The Jaipur tribunal upholds the deletion of a tax addition after bank records traced the source of the foreign currency deposits and established that Japanese yen had been mistaken for Indian rupees
PRAVASISAMWAD.COM
A Dubai-based non-resident Indian (NRI) has secured relief from a ₹3.41 crore income-tax addition after the Income Tax Appellate Tribunal (ITAT), Jaipur, found that a tax officer had confused Japanese yen with Indian rupees while assessing two foreign currency deposits.
In its order dated 22 September 2026, the tribunal upheld the deletion of the addition made against Kavita Khanwani for the 2018-19 assessment year under Section 69A of the Income-tax Act, 1961, which deals with unexplained money.
Khanwani and her husband, Kishan Chand, jointly held two Foreign Currency Non-Resident (FCNR) term deposits denominated in Japanese yen. Chand was the primary account holder, while Khanwani was the second holder.
The deposits, opened in October 2017 and February 2018, had a combined principal of approximately 3.38 crore Japanese yen. However, the assessing officer treated the foreign currency figures as rupee amounts and classified ₹3.41 crore as unexplained money.
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The tribunal noted that the actual rupee investment was approximately ₹2 crore, not ₹3.41 crore
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It found that the tax addition resulted from the incorrect interpretation of the currency figures
Bank records established the source of funds
The tribunal examined statements relating to the FCNR deposits and the joint Non-Resident External (NRE) savings account used to fund them.
The records showed that each deposit was funded by a debit of approximately ₹1 crore from the NRE account. Each debit was preceded by a corresponding credit received through banking channels, with the transaction details identifying Chand.
The tax department had also obtained confirmation from IndusInd Bank regarding the transactions. Further, the source of the same deposits had been accepted in Chand’s separate tax assessment.
The tribunal held that the funds’ immediate source was identifiable through the bank’s records and that the department had not established that the money originated from an undisclosed source in India.
It consequently dismissed the tax department’s appeal and upheld the removal of the ₹3.41 crore addition against Khanwani.
The ruling highlights the importance of correctly interpreting foreign currency transactions and maintaining clear banking records for overseas Indians investing in India. It relates specifically to Khanwani’s assessment; her husband’s separate tax proceedings remain distinct.
