Bogus Political Donation Claim Fails: ITAT Upholds Denial of Section 80GGC Deduction

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

This appeal has been filed by the assessee against the order dated 15.01.2026 passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as ‘Ld. CIT (A)’ in short), under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’ in short) for Assessment Year 2019-20.

2. The Assessee has raised the following grounds of appeal:

1. The Ld. AO has erred in law and on facts by not obtaining prior approval of the competent authority as required under Explanation 2 clause iv to Section 148, rendering the reassessment proceedings invalid, particularly when case is reopened based on third party search.

2. The Ld. AO has erred in obtaining approval under section 151 from the PCIT instead of the PCCIT, despite he himself has invoked Section 149(1)(b) in the 151 approval form. Such approval from an incompetent authority vitiates the reassessment proceedings.

3. The Ld. AO has erred in law and on facts in invoking Section 149(1)(b), despite for matters beyond three years from the end of A.Y. 2019-20 the alleged escapement should exceed Rs. 50,00,000, which is not fulfilled in present case.

4. The Ld. AO has erred in law and on facts by relying on an unsigned approval under section 151, in violation of Section 282A and the DSC Policy, 2018. The absence of valid sanction renders the reassessment proceedings void.

5. The Ld. AO has erred in law and on facts in completing the assessment through the NFAC, even though the matter emanates from search-related information, for which jurisdiction is specifically conferred upon the Central Circle. The assessment order passed by an authority lacking such jurisdiction is therefore vitiated in law and liable to be held void ab initio.

6. The Ld. CIT Appeals has upheld the decision of Ld. AO by disallowing the deduction of Rs. 9,25,000 claimed under section 80GGC, without properly appreciating the evidences and documents furnished by the assessee. The disallowance is unjustified and contrary to the material on record.”

3. The brief facts of the case are that the assessee filed his return of income on 07.08.2019 declaring total income of Rs.97,93,410/-. Subsequently, information was received through the Insight Portal that the assessee had made a donation of Rs.9,25,000/- to ‘Sardar Vallabhbhai Patel Party’ during FY 2018-19 and claimed deduction u/s 80GGC of the Act. Based upon information received consequent to a search action conducted on 07.09.2022 in the case of certain Registered Unrecognized Political Parties (RUPPs), the Assessing Officer formed a belief that income chargeable to tax had escaped assessment. A notice under section 148A(b) was issued on 28.03.2023. After considering the reply of the assessee, the Assessing Officer passed an order under section 148A(d) dated 04.05.2023 and thereafter issued notice under section 148 on the same date. In the reassessment proceedings, the Assessing Officer held that the donation claimed by the assessee was not genuine and represented participation in an accommodation entry arrangement. Accordingly, deduction u/s 80GGC amounting to Rs.9,25,000/- was disallowed and added back to the income of the assessee.

4. Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the Ld. CIT(A) who upheld the action of the Assessing Officer.

5. Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.

6. Before us, the Ld. AR submitted that reopening is bad in law as approval under section 151 was granted by the PCIT instead of PCCIT despite invocation of section 149(1)(b) of the Act. The Ld. AR also submitted that the escapement income, as alleged by Revenue, was only Rs.9,25,000/-; therefore, provisions of Section 149(1)(b) are not applicable. The Ld. AR further contended that since the information arose from search, jurisdiction vested with Central Circle and not NFAC. On merits, it was submitted that donation was made through banking channel to a registered political party and all evidences including receipts were furnished, and therefore disallowance u/s 80GGC is unjustified. Reliance was placed on judicial precedents including the decision of the Co-ordinate Bench of this Tribunal in the case of Vaibhav Kishanlal Jajoo Vs. DCIT in ITA No. 1541/Ahd/2025.

7. The Ld. DR supported the orders of the lower authorities. Referring to the order-sheet entry dated 09.04.2026, he submitted that notice u/s 148A(b) was issued on 28.03.2023, i.e., within three years from the end of AY 2019-20 and contended that the notice issued u/s 148 on 04.05.2023 was within the limitation prescribed u/s 149 of the Act and, therefore, the case falls u/s 149(1)(a) of the Act. He further submitted that approval granted by the Ld. PCIT under section 151 was valid and that reassessment by the jurisdictional Assessing Officer could not be faulted merely because the information had emanated from a search conducted in the case of third parties. On merits, he relied upon the orders of the lower authorities.

