Tax notice for Rs 1 cr remittance from Kuwait

Mr. Narshibhai, originally from Krishnanagar Naroda Road, Ahmedabad, migrated to Kuwait to work in the oilfields of Mina Al-Ahmadi. He had been living in Kuwait for a considerable time and earned a substantial salary. To send money back home to his family, Mr. Narshibhai purchased an insurance policy in India and started transferring funds through his bank accounts in India (NRE and NRO accounts). However, he faced a tax issue with the Indian Income Tax Department, who issued an unexplained tax notice.

Despite his salary being deposited in the National Bank of Kuwait, Mr. Narshibhai remitted the funds to his ICICI and HDFC Bank accounts. According to Indian tax laws, banks are required to file a Specified Financial Transactions (SFT) statement with the Income Tax Department. The tax department discovered Mr. Narshibhai's significant financial holdings in India, which led to the issuance of the tax notice.

To clarify the situation, Mr. Narshibhai should have filed an Income Tax Return (ITR) explaining the money in his bank accounts and the insurance policy. However, he failed to submit any ITR, causing the tax problem to escalate. Due to the lack of proper documentation, the Income Tax Assessing Officer from Ahmedabad's International Taxation wing issued a tax notice, demanding an explanation for the money in his bank accounts and the insurance policy.

Mr. Narshibhai filed an ITR declaring nil income, but the tax officer requested him to provide complete documentation, including bank statements, details of time deposits, and an explanation of the SFT-reported figures. Narshibhai provided limited information, mainly the NRE account statement, without the complete documentation required to clarify the nature and source of the reported balances.

Consequently, the tax officer treated the entire balance as unexplained under Section 69A, resulting in an assessment of Rs 3.63 crore.