Indian working in Kuwait sent home over a crore in remittances but filed no ITR; taxman treated Rs 3.63 crore as unexplained, ITAT deletes Rs 5.52 lakh and orders fresh check of Rs 2.50 crore
An Indian working in Kuwait and originally from Ahmedabad received an income tax notice after he failed to file an Income Tax Return (ITR), despite remitting more than a crore to his bank accounts in India.The man had moved to Kuwait to work in the oilfields at Mina Al-Ahmadi and had been earning a decent salary. While there, he purchased an insurance policy in India and began sending money to his family back home.His salary was credited to his account with the National Bank of Kuwait, from where he transferred funds to his ICICI and HDFC Bank accounts in India, including NRE and NRO accounts. These transactions came under the Income Tax Department’s radar through the Specified Financial Transactions (SFT) reporting system.Banks are required to report specified transactions to the Income Tax Department, and the department’s SFT/Insight system showed that, as of December 31, 2018, he had Rs 2.49 crore with HDFC Bank, Rs 1.09 crore with ICICI Bank and an insurance policy worth Rs 3.77 lakh with ICICI Prudential Life Insurance Company.
What the case is about
The absence of an original ITR became a key issue. Although the department had information about the substantial sums held in his Indian accounts, there was no tax return on record explaining their nature and source.The Income Tax Assessing Officer from the International Taxation wing in Ahmedabad consequently issued a notice asking him to explain the money in his bank accounts and the insurance policy.The man subsequently filed an ITR declaring nil income. The tax officer then sought detailed information, including his NRE and NRO bank statements, details of time deposits, an explanation of the SFT figures and a reconciliation of the amounts reported by the banks.The man provided only limited information, primarily his NRE account statement. He did not submit the complete documentation required to explain the reported balances, nor did he provide a reconciliation showing how the cumulative SFT figures had been calculated.The AO therefore treated the entire Rs 3.63 crore reported through SFT as unexplained money under Section 69A. Since there were no documents before the AO establishing that the funds represented foreign remittances, accumulated savings or another identifiable source, the amount was taxed under Section 115BBE. His assessed income was consequently determined at Rs 3.63 crore.
What happened in the appeal?
The man challenged the assessment and, during the appellate proceedings, filed an application under Rule 46A seeking admission of additional evidence.The documents included statements of his National Bank of Kuwait account, salary details from his employer, Indian NRE account statements and other records intended to establish the movement of his Kuwait earnings into his Indian accounts.The Commissioner of Appeals (CIT A) sought a remand report from the AO. During the remand proceedings, the AO examined the additional evidence and issued notices under Section 133(6) to ICICI Bank, HDFC Bank and ICICI Prudential Life Insurance Company to verify the SFT-reported figures.The remand proceedings established that the man was earning a good salary in Kuwait. His salary was credited to his National Bank of Kuwait account and subsequently remitted to India through proper banking channels into his NRE accounts with ICICI Bank and HDFC Bank. This explained the source of certain deposits, particularly the fixed deposits with ICICI Bank.However, the SFT figures could not be fully matched with the actual bank statements. The man argued in his rejoinder that if the AO himself could not reconcile the figures, it was unreasonable to expect him to do so.The CIT (A) deleted the additions relating to the ICICI Bank account and the insurance policy but retained the Rs 2.49 crore HDFC Bank addition and Rs 5.52 lakh as unexplained money.The matter then reached the ITAT Ahmedabad. S. N. Divatia and Samir Vora represented the man before the ITAT Ahmedabad D Bench, comprising Smt Annapurna Gupta, Accountant Member, and Mr Siddhartha Nautiyal, Judicial Member. The tribunal passed its order on April 24, 2026, granting partial relief.
Why did ITAT Ahmedabad partly rule in his favour?
The tribunal relied on two Gujarat High Court rulings, Anilkumar Ramabhai Patel v. ITO [2025] 178 taxmann.com 634 (Guj.) and Nitin Mavji Vekariya v. ITO [461 ITR 18 (Guj.)]. The principle from these decisions is that where funds in an NRE account are shown to have originated from foreign earnings, Section 69A cannot be applied to treat those funds as unexplained money.Chartered Accountant Suresh Surana told ET that the man’s NRI status, his employment in Kuwait and his NRE accounts were undisputed. There was also evidence showing that his overseas salary was first credited to his National Bank of Kuwait account and then remitted to India through banking channels.
Why was the Rs 5.52 lakh addition deleted?
The tribunal found that the Rs 5.52 lakh addition relating to ICICI Bank arose from the inability to reconcile the cumulative SFT figure with the actual bank records.The Income Tax Department had not produced independent evidence establishing that this amount represented undisclosed income or came from an unexplained source. Since a substantial portion of the same account had already been accepted as having originated from foreign salary remittances, the tribunal found no sufficient basis to treat the residual Rs 5.52 lakh as unexplained.The addition was therefore deleted.
Why was the Rs 2.50 crore addition not deleted?
The tribunal took a different view of the approximately Rs 2.50 crore reported in relation to HDFC Bank. It noted that the addition was based on a cumulative SFT figure, without transaction-wise details or supporting material establishing what the amount represented.Surana says: “Despite a notice issued under Section 133(6), HDFC Bank did not provide the required information, and even the Assessing Officer could not ascertain or reconcile the basis of the reported figure.”The basis of the addition therefore remained unverified. However, the tribunal also noted that the man had not furnished a complete one-to-one reconciliation himself.It consequently sent the HDFC Bank issue back to the Assessing Officer for fresh verification rather than deleting the addition outright. The tribunal directed that no addition should be made if the funds are found to represent foreign income remitted to India or the subsequent redeployment of those funds.The appeal was thus partly allowed for statistical purposes. The Rs 5.52 lakh addition was deleted, while the approximately Rs 2.50 crore HDFC Bank addition was remanded for fresh examination.
