NRI Seafarer Faced Rs. 82.50 Lakh Additions for Property Purchase and Cash Deposits; ITAT Orders Fresh Assessment

The ITAT Mumbai has granted relief to Mr Rahul Vijay Rai, a seafarer and Non-Resident Indian (NRI), by setting aside the assessment order and sending the matter back to the tax authorities for fresh examination.

The assessee, Mr Rahul Vijay Rai, had not filed its income tax return (ITR) for the Assessment Year 2016-17. As per the information available on the ITBA/Insight Portal of the department, the tax authorities discovered that the assessee had carried out financial transactions of Rs 1.70 crore during the year in consideration (purchased an immovable property of Rs 1.36 crore and deposited cash in bank accounts).

Since the assessee had not filed any ITR for the year under consideration, the tax authorities initiated reassessment proceedings and eventually made additions of Rs 48.97 lakh as unexplained investment under Section 69 and Rs 33.53 lakh as unexplained cash credit under Section 68 of the Income Tax Act. The assessee challenged the additions before the Dispute Resolution Panel (DRP), but the DRP sustained the reassessment, noting the assessee had not furnished proper submissions despite granting multiple opportunities.

Thereafter, the assessee filed an appeal before the ITAT Mumbai, arguing that adequate opportunity had not been provided during the proceedings. The Tribunal observed that although the assessee had participated in the assessment proceedings, he could not effectively represent his case before the DRP. Considering that he was a seafarer and may not have been fully aware of the DRP proceedings, the Tribunal felt that he should be given another opportunity to explain the source of the property investment and bank deposits.

The ITAT held that “It is a fact on record that the assessee, to some extent, was able to establish the source of investment in property during assessment proceedings. Had the assessee get an opportunity to represent his case before learned DRP, he could have been in a position to counter the allegations of the Assessing Officer with further evidence. Thus, in our view, the assessee deserves an opportunity to explain the source of investment in property and deposits in the bank accounts.”

Accordingly, the tribunal set aside the reassessment order and restored the matter to the tax authorities for fresh adjudication after providing a reasonable hearing opportunity. Consequently, the assessee’s appeal was allowed for statistical purposes.