Rajen Jayantilal Merchant Vs Assessment Unit (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, dismissed the assessee’s appeal challenging the reassessment order for Assessment Year 2019-20, which had disallowed a deduction of ₹1,50,000 claimed under Section 80GGC of the Income Tax Act for a donation made to a registered unrecognised political party.
The assessee had originally filed a return declaring total income after claiming deductions under Chapter VIA, including the deduction under Section 80GGC for a donation made through banking channels. The assessment was reopened on the ground that the donation was allegedly made to a registered unrecognised political party involved in providing bogus deductions. During the reassessment proceedings, the assessee furnished the donation receipt, bank statement evidencing the transfer, and the political party’s registration certificate. However, the Assessing Officer relied upon post-search enquiries concerning several registered unrecognised political parties and concluded that such entities were operating accommodation entry schemes whereby donations received were returned to donors after deduction of a commission, enabling wrongful tax deductions. Consequently, the deduction was disallowed.
The Commissioner of Income Tax (Appeals) upheld the addition by relying on earlier decisions involving similar claims under Section 80GGC. The appellate authority referred to findings from another case where detailed enquiries into the affairs of the same political party revealed a pattern of routing donations through multiple bank accounts, transferring funds to intermediary entities, and ultimately returning cash to donors. The enquiries highlighted irregularities in the political party’s functioning, including lack of response to statutory notices, unusual banking transactions, and discrepancies between declared donations and actual bank credits. These findings led to the conclusion that the donations constituted accommodation entries rather than genuine contributions eligible for deduction.
