JAYASREE PUTHA,RAJAMPET vs. ITO, WARD (INT TXN), NELLORE

Succinctly stated, the assessee is a Non-Resident Indian (NRI) during the subject year, i.e., AY 2020-21. The AO based on specific information disseminated through the Insight Portal in accordance with Risk Management Strategy (RMS) formulated by the CBDT observed that the assessee during the year under consideration had though purchased “APG Bank”) for Rs.1.60 crores, but had not filed her return of income, initiated proceedings under section 147 of the Act. Order under section 148A(d) of the Act, dated 31/03/2024 was passed by the AO. Notice under section 148 of the Act, dated 31/03/2024 was issued wherein the assessee was called upon to file her return of income for the subject year. However, the assessee failed to file her return of income for the year under consideration.

As observed herein above, the assessee during the subject year had purchased time deposits (TDRs) of Rs.1.60 crores with APG Bank. The assessee on being queried about the source of purchase of TDRs of Rs.1.60 crores, submitted that the same were purchased out of the foreign inward remittances received in her bank account No.0000091068473290 with APG Bank, which are culled out as under:

Also, the assessee to substantiate her aforesaid claim had placed on record the inward remittance certificate from APG Bank. Elaborating further on her contention, it was the assessee’s claim that out of the aforesaid foreign remittances, an amount of Rs.1.60 crores was utilized for purchasing Time Deposits (TDRs) bearing account No. 0000091068473290, as under:

As observed here in above, the AO in absence of complete documentary evidence to substantiate the aforesaid claim of the assessee rejected her explanation and vide his draft assessment order passed under section 144C(1) of the Act, dated 19/12/2024 prepared to treat the entire amount of investment in TDR’s as an unexplained investment under section 69 of the Act.

We find that the assessee aggrieved with the addition proposed by the AO had carried the matter before the Dispute Resolution Panel-1, Bangalore (for short, “DRP”).

The DRP observed that the assessee’s NRE account No. 0000091068473290 with APG Bank during the subject year was credited with transfer of amounts, viz., (i) 16/05/2019 and 21/05/2019: Rs.20,00,000/-, Rs.20,82,787/- and Rs.30,00,000/- (which was utilized by the assessee in investing in TDRs of Rs.70,00,000/- on 15/06/2019); (ii) on 01/08/2019 amount received of Rs.10,00,000/- was received in three tranches from account of Sri Rama Mohan Reddy, i.e., assessee’s husband through HDFC Bank: Rs.30,00,000/- (which was utilized for purchasing FDRs of Rs.30,00,000/- on 02/08/2019); (iii) on 14/11/2019 amounts of Rs.30,00,000/- and Rs.7,00,000/- were credited in the bank account of the assessee: Rs.20,00,000/- (which was utilized for purchasing FDRs of Rs.20,00,000/- on 14/11/2019); (iv) on 09/01/2020 Reddy an amount of Rs.5,00,000/- (through NEFT, HDFC Bank): (v) an amount of Rs.5,00,000/- from Sri Suresh Reddy (through NEFT, HDFC Bank): Rs.5,00,000/-; (vi) received from Sri Rama Mohan Reddy, i.e., assessee’s husband (through HDFC Bank) Rs.10,00,000/-, which all amounts were utilized for purchasing FDRs of Rs.20,00,000/- on 23/01/2020; and (vii) amounts of Rs.7,01,537/-, Rs.5,97,000/- were credited in the assessee’s bank account by way of NEFT from Sri Rama Mohan Reddy – HDFC Bank; and an amount of Rs.7,01,520/- was received in the assessee’s account from Sri Chenchu Rami Reddy – HDFC Bank, which all amounts were utilized for purchasing of FDRs of Rs.20,00,000/- on 27/02/2020. 9. The DRP observed that the assessee had furnished the details of sources receipt of funds in her bank account with APG Bank in India during the course of the proceedings as additional evidence and had not submitted the same before the AO. Accordingly, the DRP called for the comments of the AO on the aforesaid additional evidence. In reply, the AO submitted that the assessee during the course of the assessment proceedings had filed copies of the confirmations, identity proof and passports of the aforesaid three persons, viz., (i) Sri Bujji Reddy Chintalagari Subba Reddy; (ii) Sri Chenchu Rami Reddy; and (iii) Suresh Reddy. The AO observed that on verification of the information as was filed by the above mentioned three persons, observed that the source of 7 Jayasree Putha vs. ITO their income earned in Kuwait for repayment of hand loans, as was claimed to have been advanced to them by the assessee’s husband, had not furnished along with their confirmation letters. Also, it was observed by him that the assessee’s husband, i.e., Sri Rama Mohan Reddy has also not filed the details of the source from where loans were advanced by him to the above mentioned three persons along with any documentary evidence such as bank statement evidencing the transfer of amounts to them. Accordingly, the AO concluded that the explanation of the assessee regarding the foreign inward remittances which were stated to be the repayment of loans by the above mentioned three persons that were earlier advanced to them by her husband aggregating to Rs.17,01,520/- did not merit acceptance.

