Case Law Details
Ritesh Sugan Jain Vs ITO (ITAT Mumbai)
Bogus Political Donation Claim Rejected Due to Evidence of Accommodation Entry Scheme; Donation Deduction Disallowed Due to Findings of Fake Political Funding Scheme; Tax Deduction Rejected Where Donation Was Routed Back Through Intermediaries; Bogus Donation Scheme Leads to Denial of Section 80GGC Benefit; Search Findings Proving Fake Donations Result in Disallowance of Tax Claim; Deduction Claim Fails as Political Party Found Involved in Tax Evasion Mechanism.
Core Issue:- Whether deduction claimed under Section 80GGC in respect of donation to a Registered Unrecognized Political Party (RUPP), namely Rashtriya Samajwadi Party (Secular), is allowable when such donation is alleged to be bogus and part of an accommodation entry scam.
Facts:- The assessee filed return of income declaring total income of ₹9,52,310/- and claimed deduction of ₹9,90,000/- under Section 80GGC towards donation made to Rashtriya Samajwadi Party (Secular). Based on information received from the Investigation Wing through the Insight portal, it was found that the said political party was involved in a systematic bogus donation racket wherein funds received through banking channels were routed through multiple layers and returned to donors in cash after deduction of commission.
Accordingly, proceedings under Section 148A were initiated, and after considering the assessee’s submissions (which were not found satisfactory), notice under Section 148 was issued on 20.04.2023. During assessment proceedings, the AO relied upon search and seizure action conducted on 07.09.2022 on a group of Registered Unrecognized Political Parties (RUPPs) at Ahmedabad, where extensive evidence was gathered revealing that such entities were engaged in providing accommodation entries in the guise of political donations.
Statements recorded under Section 132(4) from key persons, including Smt. Sandhya Singh (President) and Shri Bishwajeet Singh (key operator), confirmed that the party was merely a conduit for bogus donations and that funds were returned in cash after deducting commission ranging between 1.5% to 5%. Based on these findings, the AO concluded that the donation claimed by the assessee was not genuine and disallowed the deduction of ₹9,90,000/-.
AO’s Findings
The Assessing Officer held that the donation claimed by the assessee was non-genuine and part of a pre-arranged accommodation entry scheme. It was observed that the political party was not engaged in any real political activity and was merely acting as a vehicle to facilitate tax evasion. The AO concluded that although the transaction was routed through banking channels, the substance of the transaction revealed that the money was returned to the assessee in cash after deduction of commission. Accordingly, the deduction under Section 80GGC was disallowed and added back to the income.
ITAT Findings
The ITAT Mumbai upheld the findings of the AO as well as the CIT(A). It observed that the facts of the present case were identical to those examined in earlier decisions where similar donations to the same political party were held to be bogus. The Tribunal noted that detailed investigation, supported by search findings and statements of key persons, clearly established that the so-called political party was engaged in a systematic scam of accepting bogus donations and returning the same to donors.
The Tribunal held that once the entire transaction is found to be sham and non-genuine, mere documentation or routing through banking channels does not establish genuineness. Relying on the principle that fraud vitiates everything, it was held that the assessee is not entitled to deduction under Section 80GGC. Accordingly, the disallowance made by the AO and confirmed by the CIT(A) was upheld, and the appeal of the assessee was dismissed.
Cases Relied Upon
- Milind Pankajbhai Shroff v. Pr. CIT-1 Rajkot- Held that donations made to Rashtriya Samajwadi Party (Secular) were part of a bogus donation racket and deduction under Section 80GGC is not allowable.
- Abhishek Ashok Lohade v. ITO:- Laid down the principle that fraud vitiates all proceedings, and mere submission of documents cannot validate a sham transaction.
- Key Takeaway:- Where investigation establishes that political donations are part of an accommodation entry scheme and funds are returned in cash after commission, deduction under Section 80GGC is not allowable, notwithstanding that payments were made through banking channels.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This is an appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [‘Ld.CIT(A)’], dated 13-10-2025, pertaining to Assessment Year (AY) 2019-20, wherein the assessee has raised the following grounds of appeals:
“1 The Ld. A.O. erred in reopening the Assessment U/S. 148
2. The Hon. CIT(A) ought to have adjudicated the ground relating to re-opening of the assessment.
3. The Ld. A.O. erred in disallowing and the Hon. CIT (A) erred in confirming the disallowance of Rs.9,90,000/- claimed U/S. 80GGC without appreciating the facts and circumstances of the case.
4. The Appellant craves leave to add, alter OR amend the above Grounds of Appeal, as the occasion may demand OR circumstances may require.
5. The unjustified disallowance made to the income of the Appellant may please be deleted in the interest of justice and equity OR in the alternative the assessment please be restored back to the file of the Ld. AO for judicious determination of income.”
3. None appeared on behalf of the assessee nor was any adjournment application filed. Considering the matter under consideration, it was decided that no useful purpose would be served in adjourning the matter any further and to decide the matter based on material available on record.
4. We have heard the Ld. DR and perused the material available on record. The facts of the case are that the assessee filed his return of income u/s. 139 of the Income Tax Act, 1961, declaring total income of Rs. 9,52,310/-, wherein he has claimed the deduction u/s. 80GGC amounting to Rs. 9,90,000/- in respect of donations made to Rashtriya Samajwadi Party (Secular). Subsequently, basis investigation carried out by the Investigation Wing, information was received from the departmental insight portal in respect of the assessee that he has paid donation to Rashtriya Samajwadi Party (Secular) which is not involved in any kind of genuine political activities and the donations received were returned by the way of layering of funds after deduction of commission and basis the said information, notice u/s. 148A(d) was issued to the assessee and in response, assessee filed its submissions which were considered but not found acceptable. Subsequently, order u/s. 148A(d) was issued on 20-042023 and simultaneously notice u/s. 148 was issued on 20-04-2023. In response, the assessee filed its submissions which were considered but not found acceptable to the AO.
