Received Income Tax Notice u/s 143(2), 148A or 148 for Political or Charitable Donation?

Summary: Recent Income-tax Department verification and reassessment proceedings concerning deductions under Section 80G and Section 80GGC have involved SMS/e-mail advisories, scrutiny notices under Section 143(2), notices under Section 142(1), and reassessment proceedings under Sections 148A and 148. The Department has referred to data analytics, Investigation Wing information, search and seizure material and alleged accommodation-entry arrangements involving certain Registered Unrecognised Political Parties (RUPPs), charitable trusts, intermediaries and return preparers. CBDT’s NUDGE campaign concerning Sections 80G and 80GGC resulted in 6.24 lakh taxpayers being nudged, 50,842 updated returns, withdrawal of ₹1,487.27 crore of excess deductions and payment of ₹681.55 crore additional taxes. The material also discusses the CBDT scrutiny guidelines dated 4 June 2026, the distinction between scrutiny and reassessment proceedings, evidentiary and natural justice issues, and recent ITAT decisions concerning donation claims and penalty under Section 270A. The supplied material emphasises that a notice or NUDGE communication does not by itself establish that a donation is bogus and that cases depend on the specific evidence and nexus with the taxpayer.

Why Has the Department Started Issuing These Communications and Notices?

On 14 July 2025, the Income-tax Department officially announced a nationwide operation against allegedly bogus deductions and exemptions.

The Department specifically referred to misuse of deductions including:

• Section 80G;
• Section 80GGC;
• Section 80GGA;
• Section 80D;
• Section 80E;
• Section 80EE;
• Section 80EEB;
• Section 80DDB; and
• certain other exemptions and deductions.

The Department stated that its exercise was based upon data analysis, third-party financial information, ground-level intelligence, advanced analytical tools, search and seizure information and evidence gathered against intermediaries and return preparers.

CBDT stated that certain organised networks of ITR preparers and intermediaries were allegedly filing returns containing fictitious deductions and claiming excessive refunds in return for commission.

Thereafter, on 13 December 2025, CBDT publicly announced a targeted NUDGE campaign specifically concerning suspicious claims under:

Section 80G — charitable donations,

and

Section 80GGC — political contributions.

CBDT stated that investigations had detected cases involving donations to certain RUPPs and charitable institutions where entities were allegedly:

• non-filers;
• non-operational at their registered addresses;
• carrying out little or no genuine political activity;
• being used as conduits for routing funds;
• involved in alleged hawala transactions; or
• issuing allegedly bogus donation receipts.

CBDT further stated that follow-up searches against certain RUPPs and trusts had resulted in incriminating evidence relating to alleged bogus donations by individuals and bogus CSR donations by companies.

Claims under Sections 80GGC and 80G were specifically identified as a high-risk pattern through data analytics.

SMS and e-mail advisories started being issued from 12 December 2025, asking identified taxpayers to review their deduction claims and correct their returns where the claims were wrong.

Therefore, taxpayers should understand that the present exercise is data-driven and investigation-based, rather than a routine examination of every person who has claimed a donation deduction.

How Large Is the Donation Scrutiny Drive?

The scale of the exercise is now supported by substantial Government data.

The Ministry of Finance / Department of Revenue Annual Report 2025-26 specifically records the outcome of the NUDGE campaign concerning Section 80GGC.

Particular	Official Figure
Taxpayers nudged through SMS/e-mail across different financial years	6.24 lakh
Taxpayers who subsequently filed updated returns	50,842
Excess deductions withdrawn	Rs. 1,487.27 crore
Additional taxes paid	Rs. 681.55 crore

The Annual Report specifically states that targeted and personalised NUDGEs were sent through SMS and e-mail highlighting mismatches and asking taxpayers to review their Section 80GGC claims.

This is presently one of the strongest official indications of the scale of the political-donation compliance exercise.

However, an important distinction must be maintained:

6.24 lakh taxpayers being “nudged” does not mean that 6.24 lakh statutory notices under Sections 143(2), 148A or 148 were issued.

The figure relates principally to personalised SMS/e-mail compliance communications.

