Summary of this article
ITAT finds gaps in Rs 12.54 crore gift documentation
Donor income mismatch raises doubts over creditworthiness and source
Case sent back to assessing officer for fresh verification
The Income Tax Appellate Tribunal (ITAT) Mumbai has sent back a case involving actor Shilpa Shetty Kundra for fresh examination, instead of issuing a final verdict. The matter is related to a gift of Rs 12.54 crore that she received from her husband, Raj Kundra.
The tribunal pointed out that important elements of the transaction were not clearly established. As a result, it ordered the Assessing Officer to reconsider the case and check the documents again.
How The Issue Came Up
Shilpa Shetty had filed her income tax for the assessment year 2020-21 for an income of Rs 10.84 crore in total. On scrutinising the books, the tax officer found that there was a credit entry for Rs 12.54 crores in her capital account.
She explained that the amount was one gift from her husband, sent with natural love and affection. To support this, she submitted her gift deed dated March 5, 2020, along with Permanent Account Number (PAN) details of her husband, his address and income tax return acknowledgement.
Why ITAT Was Questioning It
The tax officer has highlighted the issue of the lack of supporting financial evidence. There were no bank statements with a clear indication of the transfer of funds. It was also not mentioned in the gift deed which mode of payment was used for this particular transaction.
Another major problem was the disparity between the monetary value of the gift and the reported amount of the donor's income. Raj Kundra's income was reported to be Rs 27.71 lakh, which did not appear consistent with a gift of this scale.
Under Section 68 of the Income-Tax Act, a taxpayer should establish the identity of the donor, the genuineness of the transaction, and the financial capacity of the donor. Consequently, the amount was treated as unexplained income and was subject to taxation under Section 115BBE due to gaps in the said aspects. This view was later sustained by the first appellate authority.
What The Tribunal Observed
At the tribunal stage, other documents were submitted, including a joint bank account statement. But the documents still failed to clearly establish the flow of funds, ITAT found.
It stated that there was no direct link between the bank entries and the amount of the gift. The source of funds was unclear, and there was no support for the size of the transaction from the donor's income.
Importance Of Proper Documentation
The case underlines the fact that even gifts among members of a family may be subject to scrutiny if the documentation is less than complete. Tax authorities expect a clear financial trail, including bank records, details of fund transfer and proof of the donor's financial capacity. Maintaining correct records, like a detailed Gift Deed, updated Address of the Donor and supporting financial documents can help in avoiding disputes during tax assessments.
