Shilpa Shetty secured partial relief as the Income Tax Appellate Tribunal ordered fresh examination of her Rs 12.5 crore gift dispute, directing the Assessing Officer to reassess evidence under Section 68 after granting opportunity to establish genuineness.
MUMBAI: Actress and entrepreneur Shilpa Shetty has received partial relief in an income tax dispute concerning an alleged Rs 12.5 crore “gift” from her husband Raj Kundra. The Income Tax Appellate Tribunal (ITAT), while hearing the matter, has directed a fresh examination of the issue, effectively giving her another opportunity to establish the authenticity of the transaction, according to reports.
Background of the Case:
The dispute relates to the financial year 2019–20, during which Shilpa received Rs 12.5 crore, which she claimed was a gift from her husband. However, the Income Tax Department treated this amount as “unexplained credit” and added it to her taxable income.
Shilpa Shetty Kundra, an individual assessee, declared her total income at Rs 10,84,45,500 for Assessment Year 2020–21, filing her return on 4 February 2021. Her return showed income from business/profession and interest income, and the case was selected for complete scrutiny because of two key red‑flag indicators.
- The brought‑forward TDS credit claimed in the year was much lower than the TDS credit carried forward from the previous assessment year.
- The assessee had made large payments under Section 194C to persons who had not filed their income‑tax returns.
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In the course of scrutiny proceedings, the Assessing Officer (AO) examined the capital account and noted that the assessee had received a gift of Rs 12,54,54,594 (Rs 12.54 crore) in the year ended 31 March 2020, relevant to AY 2020–21. The AO then asked the assessee to provide details of the donor (name, address, PAN, amount, mode of payment, relationship, and supporting evidence), which triggered the core dispute under Section 68.
Contentions of Parties:
The assessee’s primary defence was that the Rs 12.54 crore was a genuine gift from her husband, Shri Ripusudan (Ripu Sudan) Kundra, received out of natural love and affection. In her replies, she placed on record.
- A duly executed gift deed dated 5 March 2020, stating the donor, donee, relationship, amount, and signatures of witnesses.
- The PAN of the husband and his address.
- A copy of the ITR‑V acknowledgement for the husband’s return for AY 2020–21, as requested by the AO.
The assessee argued that, since the gift was from a spouse, its genuineness was beyond doubt and that she had discharged the primary onus under Section 68 simply by establishing the donor’s identity, relationship, and the instrument of transfer.
Before the ITAT, her counsel further relied on Supreme Court precedents, such as CIT v. Orissa Corporation (P) Ltd. and CIT v. Divine Leasing & Finance Ltd. both of which emphasise that once the assessee explains the transaction and the source adequately, the addition under Section 68 cannot be mechanically sustained. The assessee also submitted clarificatory affidavits of both herself and her husband affirming the genuineness of the gift.
The Department (AO and later the Commissioner) accepted that the gift deed and PAN were formally in order, but stressed that no documentary proof of actual fund transfer was produced. They observed that Despite repeated requests, the assessee did not file bank statements of her husband or herself to show the movement of funds corresponding to Rs 12.54 crore, the PAN and full details of the donor were provided only in the reply dated 15 September 2022, at the “fag end” of the proceedings, when the assessment was nearing the time‑bar date of 30 September 2022 under Section 143(3),
The husband had declared an income of only Rs 27,71,020 for AY 2020–21, which the AO found incommensurate with a gift of over Rs 12.5 crore and Even though the gift was from a spouse, the AO and CIT(A) held that, under Section 68, the creditworthiness of the donor must be demonstrable through financial records, and the assessee failed to prove how the husband could credibly make such a huge gift.
The Department also pointed out that the mode of payment was not mentioned in the gift deed or affidavits, and there was no evidence of a bank transfer, cheque, or any other traceable mode.
AO’s and Commissioner’s Orders:
The AO, after examining the limited evidence, concluded that he source of funds for the gift was not explained, the giltness and creditworthiness of the donor were not established. Hence, the deposit of Rs 12.54 crore was an unexplained credit under Section 68, taxable at special rates under Section 115BBE of the Act.
On first appeal, the Commissioner of Income‑tax (Appeals) upheld the AO’s addition, observing that the assessee had produced only the gift deed and PAN, but no bank statements showing the transfer, the donor’s income (Rs 27‑odd lakh) was not commensurate with the gift amount. Therefore, the primary onus under Section 68 was not discharged, and the addition was justified.
Observations of ITAT, Mumbai
While reviewing the matter, the ITAT observed that mere submission of documents such as a gift deed does not, by itself, prove the genuineness of a financial transaction. The ITAT, while re‑affirming the settled law under Section 68, held that the primary onus lies on the assessee to prove the identity of the person from whom the amount is received, the genuineness of the transaction, and the creditworthiness or source of the donor. The Tribunal found several gaps in the evidence before it. The gift deed did not specify the mode of payment (cash, cheque, bank transfer, etc.), and there was no clear documentary trail showing how Rs 12.54 crore moved from the husband to the assessee, despite the claim that it came from overseas funds.
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The Mumbai Bench further pointed out that the gift deed lacked crucial details, including the mode of payment, bank account particulars, and the exact manner in which the funds were transferred. Bank statements of both the assessee and her husband were not produced initially and only partially furnished later, undermining the discharge of the onus. Even when a joint Punjab National Bank statement was produced before the ITAT to show receipt of Rs 12,81,41,672 from “Kuki Investment” abroad, the linkage between that inflow and the gift remained unclear, and the husband’s ITR disclosures in Schedules AL and FA did not fully support the claimed amounts or their availability for gifting.
The Tribunal also noted that the donor’s declared income of Rs 27.7 lakh was not commensurate with a gift of Rs 12.5 crore, and that PAN and other donor details were furnished only near the time‑bar date, curtailing proper enquiry under Section 133(6). The ITAT therefore set aside the AO’s and CIT(A)’s orders, remanded the case for fresh examination after giving the assessee a reasonable opportunity, and directed her to furnish complete details, clarifications, and documents; failure to comply would attract no leniency.
Emphasising that the primary burden of proof under Section 68 rests on the taxpayer, the Tribunal reiterated that identity, genuineness, and creditworthiness must all be clearly established. It has now directed the Assessing Officer to re-examine the issue after providing Shilpa an opportunity to submit complete bank statements, financial records, and other supporting evidence to substantiate the claimed gift.
Case Title: Shilpa Shetty Kundra Vs. DCIT ITA No.996/M/2025
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