₹12.54 Crore Gift Case: ITAT Flags Genuineness Issues in Gift Received by Shilpa Shetty
In a high-profile and instructive ruling, the ITAT has raised serious concerns over the genuineness of a ₹12.54 crore gift received by Shilpa Shetty from her husband. The case highlights a crucial principle under the Income-tax Act-mere documentation is not enough; the transaction must pass the test of genuineness, identity, and creditworthiness under Section 68.
This ruling is particularly important for taxpayers claiming large gifts, as it clarifies that paperwork alone cannot establish authenticity without supporting financial trail and capacity of the donor.
The Tribunal examined the claim of gift and identified multiple deficiencies that ultimately cast serious doubt on its genuineness. The first and foremost observation was that the assessee relied primarily on a gift deed and PAN details of the donor. The ITAT held that while these documents may establish identity, they are insufficient to prove the genuineness of the transaction under Section 68.
A significant flaw noted was that the gift deed itself did not specify the mode of transfer, such as whether the amount was transferred through banking channels, nor did it contain details of how the funds were actually moved. This absence of transactional clarity weakened the evidentiary value of the gift deed.
The Tribunal also scrutinized the financial capacity of the donor, which is a key requirement under Section 68. It was observed that the income disclosed by the husband in his income tax return was not commensurate with the magnitude of the gift. This mismatch raised a serious question-whether the donor had the financial strength to make such a substantial gift.
Further, the explanation that the funds originated from an overseas entity did not stand scrutiny. The Tribunal noted that the details of such foreign receipts were not properly reconciled with disclosures made in Schedule FA (Foreign Assets). This inconsistency further eroded the credibility of the claim.
Another critical lapse was the absence of bank statements evidencing actual transfer of funds. In high-value transactions, especially gifts, the banking trail is one of the strongest indicators of genuineness. The lack of such evidence proved detrimental to the assessee’s case.
Based on these factors, the Tribunal effectively concluded that the essential ingredients of Section 68-identity, creditworthiness, and genuineness-were not satisfactorily established.
This ruling serves as a strong reminder that gift transactions, particularly high-value ones, are closely scrutinized and must be backed by robust documentation and financial evidence. Simply producing a gift deed or PAN details will not suffice if the surrounding circumstances raise doubts.
For taxpayers and professionals, the implications are clear. Any claim of gift must be supported by complete documentation, including clear mode of transfer, bank statements, financial capacity of the donor, and consistency with tax disclosures, especially in cases involving foreign funds.
Key Takeaways for Taxpayers and Professionals
Gift deed alone does not prove genuineness under Section 68.
Donor’s financial capacity must justify the amount gifted.
Clear banking trail is essential to establish authenticity.
Foreign source of funds must match disclosures in Schedule FA.
Incomplete or inconsistent documentation can lead to addition under Section 68.
Conclusion
The ITAT has once again emphasized that tax law looks beyond documentation to the substance and credibility of transactions. In cases of large gifts, the burden of proof lies heavily on the assessee to establish all three pillars of Section 68.
Bottom Line: No trail, no capacity, no clarity-no genuine gift under Section 68.
The copy of the order is as under:
