ITAT Upholds Denial of Section 80GGC Deduction for Donations to Alleged Accommodation Entry Political Party

Arun Pratap Singh Vs ITO (ITAT Delhi)

ITAT Upholds Denial of Section 80GGC Deduction for Donations to Alleged Accommodation Entry Political Party

The Delhi ITAT upheld the disallowance of deduction claimed under Section 80GGC in respect of a donation of ₹3 lakh made to Rashtriya Samajwadi Party (Secular), despite the payment having been made through banking channels and supported by a donation receipt.

The Tribunal noted that search proceedings on the political party had revealed a systematic accommodation entry racket, wherein donations received through cheques or bank transfers were allegedly routed through multiple entities and ultimately returned to donors in cash after deducting commission. Statements of the party’s office bearers and findings of the Investigation Wing supported this modus operandi.

Relying on earlier decisions of the Ahmedabad, Mumbai and Delhi Benches, the Tribunal held that where evidence establishes that a political party was merely facilitating bogus donation entries, the mere existence of a bank transaction or donation receipt is insufficient to establish a genuine claim under Section 80GGC. Since the assessee could not bring any fresh material to rebut the investigation findings, the Tribunal confirmed the denial of deduction and dismissed the appeal.

FULL TEXT OF THE ORDER OF ITAT DELHI

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeal)/National Faceless Appeal Centre, Delhi [in short ‘CIT(A)’] dated 30.01.2026, for assessment year 2019-20.

2. Shri Arun Pratap Singh appearing in person submits that he is a salaried employee. During the period relevant to assessment year under appeal, he had made donation of Rs. 3 lacs to a political party namely, ‘Rashtriya Samajwadi Party’ (Secular) and claimed deduction u/s. 80GGC of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the same. He submitted that the donation was given through NEFT i.e. banking channel which is clearly reflected in the bank statement of the assessee. The donation made by the assessee to a political party is supported by a valid donation receipt issued by the political party. He stated that the AO has not only disallowed deduction of Rs. 3 lacs claimed by the assessee u/s. 80GGC, but has also made adhoc addition of Rs.15,000/- u/s. 69C read with section 115BBE of the Act on the presumption that the assessee has paid commission @5% of the donation made. The disallowance of deduction and addition u/s. 69C is merely based on assumptions, without any evidence. He thus, prayed for deleting the addition made by the AO and allow deduction of Rs.3 lacs claimed u/s. 80GGC of the Act and to delete the addition of Rs.15,000/-. To support his submissions, the assessee also placed reliance on the Tribunal order SMC Bench in ITA No. 11/RPR/2026 titled ACIT vs. Anuj Prakash Gupta decided on 05.02.2026.

3. Per contra, Shri Manoj Kumar, Sr. DR representing the department vehemently supported the impugned order and the assessment order. He submitted that assessee has made donation to ‘Rashtriya Samajwadi Party’ (Secular) [in short RSP(S)]. As per information received from the Investigation Wing the aforesaid political party is engaged in providing accommodation entries in the guise of political donations. During the course of investigation, it was found that the said political party was routing funds received in its bank account through layers of various entities and individuals. The President and key office bearer of the said political party had admitted in their statements recorded on oath, during search proceedings that the party was involved in providing accommodation entries. In the backdrop of the facts discussed by the AO and the CIT(A), the Ld. DR vehemently prayed for upholding the impugned order and dismissing appeal of the assessee.

4. Both sides heard. Orders of the authorities below examined and the decision on which assessee has placed reliance, considered. During the period relevant to assessment year under appeal, the assessee had made donation of Rs. 3 lacs to a political party i.e. ‘Rashtriya Samajwadi Party’ (Secular). The case of the revenue is that search u/s. 132 of the Act was carried out on the said political party. During the course of search, statements of the President and key office bears of the political party were recorded on oath and in their statements they had admitted that they were providing accommodation entries. Explaining the modus operandi, they admitted that the donation received through banking channels were returned to the donors in cash, after deducting commission.

