2026 (2) TMI 155 - AT - Income Tax

Bogus political donations deduction under section 80GGC revised for verification failures; deduction disallowed and appeal dismissed.

Revisionary scrutiny found the assessing officer failed to verify donation receipts and the genuineness of three donee political entities, rendering the ... Revision u/s 263 - bogus political donations - assessee had claimed deduction u/s 80GGC on account of donations allegedly made to four political parties - According to the Principal CIT, except for Bharatiya Janata Party, the remaining three entities were found to be bogus and were allegedly involved in scams relating to tax evasion through bogus donations - HELD THAT:- Revision u/s 263 is not founded on a mere change of opinion or on a later external event alone. It is based on concrete factual discrepancies found in the assessment record itself, including incorrect donation receipts and lack of verification of the genuineness and eligibility of the donee political parties. Principal CIT has demonstrated, with reference to the material on record, that the AO failed to examine vital aspects of the claim and did not go into the issue of deduction under section 80GGC in respect of the entire amount claimed. We also find merit in the reliance placed by the Principal CIT on the judgment of BSES Rajdhani Power Ltd [2023 (6) TMI 1146 - SC ORDER] wherein it has been held that non-examination of an issue in respect of the whole claim constitutes an error amenable to revision under section 263. In the present case, the Assessing Officer’s failure to verify the genuineness of the political parties and the correctness of the donation receipts has clearly rendered the assessment order erroneous. Since such error has resulted in allowance of an inadmissible deduction and consequent loss of revenue, the order is also prejudicial to the interests of the Revenue. Thus, the twin conditions for invoking section 263 stand fully satisfied. No infirmity in the order passed by the Principal CIT. Decided against assessee. Issues: Whether the Principal Commissioner of Income Tax validly invoked section 263 of the Income-tax Act, 1961 to set aside the assessment insofar as deduction claimed under section 80GGC for donations to certain political parties, on the ground that the assessment order was erroneous and prejudicial to the interests of the Revenue.Analysis: The assessment accepted the returned income after the Assessing Officer called for and recorded donation receipts and bank statements. Subsequent review by the Principal CIT disclosed material discrepancies in the records, including donation receipts with donor names not matching the assessee and objective indicia that three donee entities were non-genuine and involved in tax-evasion through bogus donations. The apparent inquiries conducted by the Assessing Officer did not include meaningful verification of the identity, genuineness and eligibility of the donee political parties or reconciliation of glaring inconsistencies in the documentary record. The position is distinguishable from cases where a complete inquiry was conducted and revision was sought only on the basis of later external developments; here the revision is founded on concrete defects in the assessment record itself. Reliance on the Supreme Court principle that non-examination of an issue in respect of the whole claim renders an order erroneous was applied to conclude that both limbs of section 263 (erroneous and prejudicial to revenue) are satisfied.Conclusion: Section 263 was rightly invoked; the Principal Commissioners order setting aside the assessment in respect of the deduction under section 80GGC is upheld and the appeal is dismissed (decision in favour of Revenue).