Broader CBDT Drive — ₹1,045 Crore of Claims Withdrawn

Separately, CBDT’s official communication dated 14 July 2025 stated that approximately:

40,000 taxpayers

had updated their returns during the preceding four months and voluntarily withdrawn allegedly false claims aggregating:

₹1,045 crore.

The ongoing verification exercise covered approximately 150 premises across the country.

This broader exercise expressly included Sections 80G and 80GGC, but it also covered several other deductions. Therefore:

The entire ₹1,045 crore should not be described as donation deductions alone.

Around 8,000 Donation Notices Reported in 2023

The scrutiny of donation deductions is not entirely new.

In April 2023, contemporaneous reports citing Income-tax officials stated that approximately:

8,000 taxpayers

had been issued notices in relation to large donations to charitable trusts.

Those reportedly receiving notices included:

• salaried employees;
• self-employed individuals; and
• companies.

The notices reportedly related principally to AYs 2017-18 to 2020-21.

The reported concern was that the donation amounts appeared disproportionate to the taxpayers’ declared income and expenditure.

This figure should, however, be described as a reported figure based on Income-tax officials, rather than as a figure formally notified through a CBDT circular.

₹1,400 Crore Recovery from Around 63,000 Donors — Reported 2025

Reports based on Income-tax Department sources during 2025 stated that approximately:

₹1,400 crore

had been recovered from around:

63,000 donors

in relation to questionable contributions made to RUPPs during the period 2022-2024.

The same reports stated that more than 4 lakh suspected taxpayers had claimed deductions under Section 80GGC during the relevant period.

Again:

63,000 donors does not necessarily mean 63,000 statutory notices.

The figure represents taxpayers reportedly covered by the wider recovery/compliance exercise.

Reported ₹9,169 Crore Political-Donation Investigation

A further major investigation reported during November 2025 referred to allegedly excess/questionable political-donation deductions aggregating:

₹9,169 crore

over two assessment years.

Assessment Year	Reported Excess/Questionable Deduction
AY 2022-23	Rs. 6,116 crore
AY 2023-24	Rs. 3,053 crore
Total	Rs. 9,169 crore

The investigation reportedly found that 36 RUPPs alone accounted for approximately ₹5,591 crore of the alleged questionable routing.

Reports also referred to examination of hundreds of bank statements, case files, WhatsApp communications and other digital evidence.

These figures are useful for understanding the magnitude of the investigation, but they are reported investigation figures and should not be treated as figures formally notified through a CBDT notification or circular.

Is Every Person Who Claimed 80G or 80GGC Receiving a Notice?

No.

There is presently no publicly issued CBDT circular stating that every assessee claiming Section 80G or Section 80GGC deduction must receive a notice.

Nor is there any publicly prescribed fixed amount such as:

₹5 lakh, ₹10 lakh or any other amount

above which scrutiny automatically follows merely because a donation deduction has been claimed.

The Department’s current approach appears substantially risk-based and information-driven.

The risk generally increases where the Department possesses specific information concerning:

• a political party or trust appearing in Investigation Wing material;
• unusual donation amounts compared with declared income;
• mismatch in information available with the Department;
• involvement of an intermediary or return preparer;
• suspicious movement of funds through the recipient entity;
• statements of political-party or trust office bearers;
• search material suggesting accommodation entries;
• repeated donations to suspicious entities; or
• transactions fitting an identified risk pattern.

Therefore, the real question is not simply:

How much donation was made?

The more important question is:

What information does the Department have concerning the recipient and this particular donor?

CBDT Compulsory Scrutiny Guidelines dated 4 June 2026 — Sections 143(2), 148A and 148

An important administrative guideline explaining how such cases may enter formal assessment proceedings is:

CBDT F. No. 225/56/2026/ITA-II dated 4 June 2026 — Guidelines for Compulsory Selection of Returns for Complete Scrutiny during FY 2026-27.

These Guidelines apply to returns filed during FY 2025-26 under the Income-tax Act, 1961.

Parameter CS-06 — Specific Information Pointing to Tax Evasion

Under Parameter CS-06, cases may be compulsorily selected where:

specific information pointing to tax evasion for the relevant assessment year is received from the Investigation Wing, law-enforcement agency, intelligence authority or regulatory authority and the assessee has furnished a return.

