Mahesh Upendra Majithia Vs DCIT (ITAT Ahmedabad)
Bogus Political Donation Claim Fails: ITAT Upholds Denial of Section 80GGC Deduction
The Ahmedabad ITAT upheld the disallowance of ₹9.25 lakh claimed under section 80GGC towards donation made to the Sardar Vallabhbhai Patel Party, holding that the transaction formed part of a larger accommodation entry racket involving Registered Unrecognized Political Parties (RUPPs). The Tribunal noted that a search conducted on certain political parties revealed a systematic modus operandi whereby donations received through banking channels were allegedly returned to donors in cash after retaining a commission, enabling donors to claim 100% deduction under section 80GGC.
The assessee argued that the donation was made through proper banking channels and supported by receipts, and also challenged the validity of the reassessment proceedings. However, the Tribunal rejected the jurisdictional objections, holding that the notice under section 148A(b) had been issued within three years from the end of the assessment year and therefore the reopening was valid. It further held that approval granted by the PCIT under section 151 was proper and that the jurisdiction of the Assessing Officer was not affected merely because the information originated from a search conducted in another person’s case.
On merits, the Tribunal observed that the issue was not merely whether payment was made through banking channels but whether the underlying donation was genuine. Relying on search findings, statements of key persons controlling the political parties, seized documents and several coordinate bench decisions, the Tribunal concluded that the assessee failed to rebut the specific adverse material showing that the political party was part of a bogus donation network. Accordingly, the deduction under section 80GGC was denied and the reassessment was sustained.
Takeaway: Mere payment through cheque and possession of donation receipts do not automatically secure deduction under section 80GGC. Where search material establishes that the political party was operating as an accommodation entry provider, the deduction can be denied despite documentary compliance.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