Apropos the balance amount of Rs.1,43,81,324/- of foreign inward remittance in the bank account of the assessee with APG Bank, it was stated by the assessee to have been received from her husband, i.e., Sri Rama Mohan Reddy. The AO observed that the aforesaid amount to the extent of Rs.1,06,25,552/-, i.e., to the extent the source of the same was explained by the assessee along with supporting evidence did merit acceptance. Accordingly, the AO vide his aforesaid “remand report”, dated 14/07/2025 submitted that the source of the investment made towards the purchase of TDRs of Rs.53,74,448/- (Rs.1,60,00,000/- - Rs.1,06,25,552/-) remained unexplained.

The DRP after considering the “remand report” of the AO and the rejoinder filed by the assessee, observed that the Time Deposits (TDRs) to the extent of Rs.1,06,25,552/- was sourced out of the salary proceeds of the assessee’s husband, i.e., Sri Rama Mohan Reddy, which he had earned in Kuwait. Apropos the remaining amount of Rs.53,74,448/- the DRP observed that though the assessee had claimed to have received the said amount as repayment of hand loans that were earlier advanced by her husband to the above mentioned three individuals, but as the assessee had failed to place on record the source of income and confirmation letters of the above mentioned individuals, thus, in absence of any material to support their creditworthiness, the claim of the assessee did merit acceptance. Apart from that, the DRP observed that the assessee had also not submitted any bank statement or any supporting documents to justify the date of transfer, medium of transfer, date of repayment, which would evidence that the aforesaid amounts aggregating to Rs.17,01,520/- was actually transferred by the aforementioned three persons. Accordingly, the DRP, based on its aforesaid observations concluded that the benefit regarding the source of investment towards purchase of the TDRs to the tune of Rs.17,01,520/- could not be given to the assessee.

Apropos, the remaining amount of Rs.36,72,928/-, which the assessee had claimed to have received as foreign inward remittances

Thereafter, the AO vide his order passed under section 144 r.w.s 144C(13) of the Act, dated 10/10/2025, while giving effect to the directions of the DRP made an addition of Rs.53,74,448/- and determined the income of the assessee at the same amount.

Aggrieved, the assessee has assailed the order passed by the AO under section 144 r.w.s 144C(13) of the Act, dated 10/10/2025 before us.

We have heard the Leaned Authorized Representatives of both parties, perused the orders of the authorities below and the material available on record.

