ITAT said the NRI's bank statements and documents proved payments. The ruling clarifies how NRE funds can be used for property purchases without triggering tax queries.
The Tax Appellate Tribunal in Ahmedabad ruled that an NRI and US citizen had adequately explained the source of funds for a ₹79.9 lakh flat in Mumbai, overturning additions proposed by the tax department. The decision, reported by The Economic Times, clarifies how NRE account transactions can be documented to avoid Section 148 reassessments.
The man, living in America since 2002, booked the flat in Kandivali West in 2011 and made payments through his HDFC Bank NRE and NRO accounts between 2011 and 2018. His brother, also an NRI, contributed toward the property. The man did not file income tax returns, prompting the tax department to issue a notice in March 2023 questioning the source of funds.
The assessing officer assessed his total income at ₹57.2 lakh and issued a draft order. The Dispute Resolution Panel, after obtaining a remand report, said the NRI had satisfactorily explained ₹51.9 lakh. It ordered that amount deleted but kept an addition of ₹1 lakh in cash deposits and ₹4.32 lakh in stamp duty and registration charges.
The NRI appealed to the ITAT, submitting bank statements from 2015 showing the cash deposit of ₹1 lakh was used for advance booking, and NRE account details showing a withdrawal of ₹1.08 lakh in March 2009. The tribunal directed the assessing officer to delete the ₹1 lakh addition. On the stamp duty and registration charges, he provided a bank challan and other documents including a registered agreement from May 2015. The ITAT accepted the documents and ordered those additions removed as well.
The ruling underscores that NRIs can defend property purchase payments with proper bank records and registered agreements, even when returns were not filed on time. The case reached the tribunal after a belated return was filed in response to the notice; the tax department had argued the return was invalid.
HDFC Bank, through which most payments flowed, is the bank involved. The stock has an AlphaScala Score of 36 out of 100, with a Mixed rating in the Financial Services sector. For NRIs using NRE funds for India real estate, the decision signals that clear documentation of cash deposits and cross-referencing of bank statements with registered sale deeds can satisfy the tax authorities.
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