5. The Division Bench of the Tribunal in the case of Saurabh Pravinbhai Patel And Brajesh Pravinbhai Patel AOP vs. Assessment Unit Income Tax in ITA No.1017/Ahd/2023 for AY 2020-21 decided on 30.04.2025 where assessee’s claim of donation to RSP(S) u/s.80GGC of the Act was rejected by the AO, on appeal to the Tribunal by the assessee, the Tribunal dismissed the appeal and confirmed findings of the AO. The relevant excerpts from said Tribunal order are as under:-

“4. Aggrieved against the assessment order, assessee filed an appeal before Ld. CIT(A). After considering the Tribunal’s decision, confirmed the disallowance made by the Assessing Officer by observing as follows:

“While adjudicating the instant case by the undersigned, the eye opening facts came in notice in the case of Pavan Anil Bakeri vs. Deputy Commissioner of Income-tax adjudicated by the Hon’ble ITAT, Ahmedabad Bench which changed the course of the case to a whole new direction In the above case the Hon’ble ITAT held that where assessee made donation to a political party and claimed deduction under section 80GGC, since Assessing Officer found that bank accounts of above political party had been used by accommodation entry provider where donation received by cheques were layered though various bank accounts and ultimately cash was returned back, donation claimed under section 80GGC was merely accommodation entry and thus, disallowance of deduction under section 80GGC was proper. The sequence of events in the above case are “The assessee paid donation of Rs 52,00,000/- to Rashtriya Samajwadi Party (Secular) To verify the genuineness and utilization purpose of the donation, a notice u/s 133(6) was issued on 5-10-2018 to Rashtriya Samajwadi Party (RSP) There was no representation from RSP Therefore another opportunity was granted vide letter dated 16-10-2018 Again there was no response from RSP. Therefore a summon u/s 131(1) of the Act was issued to Shri S.N. Chaturvedi, National President, RSP to attend the office on 19-11-2018 to produce the requisite the donation details. No one attended the office of the said date of hearing.

21 RSP is a political party registered with Election Commission of India. The Assessing Officer called for the bank details of RSP with Oriental Bank of Commerce, New Naroda Branch. From the perusal of the bank statement, it was observed there was a credit entry of Rs. 52,00,000/-on 07-10-2015 which is donation given by the assessee and there was two debit entries amounting to Rs. 27.00,000/- and Rs 25,00,000/- respectively on the same day On further enquiry from the Oriental Bank of Commerce the amount of Rs. 27,00,000/-credited to Sterlite Inc and Rs 25,00,000/-credited to Shah And Co. on 7-10-2015.

2.2. On examination of the RSP bank statement, it was found that it is a general practice of crediting huge cash and subsequently transfering to another party on same day. Further analysis of the transaction particulars reveals that the cash was transferred to mainly four parties namely Guru Enterprise, Unique Trading, Mahavaisnavi and KK Indersriz. It was also observed that no cash withdrawal for expenses like rent, electricity, water, newspaper, fuel etc of RSP and is not reflecting in the bank account. There is an Inspector of Income-tax was deputed to visit the premises of RSP at UG-8. Harekrishna Complex, C.TM Char Rasta, Amraiwadi, Ahmedabad-380026 on 15-11-2018 The Inspector submitted his report that RSP office situated on 2nd Floor of 3 storey building which is a small shop and shutter of which was half closed on that day. Nearby peoples were inquired that RSP Office which is found to be closed in most of the times. Copy of the said RSP Office photographs is reproduced in the assessment order. Further perusal of the records of RSP it is observed that during the assessment year 2016-17, RSP has received only donation amounting to Rs. 14,73,309/- whereas as per the bank account statement of the RSP in Oriental Bank of Commerce, total amount credited is Rs. 38,15,03,885/-That apart from RSP is maintaining two other bank account one at Bank of India and another of Central Bank of India. Further enquiry of Mis. Sterlite Inc and Shah And Co both the accounts were closed on 30-3-2016. An enquiry by the Bank both the proprietorship firms, where there is no stocks found and the office premises were being occupied by another person.

