ITAT Admits Additional Evidence in NRI Foreign Remittance Tax Dispute

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) remanded the matter back to the Dispute Resolution Panel (DRP) after admitting additional evidence filed by an NRI assessee to substantiate foreign remittances received in his NRE bank accounts. The Tribunal held that documents relating to foreign residence, overseas business entities and source of remittances were crucial for proper adjudication of additions made under Section 69A of the Income Tax Act.

In the case of Jitendra Motilal Chawla v. Income Tax Officer, the assessee, a non-resident individual, had not originally filed his return of income for AY 2019-20. Based on information available on the Insight Portal regarding substantial financial transactions including foreign remittances and bank deposits, reassessment proceedings were initiated under Sections 147/148.

During assessment proceedings, the Assessing Officer treated credits aggregating to more than Rs. 10.25 crore appearing in various bank accounts as unexplained money under Section 69A read with Section 115BBE. The assessee contended that the amounts represented foreign inward remittances in NRE accounts and were not taxable in India since he was a non-resident.

Before the DRP, the assessee explained that substantial remittances were received from LTA LLC, a UAE-based trading company in which he held 80% shareholding, while another amount was received from his brother residing abroad. The assessee also pointed out duplication in certain entries considered by the Assessing Officer. However, the DRP partly sustained additions of Rs. 5.43 crore on the ground that adequate documentary evidence regarding ownership, financial capacity, foreign business activities and genuineness of remittances had not been furnished.

Before the Tribunal, the assessee filed an application under Rule 29 of the ITAT Rules seeking admission of additional evidence including foreign residence permits, company incorporation documents, certificates of good standing, passports and other corporate records to establish that the funds were earned abroad and transferred from overseas sources.

The Tribunal observed that the additions made by the DRP were mainly due to lack of documentary evidence regarding nature and source of remittances and overseas status of the remitters. It held that the additional evidence sought to be produced had a direct bearing on the controversy and went to the root of the matter.

The Bench further noted that the additional documents were largely third-party records and their non-filing earlier did not appear deliberate or mala fide. Referring to the principle that procedural rules should not obstruct substantial justice, the Tribunal held that such evidence deserved admission in the interest of justice.

Thus, the ITAT admitted the additional evidence and restored the entire matter to the file of the DRP for fresh adjudication after considering the documents and granting adequate opportunity of hearing to the assessee.

The appeal was therefore allowed for statistical purposes.

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