A Non-Resident Indian (NRI) taxpayer successfully challenged the Income Tax Department after being initially slapped with a draft assessment order adding Rs 2.28 crore as "unexplained income," raising his total assessed income to Rs 2.32 crore.
The case drew attention because the taxpayer had filed his income tax return belatedly, declaring a modest income of Rs 3.83 lakh. Despite this, the department invoked Section 69A of the Income Tax Act, 1961, alleging that the taxpayer failed to explain multiple high-value transactions.
Refusing to accept the assessment, the NRI approached the Dispute Resolution Panel (DRP) in April 2023. The DRP requested two remand reports from the assessing officer to verify the taxpayer's claims. However, after reviewing the reports, most of his explanations were rejected, and the DRP upheld the alleged income.
Undeterred, the taxpayer moved the case to the Income Tax Appellate Tribunal (ITAT) in Ahmedabad. The tribunal critically reviewed all submitted documents, including bank statements, fixed deposit records, investments and insurance proofs. Recognizing the taxpayer's evidence, ITAT slashed the alleged unexplained income by 97%, reducing it to just Rs 63,133.
The tribunal also criticized the DRP and the assessing officer for relying on assumptions rather than documented proof. In conclusion, the appeal was partly allowed, marking a significant win for the taxpayer and highlighting the importance of evidence-backed claims in income tax disputes.
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