TaxTMI 
TaxTMI 
2026 (7) TMI 1645
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....n law, ab initio void, and the consequential proceedings u/s 147 r.w.s. 1448 deserve to be quashed. Ground 2: Non application of mind: Mechanical Reliance on Investigation Wing Information The learned AO erred in initiating and completing reassessment proceedings solely on the basis of information from the Investigation Wing regarding search on certain political parties, without independent inquiry, without verification, and without bringing any adverse material on record to show the appellant s involvement in any alleged bogus political donation activity. Ground 3: No Evidence of Cash back or Appellants Involvement. The learned AO erred in relying only on the alleged modus operandi, third party statements and generalized findings of search, without bringing on record any evidence, document, cash trail, statement, or corroborative material showing that any portion of the amount donated by the appellant was returned in cash or otherwise. Ground 4: Wrongful Disallowance of Deduction u/s 80GGC The learned AO erred in disallowing the deduction of 2,00,000 u/s 80GGC merely on the basis of third party confessions and search findings, ignoring that the appellant....
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....ellant to the alleged "bogus donation scam" or proving the rerouting/ receipt of cash back. 5.2.2. The AO's action for reopening was based on specific intelligence and material, presumably from a search action against a third party (an alleged entry provider or the political party itself), which indicated a quid pro quo arrangement where the nominal donation was merely a façade. This mechanism involves the donor making a payment (via banking channels) to the political party, obtaining a deduction certificate, and then receiving 1052973844(1) the corresponding cash back from the party's network, thereby converting unaccounted cash into ostensibly accounted funds through the deduction claim. 5.2.3. While the appellant has produced a bank statement showing the outgoing payment and a donation receipt, the law is well-settled that the mere presence of documentary evidence is not sufficient if the transaction itself lacks commercial or legal substance. When the department is in possession of material that suggests the transaction is a "colourable device" or a circular transaction, the burden of proving the genuineness and bona fides of the transaction shifts signi....
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....o 6 On merits as well as on principle of natural justice and order on presumption basis : 7. On careful consideration of the grounds of appeal, it is found that the identical issue was considered by Co-ordinate Bench of this Tribunal in in the case of Saurabh Pravinbhai Patel Vs. ITO in ITA No. 1017/Ahd/2023 vide order dated 30.04.2025 on donation made to political parties u/s. 80GGC of the Act wherein it was held as follows: "4. Aggrieved against the assessment order, assessee filed an appeal before Ld. CIT(A). After considering the Tribunal's decision, confirmed the disallowance made by the Assessing Officer by observing as follows: "While adjudicating the instant case by the undersigned, the eye opening facts came in notice in the case of Pavan Anil Bakeri vs. Deputy Commissioner of Income-tax adjudicated by the Hon'ble ITAT, Ahmedabad Bench which changed the course of the case to a whole new direction In the above case the Hon'ble ITAT held that where assessee made donation to a political party and claimed deduction under section 80GGC, since Assessing Officer found that bank accounts of above political party had been used by accommodation entry pro....
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....eoples were inquired that RSP Office which is found to be closed in most of the times. Copy of the said RSP Office photographs is reproduced in the assessment order. Further perusal of the records of RSP it is observed that during the assessment year 2016-17, RSP has received only donation amounting to Rs. 14,73,309/- whereas as per the bank account statement of the RSP in Oriental Bank of Commerce, total amount credited is Rs. 38,15,03,885/-That apart from RSP is maintaining two other bank account one at Bank of India and another of Central Bank of India. Further enquiry of Mis. Sterlite Inc and Shah And Co both the accounts were closed on 30-3-2016. An enquiry by the Bank both the proprietorship firms, where there is no stocks found and the office premises were being occupied by another person. 2.3 On further verification the donation amount of Rs. 52,00,000/- paid by the assessee to RSP was transferred to Waheguru Enterprise and Sapan Traders on 7-10-2015 of Rs. 25,00 000/-and Rs. 27,00,000/- respectively. This systematic pattern of transferring the funds credited by RSP clearly establishes the modus operandi of the account opening i.e. to route or transfer the funds of....
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....tation trail as a legitimate transaction would normally follow. The only thing which sets its apart from a genuine business entity is lack of genuineness in its actual operations. The operations came out by these entities, are only to facilitate financial manoeuvring for the benefit of its clients, or with that predominant underlying objective, to give the colour of genuineness to these entities. These shell entities, which are routinely used to launder unaccounted monies, are a fact of life, and as much a part of the underbelly of the financial world, as many other evils. Even a layman, much less a Member of this specialized Tribunal, cannot be oblivious of these ground realities." In the aforesaid case, the Hon'ble ITAT bench held "As regarding ground no. 2, donation of Rs. 52,00,000/- made u/s. 80GGC, the ground is general in nature. The assessee has not produced any additional evidence in support of its claim. In fact the assessee had stated that it had cordial relationship with Mr. Kamlendu Tripathi Secretary of RSP and no other criteria was followed for making these donations. The Ld AO made a detailed enquiry of RSP and its Bank accounts and transfer of funds to....
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....lined to agree with the decision made by the AO during the assessment proceedings regarding the donation made was basically a bogus donation as the Political Party is indulging only in providing accommodation entry. Thus in view of the above discussion, the submission made by the appellant regarding the claim of deduction for donation of Rs. 1.13.51,000/- to be allowed is not acceptable as already discussed in detail in the preceding Paras of the instant order. Therefore, the ground of appeal stands dismissed." 5. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of Appeal: 1. The learned National Faceless Appeal Centre has erred in law and facts by confirming the disallowance of claim for deduction under section 80GGC of the Act of Rs. 1,13,51,000/- made by the learned A.O. and therefore the learned A.O. be directed to allow the same while computing total income. 2. That the appellant craves liberty to add, amend and alter any ground of appeal before the final hearing. 6. Ld. Counsel appearing for the assessee filed same set of documents filed before the Assessing Officer and reiterated its submissions....
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.... 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 ....
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....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(....