TaxTMI 
TaxTMI 
2026 (7) TMI 1301
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....g zero contributions OR non filing of accounts by the political party cannot be deemed conclusive proof of non-genuineness of the Appellants specific transaction. Compliance failures of the donee political party cannot be imputed to the Appellant donor. As held in ACIT v. Armee Infotech supra and confirmed in the Raipur ITATs order, disallowance made purely on presumption and general findings cannot be upheld in absence of specific corroboration. 2. DONOR CANNOT BE HELD RESPONSIBLE FOR THE ACTS OF THE DONEE That on the facts and in the circumstances of the case, the Assessing Officer erred in holding the Appellant accountable for any alleged non compliance, irregularity, OR misuse of funds by Rashtriya Samajwadi Party Secular, the donee political party. The Honble Supreme Court of India in LIC of India v CIT 1997 219 ITR 410 SC has laid down 2 that donors cannot be held responsible for the manner in which political parties OR other recipients utilize donated funds post donation, applying the Doctrine of Impossibility. The Appellants obligations ended upon making the donation through banking channels and furnishing the requisite documentary evidence. The Income Tax Act, 196....
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....e the same with specific material. That the Honble Income Tax Appellate Tribunal, Raipur Bench, in ITA No 11RPR2026 ACIT Circle 11 Bilaspur v Anuj Prakash Gupta, Assessment Year 2019 20, decided on 05 Feb 2026 has categorically held. 7. VIOLATION OF PRINCIPLES OF NATURAL JUSTICE DENIAL OF CROSS EXAMINATION: That on the facts and in the circumstances of the case the Assessing Officer violated the fundamental principles of natural justice by relying upon statements and findings from search proceedings carried out against third parties without confronting the Appellant with such material and without affording him any opportunity to cross examine the persons whose statements were relied upon. It is a well settled principle that any adverse evidence OR statement relied upon by the Assessing Officer must be communicated the Appellant and the opportunity to cross examine must be given. Reliance is placed on the judgments in Shobhit Gupta v ACIT and Principal Commissioner of Income Tax v Kishore Kumar Mohapatra." 2. Briefly stated facts of the case are that assessee an employee of M/s. JP Morgan Services India Pvt. Ltd. filed his return of income for the year under consideratio....
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....ed copy of the receipt received from the said political party, the copy of the bank account statement and the copy of the registration of the impugned party from the Election Commission of India. The ld Assessing officer however, noticed that the said political party did not comply to the provision of Section 29C of the Representation of Peoples Act, 1951 and had not filed the contribution report for the period from financial year 2013-14 to 2022-23. Similarly, the said political party did not file the annual report for the period from financial year 2013-14 to 2022-23 and therefore assessing officer held the conditions laid down in Section 13A of the Income-tax Act were not fulfilled by the said party and therefore said party was not entitled to claim exemption on the income earned in respect to the relevant assessment year. Accordingly, the assessing Officer issued a show cause notice to the assessee, relevant part which is reproduced as under: "2.4 Variation proposed on the basis of inference drawn (specify the basis of inference and quantify the variation proposed, if possible) From the information received from the Directorate of Income tax (Investigation), t....
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.... party was involved in activity of accommodating entry by accepting bogus donation, then why the genuine donation has to be disallowed to the innocent assessee, where no cash has been received after making such contribution. Section 80GGC of the income tax permits an individual to claim a tax deduction for any donations or contributions made towards any political party. We have claimed such deduction in our return in good faith and in bona fide manner. ..... I hereby submit that I file my income tax return regularly and honestly with all due income tax on the income earned by me during the respective financial year. I had made genuine contribution to Rashtriya Samajwadi Party (Secular) for a sum of Rs. 4,00,000/- during FY 2018-19 after going through the independent approved documents as submitted above; and my claim of deduction u/s. 80GGC is legal and as per the Law. The assessee had reported net income of Rs 5,01,250/- in the return of income filed for the year under consideration after the claim of the donation of Rs 4,00,000/- to an unrecognized political party and there is no proof that said political party is active or ever contested any r....
