A Rs 1.5 crore fixed deposit held by a father and son jointly with HDFC Bank led to a tax demand of Rs 2.59 crore on the son. The son maintained that the money belonged entirely to his father, who had created the deposit using funds from his Non-Resident External account. His name was included only as a joint holder for administrative convenience.
The Income Tax Department, however, treated the entire Rs 1.5 crore as the son’s unexplained investment. It added the amount to his income under Section 69 of the Income-tax Act and raised a demand of Rs 2.59 crore.
The Mumbai bench of the Income Tax Appellate Tribunal has now sent the matter back to the Assessing Officer for fresh examination. It has asked the tax officer to verify the bank documents submitted by the taxpayer, including a statement showing the source of the deposit and a bank certificate identifying his father as the first holder.
The tribunal has not deleted the addition or given a final ruling on who owns the deposit. But it has said that the new documents go to the heart of the dispute and must be examined before the tax department reaches a conclusion.
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How a joint fixed deposit led to a tax dispute
The case relates to assessment year 2019-20. The taxpayer, Kaushik Narottam Soni, was a non-resident Indian during the relevant year. He had not originally filed an income tax return in India.
The Income Tax Department received information through its Insight Portal about financial transactions linked to him. Based on this information, it reopened his assessment under Section 147 of the Income-tax Act.
During the reassessment proceedings, the Assessing Officer found that a fixed deposit of Rs 1.5 crore was held with HDFC Bank in the taxpayer’s name.
The tax officer asked the taxpayer to explain the source of the investment. Soni said the deposit belonged to his father, Narottam Odhavji Soni, who was also a non-resident. He said his father had created the deposit using money held in his NRE bank account.
Soni explained that his name had been added as a joint holder only for administrative convenience and to ensure the smooth transfer of assets. He was not the person who had invested the money, he argued.
However, the taxpayer did not submit supporting bank documents during the reassessment proceedings. The Assessing Officer also issued notices to HDFC Bank under Section 133(6), seeking information about the deposit. The bank did not respond to these notices.
With no documentary evidence available to establish the source and ownership of the deposit, the Assessing Officer treated Rs 1.5 crore as unexplained investment under Section 69.
The Dispute Resolution Panel also upheld the addition. The final assessment order was passed on December 10, 2025.
The tax demand against Soni rose to Rs 2.59 crore. This included tax arising from the addition, interest and other applicable levies.
Why the taxpayer said the money belonged to his father
Soni challenged the assessment before the Mumbai ITAT. His main argument was that the tax department had confused joint ownership of the bank deposit with ownership of the money used to create it.
He maintained that his father was the first holder and the beneficial owner of the fixed deposit. His own name appeared only as a joint or third holder.
He also argued that the deposit had been created from funds in his father’s NRE account. Since both he and his father were non-residents, he contended that the money represented foreign income and was not taxable in India.
The taxpayer further explained why he could not produce the relevant bank records during the assessment. The deposit was an old one, and obtaining the records from the bank’s Bhuj branch had taken time. He was also based outside India, which added to the difficulty.
He subsequently obtained the required documents. These included a bank statement dated March 27, 2025, which showed that the Rs 1.5 crore fixed deposit had been created from his father’s NRE account.
He also submitted a bank certificate confirming that his father was the first holder and that he was only a joint or third holder.
The taxpayer asked the tribunal to admit these documents as additional evidence and send the matter back to the Assessing Officer for verification.
What the ITAT said
The Mumbai ITAT examined the arguments made by both sides.
The tax department opposed the taxpayer’s request. It argued that he had been given sufficient opportunities during the assessment proceedings but had failed to produce documents to establish the source of the fixed deposit.
The department also pointed out that the bank had not responded to the notices issued by the Assessing Officer. It argued that the additional evidence should not be used to fill gaps in the taxpayer’s case at the appellate stage.
The tribunal, however, noted that the new bank statement and certificate were important because they could establish two central facts: who owned the fixed deposit and where the money had come from.
The tribunal observed that the documents prima facie indicated that the deposit had been created from the NRE account of the taxpayer’s father and that the son was only a joint holder.
It said these documents went to the root of the issue and required proper verification by the Assessing Officer.
The bench, comprising Judicial Member Beena Pillai and Accountant Member Arun Khodpia, therefore set aside the issue and sent it back to the Assessing Officer for a fresh decision.
The tax officer has been directed to examine the additional evidence, verify the ownership of the fixed deposit and establish the source of funds before deciding the matter in accordance with the law.
The tribunal also directed the taxpayer to cooperate with the proceedings and provide a reasonable opportunity to be heard.
The appeal was allowed for statistical purposes. This means the tribunal has reopened the examination of the issue, but has not granted final relief on the Rs 1.5 crore addition.
“Being a joint holder of a bank deposit does not automatically mean that the entire investment belongs to that person. What matters is who actually contributed the money and whether the source of funds can be established,” says Sudhakar Sharma, Partner, RSP Solutions and Associates.
In cases involving family members, especially NRIs, taxpayers should retain bank statements, fixed deposit receipts and other records that clearly establish the ownership and source of the deposit, according to Sharma. Without proper documentation, even a genuine family arrangement can lead to an avoidable tax dispute,” says Sudhakar Sharma, Partner, RSP Solutions and Associates, he added.
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What does this mean for joint holders of bank deposits?
The order highlights an important distinction between being named as a joint holder of a bank deposit and being the person who actually invested the money.
A joint holder’s name on a fixed deposit does not, by itself, establish who contributed the funds. However, if the tax department questions the source of the investment, the family must be able to establish the actual ownership and source of the money through supporting documents.
This can become particularly important in NRI families, where deposits may be created from NRE accounts and another family member may be added as a joint holder for convenience or succession-related reasons.
Families should preserve the original bank transfer records, NRE account statements, fixed deposit receipts and bank certificates identifying the holders. Where the money belongs to a parent or another family member, clear documentation of the source and ownership can help avoid disputes.
In Soni’s case, the bank statement and certificate were submitted at the appellate stage. The ITAT has now asked the tax officer to examine them. The final tax treatment will depend on the outcome of that verification.
Case details: Kaushik Narottam Soni vs Income Tax Officer, International Tax Ward 4(2)(1), Mumbai. ITA No. 1771/Mum/2026, assessment year 2019-20. Order pronounced on April 30, 2026, by the Mumbai bench of the Income Tax Appellate Tribunal.
Disclaimer: This is a case-specific tribunal order. The ITAT has remanded the matter for fresh verification and has not finally held that the fixed deposit belongs to the taxpayer’s father or that the amount is exempt from tax in India. The final outcome will depend on the Assessing Officer’s examination of the evidence.
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