Dinesh Singhal Vs Assessment Unit (ITAT Jaipur)
Political Donation Through NEFT Not Enough for Section 80GGC Deduction: ITAT Upholds Disallowance
Summary: The Income Tax Appellate Tribunal (ITAT), Jaipur Bench, has upheld the disallowance of a ₹1.51 lakh deduction under Section 80GGC, holding that payment through banking channels and a donation receipt do not conclusively establish a genuine political contribution when contrary evidence remains unrebutted.
In Dinesh Singhal v. Assessment Unit, Income Tax Department, the Tribunal distinguished between proof that money reached a political party and proof that it constituted a genuine contribution. Registration of the recipient and non-cash payment could not, by themselves, establish entitlement where the Revenue produced evidence of donations being returned in cash.
The order dated 5 November 2026 was passed in ITA No. 199/JPR/2026, concerning Assessment Year 2019-20, by Judicial Member Kuldip Singh and Accountant Member Prakash.
Background of the Donation Claim
The assessee filed his return declaring total income of ₹8,48,280, after claiming a deduction of ₹1,51,000 for a contribution made through NEFT to Rashtriya Samajwadi Party (Secular), or RSP(S).
Following a search conducted on 7 September 2022 on a group of registered unrecognised political parties in Ahmedabad, including RSP(S), the assessment was reopened through a notice under Section 148 dated 18 April 2023.
During reassessment, the assessee furnished a donation receipt, bank statement and affidavit. He maintained that the statutory requirements were satisfied because the recipient was registered and the payment was not made in cash.
He also requested copies of the evidence relied upon and sought cross-examination of the persons whose statements formed the basis of the proposed disallowance.
Revenue Relied on Sworn Admissions
The Assessing Officer relied on statements recorded under Sections 132(4) and 131(1A) from the party’s president, her husband who managed its affairs, and its former president.
According to the assessment findings, these persons admitted that the party carried on no political activity and received donations that were returned to donors in cash through dummy entities, after retaining approximately 4% to 5% commission.
The officer also recorded that donors were procured through commission agents and that no party office was found at its known addresses.
The assessment order stated that the relied-upon statements and related information had been supplied with the Section 148A(b) notice and again during the show-cause proceedings. The request for cross-examination was declined, and the deduction was disallowed.
CIT(A) Confirmed the Disallowance
The CIT(A) held that a banking channel establishes the mode of payment, rather than conclusively proving the transaction’s genuineness.
The appellate authority considered that the sworn admissions of the persons running the party remained uncontroverted. It found that the receipt and other documents did not overcome the investigative material concerning the donation arrangement.
The assessee appealed, contending that the Revenue had failed to discharge the burden of proving the donation non-genuine.
However, no one appeared on his behalf at the Tribunal’s hearings on 31 August and 8 October 2026. No paper book or written submissions were filed. The Tribunal therefore decided the appeal on merits after hearing the Revenue, under Rule 24 of the ITAT Rules.
A Payment Must Constitute a Genuine Contribution
The Tribunal noted that the recipient’s registration and the non-cash mode of payment were not disputed.
However, Section 80GGC requires an amount to have been contributed. The Tribunal explained that a payment returned to its payer in cash after deduction of commission does not constitute a contribution merely because a receipt describes it as one.
Registration and payment mode are conditions for deduction; they do not transform a circular payment into a genuine contribution.
A receipt may prove payment, but does not independently resolve whether the money ultimately remained with the recipient.
Burden Shifted Back to the Assessee
The Tribunal held that the person claiming a deduction bears the burden of establishing its supporting facts.
A receipt and bank entry may satisfy the initial burden. However, where the Revenue produces material striking at the transaction’s substance, the claimant must address that material.
Here, the evidence comprised sworn admissions by those operating the recipient party, rather than merely an investigative inference.
Against that material, the assessee supplied only the receipt, bank statement and an affidavit asserting good faith. These established that money reached the party but did not address what happened thereafter. The Tribunal also observed that the donor’s good faith was not the test.
Final Decision and Scope
The Tribunal sustained the ₹1,51,000 disallowance and dismissed the appeal, finding no error in the CIT(A)’s consideration of surrounding circumstances and human probabilities.
It expressly stated that the validity of reopening and denial of cross-examination were not issues before it, and offered no opinion on them.
The ruling therefore turns on the unrebutted evidence in this case: a non-cash payment and donation receipt could not, alone, overcome material challenging the contribution’s genuineness.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
1. This appeal by the Assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “the learned CIT(A)”] dated 30.12.2025 arising out of the assessment order dated 27.03.2025 passed by the Assessing Officer (hereinafter referred to as “the AO”) under section 147 read with section 144B of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for the assessment year 2019-20.
2. The ground of appeal raised by the Assessee before us in the memorandum of appeal in Form No. 36 reads as under:
“That Ld. C.I.T (A)- NFAC, Delhi has erred, in confirming the disallowing of Appellant’s claim under section 80GGC of Rs. 1,51,000/- made to Recognized Political Party (Rastriya Samajwadi Party) despite on record facts:-
1. Evidence of Payment – Receipt number 031655 Dt. 11/1/2019
2. Payment has been made by NEFT.
3. Affidavit of Appellant.
As the onus of proving the donation as non-genuine has not been discharged the disallowance confirmed need to be deleted.”
