If Indians living abroad (NRIs) buy property in India and do not provide correct information about the source of the money, the tax department can start an investigation. One such case came to light, in which the Income Tax Department considered Rs 56.15 lakh as unexplained investment on the purchase of property by an NRI. According to tax advisory platform TaxBuddy, the matter later reached the Income Tax Appellate Tribunal (ITAT) Ahmedabad, where the taxpayers got relief after examining the entire trail of the fund.
Why did the tax department raise questions?
This case is related to an NRI named Vashdev Daryanomal Kalwani. He had bought a property in India. During the investigation, the Income Tax Department found that he had invested about Rs 56,15,441, but according to the department, the source of this money was not disclosed properly. Therefore, this amount was considered as unexplained investment and added to his income.
What explanation did the taxpayers give?
Kalwani told that he has been living in UAE since 1993 and is an NRI. Their income in India mainly comes from interest from NRI bank accounts. He said that the money to buy the property came from his earnings in Dubai. This money was first transferred from the Dubai bank account to the Indian bank account and then payment for the property was made from the same.
What did ITAT find?
When the matter reached ITAT Ahmedabad, the tribunal conducted a thorough investigation of the bank transaction. The investigation found that the money came from a bank account in Dubai to a bank account in India and then payment for the property was made from the same. Since there was a complete record of the movement of money, the tribunal said that this investment could not be considered unexplained.
ITAT’s final decision
ITAT held that there was no solid basis for the Assessing Officer to add Rs 56,15,441 to the income. Therefore, the tribunal removed this addition and accepted the appeal of the taxpayers.
Lesson for taxpayers
This case shows that especially NRIs should keep all the documents safe while investing. Such as foreign and Indian bank statements, proof of sending money (SWIFT or TT advice) and if several members of the family have given money, then a clear record of it.