The Mumbai bench of the Income Tax Appellate Tribunal, comprising accountant member S Rifaur Rahman and judicial member Ravish Sood, has ruled that the gift to Kushal Tandon is not bogus and can't be treated as unexplained income, as reported by The Times of India.
The actor had filed an appeal with the ITAT for multiple disputed tax issues. However, gifts that are received from certain relatives (like parents) are exempt from income tax under Section 56 of the I-T Act. Tax officers closely inspect such transactions, to ensure no foul play is involved. If the recipient is unable to validate the gift, it is treated as an ‘unexplained cash credit’. This is taxed at a high rate of 60% plus 25% surcharge along with a 6% penalty. The final tax rate is 83.25% approximately.
Tandon was asked to provide documentary evidence to support the transaction. However, his father’s income tax return for the year showed an income of Rs 4.12 lakh only. This is when tax officers classified the gift as an ‘unexplained cash credit’.
Kushal Tandon’s father had appropriately filed the gift deed with income tax authorities. But, what authorities had not considered was that he was gifting the amount from his past savings, and not from his income, the ITAT duly noted.
In its order, the ITAT said, “We concur with the view taken by the I-T officer that the income shown in the tax return of Virendra Tandon was not substantial.
However, a material fact that had been lost sight of by the lower tax authorities is that the actor’s father had never stated that he had gifted the amount in question out of his income for the year under consideration, but had in unequivocal terms stated that the same was given by him out of his past accumulated savings.”
Based on all facts presented, the ITAT bench said that the addition of Rs 30 lakh as unexplained cash credit did not have any merit.