8. We have considered rival submissions and perused material on record. The undisputed chronology of events, as noticed by the Bench vide order sheet-entry dated 09.04.2026, shows that notice u/s 148A(b) was issued on 28.03.2023, i.e. within three years from the end of assessment year 2019-20. Therefore, the case falls under section 149(1)(a) and not section 149(1)(b). Since the case falls u/s 149(1)(a) of the Act, approval granted by the PCIT u/s 151 is valid and there is no requirement of approval from PCCIT. The objection regarding jurisdiction of NFAC is also rejected as reassessment jurisdiction remains with the jurisdictional Assessing Officer and merely because the information was received from a search conducted in another person’s case does not take away the Assessing Officer’s jurisdiction.

Accordingly, Grounds relating to reopening are dismissed.

9. With regard to the deduction u/s 80GGC of the Act, the assessee claimed deduction of Rs.9,25,000/- u/s 80GGC in respect of donation allegedly made to Sardar Vallabhbhai Patel Party. The Revenue has brought on record material, based on search in the case of RUPPs group indicating that the said political party was part of a larger accommodation entry network where donations were routed, after retaining commission. Though the assessee has furnished banking channel evidence and donation receipts, the issue is not merely of payment but of genuineness of the underlying transaction. The search material, including statements of key persons and seized documents, clearly indicates that the said political party was engaged in providing accommodation entries in the form of bogus donations. The assessee has not been able to rebut the specific adverse material or establish that the transaction was outside the alleged accommodation entry arrangement.

9.1 We find that similar issue stands adjudicated by the Co-ordinate benches of this Tribunal in the cases of :-

(i) Mihir Bipinbhai Parekh Vs. DCIT (ITA No. 1173/Mum/2026),

(ii) Milind Pankajbhai Shroff Vs. Pr. CIT-1, Rajkot (ITA No.93/RJT/2023), Ritesh Sugan Jain Vs. ITO (ITA No. 8546/Mum/2025),

(iii) Rajen Jayantilal Merchant Vs. ITO (ITA No. 1683/Ahd/2025),

(iv) Saurabh Pravinbhai Patel Vs. ITO (ITA No. 1017/Ahd/2023).

9.2 For the sake of ready reference, the detailed adjudication in the case of Milind Pankajbhai Shroff, vs The Pr. CIT 1, Rajkot in ITA No.93/RJT/2023 dtd 20/05/2024 is reproduced as under :-

“22. Now, we shall also adjudicate the other arguments advanced by Id. DR for the revenue to the effect that “fraud vitiates everything”. In this connection, at the cost of repetition, we reiterate the findings of Id PCIT, which are as follows:

(i) Rashtriya Samajwadi Party (Secular) is a Registered Unrecognized Political Party and it is one of the 23 RUPPs covered in the RUPPs Group of Ahmedabad. This party was established on 21.10.2008 and its registered address as per its website is Samruddhi Complex, Opp-Sakar-3, Income Tax Circle, Ahmedabad. However, during pre-search enquiry, no party office is found at the aforesaid address.

(ii) The modus-operandi of this political party is that the donation is received through cheque in the bank account of the party and then routed through intermediary(ies) (which is generally shell entity(ies) controlled by either the persons running the party or by any other person) in the garb of various purchases or other payments, which are found to be bogus in nature. It is pertinent to mention here that the political party doesn’t pay any tax since it is exempt u/s 13A of the Act.

(iii) During the search proceedings, on 07.09.2022, statement on oath u/s 132(4) of the I.T. Act, was recorded of Smt. Sandhya Singh, National Party President of the Rashtriya Samajwadi Party (Secular). As evident from the declaration made on oath by Smt. Sandhya Singh that although she is national party president of the party, however, all the work related with party is being looked-after by her husband Shri Bishwajeet Singh. She was not aware about any activity of the party. Further, vide Q. No. 18 and 19, she was categorically asked regarding details of bank accounts, books of accounts, nature and quantum of the expenditures of the Rashtriya, Samajwadi Party. In reply to the same, she again stated that she is not aware of any details regarding these subjects. She stated that all these things are being handled by her husband Shri Bishwajeet Singh.

