An Indian working in Kuwait, Narshibhai, faced a Rs 3.63 crore tax case after the Income Tax Department flagged large sums in his Indian bank accounts and found that he had not filed an original Income Tax Return (ITR) explaining the money.
The case was first reported by the Economic Times on Thursday, September 10. Narshibhai, originally from Ahmedabad, worked in the oilfields at Mina Al-Ahmadi, Kuwait. His salary was credited to his National Bank of Kuwait account, from where he transferred funds to his accounts in India.
According to the department’s Specified Financial Transactions (SFT) records, Narshibhai had Rs 2.49 crore with HDFC Bank and Rs 1.09 crore with ICICI Bank as of December 31, 2018. The records also showed an insurance policy worth Rs 3.77 lakh with ICICI Prudential Life Insurance Company.
Narshibhai had not filed an original ITR, leaving the department without a return against which it could verify the source of the reported funds. The Assessing Officer (AO) of the International Taxation wing in Ahmedabad issued a notice seeking an explanation for the bank balances and insurance policy.
Narshibhai later filed an ITR declaring nil income. The AO then sought his NRE and NRO account statements, details of deposits and a reconciliation of the SFT figures.
He submitted some documents but did not provide a complete reconciliation. The AO subsequently treated the Rs 3.63 crore reported through SFT as unexplained money under Section 69A of the Income Tax Act and assessed it under Section 115BBE.
During the appellate proceedings, Narshibhai submitted additional evidence under Rule 46A, including statements from his National Bank of Kuwait account, salary records and Indian NRE account statements.
The Commissioner of Income Tax (Appeals) sought a remand report from the AO. The officer also issued notices under Section 133(6) to ICICI Bank, HDFC Bank and ICICI Prudential Life Insurance Company to verify the SFT figures.
The documents established that Narshibhai’s salary was earned in Kuwait and transferred to India through banking channels. This explained a substantial portion of the deposits in his ICICI Bank account.
However, the SFT figures could not be fully matched with the underlying bank records. The CIT (Appeals) deleted the additions relating to ICICI Bank and the insurance policy but retained the Rs 2.49 crore HDFC Bank addition and Rs 5.52 lakh as unexplained money.
Narshibhai challenged the remaining additions before ITAT Ahmedabad. S. N. Divatia and Samir Vora represented him before the tribunal’s D Bench, comprising Accountant Member Annapurna Gupta and Judicial Member Siddhartha Nautiyal.
In its order dated April 24, 2026, the tribunal considered Gujarat High Court rulings in Anilkumar Ramabhai Patel v. ITO and Nitin Mavji Vekariya v. ITO concerning foreign earnings credited to NRE accounts.
Chartered Accountant Suresh Surana, cited by the Economic Times, said Narshibhai’s NRI status, employment in Kuwait and NRE accounts were not disputed.
The tribunal found that the Rs 5.52 lakh addition resulted from a mismatch between the cumulative SFT figure and the bank records. The department had not produced independent evidence establishing that the amount represented undisclosed income.
The ITAT therefore deleted the Rs 5.52 lakh addition.
The tribunal did not delete the approximately Rs 2.50 crore HDFC Bank addition.
It noted that the amount was based on a cumulative SFT figure without transaction-wise details. HDFC Bank had not provided the requested information despite a notice under Section 133(6), while the AO was also unable to establish the basis of the reported figure.
Narshibhai had also not provided a complete reconciliation. The tribunal therefore sent the HDFC Bank issue back to the AO for fresh verification.
The tribunal directed that no addition should be made if the funds are found to represent foreign earnings remitted to India or the subsequent redeployment of those funds.