In such cases, notice under Section 143(2) may be served through the prescribed mechanism.

This is particularly relevant to donation cases.

A typical current-year scrutiny sequence may therefore be:

• Search/investigation of political party or trust
• Donor information discovered
• PAN and transaction identified
• Information supplied by Investigation Wing
• Case selected under relevant scrutiny parameter
• Section 143(2) notice
• Section 142(1) questionnaire
• Assessment

Sections 148A and 148 — Earlier Assessment Years

The same underlying Investigation Wing/search information may have a different consequence where the relevant assessment year is an earlier year which is no longer within the ordinary current scrutiny cycle.

Where information suggests that income chargeable to tax has escaped assessment, proceedings may instead move through the reassessment provisions, subject to satisfaction of the statutory conditions and limitation provisions.

The normal route may be:

• Investigation Wing/search information
• Section 148A show-cause notice
• Taxpayer’s reply
• Order deciding whether reassessment is warranted
• Section 148 notice
• Return filed in response to Section 148
• Section 143(2)/142(1), as applicable
• Reassessment under Section 147

Thus, broadly:

Section 143(2) generally represents scrutiny of a return which is open for scrutiny,

whereas:

Sections 148A/148 are relevant where the Department seeks to reopen an earlier assessment on the ground that income has escaped assessment.

The 2026 Compulsory Scrutiny Guidelines also recognise cases in which notice under Section 148 has already been issued and prescribe the procedural routing of such reassessment cases through the faceless system.

Importance of “Specific Information”

The words:

“specific information pointing to tax evasion”

are important.

There is a material difference between:

“XYZ Political Party was involved in suspicious transactions”

and:

“Specific seized material shows that Mr. X transferred ₹10 lakh to XYZ Political Party and thereafter received ₹9.70 lakh back.”

The first represents general adverse material concerning the recipient.

The second directly connects the individual taxpayer with the alleged accommodation-entry mechanism.

This distinction may become extremely important during scrutiny or reassessment proceedings.

What Types of Communications or Notices May a Taxpayer Receive?

Communication / Section	What It Ordinarily Means in a Donation Case
NUDGE SMS / E-mail	Advisory asking the taxpayer to review an 80G/80GGC claim. It is not itself an assessment notice.
Section 133(6)	Information may be sought during verification of a transaction or mismatch.
Section 143(2)	The return has been selected for scrutiny.
Section 142(1)	AO seeks documents and explanations supporting the donation.
Section 148A	Department proposes reopening an earlier assessment year and provides an opportunity before Section 148.
Section 148	Formal reassessment proceedings are initiated.
Section 147 r.w.s. 143(3)/144B	Final reassessment after examination of the claim and evidence.
Section 270A r.w.s. 274	Penalty proceedings may follow where under-reporting or misreporting is alleged.
Section 263	PCIT may seek revision where an earlier assessment allegedly allowed the claim without proper inquiry.
Section 156	Consequential demand notice after tax/interest/penalty becomes payable.

These provisions operate at different stages and should not be treated as interchangeable.

What Does a NUDGE SMS or E-mail Mean?

A NUDGE communication should be treated as a warning or voluntary-compliance opportunity, not as a finding that the donation is bogus.

CBDT itself describes the targeted NUDGE campaign as a taxpayer-friendly measure giving taxpayers an opportunity to update their ITRs and withdraw wrong claims, if any.

Accordingly:

NUDGE received ≠ assessment initiated.

and:

NUDGE received ≠ donation proved bogus.

A taxpayer receiving such communication should first examine the transaction.

Where the claim is genuinely incorrect, appropriate corrective action may be considered in accordance with law.

However, where the donation is genuine and supporting evidence exists, the taxpayer should not automatically conclude that the deduction must be surrendered merely because an SMS/e-mail has been received.

The important questions are:

• What deduction was claimed?
• To whom was the donation made?
• Was the recipient eligible?
• Is the payment traceable through banking channels?
• What information does the Department possess?
• Is there any material specifically connecting the taxpayer with an alleged accommodation-entry arrangement?