2.3 On further verification the donation amount of Rs. 52,00,000/ paid by the assessee to RSP was transferred to Waheguru Enterprise and Sapan Traders on 7-10-2015 of Rs. 25,00 000/-and Rs. 27,00,000/- respectively. This systematic pattern of transferring the funds credited by RSP clearly establishes the modus operandi of the account opening i.e. to route or transfer the funds of RSP back to the donator. Thus the assessee gave Rs. 52,00,000/- to RSP in the form of donation which was transferred to accounts of Shri Mukesh Mehta who claimed to be a businessman. Again the said amount was transferred to Sapan Traders and Waheguru Enterprise. Thus the donation claimed to be paid by the assesse is found to be bogus and the same is disallowed u/s. 80 initiated penalty proceedings u/s. 271(1)(c) of the Act for concealment of income.”

On further appeal Ld. CIT (A) observed in the case “The Assessing Officer has clearly brought out facts that bank accounts of above political party have been used by the accommodation entry provider where the donation received by cheques were layered through various bank accounts and ultimately cash was returned back. I therefore, agree with the findings given by the AO that donation of Rs. 52,00,000/-claimed u/s. 80GGC is merely accommodation entry. The Honorable ITAT Ahmedabad in the case of Pavankumar M. Sanghvi v. ITO, Wd. 3(1)(2), Baroda [2017] 81 taxmann.com 308 on the issue of accommodation entry has observed as under-

“8. As I proceed to deal with genuineness aspect, it is important to bear in mind the fact that what is genuine and what is not genuine is a matter of perception based on facts of the case vis-a-vis the ground realities. The facts of the case cannot be considered in isolation with the ground realities. It will, therefore, be useful to understand as to how the shell entries, which the loan creditors are alleged to be, typically function, and then compare these characteristics with the facts of the case and in the light of well settled legal principles. A shell entity is generally an entity without any significant trading, manufacturing or service activity, or with high volume low margin transactions to give it colour of a normal business entity used as a vehicle for various financial manoeuvers. A shell entity, by itself, it not an illegal entity but it is their act of abatement, of, and being part of financial manoeuvring to legitimize illicit monies and evade taxes, that takes it actions beyond what is legally permissible These entities have every semblance of a genuine business its legal ownership by persons in existence, statutory documentation as necessary for a legitimate business and a documentation trail as a legitimate transaction would normally follow. The only thing which sets its apart from a genuine business entity is lack of genuineness in its actual operations. The operations camed out by these entities, are only to facilitate financial manoeuvring for the benefit of its clients, or with that predominant underlying objective, to give the colour of GGC of the Act and added back to the total income of the assessee and also genuineness to these entities. These shell entities, which are routinely used to launder unaccounted monies, are a fact of life, and as much a part of the underbelly of the financial world, as many other evils. Even a layman, much less a Member of this specialized Tribunal, cannot be oblivious of these ground realities.”

In the aforesaid case, the Hon’ble ITAT bench held “As regarding ground no. 2, donation of Rs. 52,00,000/- made u/s. 80GGC, the ground is general in nature. The assessee has not produced any additional evidence in support of its claim. In fact the assessee had stated that it had cordial relationship with Mr. Kamlendu Tripathi Secretary of RSP and no other criteria was followed for making these donations. The Ld AO made a detailed enquiry of RSP and its Bank accounts and transfer of funds to one Shri Mukesh Mehta proprietor of two firms and he transferred it to Waheguru Enterprise and Sapan Traders, which is clearly a systematic financial maneuver to legitimate illicit moneys and evade taxes. It is appropriate to follow the Hon’ble Supreme Court judgment, wherein SLP filed by the assessee is dismissed confirming the Tribunal’s decision to come to the conclusion that the entire loan transaction was not genuine, in the case of Pavankumar M. Sanghvi v. ITO [2018] 97 taxmann.com 398/258 Taxman 160 (SC) which held as follows:

