Summary of this article
ITAT Jaipur deletes Rs 3.41 crore unexplained money addition
Tax officer mistook Japanese Yen figures for Indian rupees
Bank records established the source of FCNR deposits
A Dubai-based Indian woman has received relief from a Rs 3.41 crore tax demand from the Income Tax Appellate Tribunal (ITAT) in Jaipur. The tribunal found that the assessing officer had mistakenly treated Japanese Yen figures as Indian rupees while examining her foreign currency deposits. The tribunal upheld the deletion of the addition after bank records established the source of the funds.
Kavita Khanwani, a non-resident Indian (NRI) originally from Rajasthan, invested in two foreign currency non-resident (FCNR) term deposits jointly held with her husband. In the order dated September 22, 2026, the ITAT Jaipur bench ruled in her favour after finding that the tax department had incorrectly classified the investment as unexplained money under Section 69A of the Income-tax Act, 1961.
How The Rs 3.41 Crore Tax Dispute Began
Kavita and her husband decided to invest money in India through FCNR deposits denominated in Japanese Yen. Her husband was listed as the primary holder. The funds were transferred through banking channels from abroad to her husband’s non-resident external account. The deposits were opened on October 14, 2017 and February 21, 2018. However, the Income Tax Department questioned the source of the investment and issued separate notices to the couple, treating the money as unexplained.
Tax Officer Mistook Yen Figures for Rupees
The key issue of this case was the interpretation of the deposit statements. The ITAT observed that the assessing officer had read the figures in yen instead of rupees. The combined principal of the two deposits reached JPY 3.38 crore, which is equivalent to Rs 2 crore at the time of investment.
The tribunal noted that the Rs 3.41 crore addition did not correspond to any amount of money found in rupees. Upon examining the bank statements, it showed that each deposit was funded through joint NRE accounts.
Bank Records Supported The Woman’s Case
The ITAT noted that IndusInd Bank had responded to the tax department’s enquiry and confirmed the transactions that took place as well as tracked the source of funds. The authenticity of the bank statements was not disputed. The tribunal further observed that the department had not established that the money originated from any source in India. Since the source of the funds was identifiable from the bank’s own records, the tribunal found no sufficient basis to treat the investment as unexplained in her case.
This ruling highlights the importance of accurate understanding of foreign currency statements and examining documented evidence before the tax body makes any tax additions.
NRIs who are investing in India should retain bank statements, remittance records, and deposit documents to establish the source of their funds. This also does not mean that all overseas investments are exempt from scrutiny. It highlights that tax authorities must assess the evidence correctly and differentiate between foreign currency amounts and their rupee equivalents.
