ITAT Mumbai Deletes 2 Crore Addition; NRI Proves Property Investment Came Entirely From Foreign Salary Savings
This appeal arose from a reassessment order passed under section 147 read with section 144C(13) pursuant to DRP directions. The assessee, an NRI employed in Dubai since 2001 and returning to India only in 2021, had invested Rs. 2 crore during A.Y. 2016-17 towards purchase of a residential property in Mumbai. No tax return was filed in India as the assessee had no Indian-source income. Based on information regarding the investment, the Department issued a notice under section 148.
During the assessment and DRP proceedings, the assessee produced extensive documentation establishing that the entire Rs. 2 crore investment originated from accumulated foreign salary savings. The evidences included RAK Bank statements showing withdrawals of AED 12,00,000 in September 2015, authorised dealer certificates for remittances of AED 11,65,000 to India, corresponding inward credits aggregating to Rs. 2,00,52,630 in the Axis Bank NRE account, as well as salary records, employment contract, UAE residence visa, and an employee listing from the official Ministry of Labour website showing his role as General Manager since 2006.
The authorities below nevertheless rejected the explanation on unsubstantiated grounds, questioning the employer’s credentials and the authenticity of documents without making any inquiry under statutory powers. The Assessing Officer invoked section 69 and treated the Rs. 2 crore investment as unexplained.
Issue Raised: Whether the addition of Rs. 2,00,00,000 under section 69 was justified when the assessee, a long-term NRI, produced a complete and verified trail proving that the investment was funded entirely from foreign salary income remitted through authorised channels into an NRE account.
SC’s Decision: The ITAT Mumbai allowed the appeal and deleted the entire Rs. 2 crore addition. The assessee was an NRI continuously residing and working in Dubai since 2001 and had no income accruing or arising in India during the relevant year. It found that the documentary evidence, full foreign bank trail, authorised dealer certificates, salary records, and visa documentation, formed a “complete, credible, and coherent” explanation of the source of funds. Also, an AED 12,00,000 was withdrawn from RAK Bank, AED 11,65,000 was remitted to India, and Rs. 2,00,52,630 was credited into the NRE account, from which the property payment was made. The Department did not rebut or disprove a single document, nor use section 133(6) or any verification mechanism despite challenging authenticity.
The Apex Court observed that Section 69 cannot be invoked where the assessee has furnished satisfactory explanation, and more importantly, where the investment does not represent income taxable in India under section 5(2). It said that the DRP’s objections were based on conjecture, such as alleging “close connection” with the employer, without any supporting material. The Tribunal held that the assessee’s explanation was fully substantiated, the source of funds was clearly foreign salary income, and therefore the addition of Rs. 2 crore under section 69 was “wholly unsustainable.”
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