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.... The assessing officer also held that the genuineness of the transaction and existence of said political party is not established by the assessee. The Assessing Officer further held that only copy of ITR by said political party was filed on 10.08.2017, wherein in the statement of income for the period ended on 31.03.2016 they have shown nil amount regarding voluntary contribution, Further, as per information on ITBA portal about ITR of said political party, they have mentioned that no contribution is received. The Assessing Officer further held that even in the preceding year, the assessee has paid similar contribution of Rs. 35.00 lakh to the same political party, which is also more than 40% of the gross total income. The Assessing Officer took his view that assessee is contributing almost 50% of his income in all two years to said political party and such political party has not contested any election nor they have any presence in the Regional or at National level. On the basis of such adverse report /material gathered by Assessing Officer, the Assessing Officer disallowed the entire donation of Rs. 50.00 lakh under section 80GGC. 8. We find that before Id CIT(A) the ass....
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....t it is not his duty to verify the affairs of such political party. It is not the case of the assessee that he is one of the main officer bearer or having any organisational post either at the District level or State level in the said political party. Even the assessee has not provided the details of his bank account or the bank account of such political party. Before us, the assessee has filed copy of the receipt of contribution/ donation to the said political party alongwith the bank statement. No certificate is furnished in the form of verification of list of documents, if such bank statement is filed before lower authorities. Filing of such documents which were not certified, if filed before lower authorities, is not permissible. In view of the aforesaid factual discussions, we do not find any merit in the grounds of appeal raised by the assessee. 11. The case laws relied by the Id AR for for the assessee is not helpful to the assessee as the facts of the case in hand is quite distinguishable on facts. In case of CIT vs. Armee Infotech (supra), the assessee is the said case made donation to six different entity including to the said political party of Rs. 55.00 lakhs. ....
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....h 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....
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....t 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, the findings of the Coordinate Bench of ITAT Pune, are reproduced below: "9. There is yet one more reason as to why we are inclined to confirm the addition made by Assessing Officer, in view of the well settled principle of law that fraud vitiate everything and even principle of natural justice have no application and such transaction is void ab initio. The Hon'ble Supreme Court in the case of Friends Trading Co. vs. Union of India in Civil Appeal No.5608 of 2011 vide order dated 23.....
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....efined as an act of trickery or deceit. The aforesaid principle has been reiterated in Roshan Deen v. Preeti Lal [AIR 2002 SC 33], Ram Preeti Yadav v. U. P. Board of High School and Intermediate Education and other [(2003) 8 SC 311] and Ram Chandra Singh v. Savitri Devi and others [(2003) 8 SCC 319]. 23. In State of Andhra Pradesh and another v. T. Suryachandra Rao [AIR 2005 SC 3110] after referring to the earlier decision this court observed as follows:-"In Lazaurs Estate Ltd. v. Beasley [(1956) 1 QB 702] Lord Denning observed at pages 712 & 713, "No judgment of a Court, no order of a Minister can be allowed to stand if it has been obtained by fraud. Fraud unravels everything." In the same judgment Lord Parker LJ observed that fraud vitiates all transactions known to the law of however high a degree of solemnity." 24. Yet in another decision Hamza Haji v. State of Kerala &Anr. [AIR 2006 SC 3028] it has been held that no court will allow itself to be used as an instrument of fraud and no court, by way of rule of evidence and procedure, can allow its eyes to be closed to the fact it is being used as an instrument of fraud. The basic principle is that a party who se....
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....he case, appellant is a salaried individual working during the year with a M/s JP Morgan Services India Pvt. Ltd. Originally the appellant had filed his Return of Income (Rol) on 14.07.2019 for the A.Y. 2019-20 declaring Total Income of Rs. 5,01,250/-. Subsequently, the AO received information, disseminated by the Investigation Wing that the appellant had made availed accommodation entry of bogus claim of deduction u/s 80GGC, the AO issued notice and order u/s 148A(b) and 148A(d) respectively; and finally, a notice u/s 148 was issued on 17.04.2023. It is important to note that the appellant had responded to notice u/s 148A(b), by submission dated 08.04.23 which has considered by the AO before passing order u/s 148A(d) and then the notice u/s 148 has been issued on 17.04.2023. In response to the notice u/s 148, the appellant filed his Rol on 06.05.2023 declaring Total Income of Rs. 5,01,250/. The re-assessment proceedings set in motion by the AO culminated in passage of an order u/s 147 r.w.s. 144B on 10.12.2024 where additions of Rs. 4,00,000/- was made by way of disallowance of claim of deduction u/s 80GGC. Impugning such order and the additions, the appellant has preferred this a....
