Tax notice for using NRE a/c to buy property...

In a recent decision from the Income Tax Appellate Tribunal (ITAT) Ahmedabad, a non-resident Indian taxpayer was granted relief from an income tax notice regarding unexplained cash credit. Mr. Purohit, a US citizen residing in the USA since 2002, had purchased a property in Kandawali West, Mumbai in 2011. The purchase agreement was executed in 2015 and the payments made to the Mumbai-based builder were through his NRE/NRO account with HDFC Bank and his brother, also an NRI.

The tax department reopened Mr. Purohit's file in 2023, issuing a tax notice under Section 148. Mr. Purohit subsequently filed a belated income tax return, which was deemed invalid. The Assessing Officer proposed to assess his total income as Rs 57,24,172. Mr. Purohit challenged this assessment order before the Dispute Resolution Panel (DRP), which found that Rs 51.9 lakh had been properly explained.

However, the DRP confirmed the remaining unexplained amounts – a Rs 1 lakh cash deposit, Rs 4 lakh in registration charges, and Rs 32,280 in stamp duty.

Feeling aggrieved, Mr. Purohit appealed to the ITAT Ahmedabad, represented by Mr. Ketan Vajani. Dr. BRR Kumar and T. R. Senthil Kumar, both members of the ITAT, heard the case. Mr. Vajani explained that Mr. Purohit's bank statements showed a deposit of Rs 1 lakh in his NRE account in March 2009, which was used for the flat's booking. He also provided evidence of stamp duty and registration charges paid to the builder, supported by a bank challan and registration receipt.

The ITAT Ahmedabad ruled that the addition of Rs 1 lakh to Mr. Purohit's income should be deleted, considering his bank statements and the builder's confirmation. The tribunal emphasized that documented banking trails cannot be disregarded on mere suspicion when substantiated by such evidence. The decision affirms the importance of compliance and precise documentation for non-resident individuals in tax proceedings.