A few months after demonetisation on March 21, 2017, the Income Tax Department conducted a search at Mr Gupta’s property in G.K Enclave-1, Delhi, where they found Rs 1.12 crore cash in Indian currency and Rs 4.34 lakh in foreign currency . As a result, he was promptly taken in for questioning by the tax department.
Gupta justified this huge amount of cash stash by saying that he was a director of a company and that company had withdrawn cash from its 11 bank accounts fearing further action related to demonetisation and kept it in Gupta’s house.
Regarding the foreign currency cash, Advocate Ajay Wadhwa and Advocate Shivam Garg who represented Gupta, mentioned that Gupta had informed the Income Tax Investigation Officers that the foreign currency worth Rs 4.34 lakh belonged to his sister-in-law Ms. Kemp who worked with Jet Airways and was staying with him at his G.K Enclave-1 house.
To back up Gupta’s claim, Ms. Kemp gave a written statement confirming that the foreign currency found in the possession of her brother-in-law during the tax raid was given by her for safekeeping. Ms. Kemp explained that because of her frequent travels for her job at Jet Airways, she often carried a lot of foreign currency with her and had entrusted her unused foreign currency to her brother-in-law.
The Income Tax investigation team was satisfied with her explanation and did not seize the foreign currency.
However, while the Income Tax Investigation Team was satisfied, the Income Tax Assessing Officer (AO) from Jhandewalan Central Circle was not. The AO deemed the cash and the foreign currency found during the search as unexplained and included it under Section 69A. Additionally, the AO proceeded to tax it under Section 115BBE.
Ultimately Gupta won the case in ITAT Delhi.
Why did the brother-in-law win the case?
Shourya Garg, Advocate at Garg & Garg Tax Associates, said to ET Wealth Online: The brother-in-law won the case in ITAT Delhi as he was able to prove ownership through a credible, corroborated explanation.
Garg says that what worked in his favour was that Ms. Kemp herself gave a written confirmation supporting this and even the investigation officers were satisfied enough with the explanation at the time of the search itself that they chose not to seize the currency. Since the Assessing Officer could not counter or dislodge this explanation with any contrary evidence, the CIT(A) granted relief and the ITAT saw no reason to interfere with that finding.
Garg says: "This case is really a good example of how possession alone doesn’t establish ownership if there is a credible paper trail showing otherwise."
How much foreign currency can Indian residents keep at home in cash, as per the law?
Garg says that under Regulation 3 of the Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2015, a person resident in India can retain foreign currency notes, bank notes, and traveller’s cheques up to USD 2,000 or its equivalent in aggregate, without any specific time limit, provided the currency was legitimately acquired, for instance, as unspent foreign exchange from a trip abroad or received as a gift or honorarium from someone visiting India.
Garg says: "Anything beyond that limit is expected to be surrendered to an authorised dealer within a specified period, unless it falls under a separately permitted category. There is no cap at all on foreign coins, interestingly, only currency notes and traveller’s cheques are regulated this way."
ITAT Delhi order
The Income Tax Commissioner of Appeals (CIT A) looked over the evidence and the company’s books of accounts were satisfied that the company, where Gupta was one of the directors, actually had the exact amount of cash they reported in their books. So CIT (A) was satisfied with Gupta’s justification and deleted the addition of the Rs 1.12 crore Indian currency cash in Gupta’s hands. ITAT Delhi in 2023 also agreed with CIT (A) and dismissed the AO’s concerns about this Indian currency cash. However, the foreign cash justification was not accepted by ITAT Delhi in 2023.
So ITAT Delhi ruled in 2023 that since Gupta did not give any evidence to prove his sister-in-law’s foreign cash, the said the foreign currency must be added to Gupta’s income and taxed accordingly.
Accountant member M. Balaganesh and Judicial member Anubhav Sharma of ITAT Delhi said in their 2023 order: “Merely because the said foreign currency was not seized by the search party, it does not amount to acceptance of the explanation given by the assessee.”
Feeling aggrieved, Gupta filed another appeal before ITAT Delhi (ITA 1836/DEL/2021). This second appeal in ITAT Delhi was filed on the solitary issue of addition of his sister-in-law’s foreign currency in his income for tax purposes.
The second appeal in ITAT Delhi was heard by Judicial member Anubhav Sharma and Accountant member Amitabh Shukla, and they passed the judgement on July 29, 2026.
Since the CIT (A) had already given Gupta relief from this foreign currency case but ITAT Delhi back in 2023 had overruled it and added the cash in foreign currency to Gupta’s income.
In the 2026 order, ITAT Delhi said that the Income Tax Assessing Officer failed to counter the arguments made by Gupta, (particularly regarding the Jet Airways connection involving his sister-in-law).
As a result, ITAT Delhi concluded in their 2026 ruling that they see no issues with the decision made by the ld. CIT(A). They said: “We are of the considered view that the impugned order does not require any intervention at this stage.”
ITAT Delhi ruled: “We therefore confirm the order of the ld. CIT(A) and dismiss the ground of appeal no.2 raised by the Revenue. 7. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 29th July, 2026.”
So Mr Gupta won both the cases (the Indian currency cash back in 2023 and foreign currency one in 2026).
