Indian Expat in Kuwait Transfers Over a Crore in Remittances, Faces Tax Scrutiny as ITAT Reviews Unexplained Income
An Indian expatriate working in Kuwait has received an income tax notice for failing to file an Income Tax Return (ITR) after transferring over ₹1 crore to his Indian bank accounts. The individual, originally from Ahmedabad, worked in the oilfields at Mina Al-Ahmadi and sent money back home to support his family. His financial activities came under scrutiny due to the Income Tax Department’s Specified Financial Transactions (SFT) reporting system.
The man held substantial funds in his Indian accounts, including ₹2.49 crore with HDFC Bank and ₹1.09 crore with ICICI Bank, along with an insurance policy valued at ₹3.77 lakh with ICICI Prudential Life Insurance Company. The absence of an original ITR raised concerns for the tax authorities, prompting an inquiry into the nature and source of these funds.
Inquiry and Assessment
The Income Tax Assessing Officer from the International Taxation wing in Ahmedabad issued a notice requiring the man to clarify the source of the funds in his accounts and the insurance policy. Although he filed an ITR declaring nil income, he provided limited documentation, primarily his NRE account statement. The AO deemed the entire ₹3.63 crore reported through SFT as unexplained money under Section 69A, as there was no evidence to establish the funds as foreign remittances or savings. Consequently, his assessed income was set at ₹3.63 crore.
Appeal Process
In response, the man appealed the assessment and submitted additional evidence, including bank statements and salary details from his employer in Kuwait. The Commissioner of Appeals sought a remand report from the AO, who then verified the additional evidence and issued notices to the banks involved. The remand proceedings confirmed that the man earned a substantial salary in Kuwait, which was remitted to India through proper banking channels. However, discrepancies remained between the SFT figures and actual bank statements.
The CIT (A) removed the additions related to the ICICI Bank account and the insurance policy but upheld the ₹2.49 crore addition from HDFC Bank as unexplained money. The case was subsequently taken to the ITAT Ahmedabad, where a partial ruling was issued.
Tribunal Ruling
The ITAT Ahmedabad based its decision on two Gujarat High Court rulings, establishing that funds in an NRE account from foreign earnings cannot be classified as unexplained money under Section 69A. The tribunal acknowledged the man’s NRI status and the legitimacy of his salary remittances. However, it noted that the ₹2.50 crore addition related to HDFC Bank lacked transaction-wise details and supporting documentation, leading to a remand for further verification. The tribunal directed that no addition should be made if the funds are confirmed as foreign income remitted to India.
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