Rajendra Maganbhai Patel Vs ACIT (ITAT Ahmedabad)
ITAT Ahmedabad held that funds remitted from foreign sources into NRE accounts are not taxable in India unless there is material to establish that they originate from taxable Indian income. Accordingly, exemption u/s. 10(4) of the Income Tax Act granted.
Facts- The assessee is a Non-Resident Indian and citizen of UK. On the basis of information available in ITBA system, the AO issued notice u/s 148 of the Act to the assessee. The assessee submitted return of income for both the years in response to notice u/s 148 of the Act. On the basis of information submitted by the assessee in response to notice u/s. 143(2) / 142(1) of the Act and show-cause notice, AO issued a draft assessment order proposing addition on account of unexplained credits to NRE accounts of the assessee. DRP directed the AO to delete some additions as explained. Based on the directives of DRP AO confirmed some additions. Being aggrieved, the present appeal is filed.
Conclusion- Held that the AO’s additions cannot be sustained merely on the basis of NRE credits without proving that the original source of funds was taxable in India. As held in judicial precedents like Nitin Mavji Vekariya (461 ITR 18) and Bhavesh Chandrakantbhai Bhatt (8240 of 2024), NRE deposits sourced from foreign remittances are beyond Indian taxation. In the absence of material establishing that the credits were from an Indian taxable source, the additions are legally unsustainable. Considering all the facts, legal precedents, and provisions of Section 10(4) of the Act, it is evident that funds remitted from foreign sources into NRE accounts are not taxable in India unless there is material to establish that they originate from taxable Indian income.
