GHANSHYAMBHAI JASUBHAI PATEL,MANINAGAR, AHMEDABAD, GUJARAT vs. INCOME TAX OFFICER, WARD-1 , INTERNATIONAL TAXATION AHMEDABAD

The assessee has taken the following grounds of appeal:

During the assessment proceedings, the Assessing Officer observed that the assessee had made substantial time deposits in HDFC Bank and Bank of Baroda, along with maintaining certain other bank balances, aggregating to Rs. 4,29,50,761/-. The assessee also made investment in immovable property amounting to Rs. 66,56,250/-. Since the assessee failed to explain the source of these investments and did not furnish any supporting evidence such as tax residency certificate, bank statements, financial statements or details of foreign income, the Assessing Officer treated these amounts as unexplained investments under section 69 read with section 115BBE of the Act and made additions accordingly. A draft

Against the draft assessment order, the assessee filed objections before the Dispute Resolution Panel (DRP). The DRP, after considering the objections, remand report of the Assessing Officer and submissions of the assessee, examined the issue of unexplained investments in detail. In respect of addition of Rs. 4,29,50,761/- relating to bank deposits and balances, the DRP held that the assessee had failed to satisfactorily explain the source of funds and noted various inconsistencies in the explanation regarding remittances from abroad. Applying the test of human probabilities and relying on judicial precedents, the DRP held that the excess remittances to the extent of Rs. 3,77,08,177/- remained unexplained and directed the Assessing Officer to restrict the addition to that extent.

Further, with regard to the investment in immovable property of Rs. 66,56,250/, the DRP observed that only part of the payment could be verified and an amount of Rs. 36,78,500/- remained unexplained. Accordingly, the DRP directed the Assessing Officer to sustain the addition to the extent of Rs. 36,78,500/- and grant partial relief for the balance amount.

Pursuant to the directions of the DRP, the Assessing Officer passed the final assessment order under section 144 read with section 147 and section 144C(13), making addition of Rs. 3,77,08,177/- on account of unexplained bank deposits and Rs. 36,78,500/- on account of unexplained

The assessee is in appeal before us against the final order passed by AO pursuant to DRP directions.

We have heard the rival contentions and perused the material on record. We find that the additions in the present case have been made by the Assessing Officer under section 69 of the Act primarily on account of non-compliance during the assessment proceedings and not on the basis of proper appreciation of evidences. The Ld. DRP has also sustained part of the additions by adopting a restricted approach without fully appreciating the factual position regarding the source of funds of the assessee.

On careful examination of the material placed before us, we note that the assessee is a non-resident individual who has been residing in Kenya for more than 20 years and is regularly assessed to tax in Kenya. The assessee has placed on record his Tax Residency Certificate, copies of income tax returns filed in Kenya for multiple years and bank statements of his foreign bank account as well as NRE accounts maintained in India. From these documents, it is evident that the assessee has been earning income abroad over a long period of time and such income has been duly subjected to tax in Kenya.

On a detailed factual analysis, we find merit in the contention of the assessee that the Ld. DRP has incorrectly compared the remittances made during the financial year 2017-18 with the income disclosed in the Kenyan tax return for calendar year 2018. The remittances in the present case have been made between October 2017 to March 2018 and therefore logically relate to income earned in earlier period, more specifically the calendar year 2017 and also earlier accumulated savings. The assessee has demonstrated that income declared in Kenya for calendar year 2017 itself amounts to Rs. 8,77,91,607/- and further, when proportionate income for the relevant financial year is considered, the total income comes to approximately Rs. 7,02,46,660/-, which is higher than the total remittances of Rs.5,53,20,000/-.

Further, the assessee has also placed on record details of income declared in earlier years i.e. calendar years 2015, 2016 and 2017 aggregating to approximately Rs. 12,05,69,317/-. This establishes that the assessee had sufficient sources in the form of accumulated foreign income

We also find that the Assessing Officer as well as the Ld. DRP have not disputed the fact that the assessee is a tax resident of Kenya and has earned income abroad. The rejection of explanation is based merely on assumptions and mismatch of one year’s income with aggregate remittances, which in our considered view is not a correct approach in the facts of the present case.

Insofar as the addition on account of investment in immovable property amounting to Rs. 36,78,500/- is concerned, we find that the same is intrinsically linked to the remittances made by the assessee from abroad. Once it is established on facts that the assessee had sufficient explained foreign income and the remittances are duly sourced from such income, the consequent investment in immovable property cannot be treated as unexplained merely because certain payments were not fully verifiable at the assessment stage. The assessee has also furnished payment details and receipts in support of such investment.

Considering the totality of facts, evidences on record and the detailed factual matrix discussed above, we hold that the assessee has satisfactorily explained the nature and source of the funds remitted to India as well as the investments made therefrom. The additions made by the

Accordingly, we direct the Assessing Officer to delete the addition of Rs. 3,77,08,177/- made on account of alleged unexplained remittances as well as the addition of Rs. 36,78,500/- made on account of alleged unexplained investment in immovable property.

In the result, the appeal of the assessee is allowed. This Order is pronounced in the Open Court on 20/04/2026