Shri S Rama Rao, Advocate, Learned Authorized Representative (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal, submitted that the assessee during the subject year was holding the status of a Non-Resident Indian (NRI) and she along with her spouse Sri Rama Mohan Reddy were both settled in Kuwait for the last many

Coming back to the core issue involved in the present case, we find that the same hinges around the source of the TDRs of Rs.1.60 crores purchased by the assessee with APG Bank during the subject year. We find on a perusal of the record that it has been the claim of the assessee that the subject TDRs were sourced out of the foreign inward remittances aggregating to Rs.1,60,82,844/- in her bank account No.0000091068473290 with APG Bank, Branch Rajampetamain. The aforesaid claim of the assessee is supported by a certificate issued by APG Bank, dated 30/12/2024, Page 79 of APB. As observed by us herein above, the aforementioned amount of Rs.1,60,82,844/- credited in the NRE account No.71068473290 of the assessee was comprised of, viz., (i)

We may herein observe that the AO vide his “remand report”, dated 07/07/2025 filed with DRP-1, Bengaluru, inter alia, submitted that the assessee had claimed that an amount of Rs.1,43,81,324/- was received by her from Sri Rama Mohan Reddy, which in turn was comprised of transfers from the latter’s bank account with National Bank of Kuwait (i.e., NBK Account No.2012939214) in Kuwait Dinars (KWD), as well as amounts remitted by him through money transfers. However, the AO observed that the explanation of the assessee regarding the source of the amounts transferred by Sri Rama Mohan Reddy (supra) to her NRE account with NBK Bank could be accepted only to the extent the same was sourced by way of transfers from the said foreign bank. Accordingly, the AO based on his aforesaid “remand report” declined to accept the explanation of the assessee regarding the source of the purchase of TDRs to the extent of Rs.37,55,662/- (15719 KWD) that were stated to have been remitted by her husband in her aforesaid NRE account with APG Bank.

Elaborating further, the AO in his “remand report”, dated 07/07/2025 had observed that it was the claim of the assessee that 15719

We find that the AO had rejected the explanation of the assessee on the ground that the source of the foreign inward remittance of Rs.36,72,928/- (15719 KWD) did not merit acceptance.

We have thoughtfully considered the view taken by the AO and at the threshold find that that he had grossly erred in making an addition of Rs.36,72,928/- under section 69 of the Act. Before proceeding further, we would mince no words in observing that the AO while addressing the facts involved in the present case had proceeded grossly on a fallacious basis, i.e., in serious contradiction of the settled provisions of law.

We say so, for the reason that as the assessee during the subject year was a Non-Resident Indian within the meaning of section 6(1) of the Act, therefore, the scope of her total income as per section 5(2) of the Act would include all income from whatever source derived which, viz., (a) is 13 Jayasree Putha vs. ITO received or deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year. Now coming to the facts of the case, we find that it is an admitted fact that the aforesaid amount of Rs.36,72,928/-, i.e., 15719 KWD forms part of the foreign inward remittance in the NRE Account No. 0000091068473290 of the assessee with APG Bank. We find that though it has been the claim of the assessee that the aforesaid amount of Rs.36,72,928/- (15719 KWD) were remitted in her bank account by her husband, i.e., Sri Rama Mohan Reddy out of the ATM cash withdrawals from his bank account with NBK bank/accumulated cash savings over the year, but the same was summarily rejected by the AO. In our view, even if the explanation of the assessee regarding the source of the aforesaid amount of Rs.36,72,928/- (15719 KWD) is not to be accepted, we are unable to comprehend how the same would fall within the meaning of income received or deemed to be received or accruing or arising to the assessee from whatever the source during the subject year in India. Assuming that the aforesaid amount of 15719 KWD was the unexplained income of the assessee, but the same having been earned by her in Kuwait could not have been brought to tax in her hands in India because of her being a Non-Resident Indian (NRI) during the subject year. We say so, for the reason that even assuming that the subject amount of 15719 KWD remitted in her NRE bank account in India was in the nature of income, thought undisclosed, the same by no means

Coming now to the amount aggregating to Rs.17,01,520/-, which as observed by us herein above, was claimed by the assessee to have been received on account of repayment of hand loans that were advanced by her husband, i.e., Sri Rama Mohan Reddy to three persons, viz., Sri V. Suresh Reddy, Sri Chenchu Rami Reddy and Sri Bujji Reddy Chintalagari Subba Reddy aggregating to Rs.17,01,520/-. We find that the assessee to substantiate the veracity of her aforesaid claim had filed before the AO and DRP, the affidavits of all the aforementioned persons, viz., Sri V.

