Unexplained investment in time deposits: tribunal deletes section 69 addition after foreign business remittances confirmed as source

Assessment under unexplained investment provisions turned on whether deposits in an NRE account originated from the assessee's foreign business. The tribunal accepted documentary evidence showing transfers from a foreign business account and held that establishing a direct correlation between remittances and overseas business activity satisfies the evidentiary requirement; identical sourcing explanation for an immovable property had been accepted earlier. Consequence: the income-tax addition treated as unexplained investment was deleted and the appeal allowed.

---

---

Issues: Whether the addition of Rs. 1,00,00,000 under section 69 of the Income-tax Act, 1961 as unexplained investment in fixed deposits is justified when the assessee received Rs. 1,00,00,000 in his NRE account by remittance from a foreign bank and asserted that the funds originated from business carried on abroad.

Analysis: Relevant statutory provisions include Section 69 (unexplained investments) and the income-tax provisions governing taxation of amounts received in India by a non-resident. The assessment was reopened under provisions including Section 148/148A and finalized under Section 147 read with Section 144C(13). Authorities below treated the credit of Rs. 1,00,00,000 in the NRE account (dated 09.10.2014) as not satisfactorily substantiated because documentary links to the foreign business (audited accounts, foreign bank remittance advices, accounting entries) were not produced. The assessee, however, produced the NRE bank statement showing the credit, a foreign bank statement showing the debit from an account maintained as partner in the foreign business, and supporting business documentation (trading licence, MOA) and demonstrated an identical explanation accepted by the AO for a separate investment in immovable property. The material on record therefore showed remittance from a foreign business account into the assessee's NRE account and that the credited amount was used for fixed deposits in the relevant assessment year. The assessment of unexplained investment under Section 69 requires that the explanation offered be improper, unreasonable or unacceptable on the record; where contemporaneous banking evidence establishes remittance into the assessee's NRE account from a foreign account maintained in connection with the asserted foreign business and identical evidence was accepted for a separate transaction, the statutory test for deeming the amount unexplained is not met.

Conclusion: The addition of Rs. 1,00,00,000 under Section 69 of the Income-tax Act, 1961 is not justified; the addition is deleted and the appeal is allowed in favour of the assessee.

---