Additional Evidence On Foreign Remittances Must Be Examined If It Goes To Root Of Matter: ITAT Ahmedabad

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has held that in reassessment proceedings involving unexplained foreign remittances, additional evidence relating to a taxpayer's overseas residency status and foreign business activities must be examined where it goes to the root of the controversy.

Vice President Dr. B.R.R. Kumar and Judicial Member Siddhartha Nautiyal set aside the assessment in Mr. Jitendra Motilal Chawla's case and restored the matter to the Dispute Resolution Panel (DRP) for reconsideration. The Bench held:

“The additional evidences sought to be filed by the assessee go to the root of the controversy and are necessary for proper adjudication of the issues involved.”

The reassessment proceedings arose from information received through the Insight Portal, based on which the Income Tax Department reopened the case of Mr. Jitendra Motilal Chawla, a non-resident individual, citing substantial financial transactions across multiple bank accounts, including foreign remittances, fixed deposits, and bank balances.

The Department noted credits exceeding Rs. 10.25 crore in various accounts and treated the amounts as unexplained money under Section 69A read with Section 115BBE of the Income Tax Act.

Chawla contended that the amounts represented foreign inward remittances credited into NRE accounts and were not taxable in India, as he qualified as a non-resident. He further submitted that part of the funds originated from UAE-based entity LTA LLC, in which he held ownership interest, while the remaining portion came from his brother residing abroad.

The authorities below granted partial relief but sustained additions of approximately Rs. 5.43 crore, holding that sufficient documentary evidence regarding ownership of foreign entities, overseas business activities, and the source of remittances had not been furnished.

Before the Tribunal, the Chawla sought admission of additional evidence, including foreign residence permits, passports, company incorporation records, shareholding details, and other overseas business records to establish his non-resident status and substantiate the foreign origin of funds.

The Bench also observed that the sustained additions were primarily based on the alleged insufficiency of documentation concerning the nature and source of remittances and the financial capacity and status of the foreign remitters.

It further noted that the additional documents were material to the core controversy and required consideration for proper adjudication.

The Tribunal also observed that many of the documents were third-party records and found no indication that their non-production at earlier stages was deliberate. It restored the matter to the DRP for fresh adjudication after examining the additional evidence and granting the taxpayer an adequate opportunity of hearing.

Accordingly, the ITAT allowed the appeal for statistical purposes and remanded the dispute for de novo consideration.

For Appearance: Shri Hardik Vora, AR

For Respondent: Shri Sher Singh, CIT-DR