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The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has ruled in favour of a woman who challenged a tax addition of INR 80 lakh linked to the purchase of a residential property. The tribunal held that the amount paid directly by her NRI husband from his overseas bank account could not be treated as her unexplained investment. The ruling underscores the importance of documentary evidence in property transactions involving funds remitted by family members residing abroad.
The Income Tax Appellate Tribunal (ITAT) has set aside a tax addition imposed on a woman after concluding that funds transferred by her husband from his overseas bank account for the purchase of a residential property could not be treated as her unexplained investment.
The dispute arose after the Income Tax Department questioned the source of approximately INR 80 lakh that formed part of the consideration paid for a property purchased in the woman's name. While she had contributed a portion of the purchase price from her own Indian bank account, the remaining amount was remitted directly by her husband, who was working and residing in the United Arab Emirates.
During assessment proceedings, tax authorities treated the overseas remittance as unexplained investment in the hands of the property owner and added the amount to her taxable income. The taxpayer challenged the assessment, arguing that the money belonged to her husband and that the transaction was supported by banking records and other documentary evidence.
After examining the material placed on record, the tribunal observed that the payment had been made directly by the husband from his foreign bank account through recognised banking channels. It also noted that the tax department had not produced evidence to establish that the amount represented the woman's undisclosed income or that she had independently funded the payment.
The ITAT held that merely because the property was registered in the wife's name, the remittance made by her husband could not automatically be considered her unexplained investment. In the absence of evidence contradicting the source of funds, the tribunal ruled that the tax addition was not sustainable and ordered its deletion.
The ruling highlights the significance of maintaining clear financial records in property transactions involving family members, particularly where funds originate from overseas accounts. Documents such as bank statements, remittance records and payment trails can play a crucial role in establishing the source of investment during tax assessments.
Tax professionals say the decision reinforces the principle that additions under income tax provisions must be backed by credible evidence. Where taxpayers are able to demonstrate the legitimate origin of funds through verifiable documentation, authorities are expected to evaluate the entire transaction rather than relying solely on the ownership of the property.
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