In a recent judgement, the Income Tax Appellate Tribunal (ITAT) Ahmedabad gave relief to a non-resident man from an income tax notice for unexplained cash credit, as he could fully explain the source of the funds including the cash he used to pay the builder to buy a property in Kandawali West, Mumbai. This man (Mr Purohit) is a non-resident Indian who is also a US citizen and thus has been residing in the USA since April 2002.
To tell you in a brief about why he got the unexplain tax notice, in 2011, he had booked a residential flat at Kandawali West, Mumbai for a consideration of Rs 79.9 lakh from a Mumbai based builder. The sale agreement with the builder was executed on July 20, 2015 and he made the payment for this apartment during 2011 to 2018. These payments to the builder were made by him through his NRE/NRO account with HDFC Bank and also by his own brother, who is also an NRI.
However Mr Purohit did not file an income tax return (ITR), thus his income tax department file was re-opened and he was issued a tax notice under Section 148 on March 23, 2023.
In response to the said tax notice Mr Purohit filed a belated income tax return (ITR) which was considered invalid one by the tax department. Therefore the Assessing Officer issued a draft assessment order dated March 26, 2024 under Section 144C proposing to assess his total income as Rs 57,24,172.
Mr Purohit felt aggrieved and filed his objections to the said draft assessment order before the Dispute Resolution Panel (DRP) of the Income Tax.
The DRP called for a remand report from the tax assessing officer and said that Rs 51.9 lakh was properly explained by him, thus this amount must be deleted. The DRP observed that Mr Purohit submitted documentary evidence for the investments made by him and remaining amount of Rs 1 lakh cash deposit and Rs 4 lakh being registration charges and Stamp Duty of Rs 32,280 remained unexplained and therefore confirmed the same.
Mr Purohit felt aggrieved by the order of DRP since they had not fully removed all the unexplained cash amounts so he filed an appeal with ITAT Ahmedabad. Mr Ketan Vajani represented Mr Purohit before ITAT Ahmedabad. Dr. BRR Kumar, Vice President and T. R. Senthil Kumar, Judicial Member of ITAT Ahmedabad heard his case.
ITAT Ahmedabad judgement
Mr Vajani told ITAT Ahmedabad that his bank statements relating to the year 2015, shows that cash was deposited in HDFC Bank account to the tune of Rs 1 lakh and the same was utilized for payment of advance of the booking of flat.
Mr Vajani also said to ITAT Ahmedabad that Mr Purohit explained that the source of cash withdrawal from his NRE account aggregating to Rs 1,08,000 during March 5, 2009 to March 25, 2009 and relevant NRE bank account details were also placed on record.
ITAT Ahmedabad said that considering the same, the assessee’s visit to India, the addition of Rs 1 lakh made is hereby directed to be deleted.
He said that he had paid stamp duty of Rs 4 lakh and registration charges of Rs 32,280 to the builder and in his support submitted a copy of the bank challan for the same. He also submitted the registration charges receipt issued by Sub-Registrar Office, Borivali. Moreover, Mr Purohit also submitted aNotarized Affidavit from the builder dated April 21, 2025 confirming that the payment made by him towards the purchase of flat which includes the Stamp duty and registration charges.
ITAT Ahmedabad judgement: “Though this affidavit is a new document but supported with the registered documents of May, 2015. We therefore hereby direct the assessing officer to delete the above additions of Rs 4,32,280 on these counts”
Chartered Accountant Priyal Goel Jain, Partner and NRI Tax Expert, Dinesh Aarjav & Associates, said to ET Wealth Online that ITAT Ahmedabad has drawn a clear line against mechanical additions under Section 69, reiterating that documented banking trails cannot be brushed aside on mere suspicion.
Jain says: “The ruling reinforces a critical principle in reassessment jurisprudence under Section 148— that where an NRI substantiates the source of funds through NRE/NRO accounts, supported by builder confirmations and statutory payment records, the burden shifts squarely back to the Revenue.”
According to Jain, for global Indian investors, the verdict offers both reassurance and a reminder: compliance discipline and documentary precision remain the strongest shields against protracted tax litigation.
aniltikotekar4sme.com 