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....ent in view of specific information from the Investigation Wing, about wrong claim allowed or income not disclosed in a case, is a valid action as held by several judicial authorities of the land. We may recall here ratio emanating from decision of the Hon'ble Supreme Court of India in the case of ITO Vs Purushottam Das Bangur (1997) 90 Taxman 541 (SC) wherein it was held that the letter of Deputy Director of Investigation giving information that low quotation on stock exchange of a company's share was an artificial manipulation in view of the facts and figures showing that the company was prospering at that time, was a valid information from which the Assessing Officer could have reason to believe that income chargeable to tax had escaped assessment for the relevant year. The Hon'ble High Court of Gujarat in the case of Pushpak Bullion (P.) Ltd. Vs DCIT [2017] 85 taxmann. com 84 (Gujarat) held that Where investigation wing of department had during course of investigation in case of a third party found that he was indulged in providing accommodation entries and bogus bills, and assessee had made sizeable purchases from him, reopening notice against assessee was justifie....
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.... (Secular) (RSP)' which is about 24% of his gross salary income of the year and about 1/3 rd of the Total Income before claiming deductions under chapter VIA. This makes the whole affair murky as it is not clear whether the appellant has ever before or afterwards made any contribution to any political party and clamed exemption, including mainstream, recognized political parties! The fact of the matter in this case is that the purported donation of Rs. 4,00,000/- does not meet the test of the principles of probabilities enunciated by several judicial authorities particularly by the Hon'ble Supreme Court in the case of CIT Vs. Durga Prasad 82 ITR 540 (SC) and Sumati Dayal Vs. CIT 214 ITR 801(SC). 5.3.6. The appellant has attempted to shift to onus on the AO alluding that the no material about the lack of bonafide etc. of his claim of deduction was provided to him. Such stance is legally and factually untenable. In this case, the claim of deduction u/s 80GGC was made by the appellant and therefore, onus is on him to establish the bonafide of the same when called by the AO. The AO was acting in view of explicit information received from the Investigation Wing about th....
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....ty 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.....
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....is also explored and held that the section 29A of the said Act, governs registration of Associations and Bodies as political parties. The section 29B of the said Act provides for receipt of contributions by such parties. These sections do not override provisions of Income Tax Act, particularly those related to looking into bonafide of the contributions made/received by the said registered political parties. 5.3.10. India is a democracy where right to association is one of the fundamental rights and participation in the political processes is accordingly liberally construed in the humble opinion of this author. The information in the public domain testifies that as of August 2025, there are a total of 2,920 registered political parties in India, consisting of 6 national parties, 67 state parties, and 2,854 registered but unrecognized political parties (RUPPs). The Election Commission of India time to time delist such RUPPs. It is learnt that recently 334 RUPPs have been delisted, bringing the number of unrecognized parties down to 2,520. 5.3.11. The RUPP, i.e. 'RSP' to which this appellant has made 'donation' is one such delisted RUPP. The facts and....
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.... chief executive officer of the association or body (whether such chief executive officer is known as Secretary or by any other designation) and presented to the Secretary to the Commission or sent to such Secretary by registered post. (4) Every such application shall contain the following particulars, namely:- (a) the name of the association or body; (b) the State in which its head office is situate; (c) the address to which letters and other communications meant for it should be sent; (d) the names of its president, secretary, treasurer and other office-bearers; (e) the numerical strength of its members, and if there are categories of its members, the numerical strength in each category; (f) whether it has any local units; if so, at what levels; (g) whether it is represented by any member or members in either House of Parliament or of any State Legislature: if so, the number of such member or members. (5) The application under sub-section (1) shall be accompanied by a copy of the memorandum or rules and regulations of the association or body, by whatever name called, and such memorandum or rules and ....
