Property bought using NRI husband’s funds? ITAT deletes ₹80 lakh tax addition

A Mumbai woman has secured relief from the Income Tax Appellate Tribunal (ITAT) after it deleted an addition of ₹80.10 lakh made under Section 69 of the Income-tax Act, holding that the tax department cannot treat an investment as unexplained solely because one remittance document was unavailable when the overall transaction is supported by sufficient evidence. The ruling came in the case of Sanobar Ajaz Ahmed Saudagar vs Income Tax Officer for Assessment Year 2016-17.

The dispute arose from the purchase of a residential property worth ₹1.40 crore. The taxpayer had paid ₹58.50 lakh from her Indian bank account, while her husband, who was employed in Dubai, remitted ₹80 lakh directly to the seller through a Dubai Exchange Bureau. During reassessment proceedings initiated after information was flagged under the tax department’s risk management system, the assessing officer accepted the payments made from the taxpayer’s own account but treated the ₹80 lakh remitted from Dubai as an unexplained investment because the taxpayer could not produce the exchange bureau’s remittance records after nearly a decade. An additional ₹10,000 was also added as unexplained consideration.

Why the tax department treated ₹80 lakh as unexplained

According to the tribunal order, the assessing officer accepted the taxpayer’s explanation for part of the purchase consideration, including funds generated from the sale of an earlier property and money received from her husband. However, the officer held that the direct payment of ₹80 lakh to the seller had not been sufficiently proved because supporting documents such as remittance advice, exchange bureau records or bank debit statements from the husband’s overseas account were not produced.

The first appellate authority upheld the additions, prompting the taxpayer to approach the ITAT.

Why the ITAT ruled in favour of the taxpayer

Before the tribunal, the taxpayer produced a detailed reconciliation explaining the entire purchase consideration. The evidence included the registered sale deed, the seller’s bank statement showing receipt of ₹80 lakh, the husband’s passport and identity documents, his income-tax records, an affidavit confirming the payment, a gift deed, bank confirmation identifying him as the remitter and records relating to the remaining payments, including TDS and a ₹10,000 pay order.

The ITAT observed that the Income Tax Department had not disputed the husband’s identity, his financial capacity, the genuineness of the documents produced or the fact that ₹80 lakh had reached the seller’s account. It held that the absence of a single remittance document from the Dubai Exchange Bureau, after almost 10 years, could not override the substantial documentary evidence establishing the source and utilisation of funds.

The tribunal concluded that the taxpayer had satisfactorily explained the investment by establishing the identity of the contributor, his financial capacity, the source of funds and their use for the property purchase. Accordingly, it deleted the addition of ₹80 lakh under Section 69 as well as the separate addition of ₹10,000, allowing the taxpayer’s appeal in full.