The aforesaid person had vide his confirmation letter, dated 04/07/2025 stated, viz., (i) that he was residing in Kuwait for 18 years period, i.e., from 2004 to 2022 and was employed with HILTI, Kuwait during the said period; (ii) it is confirmed by him that Sri Rama Mohan Reddy Putha, i.e., the assessee husband had advanced to him a cash loan of Rs.2977.99 KWD (equivalent to Rs.7,01,520/-), which was repaid by him on 26/02/2020 by transferring the amount to the bank account No.91068473290 of the assessee with APG Bank through foreign remittance; (iii) also, the above person had deposed the facts by filing an affidavit, dated 29/04/2025 (Pages 91 to 92 of APB).

Bujji Reddy Chintalagari Subba Reddy:

The aforesaid person has filed a confirmation, dated 04/07/2025 and an affidavit dated 28/04/2025, wherein it is stated/deposed by him as under:

Sri Suresh Reddy: (i) The aforesaid person has filed a confirmation letter, dated 04/07/2025 and an affidavit, dated 29/04/2025, wherein he had stated that he was in Kuwait for about five years during the period, i.e., AY 2015-21, and was employed in other companies during the above said period. (ii) It is confirmed/deposed by him that Sri Rama Mohan Reddy, i.e., the assessee’s husband had given to him a hand loan in cash 2109.41 KWD (equivalent to Rs.5,00,000/-), which was repaid by him on 09/01/2020 by transferring the amount to the assessee’s bank account No. 91068473290 through foreign inward remittance (Pages 86 to 87 of APB).

At this stage, we may herein observe that it is not the case of the revenue nor even alleged before us that the impugned addition has been made for the reason that the aforesaid subject amounts received by the assessee by way of remittance from the aforementioned persons is in the 17

In our view, the aforesaid confirmations filed by the above mentioned persons clinches the issue in hand, i.e., inward remittances in the bank account of the assessee from the said persons was on account of the repayment of the hand loans that were advanced by the assessee’s husband to them on an earlier occasion.

Be that as it may, we find that the AO in his “remand report” had observed that as the above mentioned three persons had not placed on record any material/evidence which would substantiate the source of the income earned by them out of which the repayment of the hand loans were made by them by way of remittance in the bank account of the assessee, therefore, the claim of the assessee did not merit acceptance. Apart from that, it was observed by the AO that the assessee had also not placed on record any details/documentary evidence which would explain the source out of which her husband had advanced the loans to the above mentioned persons.

We are unable to comprehend the aforesaid observations of the AO. In our view, even if the confirmations of the aforesaid persons were to be discarded, the amounts remitted by them to the NRE account of the 18 Jayasree Putha vs. ITO assessee amounting to Rs.17,01,520/- could not have been assessed as the unexplained income of the assessee. We say so, for the reason that going by the version of the AO even if it was to be assumed that the assessee’s husband had out of his unexplained income earned got advanced the loans to the above mentioned three persons, then also no adverse inference not only as regards the assessee but also in the case of her husband could have been drawn for the reason that both of them during the subject year were Non-Resident Indians (NRIs) and the income, if any, whether explained as otherwise was earned by them in a foreign land, i.e., Kuwait, and the same could not have been brought to tax in their hands as per the limited scope of section 5(2) of the Act, as per which the total income of a Non-Resident Indian includes income from whatever source derived which, viz., (i) received or deemed to be received in India in such year; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year. Once again we are unable to persuade ourselves to concur with the aforesaid fallacious view taken by the AO and accordingly direct him to delete the addition of Rs.17,01,520/-.

We thus, based on our aforesaid deliberations direct the AO to vacate the addition of Rs.53,74,448/-, and resultantly allow the appeal filed by the assessee.

The Principal Commissioner of Income Tax, Tirupati.

"वभागीय""त"न"ध, आयकरअपील"यअ"धकरण /DR,ITAT, Hyderabad.

The Commissioner of Income Tax 6. गाड"फ़ाईल / Guard file