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....on 2 of the Income-tax Act, 1961 (43 of 1961), but does not include Government company, local authority and every artificial juridical person wholly or partially funded by the Government." As already observed the aforesaid provisions do not per se establish bonafide of financial transactions to be undertaken by such RUPPs not to mention that they do not override provisions enshrined in the Income tax statute. Hence, when Investigation Wing has cast the doubts on bonafide of the said RUPP, the appellant was under onus to dispel them. 5.3.13. The alternate argument that the AO has not been able to provide cash trail or any indirect benefit received by him also does not hold. Such plea is unwarranted when the proceedings are conducted where circumstantial evidences revealed that the recipient of donation of Rs. 4,00,000/- was a dubious entity running racket of providing bogus entries for claim of deduction u/s 80GGC. Moreover, it is established norm for test of evidence as far as proceedings in the Income Tax Statute are concerned that the proceedings in the Income Tax Act, particularly to determine tax liability, is different from criminal proceedings hence the esta....
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....e Assessing Officer is not fettered by the technical rules of evidence and the like, and that he may act on material which may not strictly speaking be accepted evidence in court of law.' The Hon'ble Apex Court in the case of CIT v. Durga Prasad More (1971) 82 ITR 540 (SC) has held that 'Assessing Officer can go beyond the parameters laid down in Civil, Criminal and Evidence Act and look into the surrounding circumstances and even issue summons and examine witnesses and other people who he suspects would have given the loans or entered into agreements in order to find out the reality of the situation.' 5.3.14. The appellant, specifically through the ground no. 2 of the appeal, has assailed this reassessment order citing that opportunity to cross examine the persons related to said entry providers was not allowed to him. The appellant has cited that it was not given opportunity to cross-examine the said entry operators, is of no merit until the appellant is able to dislodge and disprove the doubts raised on the bonafide about the deduction calimed. The Hon'ble Supreme Court in the case of 'Ayubkhan Noorkhan Pathan v State of Maharashtra & others'....
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....ng has not been satisfied in their individual cases. In all the cases, the assessees have been issued notices under sections 143(2) and 142(1) they have been directed to furnish the documents, the assessee have complied with the directions, appeared before the Assessing Officer and in many cases represented by Advocates/Chartered Accountants, elaborate legal submissions have been made both oral and inwriting and thereafter the assessments have been completed. Nothing prevented the assessee from mentioning that unless and until the report is furnished and the statements are provided, they would not in a position to take part in the inquiry which is being conducted by the Assessing Officer in scrutiny assessment under section 143(3)................... 5. 3.15, In the present case, the donation has certainly been paid through banking channels but that was the part of the design where entities were floated so as to provide accommodation entries of deduction u/s 80GGC while availing the benefit of section 13A. The substance has to prevail over form. Also, a claim of deduction or for that matter any transaction having bearing on revenue has to be considered in totality of facts ....
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....bsequent investigations. Grounds relating to genuineness of donation under section 80GGC 6.4 The principal contention of the assessee is that he had discharged the burden cast upon him by law by producing the donation receipt, proof of payment through banking channels and the registration details of the political party. According to the assessee, once these documents were furnished, no adverse inference could be drawn merely on account of alleged irregularities committed by the recipient political party. 6.5 We are unable to accept the aforesaid submission in the facts of the present case. The issue before us is not whether the payment was routed through banking channels. The issue is also not confined to the existence of a receipt acknowledging the payment. The real question is whether the transaction was genuine and whether the claim of deduction represents a bona fide contribution contemplated under section 80GGC of the Act. 6.6 It is a settled principle that the apparent may not necessarily be accepted as real when surrounding circumstances and attendant facts create serious doubts regarding the genuineness of the transaction. The taxing authorities are entitled to ....
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....sent case does not concern subsequent utilization of donated funds. Rather, the issue is whether the very claim of donation itself is genuine. Where credible material exists to indicate that the recipient entity was functioning as a conduit for providing accommodation entries and that the transaction lacked commercial or factual credibility, the donor cannot seek deduction merely by relying upon banking documents and receipts. The genuineness of the claim remains open to examination and must be established on the basis of the totality of circumstances. Ground relating to violation of principles of natural justice 6.12 The assessee has further alleged violation of principles of natural justice on the ground that statements recorded during search proceedings were relied upon without affording an opportunity of cross-examination. 6.13 We do not find merit in the contention. The reassessment proceedings were initiated on the basis of information emanating from search and investigation proceedings. The assessee was informed of the nature of allegations and was afforded opportunity to explain the transaction. The addition has not been made solely on the basis of any isolated sta....