Business & Finance
ITAT Ahmedabad Grants Partial Relief to Kuwait-Based NRI in Rs 3.63 Crore Unexplained Income Case
An Indian national employed in Kuwait's oilfields, originally from Ahmedabad, faced income tax scrutiny after remitting over a crore of rupees to his Indian bank accounts without filing an Income Tax Return (ITR). The Income Tax Appellate Tribunal (ITAT) Ahmedabad has now granted him partial relief in the matter.
The man, who worked at Mina Al-Ahmadi in Kuwait, had been sending money earned there to his family in India. His salary was deposited into his National Bank of Kuwait account, from which he transferred funds to his ICICI and HDFC Bank accounts in India, including NRE and NRO accounts. He also held an insurance policy with ICICI Prudential Life Insurance.
These transactions were flagged by the Income Tax Department through its Specified Financial Transactions (SFT) reporting mechanism, which banks use to report certain transactions. As per the department's records, by December 31, 2018, he held Rs 2.49 crore in HDFC Bank, Rs 1.09 crore in ICICI Bank, and an insurance policy valued at Rs 3.77 lakh.
Since he had not filed an ITR to explain these funds, the Assessing Officer (AO) from the International Taxation wing in Ahmedabad issued a notice seeking clarification. The man then filed an ITR declaring nil income. When asked to provide detailed bank statements, time deposit records, and a reconciliation of the SFT figures, he submitted only partial documentation, mainly his NRE account statement.
As a result, the AO treated the entire Rs 3.63 crore as unexplained money under Section 69A of the Income Tax Act and taxed it under Section 115BBE, assessing his total income at Rs 3.63 crore.
The man appealed the decision and submitted additional evidence under Rule 46A, including his National Bank of Kuwait account statements, employer-issued salary details, and Indian NRE account records to demonstrate the flow of his Kuwait earnings into India. The Commissioner of Income Tax (Appeals) sought a remand report, during which the AO issued verification notices under Section 133(6) to ICICI Bank, HDFC Bank, and ICICI Prudential Life Insurance.
The remand process confirmed that his Kuwait salary was properly remitted to India through banking channels into his NRE accounts, explaining certain deposits, particularly ICICI Bank fixed deposits. However, discrepancies remained between the SFT-reported figures and actual bank statements. The CIT(A) subsequently deleted additions related to the ICICI Bank account and insurance policy but upheld the Rs 2.49 crore HDFC Bank addition and Rs 5.52 lakh as unexplained income.
The case then went to ITAT Ahmedabad's D Bench, comprising Accountant Member Annapurna Gupta and Judicial Member Siddhartha Nautiyal, with S.N. Divatia and Samir Vora representing the taxpayer. In its order dated April 24, 2026, the tribunal offered partial relief.
The tribunal cited two Gujarat High Court precedents — Anilkumar Ramabhai Patel v. ITO and Nitin Mavji Vekariya v. ITO — which establish that funds in an NRE account proven to originate from foreign earnings cannot be treated as unexplained money under Section 69A. Chartered Accountant Suresh Surana noted that the man's NRI status, Kuwait employment, and NRE accounts were not in dispute, and evidence confirmed his salary was routed through his Kuwait bank account before being remitted to India.
Regarding the Rs 5.52 lakh addition tied to ICICI Bank, the tribunal found it stemmed from an inability to reconcile cumulative SFT data with actual bank records, and the tax department had not provided independent proof that the amount was undisclosed income. Given that most of the account's funds were already accepted as foreign salary remittances, the tribunal deleted this addition.
However, the tribunal took a different approach with the roughly Rs 2.50 crore HDFC Bank addition, noting it was based solely on a cumulative SFT figure lacking transaction-wise details. Surana pointed out that HDFC Bank failed to respond adequately to the Section 133(6) notice, leaving even the AO unable to verify the figure's basis. Since the taxpayer also had not provided a complete reconciliation, the tribunal did not delete this addition but instead remanded it to the AO for fresh verification, directing that no addition be made if the funds are shown to be foreign income remittances or their subsequent reinvestment.
The appeal was thus partly allowed for statistical purposes, with the Rs 5.52 lakh addition deleted and the Rs 2.50 crore HDFC Bank matter sent back for further examination.