2026 (1) TMI 987 - AT - Income Tax

Reopening of assessment and 80GGC deduction for donations to unrecognized political parties; remand ordered to verify evidence and adjudicate.

Reopening of assessment addressed validity of the reopening and entitlement to deduction for donations to unrecognized political parties; the tribunal ... Reopening of assessment - sanction granted u/s. 151 - borrowed satisfaction - eligibility of deduction u/s 80GGC - addition for the donation made to the Rashtriya Samajwadi Party (Secular) - as argued addition was made solely on the basis of unverified and uncorroborated extracts of the alleged third-party statements recorded u/s 132(4), without providing copies thereof to the appellant, in gross violation of principles of Audi Alteram Partem. HED THAT:- From the perusal of the records related to the information details of search conducted at Rashtriya Samajwadi Party (Secular), the assessee’s name was categorically mentioned related to the donation given. Thus, ground no. 1 that the reopening is valid/void ab initio does not sustain as the 144AD order categorically mentions the deduction claimed u/s. 80GGC to the extent of Rs. 10,00,000/- and though in para 4 only the RSP amounting to Rs. 5,00,000/- was mentioned in para 8.2 of the said order, the total donation of Rs. 10,00,000/- claimed by the assessee as deduction was taken into account by the Assessing Officer. Thus, ground no. 2 does not sustain. Though the ld. A.R. relied upon the case of Rajiv Bansal [2024 (10) TMI 264 - SUPREME COURT (LB)] it can be categorically mentioned that in the present case the assessee is not travelling beyond the show cause notice issued u/s. 148A(b) as the issue is related to the donations made to registered unrecognized political parties and claiming the deduction u/s. 80GGC. Sanction u/s 151 - Sanction granted u/s. 151 as in the case of reopening the assessee’s case prima facie falls within the clause (c) of provision to section 148A of the Act. The ld. A.R. submitted that the said proviso categorically mandates the Assessing Officer as to draw satisfaction note with the prior approval of the Pr. CIT or Commissioner. But the assessee has ignored the total holistic interpretation of the proviso more specifically proviso (a) as in the present assessee’s case there was search and seizure action conducted by the revenue in respect of 23 Ahmedabad based registered un-recognized political parties (Date of search 07-0- 2022). Thus, the said contention will also do not apply in assessee’s case. Ground no. 4 is dismissed. Additions are solely made on the basis of Investigation Wing and are from borrowed satisfaction without allowing the assessee to cross examine those third parties - From the perusal of the records, the assessee has given the details of bank statements along with donations receipts as well as registration letter of political parties with the Election Commission of India. These documents were not taken cognizance by the AO as well as by the CIT(A). Therefore, it will be appropriate to remand back this issue to the file of the Assessing Officer for taking cognizance of these details and adjudicate the same as per Income Tax Statute. Thus, the appeal of the assessee is partly allowed for statistical purpose. Issues: (i) Whether the reopening of assessment and related proceedings under sections 147, 148, 148A and sanction under section 151 are valid and within the scope of the show cause notice; (ii) Whether the disallowance of donations claimed under section 80GGC (additions confirmed by the authorities) was sustainable where the Assessing Officer relied on Investigation Wing material without taking cognizance of the assessee's supporting documents and without permitting cross-examination of third parties.Issue (i): Validity and scope of reopening under sections 147/148/148A and validity of sanction under section 151.Analysis: The Tribunal examined the show cause notice and related records and found that the notice related to donations to registered un-recognized political parties and encompassed the total deduction claimed of Rs.10,00,000/-. The Tribunal noted that the Assessing Officer did not travel beyond the scope of the show cause notice and that the sanctioning authority and procedural prerequisites under the proviso to section 148A were appropriately considered in the factual matrix of the case. The appellant's reliance on precedents with different facts was noted but held not applicable.Conclusion: The grounds challenging the validity/scope of reopening and the sanction are dismissed; the reopening and sanction are held valid and within the scope of the show cause notice.Issue (ii): Sustainability of additions/disallowance of donations under section 80GGC where reliance was placed on Investigation Wing material and third-party statements without allowing effective confrontation and where the assessee produced bank evidence, receipts and registration particulars.Analysis: The Tribunal observed that the assessee produced bank statements, donation receipts and registration documents which were not taken into account by the Assessing Officer or the CIT(A). The additions were substantially based on the Investigation Wing's report and extracts of third-party statements; the appellant was not afforded an opportunity to test or have those materials properly confronted. In light of these omissions, the Tribunal found that the matter requires fresh consideration by the Assessing Officer with due regard to the materials produced by the assessee and statutory requirements for adjudication.Conclusion: The findings confirming the additions are not upheld at this stage; the matter is remitted to the Assessing Officer for fresh adjudication taking cognizance of the assessee's supporting documents and deciding the claim in accordance with the Income-tax statute.Final Conclusion: The procedural challenges to reopening and sanction are rejected, while the substantive dispute on disallowance of donations is remitted to the Assessing Officer for fresh consideration of the evidence produced by the assessee; the appeal is allowed in part for statistical purposes and the substantive claims are to be re-adjudicated as directed.Ratio Decidendi: Where an assessing authority confirms additions primarily on the basis of investigation reports and third-party statements without taking cognizance of the assessee's contemporaneous bank evidence, receipts and registration details, the matter must be remitted for fresh adjudication to enable a decision after proper application of mind and opportunity to the assessee.