ITAT deletes addition of Rupees. 30 Lacs received by Actor Kushal Tandon as a gift from his Father

The Income Tax Appellate Tribunal (ITAT) has ruled in favour of actor Kushal Tandon, deleting an addition of £30 lakhs that the Assessing Officer had treated as an unexplained cash credit. The ITAT found that Tandon had provided sufficient evidence, including his father's financial statements and a gift deed, to prove the nature and source of the gift. The tribunal also addressed issues regarding the disallowance of a donation deduction and the ad-hoc disallowance of business expenses, finding in favour of Tandon on these points as well.

In Shri Kushal Virendra Tandon v. ACIT [ITA No.7572/MUM/2019 dated September 03, 2019], Kushal Tandon ("the Appellant") filed an appeal against the order passed by the Commissioner of Income Tax, Mumbai ("the Respondent"), dated September 17, 2019, which in turn arises from the order passed by the Assessing Officer ("AO") under Section 143(3) of the Income Tax Act, 1961 ("the IT Act"), dated December 27, 2016 for Assessment Year 2014-15.

The point of contention in this case was that the AO while assessment:

• Disallowed the deduction under Section 35 (1) (ii) of the IT Act with respect to donation of Rupees 10 Lakhs given to school of human genetics and pollution health. (Issue 1)
• Furthermore, disallowance of 20% of the expenses by attributing the same on an ad-hoc basis as personal expenses. (Issue 2)
• Also an addition of the gift received from father as unexplained cash credit under Section 68 of the IT Act. (Issue 3)

In the case, the Appellant contended that the AO has wrongly added the gift of Rs. 30 lacs that was received by him from his father as an unexplained cash credit under Section 68 of the Income Tax Act and furthermore, the Appellant has also sought for allowance pertaining to the rest of the issues.

On perusal of all the facts and evidences, the Income Tax Appellant Tribunal, Mumbai ("the ITAT") adjudicated on all the three issues at hand, they opined:

Issue 1. If the Appellant acting upon a valid registration/approval granted to an institution to whom he had donated the amount for which deduction is claimed, such deduction cannot be disallowed if at a later point of time the same is cancelled with retrospective effect.

Issue 2. It was held that neither of the lower authorities had pointed out as to what all expenses claimed by the assessee were not supported by documentary evidences, nor earmarked those which did not inspire much of confidence.

Further nothing was evident from the records which would reveal as to what all expenses the AO was of the view that had not been incurred by the assessee wholly and exclusively for the purpose of his profession.

In the backdrop of the aforesaid facts, the ITAT found substantial force in the claim of the Appellant that devoid of any such specific finding by the lower authorities, the disallowance of the aforesaid expenses in a most arbitrary manner and on an ad hoc basis, which could by no means be held to be justified.

Issue 3. As both the financial statement of Shri. Virendra Tandon ("Father") for the Assessment Year 2014-15, as well as his admission in the ‘gift deed’, dated July 21, 2013 along with a mention of the source of the gift transaction in question, that is, accumulated savings of the past, as were filed by the assesse with the A.O in the course of the assessment proceedings, therein, clearly sufficed to discharge the primary onus that was cast upon him to prove the ‘nature’ and ‘source’ of the cash credit in his books of accounts. Hence, the ITAT deletes addition of Rupees. 30 Lacs received by Actor Kushal Tandon as a gift from his Father.