3. The appeal was first adjourned to 31.08.2026 as the Bench did not function on the date originally fixed, and notice was issued to both the parties. On 31.08.2026, none appeared for the Assessee and the hearing was adjourned to 08.10.2026 with a direction that notice be served through the learned Departmental Representative (hereinafter referred to as “the learned DR”). On 08.10.2026, again none appeared for the Assessee and no adjournment was sought. No paper book or written submission is on record. Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963 permits the Tribunal in such a case to dispose of the appeal on merits after hearing the respondent. We have heard the learned DR, who supported the orders of the lower authorities, and we decide the appeal ex parte qua the Assessee on the material on record.
4. Briefly stated, the facts of the case are that the Assessee returned total income of Rs 8,48,280 after claiming a deduction of Rs 1,51,000 under section 80GGC of the Act for a contribution made by NEFT to Rashtriya Samajwadi Party (Secular) [hereinafter referred to as “RSP(S)”]. On information arising from a search under section 132 of the Act conducted on 07.09.2022 on a group of registered unrecognised political parties of Ahmedabad, including RSP(S), the assessment was reopened by notice under section 148 of the Act dated 18.04.2023. In the reassessment proceedings, the Assessee furnished the donation receipt, the bank statement and an affidavit, contended that both the conditions of section 80GGC of the Act were satisfied, asked for copies of the evidence relied upon and sought cross examination of the persons whose statements were relied upon.
4.1 The AO relied upon the statements recorded on oath under sections 132(4) and 131(1A) of the Act of the president of RSP(S), her husband who managed its affairs and its erstwhile president. According to the AO, they admitted that the party carried on no political activity, that it existed only to receive donations and return them to the donors in cash through dummy entities after retaining a commission of about four to five per cent, and that donors were procured and receipts issued through commission agents. The AO further recorded that no office of the party was found at any of its known addresses. On the Assessee’s request for the evidence, the AO recorded as under in paragraph 4.5.5 of the assessment order:
“The assessee has requested to provide him copy of any evidence which the department may possess. However, it is noticed that all such information was provided to the assessee in notice u/s 148A(b) of the I.T. Act. on 29.03.2203 [sic] which was duly served upon the assessee through E-filing portal, E-mail and speed post but the assessee chose not to reply to that notice. Even during the assessment proceedings, all the evidences which have been relied upon by this unit like copies of statement of various office bearers of political parties and related information have already been provided to the assessee in the show cause notice.”
4.2 The request for cross examination was declined and the deduction was disallowed.
4.3 The learned CIT(A) confirmed the disallowance, holding that a banking channel establishes only the mode of payment and not the genuineness of the transaction, and that the findings of the AO, founded on the admissions on oath of the very persons who ran the party, remained uncontroverted. The learned CIT(A) observed in paragraph 5.10 of the impugned order:
“The appellant has not furnished any independent evidence to demonstrate the bona fide functioning of the political party, nor has he rebutted the factual matrix relating to the nationwide bogus donation scam. Mere production of a receipt, especially one handwritten and issued by a party which is proved to be non-existent at its registered address, cannot override exhaustive investigative findings supported by statutory statements, seized records, and digital trails.”
5. We have considered the material on record and the submissions of the learned DR.
5.1 Section 80GGC of the Act allows a deduction of any amount of contribution made by a person, otherwise than by way of cash, to a political party registered under section 29A of the Representation of the People Act, 1951. The two conditions which the section places on the donor, namely a registered recipient and a non cash mode of payment, are not in dispute here. The question is anterior to both. The section speaks of an amount “contributed”, and a contribution is money that parts from the donor for good. A payment which travels to the recipient by cheque and returns to the payer in cash after deducting a commission is not a contribution at all, whatever the receipt may call it. Registration and the mode of payment are conditions of the deduction; they do not convert a circular payment into a contribution. A receipt is evidence of a payment. It is not, by itself, evidence of a contribution.
5.2 The sole ground of appeal proceeds on the footing that the onus of proving the donation to be non genuine lay on the Revenue and was not discharged. A deduction is a claim, and the burden of establishing the facts on which it rests lies on the person who makes it. The receipt and the bank entry may be taken to have met that initial burden. But the burden does not then rest with the Revenue for all time. If the Revenue brings on record material which strikes at the root of the transaction, the onus shifts back to the claimant to dispel it, and the question in every such case is whether the material brought by the Revenue is of that quality.
5.3 The material relied upon by the Revenue is not an inference drawn by the Investigation Wing about the party. It is the sworn admission, under sections 132(4) and 131(1A) of the Act, of the very persons who ran RSP(S) that the party carried on no political activity and that the donations it received were returned to the donors in cash after retaining a commission. That material was furnished to the Assessee with the notice under section 148A(b) of the Act, which went unanswered, and again with the show cause notice, and the record to that effect is not disputed. In answer, the Assessee offered only the receipt, the bank statement and an affidavit of good faith. The receipt and the bank statement prove that the money reached the party, which was never in dispute; they say nothing about what became of it thereafter, which is the whole of the Revenue’s case; and the good faith of the donor is not the test. Before us, the Assessee has placed nothing at all. The learned CIT(A) tested the claim on the surrounding circumstances and human probabilities, and we find no error in that approach or in the conclusion reached. The validity of the reopening and the request for cross examination made before the AO are not in issue before us, and we express no opinion on them.
5.4 In the light of the above, the disallowance of Rs 1,51,000 under section 80GGC of the Act is sustained. The sole ground of appeal is dismissed.
6. In the result, the appeal filed by the Assessee is dismissed.
Order pronounced in the open court on 05.11.2026