(iv) It is on record that statement of Shri Bishwajeet Singh, on oath u/s 132(4) of the I.T. Act, was recorded on 07.09.2022. During the statement proceedings, Shri Bishwajeet Singh admitted the fact that on his instance, his wife Smt. Sandhya Singh joined RSP, as president. During the statement proceedings, Shri Bishwajeet Singh revealed that the party i.e. RSP is involved in bogus donations scam across India and founder of party i.e. Shri Surya Nath Chaturvedi carried out bogus donations scam since inception of the party. He further stated that after deducting certain commission donations are being returned to the donors.

(v) Furthermore, Shri Bishwajeet Singh stated that these affairs are also being the handled by the Shri Ritesh Shah. Shri Bishwajit Singh submitted list of some bogus entities used for cash generation, which is reproduced by Id PCIT on page number 13 of his order.

(vi) During the post search inquiries, statement of Shri Amitkumar Chaturvedi (AHLPC7736R), past president of political party was also recorded, he categorically admitted that the party was engaged in bogus donations scam.

(vii) It is relevant to refer to the fact that on verification with the website of regional Chief Electoral Officer where the party is registered i.e. CEO, Gujarat State, it has been found that Rashtriya Samajwadi Party (Secular) has not filed any contribution report, since F.Y. 2013-14 onward.

(viii) The party been claiming wrong and invalid exemption, over the years under section 13A of the I.T. Act but it has also been, mentioning in its Income Tax Return of F.Y. 2018-19 that no contribution report has been filed u/s 29C of the R.P. Act, 1951.

(ix) Rashtriya Samajwadi Party (Secular) is not registered, as of today, as informed by Id Counsel for the assessee, with Election Commission of India/R.P. Act, 1951.

(x) There is no retraction of statements given by Smt. Sandhay Singh, Shri Bishwajeet Singh and Shri Amit Kumar, hence their statements are correct and valid.

On analysis of gathered data of the conducted search, it was learnt that these RUPP’s are either not carrying out any sort of genuine political or social activity or they are carrying out such activities to project themselves as genuine parties. However, in reality these political parties are being used as a vehicle of accommodation entries under the garb of political activities. The biggest advantage of creating a façade of a political party to propagate the accommodation entry scam is the fact that the income of political party is completely exempt from taxation as long as conditions laid down in section 13A of the Act, are satisfied. The persons making donations to such organizations, at the same time received back the donations made by them in the form of cash after deduction of certain percentage of commission. By this way, the assessee i.e. the donor becomes eligible for the deduction u/s 80GGC of the Act and evades the income tax liability by claiming 100% deduction on donated amount irrespective of his/her ITR. Further, In the light of disclosures made by Shri Suryanath Chaturvedi the former president and founder member of RSP (Secular), it is an established fact the Rashtriya Samajwadi Party has been formed to carry out bogus donations scam and bogus donation activities are being carried out from the inception of the party. All the party presidents from the inception have admitted that the RUPP is involved in the bogus donation scam. Moreover, Umapati IT Solution is a paper entity and has been used for layering of bogus donation received in the bank accounts of RSP(Secular).

23. From the above facts, it is abundantly clear that donation received by “Rashtriya Samajwadi Party” is bogus. The assessee has claimed deduction under Section 80GGC of the Act, and 80G(5) of the Act, which is also bogus and to that extent Assessment Order passed by assessing officer is erroneous and prejudicial to the interest of Revenue. There is a saying that The ‘tail’ cannot wag the ‘dog’. When there is a fraud, then the details and documents submitted by the assessee, before the assessing officer, during the assessment proceedings, do not assist the assessee in any manner, that is, the assessee cannot take the plea that he has submitted enough documents and details before the assessing officer and assessing officer has taken the plausible view. For that reliance can be placed on the judgment of the Coordinate Bench of ITAT Pune, in the case of Abhishek Ashok Lohade in ITA No.816/PUN/2018, order dated 22.11.2022.

From the above facts and relying on the decision cited above, it is abundantly clear that donation received by “Rashtriya Samajwadi Party” is bogus. The assessee has claimed deduction under Section 80GGC of the Act, which is also bogus and to that extent the assessment order passed by assessing officer in disallowing the deduction claimed by the assessee u/s 80GGC to the tune of Rs. xxxxx/-is upheld.”

9.3 Respectfully following the above decisions of the Co-ordinate Benches, as well as keeping in view the specificities of the case, the grounds raised by the assessee are dismissed.

10. In the result, the appeal of the assessee is dismissed.

The order is pronounced in the open Court on 12.06.2026.