Assessee received certain sum as loan from two companies – Assessing Officer having found that said lender companies were shell entities added loan amount to income of assessee under section 68-Bank statement of lender companies revealed high transactions during day and a consistently minimal balance at end of working day-Further day when assessee was given loan there were credil entries of almost similar amounts, and balance after these transactions was a small amount Tribunal taking into account bank statements of lender companies and fact that assessee failed to produce these lenders for verification held that alleged loan transactions were not genuine -High Court by impugned order held that since Tribunal had given elaborate reasons to come to conclusion that entire loan transaction was not genuine, appeal filed before it was to be dismissed Whether Special Leave Petition against impugned order was to be dismissed.

5.2 In the absence of any evidence from the assessee, the grounds raised by the assessee are untenable and therefore the same is rejected. The findings given by the lower authorities does not require any interference and the addition is sustained.

It is pertinent to mention here that out of two political parties to whom the appellant paid total donation of Rs. 1,13,51,000/- the modus operandi of the one political party named the Rashtriya Samajwadi Party (Secular) has already been discussed in details in the preceding paragraphs of the instant order. It can be safely presumed that the modus operandi of other political party named Kisan party of India is also indulging only in providing accommodation entry as can be ascertained from various newspaper reports and enquiries which is being conducted by various institutions.

In view of the findings in the above case I am inclined to agree with the decision made by the AO during the assessment proceedings regarding the donation made was basically a bogus donation as the Political Party is indulging only in providing accommodation entry. Thus in view of the above discussion, the submission made by the appellant regarding the claim of deduction for donation of Rs. 1.13.51,000/- to be allowed is not acceptable as already discussed in detail in the preceding Paras of the instant order. Therefore, the ground of appeal stands dismissed.”

5. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of Appeal:

1. The learned National Faceless Appeal Centre has erred in law and facts by confirming the disallowance of claim for deduction under section 80GGC of the Act of Rs.1,13,51,000/- made by the learned A.O. and therefore the learned A.O. be directed to allow the same while computing total income.

2. That the appellant craves liberty to add, amend and alter any ground of appeal before the final hearing.

6. Ld. Counsel appearing for the assessee filed same set of documents filed before the Assessing Officer and reiterated its submissions. Nothing new documents or evidences filed before us to deviate from the findings of the Lower Authorities. The Ld AO has clearly brought out facts that bank accounts of above political parties have been used by the accommodation entry provider, where the donation received by cheques were layered through various bank accounts and ultimately cash was returned back. The same is not disputed by the assessee with relevant materials. Further the Ld AO made a detailed enquiry of RSP and its Bank accounts and transfer of funds to one Shri Mukesh Mehta proprietor of two firms and he transferred it to Waheguru Enterprise and Sapan Traders, which is clearly a systematic financial maneuver to legitimate illicit moneys and evade taxes. In the absence of any fresh materials in support of the assessee’s claim. The Grounds raised by the assessee is devoid of merits and liable to be dismissed.”

[Emphasized by us]

6. Consistent view has been taken by the Division Bench of Tribunal in the case of Rajen Jayantilal Merchant vs. ITO in ITA No.1683/Ahd/2025 for AY 2019-20 decided on 13.11.2025 and Ritesh Sugan Jain vs. ITO in ITA No.8546/Mum/2025 for AY 2019-20 decided on 27.04.2026 upholding findings of the AO in rejecting claim of deduction u/s.80GGC of the Act.

7. The Coordinate Bench in the case of Shri Ram Agarwal vs. ITO in ITA No. 6591/Del/2025 for AY 2023-24 decided on 26.11.2025 upheld rejection of claim of deduction u/s.80GGC of the Act in respect of donations made to Registered Unrecognized Political Party.

8. Considering entire facts of the case and the documents on record, I find no infirmity in the impugned order, hence, the same is upheld and appeal of the assessee is dismissed being devoid of any merit.

Order pronounced in the Open Court on 12/06/2026.