ITO (International Taxation)-1 Vs Madhav Vasant Dalvi (ITAT Ahmedabad)
Income Tax Appellate Tribunal (ITAT) Ahmedabad, in a significant ruling on July 27, 2022, dismissed an appeal filed by the Income Tax Officer (International Taxation)-1 against Mr. Madhav Vasant Dalvi, a Non-Resident Indian (NRI). The case, pertaining to Assessment Year 2016-17, revolved around an addition of over Rs. 3.11 crore made by the Assessing Officer (AO) as unexplained credit, which the Commissioner of Income Tax (Appeals) [CIT(A)] had previously deleted.
Mr. Dalvi, residing in Maseru, Lesotho, filed his income tax return declaring a total income of Rs. 4,40,160/- for the relevant assessment year. His case was selected for scrutiny after he purchased an immovable property for Rs. 5.93 crore. The source of payment for this property was identified as his NRE (Non-Resident External) bank account with Bank of Baroda, Satellite Branch, Ahmedabad.
The Assessing Officer initiated an inquiry into the large credit entries in the NRE account, specifically four inward remittances from Bank of Baroda, Mauritius, totaling Rs. 3,11,80,920/-. Despite repeated requests, the AO deemed the assessee’s explanations and submitted documents insufficient, alleging that Mr. Dalvi failed to provide documentary evidence of the foreign source of income. Consequently, the AO added the entire amount as unexplained income under Section 69A read with Section 115BBE of the Income Tax Act, 1961, treating it as undisclosed income accrued or arisen in India.