Section 143(2): Scrutiny Notice

A notice under Section 143(2) means that the taxpayer’s return has been selected for scrutiny.

In donation cases, the Department may seek to verify whether deduction under Section 80G or Section 80GGC was:

• factually genuine;
• supported by evidence; and
• legally admissible.

For returns filed during FY 2025-26, the CBDT Compulsory Scrutiny Guidelines dated 4 June 2026 record 30 June 2026 as the relevant limitation date for service of Section 143(2) under the applicable provisions.

Therefore, whenever a Section 143(2) notice is received, limitation assumes importance.

The taxpayer may also need to determine whether selection has arisen from:

• CASS;
• Investigation Wing information;
• compulsory scrutiny; or
• another information/risk parameter.

Section 142(1): Documents and Explanation

After scrutiny begins, the Department may issue a questionnaire under Section 142(1).

In a donation matter, the AO may seek:

• donation receipt;
• bank statement;
• details of recipient;
• registration information;
• source of funds;
• reasons/background of donation;
• correspondence with recipient;
• details of intermediary, if any;
• Form 10BE in an appropriate Section 80G case;
• political-party registration and PAN in an 80GGC case; and
• explanation regarding Investigation Wing/search information.

The taxpayer should distinguish between documents within his possession and documents belonging exclusively to the recipient.

For example, the complete books of account or bank accounts of a political party are ordinarily third-party records which the Income-tax Department itself has statutory powers to obtain.

Section 148A and Section 148: Reopening of Earlier Years

Many political-donation disputes presently reaching appellate authorities concern earlier assessment years.

The common pattern is:

• Investigation Wing information
• Section 148A notice
• Taxpayer’s explanation
• Order deciding whether reassessment is warranted
• Section 148 notice
• Reassessment proceedings

The Section 148A stage is therefore extremely important.

The taxpayer’s defence should not necessarily be restricted merely to:

“I paid through cheque and I possess a donation receipt.”

Where the Department relies upon search or Investigation Wing information, the more fundamental questions include:

• What material specifically relates to this taxpayer?
• Which statement identifies this taxpayer?
• Is there evidence showing that money came back to him?
• Has any intermediary been linked with him?
• Does any seized document identify his transaction?
• Is there a corresponding cash trail?
• Or is the Department merely applying a general allegation concerning the political party to every donor?

These issues can materially affect the ultimate outcome.

Receipt and Bank Payment Are Important — But May Not Always Be Enough

Recent Tribunal decisions demonstrate that donation cases are highly fact-sensitive.

In:

Manoj Jayram Sarang Vs ITO (ITAT Mumbai), ITA No. 2531/Mum/2026, order dated 17 June 2026

the taxpayer had claimed deduction of ₹4 lakh under Section 80GGC.

The AO had received Investigation Wing information alleging that the taxpayer had availed an accommodation entry through a bogus Section 80GGC claim.

The proceedings followed:

Section 148A(b) → Section 148A(d) → Section 148 → reassessment.

The Revenue relied upon search material relating to certain RUPPs and alleged that the concerned political party formed part of an arrangement under which donations were received through banking channels and money was subsequently returned after retention of commission.

The assessee relied upon the donation receipt and banking evidence.

On the facts of that case, the Mumbai ITAT upheld the disallowance and dismissed the assessee’s appeal.

The case demonstrates that where the Department possesses substantial adverse investigation material, mere production of:

donation receipt + banking transaction

may not always conclude the matter.

At the Same Time, General Allegations Are Not Always Sufficient

The opposite position is equally important.

In:

Vijayant Bhatia v. AO, ITA No. 2846/Del/2026, ITAT Delhi, order dated 15 July 2026

the dispute concerned a Section 80GGC claim arising from the wider RUPP investigation.

The assessee had produced supporting evidence including bank statements and donation receipts.

The Tribunal found that the material on record did not provide sufficient basis, on the facts of that case, to sustain the disallowance and allowed the assessee’s appeal.

Similarly, in:

ACIT Vs Anuj Prakash Gupta (ITAT Raipur), ITA No. 11/RPR/2026

the Tribunal noted that the AO had not brought evidence on record establishing that the political party had returned money to the assessee or that the assessee had derived a direct benefit from the alleged arrangement.

