Tax notice for Rs 1 cr remittance from Kuwait

By Sohail Khan 10 September 2026, 3:49 pm

Synopsis

Indian man working in Kuwait oilfields, got his salary in National Bank of Kuwait, remitted Rs 1.09 crore back to family in India, files no ITR, got an unexplained money tax notice u/s 69; he partially wins case in ITAT Ahmedabad

Image for Rs 1.09 crore remittance sent to home by an Indian working in Kuwait, but he didn't file ITR, received income tax notice; gets relief in ITAT Ahmedabad — Indian employee remitted Rs 1.09 crore back home by working in Kuwait oilfields, filed no ITR, got an unexplained money tax notice u/s 69, partly wins case in ITAT Ahmedabad

Mr Narshibhai, who hailed from Krishnanagar Naroda Road, Ahmedabad, emigrated to Kuwait to work in the oilfields of Mina Al-Ahmadi, Kuwait. He had been in Kuwait for quite some time and was earning a decent salary. So, Narshibhai chose to buy an insurance policy in India and started sending money back home to his family. However, he got into trouble with the Indian Income Tax Department when they sent him an unexplained tax notice.

Even though Narshibhai’s salary is deposited in the National Bank of Kuwait, he remitted the money back to his ICICI and HDFC Bank accounts (NRE and NRO accounts). According to Indian tax laws, every bank has to file a Specified Financial Transactions (SFT) statement with the Income Tax Department. Through the SFT/Insight system, the tax department got wind of Narshibhai’s considerable financial holdings in India, for which the department thought he had failed to pay due tax.

To give you a clearer picture of what the Income Tax Department knew, their system indicated that as of December 31, 2018, Narshibhai had Rs 2.49 crore with HDFC Bank, Rs 1.09 crore with ICICI Bank and a policy worth Rs 3.77 lakh with ICICI Prudential Life Insurance Company.

This situation could have been easily resolved if Narshibhai had filed an ITR explaining this money, but the problem escalated because Narshibhai had not filed any original Income Tax Return (ITR). So, while the Income Tax Department had all the information about crores of rupees belonging to an Indian working in Kuwait, there was no corresponding ITR to verify it.

This lack of full information about the money is the reason why the Income Tax Assessing Officer from the International Taxation wing, Ahmedabad, decided to issue a tax notice to Narshibhai. This tax notice asked him to explain the money in HDFC Bank and ICICI Bank accounts as well as the insurance policy also.

Also read: Dubai earnings sent through banking channels, yet tax notice issued: ITAT Ahmedabad rules property purchase can’t be treated as unexplained investment

In response to the tax notice, Narshibhai filed an ITR declaring nil income. The tax officer then asked him to provide complete details including bank statements (both NRE and NRO), details of time deposits, an explanation of the SFT-reported figures and reconciliation of these figures.

However, Narshibhai didn’t fully comply with these notices and furnished only limited information, primarily the NRE account statement, without the complete documentation needed to clarify the nature and source of the reported balances.

There was no reconciliation of the SFT data, and he also did not give any explanation regarding how the cumulative figures reported by the banks were calculated. Consequently, the tax officer treated the money as unexplained and proceeded to take legal action against Narshibhai, based on available records.

The Assessing Officer thus treated the entire balances reported under SFT, amounting to Rs 3.63 crore, as unexplained money under Section 69A. The AO’s reasoning was that Narshibhai had failed to discharge the primary responsibility to clarify the nature and source of these funds.

Since no documentation was provided to prove that the amounts represented sources like foreign remittances or accumulated savings, the AO invoked Section 69A and taxed it under Section 115BBE at the applicable rate. As a result, Narshibhai's assessed income was determined by the AO as Rs 3.63 crore.

Once the unexplained money allegations were confirmed by the AO, Narshibhai decided to take the matter more seriously and decided to fight it in the tax tribunal.

During the appellate proceedings, Narshibhai filed an application under Rule 46A seeking admission of additional evidence. The additional evidence included foreign bank account statements (National Bank of Kuwait), salary details from the employer, Indian NRE bank statements and other supporting documents to establish the trail of funds from foreign earnings to Indian accounts.

The Commissioner of Appeals (CIT A) called for a remand report from the AO following the new evidence given by Narshibhai.

In the remand proceedings, the AO examined the additional evidence and also issued notices under Section 133(6) to ICICI Bank, HDFC Bank and ICICI Prudential Life Insurance Company to verify the SFT-reported figures.

The remand report brought out significant factual aspects. It was observed that Narshibhai had been earning a good salary in Kuwait, which was credited in his account with National Bank of Kuwait and subsequently remitted to India through proper banking channels into his NRE accounts with ICICI Bank and HDFC Bank. To that extent, the source of certain deposits, particularly fixed deposits with ICICI Bank, were explained.

