A Dubai-based non-resident Indian successfully challenged an income tax demand relating to a property purchase after the Mumbai tribunal ruled the reassessment notice was procedurally invalid, emphasising the importance of proper legal approval in tax assessments.
A Dubai-based non-resident Indian has won relief at the Mumbai Income Tax Appellate Tribunal after a tax demand tied to a ₹2.31 crore property purchase was struck down on procedural grounds, even though she had not filed a return for assessment year 2017-18. According to Business Today and related reports, the tribunal said the reassessment notice itself was defective because it had not been approved by the correct authority under the Income Tax Act.
The case concerned Vandana Vijay Kumar Chudamasa, who moved to Dubai for work in August 2014, followed by her husband two months later. Tax officials later identified the purchase of property during financial year 2017-18 and issued a notice under Section 148 on 2 April 2022. When no return was filed in response, the department sent further notices in August and November 2023 before completing the assessment ex parte and treating about ₹2.32 crore as unexplained investment under Section 69, according to the reports.
Chudamasa first challenged the demand before the Commissioner of Income Tax (Appeals), arguing that she was a Dubai-based NRI and that the property had been acquired jointly with her husband. That appeal failed, with the appellate authority finding that she had not produced enough supporting evidence. She then took the matter to the Mumbai tribunal, although her filing was delayed by 148 days.
The tribunal accepted her explanation for the delay, noting that she and her husband lived and worked in Dubai and had left the tax matter to a consultant whom they believed was handling the case. The more important issue, however, was the approval for reopening the assessment. Her lawyer argued that the three-year deadline had already expired on 31 March 2022, which meant Section 151(ii) required clearance from the Principal Chief Commissioner or Principal Director General, not the Principal Commissioner of Income Tax, Bengaluru-3, whose approval had been taken. The tribunal agreed, holding that the notice was invalid because the statutory approving authority had not been used.
As a result, the reassessment proceedings and the resulting tax demand were quashed. The tribunal did not decide whether the money used to buy the property was properly explained. According to the account presented on Chudamasa’s behalf, about ₹1.85 crore had been paid towards the purchase, including a ₹1.61 crore home loan, ₹1 lakh contributed by her husband and ₹23.31 lakh paid by her. Because the reassessment itself failed, the source of funds was never tested on the merits.
The ruling underscores a point that tax specialists often stress: even where a taxpayer has not filed a return, the department must still follow the correct legal process before reopening an assessment. In this case, the tribunal’s focus was not on the substance of the property purchase, but on whether the notice that set the case in motion was authorised in accordance with the law.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