5. As per the AO, basis investigation carried out by the investigation wing, certain Registered Unrecognized Political Parties (RUPPs) were engaged in the scam of accepting donations through banking channels routed to multiple layers and ultimately returned such donations in cash after charging commissions ranging from 1.5% to 5%. These RUPPs don’t pay any tax since they are exempt u/s 13A of the Act and the donors claim deduction u/s 80GGB/80GGC of the Act. Accordingly, a search and seizure action u/s 132 of the Income Tax Act, 1961 was conducted in the RUPPs group of Ahmadabad on 07-09-2022. During the course of search and seizure operation, statement of Smt. Sandhya Singh, who is the National Party President of the Rashtriya Samajwadi Party (Secular) was recorded and therein, she has stated that she is the namesake president of Rashtriya Samajwadi Party (Secular) and all the activities of the party are being handled/controlled by her husband, Shri. Bishwajeet Singh. In the statement of Shri. Bishwajeet Singh, he categorically admitted that Rashtriya Samajwadi Party (Secular) is involved in accepting bogus donations for commission ranged from 1.5% to 2% and after the donations are received from the desired donor, they returned the donation amount in cash through the CAs who managed such bogus donation. Basis the findings of the Investigation Wing and the statements so recorded, the AO held that the Rashtriya Samajwadi Party (Secular) is involved in accepting political donations in the lieu of commission and such donations are received through banking channels and later on, transferred to the shell entities and thereafter cash is withdrawn which is returned to the donors and therefore the submissions of the assessee regarding the genuineness of the donation was rejected and the amount of Rs. 9,90,000/- was added on account of bogus donation claimed u/s. 80GGC of the Act vide order passed u/s 147 r.w.s 144B of the Income Tax Act dated 07-02-2025.
6. The assessee thereafter carried the matter in appeal before the Ld. CIT(A) who has examined the findings of the AO as well as the modus-operandi involved and thereafter, relying on the Coordinate bench decision in the case of Milind Pankajbhai Shroff Vs. The Pr. CIT-1, Rajkot (in ITA No. 93/RJT/2023 dated 20-05-2024) has held that the donations received from Samajwadi Party (Secular) is bogus and therefore the claim of deduction by the assessee was bogus and the action of the AO was upheld and the findings of the Ld. CIT(A) reads as under:
“A search and seizure action u/s 132 of the Act was conducted in the case of RUPPs Group of Ahmedabad on 07.09.2022. A total of 23 Registered Unrecognized Political Parties, more than 35 bogus intermediary entities and 3 major exit providers were covered which were called as RUPP Group of Ahmedabad. The search was conducted after credible evidence of a scam going on in the form of donations to political parties for claiming bonus deduction u/s 80GGC/80GGB of the Act which are then re-routed back to the donors in cash/RTGS/NEFT or other banking channels, was gathered and collated with other relevant data points. Enquiries revealed that a few such so called political parties are engaged in huge tax evasion racket and that these are formed for the sole purpose of aiding and abetting tax evasion and earning commission in the process. Documentary and digital evidences collected during the course of search action, were confronted with the key persons of the group and subsequently seized based on which the modus operandi of donation scam was revealed. One of the findings of the search was that the RUPP political parties have been formed by the current office bearers or have been brought from the other handlers to earn commission income by running bogus donation racket. These RUPPs carry out a scam of soliciting bogus donations from various persons which is then routed through various intermediaries and returned to the donor in the form of cash/RTGS/NEFT or other banking channels, after charging a commission in the range of 1.5% to 5% of the amount donated. The modus operandi detected in the course of search operation revealed that the donation is received through cheques/NEFT/RTGS in the RUPP’s bank account. Thereafter, such amounts are routed to an intermediary in the form of expenses towards political and welfare activities. Various bogus individuals/proprietary concerns/companies are found to be active agents in this scam and comprise the point at which either cash is withdrawn or again transferred to another bogus layering entity to get converted to cash or to return to the original donors through banking channel. The donors used these RUPPs for claiming bogus deduction u/s 80GGC/80GGB of the Act. Since the whole process is bogus and non-genuine, all the expenses shown by the RUPPs in the books are bogus.
In this connection, it was found that the assessee is one of donors who had given donation to the Rashtriya Samajwadi Party (Secular) (one of the 23 RUPP), during the year under consideration.
The facts about this party and the modus operandi has been highlighted by the AO in the order of assessment which has been reproduced above.
In this connection, reference is also invited to the case of Milind Pankajbhai Shroff, vs The Pr. CIT 1, Rajkot in ITA No.93/RJT/2023 dtd 20/05/2024 wherein it has been stated:
“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. Siri 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. 9,90,000/- is upheld.”
6. We find that the facts of the present case are pari-materia to the facts before the Coordinate Bench in case of Milind Pankajbhai Shroff (supra) and where, the ld CIT(Appeal) following the said decision has returned a finding that it is a case of bogus donation and the denial of claim of deduction u/s 80GGC was upheld, we donot find any legal or factual infirminity in the order so passed by the ld CIT(A) and the findings therein are confirmed and the grounds of appeal so raised by the assessee are dismissed.
In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on 27-04-2026
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