a property purchase in India. During the assessment, the tax office noticed a property investment of Rs 56,15,441 but said the source of funds had not been adequately explained.
As a result, the department treated the amount as unexplained investment and added it to the taxpayer’s income.
What the taxpayer explained
The taxpayer argued that he had been living in the UAE since 1993 and was a non-resident Indian. According to him, his income in India mainly came from interest earned in NRI bank accounts.
He explained that the payments for the property were made using his overseas earnings from Dubai. The funds were transferred from Dubai bank accounts to Indian bank accounts and then used to pay for the property.
What ITAT observed
When the matter reached the ITAT Ahmedabad, the tribunal closely examined the banking trail of the funds. It found that the money had moved through a clear channel — from a Dubai bank account to an Indian bank account and then towards the property payment.
Since the movement of funds was properly documented, the tribunal held that the investment could not be treated as unexplained.
ITAT’s final decision
The ITAT ruled that there was no basis for the tax addition made by the assessing officer. As a result, the tribunal deleted the addition of ₹56,15,441 and allowed the taxpayer’s appeal.
Key lessons for taxpayers
The case highlights the importance of maintaining proper documentation, especially for NRIs investing in India. Tax experts say taxpayers should keep overseas and Indian bank statements, remittance proofs such as SWIFT or TT advice, and clear records if funds are contributed by multiple family members.
The ruling came in the case Vashdev Darianomal Kalwani vs ITO (International Tax), Ahmedabad, relating to Assessment Year 2015-16, with the order dated January 30, 2026.
However, it is important to note that decisions of the Income Tax Appellate Tribunal can still be challenged in higher courts, and taxpayers should seek professional advice before relying on similar claims.
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