The Flat, The Search, And The Seized Papers

The dispute traces back to a search action conducted on the developer group in December 2021. During the search, investigators found loose papers recording unaccounted cash receipts against several flats sold in the project, including two entries against Flat No. C-1502, one for Rs 21 lakh dated December 2019 and another for Rs 9 lakh dated February 2020, together adding up to Rs 30 lakh. The papers carried the buyer’s PAN and flat details, leaving no ambiguity about whose transaction it was. The registered agreement for the flat was executed in March 2020.

Based on this material, the tax department reopened the buyer’s assessment for the year 2020-21 and added Rs 30 lakh to his income as unexplained money, taxing it at the steep rate applicable to unexplained cash under the relevant provisions. The buyer did not deny making the payment. His case rested entirely on where the money came from.

A Doctor’s Cash Salary In Congo

The buyer is a diabetologist specialising in diabetic-foot care who had been working in the Democratic Republic of Congo since 2014, first with a hospital in Kinshasa and later with a mining engineering services company from December 2019. His annual salary ranged between roughly 60,000 and 78,000 US dollars, and critically, it was paid to him in cash, a detail supported by employer confirmations and salary certificates placed on record. His wife, also a medical professional and a dentist, was independently employed in Congo during the same period, earning between 42,000 and 48,000 US dollars a year. Together, the couple’s disclosed income touched roughly 1,08,000 to 1,20,000 US dollars annually in the years leading up to the flat purchase.

Part of these earnings was remitted to India through normal banking channels every year, and those remitted funds were used to pay the recorded, cheque component of the flat’s price. That portion of the transaction was never in dispute. The remaining cash portion of their salaries, according to the buyer, was carried physically into India whenever he and his wife travelled home, in amounts that stayed within the limit that does not require a customs declaration. Since the couple travelled separately and repeatedly over several years, they were able to bring in meaningful sums over time, which were then kept with the buyer’s family in Mumbai until the flat purchase came up.

Why The Tax Department Rejected The Explanation

The assessing officer and the Dispute Resolution Panel were not convinced. Their reasoning centred on the absence of documentary proof for the actual movement of the cash. No customs declarations were filed for any of the trips, no foreign bank withdrawal slips or currency encashment records were produced, and no affidavits or confirmations came from the family members with whom the cash was supposedly kept. On this basis, the authorities treated the couple’s foreign earning capacity as insufficient to explain a specific cash payment years later, and upheld the addition along with the higher tax rate that applies to unexplained income.

How The Tribunal Reasoned Its Way To A Different Conclusion

The tribunal took a materially different view of what the law actually requires. It held that the relevant provision asks for a satisfactory explanation of the nature and source of money, not an unbroken, transaction-level paper trail reconstructing the movement of every dollar over several years. Four strands of reasoning stood out.

First, the tribunal treated the couple’s disclosed foreign salary as a real and demonstrated source rather than a vague assertion of capacity. The buyer had furnished employer confirmations and salary certificates, and the department never disputed that this income existed or that it was substantial. Against combined annual earnings of over a lakh US dollars, a one-time cash requirement of Rs 30 lakh appeared modest rather than improbable.

Second, and perhaps most persuasively, the tribunal pointed out that the same foreign income stream had already been accepted by the department as the source of the banked, cheque portion of the payment for the very same flat. Having accepted the source for one part of the payment, the tribunal reasoned, the department could not simply reject the identical source for the remaining cash portion merely because that portion moved differently, especially when the buyer’s specific and unrebutted claim was that his salary itself was paid to him in cash abroad.

Third, the tribunal rejected the idea that missing customs declarations damaged the buyer’s case. It reasoned that if the amount carried on each individual trip stayed below the threshold requiring declaration, there would be no declaration to produce in the first place, so its absence proves nothing either way.

Fourth, and significantly, the tribunal noted that the department had not identified any business, profession or income-generating activity that the buyer was running in India during this period. There was no unaccounted receipt, no domestic transaction, nothing to suggest an alternative Indian source for the cash. With a credible foreign source established and no competing Indian source in sight, the tribunal found it unreasonable to treat the entire amount as unexplained income simply because the buyer could not produce a document for every rupee’s journey from Kinshasa to Kurla.

On this basis, the tribunal deleted the Rs 30 lakh addition entirely, and since the addition itself was set aside, the higher tax rate that would have applied to it fell away automatically.

What This Means For Homebuyers

The order draws a sharp line that is worth understanding carefully. The tribunal did not rule that paying a builder in cash over and above the registered price is acceptable or lawful conduct in itself; that question, and any consequences for the developer’s side of an unaccounted transaction, remained entirely outside the scope of this order. What the tribunal decided was narrower and specific to tax law: once a buyer admits to a cash payment, the tax department’s enquiry shifts to whether the source of that cash has been satisfactorily explained, and that explanation does not have to meet an impossible standard of documentary precision if a genuine, demonstrated income source of sufficient size already exists on record. For buyers, particularly those with foreign income, this is a reminder that maintaining salary certificates, employer confirmations, and a consistent remittance history can matter enormously if a builder’s own unaccounted dealings are ever unearthed years later.

Also Read: In A First: Homebuyer Gets Cash Back That She Paid To Developer

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