The ITAT specifically observed that no bank trail, statement or confirmation linking the assessee to the alleged refund had been established.

The important principle emerging from these cases is:

Adverse material concerning the political party may be relevant, but the existence or absence of an assessee-specific nexus can become decisive.

Accordingly, each case must be examined on its own facts and evidence.

Search Statements and Third-Party Evidence

Many present reassessment cases originate from searches conducted on:

• political parties;
• charitable institutions;
• intermediaries; or
• connected persons.

The donor himself may never have been searched.

A typical sequence can be:

• Search under Section 132
• Statements recorded under Section 132(4)
• Bank accounts/documents examined
• Donor list identified
• Information supplied to donors’ Assessing Officers
• Section 143(2) or Section 148A/148 proceedings

Where the Department proposes to rely upon a third-party statement or seized material against a donor, principles of natural justice assume importance.

The Supreme Court in Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) recognised the importance of giving an assessee an appropriate opportunity where adverse material gathered from a third party is proposed to be used against him.

Where the assessment materially relies upon statements of third parties, principles concerning cross-examination may also become relevant.

In Andaman Timber Industries v. CCE, Civil Appeal No. 4228 of 2006 (SC) the Supreme Court emphasised the importance of cross-examination where witness statements constitute a material basis of the adverse conclusion.

The applicability of these principles will depend upon the nature of the evidence relied upon in each case.

Penalty under Section 270A Is Not Automatic

One of the most important practical consequences after disallowance of a donation deduction is potential penalty under Section 270A.

Section 270A broadly distinguishes between:

Under-reporting

Penalty generally equal to:

50% of the tax payable on under-reported income.

Misreporting

Penalty may extend to:

200% of the tax payable on under-reported income.

However:

Disallowance of a Section 80G or 80GGC deduction does not automatically establish misreporting.

For enhanced penalty, the Department must establish the statutory requirements of Section 270A(9).

This issue was specifically considered in:

Colour Yellow Productions Pvt. Ltd. v. ITO, ITA No. 462/Mum/2026, ITAT Mumbai, order dated 22 May 2026.

The company had made a donation of:

₹17.50 lakh

and claimed deduction under Section 80G of:

₹8.75 lakh.

The case was reopened on the basis of information concerning alleged accommodation-entry donations.

During reassessment, notices under Sections 143(2) and 142(1) were issued.

The assessee withdrew the deduction in the return filed pursuant to Section 148 and paid additional tax and interest.

Nevertheless, the AO imposed penalty of:

₹5,78,022 at 200%

alleging misreporting.

The ITAT deleted the penalty, holding, inter alia, that for invoking enhanced penalty the AO was required to clearly establish which specific limb of Section 270A(9) was attracted.

The Tribunal also emphasised the distinction between a legally unsustainable claim and deliberate misreporting.

Therefore:

Withdrawal or disallowance of an 80G/80GGC deduction does not by itself justify a 200% penalty for misreporting.

Conclusion

The present scrutiny of deductions under Section 80G and Section 80GGC has become a significant enforcement area, supported by CBDT data analytics, Investigation Wing information and targeted NUDGE campaigns. The Ministry of Finance has reported that 6.24 lakh taxpayers were nudged, leading to withdrawal of ₹1,487.27 crore of excess deductions and payment of ₹681.55 crore additional tax.

However, a NUDGE communication or investigation against a political party/trust does not automatically prove that every donor’s claim is bogus. Recent decisions show that the outcome depends on whether the Department has specific material linking the particular taxpayer with an accommodation entry or money-back arrangement.

Further, disallowance of a donation claim does not automatically justify 200% penalty under Section 270A(9). Each case must therefore be examined on its own facts, evidence and compliance with the statutory requirements governing scrutiny, reassessment and penalty.

******

For any query, clarification, or detailed professional consultation relating to Income Tax or GST matters, particularly notices, assessments, litigation, legal proceedings, or tax demands, you may get in touch using the following contact details: Mobile: +91-9818640458 | Email: [[email protected]](mailto:[email protected])