The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has allowed the appeal of a non-resident Indian (NRI) taxpayer and deleted an addition of ₹2 crore made under Section 69 of the Income-tax Act, 1961, relating to alleged unexplained investment in a residential property in Mumbai.
The assessee, an NRI who had been living and working in Dubai since 2001, invested ₹2 crore during Assessment Year 2016–17 towards the purchase of a residential property in India, with the total property cost amounting to ₹3.25 crore. Since no return of income was filed in India and information regarding the investment was received through third-party sources, reassessment proceedings were initiated by the Income Tax Department under the provisions of the Act.
During the proceedings, the Assessing Officer treated the investment as unexplained, invoking Section 69, on the ground that the assessee had not substantiated the source of funds. The Dispute Resolution Panel (DRP) also did not grant relief, following which the assessee approached the ITAT, Mumbai.
The Tribunal, after examining the facts and evidences on record, observed that the assessee had furnished comprehensive documentary proof, including foreign bank statements, authorised dealer certificates, salary records, employment documents, UAE residency proof, and NRE account statements. These documents established a clear and verifiable trail demonstrating that the investment was made out of accumulated foreign salary income remitted through proper banking channels.
ITAT Mumbai held that, in terms of Section 5(2) of the Income-tax Act, income earned abroad by a non-resident, which neither accrues nor is received in India, is not chargeable to tax in India. The Tribunal further noted that the Revenue had not brought any material on record to show that the investment represented income chargeable to tax in India, nor had it rebutted the evidences produced by the assessee through independent verification.
Accordingly, the Tribunal ruled that the deeming provisions of Section 69 could not be invoked in the absence of any taxable Indian income and that the rejection of documentary evidence by the lower authorities was based on conjectures. The addition of ₹2 crore was therefore held to be unsustainable in law and was deleted, and the appeal was allowed in favour of the taxpayer.
The decision provides important clarity on the tax treatment of genuine foreign-sourced investments made by NRIs and underscores the principle that deeming provisions cannot override the basic charging provisions of the Income-tax Act.
Source #ET
