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NRI Receives Tax Notice For Unexplained Rs 66 lakh Property Purchase In India: Here’s Why ITAT Gave Relief

Posted By: Ramesh Sharma Posted On: Jan 15, 2026Share Article
NRI Receives Tax Notice For Unexplained Rs 66 lakh Property Purchase In India
ITAT Ahmedabad provided relief to the NRI. (Representative Image)

NRI Receives Tax Notice For Unexplained Rs 66 lakh Property Purchase In India: Here’s Why ITAT Gave Relief

For Non-Resident Indians (NRIs), investing in Indian real estate is often both an emotional choice and a smart financial move. However, such investments come with specific tax rules, compliance requirements, and documentation that many are not fully aware of.

Many people think that if Tax Deducted at Source (TDS) has already been deducted, they are exempt from filing an Income Tax Return (ITR). In reality, TDS is only a part of the tax mechanism and does not eliminate the legal obligation to file an ITR. Whether an individual must file returns depends largely on their total taxable income and the nature of the transaction.

This lack of awareness recently surfaced in a case where a US citizen of Indian origin purchased a property in India worth Rs 66.95 lakhs. But what followed is a notice from the Indian Income Tax Department seeking an explanation.

NRI Receives Tax Notice From Income Tax Department

Mr. Patel, who runs a convenience store at a gas station in the US, informed the tax department that his property documents were in India and that he was unable to travel immediately due to his business commitments in the US.

However, the tax department proceeded without him (ex parte) and passed an order in his absence. Having missed all earlier proceedings, Mr. Patel eventually filed an appeal before the CIT(A) with a delay of 312 days. The appeal was dismissed, as the CIT(A) noted that he failed to participate in the appellate process despite receiving three notices.

What Was Mr. Patel's Explanation?

Mr. Patel mentioned that he learnt from his Tax Consultant and informed the tax officer that he had purchased property during the impugned (disputed) year, on which TDS had been deducted.

He requested additional time to gather and submit the required documents to substantiate the purchase. However, as he failed to respond to subsequent notices, the tax officer proceeded with an ex parte assessment and added the entire investment of ₹66.95 lakh to his income under Section 69A.

Mr. Patel further explained that he had permanently moved to Florida in 2001, where he runs a convenience store at a gas station, and became a US citizen in 2009. As per Indian tax laws, he has been classified as an NRI since then. His key argument was that he needed more time to reply to the notice because his old bank statements and property documents were in India and could only be accessed by visiting the country in person.

After finally travelling to India in January 2024, he compiled the necessary documents and filed an appeal before the CIT(A), which was later dismissed. He then approached the ITAT Ahmedabad, where he was represented by Mr Parin Shah.

Judgement of ITAT Ahmedabad

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) quashed the 66.95 lakh addition for alleged unexplained property investment and ordered a fresh assessment with a proper hearing.

While noting that Mr. Patel did not respond to notices earlier, the tribunal accepted his explanation that, as a US citizen and NRI, he could not submit documents since they were in India and required his physical visit, which was not possible before the ex-parte order was passed.

ITAT Ahmedabad said: “Considering the entire facts and circumstances, therefore, we are of the view that in the interest of justice, the assessee should be granted an opportunity of hearing and opportunity to place all documents relevant to the impugned transaction to establish his case of the property being purchased by him from disclosed sources of income."

Judgement: “Accordingly, we consider it fit to restore the matter back to the AO to directing him to give the assessee due opportunity of hearing and to adjudicate the issue afresh in accordance with law. In the result, appeal filed by the assessee is allowed for statistical purposes."

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