However, the remand report also highlighted certain gaps. Firstly, the figures reported under SFT could not be reconciled with the actual bank statements.

CIT (A) observed that in the case of ICICI Bank, although statements and FD details were furnished and an amount of Rs 1.04 crore was verified as explained through foreign remittances and FD rollovers, the balance money could not be correlated.

According to CIT (A), in the case of ICICI Prudential, it was clarified that Rs 3.77 lakh represented only the policy value on a particular date and not any income event.

In the case of HDFC Bank, CIT (A) observed that the bank didn’t respond to repeated notices, and Narshibhai also failed to provide a clear break-up of the SFT-reported figure of Rs 2.49 crore. The remand report also recorded that the Insight portal no longer contained detailed underlying data for these figures, further complicating verification.

Narshibhai, in a rejoinder, argued that the AO himself was unable to reconcile the figures and therefore it was unjust to expect him to do so.

Narshibhai reiterated that all credits in his NRE accounts were sourced from foreign earnings and that no Indian income was involved. He further argued that cumulative balances cannot be taxed as income under Section 69A.

So the CIT (A) deleted the ICICI Bank account and insurance policy additions, but sustained HDFC Bank’s Rs 2.49 crore and Rs 5.52 lakh as unexplained money.

Feeling aggrieved, Narshibhai filed an appeal in ITAT Ahmedabad. S. N. Divatia and Samir Vora represented Narshibhai before ITAT Ahmedabad D Bench, where Smt Annapurna Gupta was the Accountant Member and Mr Siddhartha Nautiyal was the Judicial Member.

On April 24, 2026, Narshibhai partly won the case in ITAT Ahmedabad.

Keep reading to know why Narshibhai partly won the case.

Also read: Wife paid Rs 58 lakh from Indian bank a/c, husband paid Rs 80 lakh from UAE bank a/c for property purchase; she gets tax notice for unexplained investment, wins case in ITAT Mumbai for this reason

Why Narshibhai partly won the case?

Sanyam Goel, Director, Accorp Partners, explained to ET Wealth Online that ITAT Ahmedabad leaned on two Gujarat High Court rulings; Anilkumar Ramabhai Patel v. ITO [2025] 178 taxmann.com 634 (Guj.) and Nitin Mavji Vekariya v. ITO [461 ITR 18 (Guj.), for the principle that once funds in an NRE account are shown to originate from foreign earnings, Section 69A simply doesn't apply to them.

Chartered Accountant Suresh Surana pointed out to ET Wealth Online that the Ahmedabad ITAT observed that Narshibhai ’s NRI status, his employment in Kuwait and the existence of his NRE accounts were undisputed.

According to Surana, there was evidence that his overseas salary was credited to his account in the National Bank of Kuwait and subsequently remitted to India through banking channels. Significantly, the Assessing Officer had accepted the source of a substantial portion of the deposits in the ICICI Bank account during the remand proceedings.

Regarding the residual amount of Rs 5.52 lakh in the ICICI Bank, Surana says ITAT Ahmedabad held that the addition arose merely from an inability to reconcile the cumulative SFT figure with the bank records.

The Income Tax Department had not produced any independent evidence to prove that this amount represented undisclosed income or arose from an unexplained source.

Since the substantial portion of the same account had already been accepted as originating from foreign salary remittances, ITAT Ahmedabad found no justification for treating the minor residual difference as unexplained money and deleted the addition.

Regarding the HDFC Bank amount of approximately Rs 2.50 crore, ITAT Ahmedabad noted that the addition was based solely on a cumulative figure reported through SFT, without any transaction-wise details or supporting material.

Surana says: “Despite a notice issued under Section 133(6), HDFC Bank did not provide the required information, and even the Assessing Officer could not ascertain or reconcile the basis of the reported figure.” Thus, the foundation of the addition itself remained unverified.

However, since Narshibhai himself had also not furnished a complete one-to-one reconciliation, ITAT Ahmedabad did not delete the addition outright and instead restored the matter to the Assessing Officer (AO) for fresh verification.

ITAT Ahmedabad directed that no addition should be made if the funds were found to represent foreign income remitted to India or the redeployment of such funds.

Accordingly, the appeal was partly allowed for statistical purposes: the addition of Rs 5.52 lakh was deleted, while the addition of approximately Rs 2.50 crore was remanded for fresh examination.

Therefore, the ruling did not grant final relief concerning the entire amount, but it protected Narshibhai from an addition founded solely on unverified SFT data and placed an obligation on the AO to establish the underlying facts before invoking Section 69A.