In a landmark ruling strengthening NRI tax jurisprudence, the Income Tax Appellate Tribunal (ITAT), Ahmedabad has categorically held that overseas income earned by a Non-Resident Indian (NRI) and remitted to India through authorised banking channels cannot be treated as unexplained investment under the Income Tax Act.

This judgment is extremely important for NRIs, OCIs, foreign citizens of Indian origin, and returning Indians (R2I) who invest in Indian real estate, capital assets, or financial instruments using foreign earnings.

Case Details: ITAT Ahmedabad – ITA No. 383/Ahd/2024 (AY 2015-16)

• Assessee: Non-Resident Indian residing in UAE since 1993
• Nature of addition: ₹56.15 lakh treated as unexplained investment
• Section invoked: Section 69 of the Income Tax Act
• Nature of investment: Purchase of immovable property in India
• Source of funds: Overseas income remitted from Dubai bank accounts

The Assessing Officer treated the investment as unexplained, leading to prolonged NRI income tax litigation.

Core Legal Issue in NRI Tax Assessment

Can foreign income of a non-resident, legally earned abroad and remitted to India, be taxed as unexplained investment merely because the property is located in India?

ITAT’s Observations on NRI Taxation & Remittance

The Tribunal made the following critical findings:

• The assessee was a bona fide NRI under the Income Tax Act
• No business or salary income accrued or arose in India
• Funds originated from foreign bank accounts in Dubai
• Money was remitted through normal banking channels
• The investment trail was fully documented and verifiable
• There was no evidence of undisclosed Indian income

Hence, Section 69 cannot be invoked in such cases.

Final Verdict: Addition Deleted

The ITAT Ahmedabad held that:

• Overseas earnings legally remitted to India are fully explained
• Property investment by an NRI using foreign income is permissible
• Addition of ₹56,15,441 as unexplained investment was deleted

Appeal allowed in favour of the assessee

Why This ITAT Judgment Is a Game-Changer for NRI Tax Litigation

This ruling provides powerful protection to NRIs facing:

• Scrutiny notices for large remittances
• Additions under Section 69 / 69B
• Allegations of unexplained investment in property
• Re-opening of completed NRI assessments
• Litigation arising from foreign income repatriation

It also strengthens arguments in pending appeals before CIT(A) and ITAT across India.

Key Takeaways for NRIs & OCIs

Permissible Under Law

• Purchase of Indian property using foreign salary / business income
• Remittance through NRE, NRO or Resident accounts
• Funds received from close relatives abroad, if properly traceable
• Investments compliant with FEMA and RBI regulations

High-Risk Areas Leading to Litigation

• Cash or informal transfers
• Missing remittance documentation
• Weak explanation of source of funds
• Improper bank account structuring post-return to India
• Mixing resident and non-resident funds

Practical NRI Tax Planning to Avoid Litigation

To prevent additions and prolonged disputes through effective NRI tax planning:

• Maintain foreign bank statements
• Preserve SWIFT / inward remittance certificates
• Ensure clear fund flow mapping
• Align FEMA & Income Tax positions
• Plan investments before changing residential status
• Respond to scrutiny notices with legal precedents

How Dinesh Aarjav & Associates Handles NRI Tax & Litigation

At Dinesh Aarjav & Associates, we are deeply specialised in non-resident taxation and cross-border litigation, including:

• NRI income tax assessments & scrutiny
• Property purchase & sale taxation for NRIs
• Section 69 & unexplained investment disputes
• FEMA-compliant bank and asset structuring
• DTAA Consultancy for USA, UK, UAE, Canada & Australia
• Return-to-India (R2I) tax transition planning
• Representation before Assessing Officers, CIT(A), and ITAT

With 25+ years of experience and a strong litigation track record, we help NRIs resolve disputes efficiently and defensibly.

Facing NRI Tax Scrutiny or Property-Related Litigation?

Do not reply to tax notices without expert review.
Incorrect explanations can escalate matters into years of litigation.

Get specialised NRI tax and litigation support now from experienced NRI consultants.

Also Read: 

NRI Taxation Myths Busted: Your Ultimate Guide to Returning to India

Simplifying NRI Taxation: Insights Shared at Bank of India’s Exclusive NRI Meetup

Form 67 Filing for Foreign Tax Credit: ITAT Confirms DTAA Relief Cannot Be Denied for Procedural Delay

Breaking NRI Tax Update: ITAT Delhi Cancels Penalty on NRI Because Income Tax Notice Was Never Served