TaxTMI 
TaxTMI 
2026 (9) TMI 328
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.... 147, as it was based solely on third-party search information in the case of other persons and lacked any independent application of mind or objective satisfaction by the AO; consequently, the reopening is legally infirm, invalid, and liable to be quashed. 2. The Ld. CIT(A) failed to appreciate that the AO neither provided the statements or documents relied upon from the search proceedings nor granted any opportunity for cross-examination of the alleged third-party statements, amounting to a gross violation of the principles of natural justice and thereby rendering the addition bad in law. 3. The Ld. CIT(A) erred in confirming the disallowance of the deduction u/s 80GGC of Rs. 3,00,000/- despite the appellant having substantiated the donation through proper banking channels and supporting receipts from the political party, and without the Department bringing any material evidence on record to establish that the said amount was ever returned to the appellant. 4. The Ld. CIT(A) erred in upholding the addition of Rs. 2,85,000/- u/s 69A solely on the basis of an alleged generic modus operandi attributed to certain RUPP entities, without producing any direct ....
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....ed by the Assessing Officer, these political parties were accepting donations through cheque, RTGS or NEFT, routing the money through intermediary entities and returning the amount to the donors in cash after deducting commission ranging from 3.5% to 5%. 6. The information received by the Assessing Officer indicated that the assessee had made a political contribution of Rs. 3,00,000/- to Rashtriya Samajwadi Party (Secular) during the financial year 2018-19 and had claimed deduction of the said amount under section 80GGC of the Act. 7. On the basis of the said information, proceedings under section 148A of the Act were initiated. After passing an order under section 148A(d) and obtaining the prescribed approval, a notice under section 148 was issued on 10.04.2023. In response, the assessee filed his return of income on 09.05.2023 declaring the same total income of Rs. 17,26,020/-.A notice under section 143(2) was issued on 22.05.2024. In response, the assessee furnished a reply on 17.06.2024 along with, inter alia, the computation of total income, details of bank accounts, Form No.16, bank statement, proof of payment of life insurance premium, invoice relating to mediclaim and....
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.... to a party which allegedly had no political presence and had not complied with the requirements of the Election Commission of India. The Assessing Officer concluded that the assessee had knowingly entered into a transaction with the political party for obtaining a deduction under section 80GGC. 11. The Assessing Officer accordingly disallowed the deduction of Rs. 3,00,000/- claimed under section 80GGC. He further inferred that the assessee received Rs. 2,85,000/- in cash after deduction of commission of 5% from the donation of Rs. 3,00,000/-. The said amount was treated as unexplained money under section 69A and was subjected to the provisions of section 115BBE of the Act.The Assessing Officer also noticed that the assessee had claimed deduction of Rs. 7,500/- under section 80D, whereas the invoice furnished by him evidenced payment of only Rs. 5,450/-. The balance amount of Rs. 2,050/- was, therefore, disallowed. The total income was computed as under: Particulars Amount Income returned under section 139(1) Rs.17,26,020/- Income returned in response to notice under section 148 Rs.17,26,020/- Disallowance under section 80GGC Rs.3,00,000/- Addition und....
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....ontribution was an exception to the general practice followed by the political party. The learned CIT(A), therefore, confirmed the disallowance of Rs. 3,00,000/- under section 80GGC. 17. The learned CIT(A) further held that the seized material and statements established that the donations were returned to the donors in cash. The assessee had failed to rebut the evidence by producing any contrary material. Reference was also made to the presumptions under sections 132(4A) and 292C of the Act. The addition of Rs. 2,85,000/- under section 69A was accordingly sustained. The disallowance of Rs. 2,050/- under section 80D was also confirmed on the ground that the assessee had not furnished any evidence in excess of the invoice for Rs. 5,450/-. Consequently, the appeal was dismissed. 18. Before us, the learned Authorised Representative (AR) reiterated the facts and submitted that the assessee had discharged the burden cast upon him under section 80GGC. The contribution of Rs. 3,00,000/- was made to Rashtriya Samajwadi Party (Secular) through a banking channel. The assessee had furnished the bank statement evidencing the payment and the receipt issued by the political party. The statu....
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....bution made by an eligible person to a political party, except where the contribution is made in cash. For this purpose, a political party means a political party registered under section 29A of the Representation of the People Act, 1951. The provision does not require that the recipient should be a recognized political party or that it should have contested elections during the relevant period. Registration and recognition are distinct concepts. 25. In the present case, the Department itself proceeded on the basis that Rashtriya Samajwadi Party (Secular) was a registered unrecognized political party. The payment through a banking channel and the issuance of the donation receipt have not been disproved. The statutory identity of the recipient and the noncash mode of payment, therefore, stand established from the material accepted in the assessment order. 26. We are conscious that payment through a banking channel and production of a receipt cannot, by themselves, make an otherwise sham transaction genuine. Nevertheless, an allegation that a transaction is an accommodation entry must be supported by material establishing a nexus between the alleged accommodation-entry operatio....
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....red view, the said presumptions do not establish the alleged receipt of cash by the present assessee. The presumptions primarily operate in respect of the person from whose possession or control the books of account, documents, money or other assets are found. The material referred to by the authorities below was not found in the possession or control of the assessee. In any event, a statutory presumption cannot establish a fact which the document itself does not record. A record showing the assessee as a donor may support the admitted fact that the assessee made a contribution, but it cannot be presumed to establish that the assessee received cash in return unless the document contains some material to that effect. 30. The issue is directly covered by the decision of the Coordinate Bench in Mukesh Somani v. Assessing Officer, ITA No.1140/Jodh/2025, order dated 02.06.2026. The said case also related to the assessment year 2019-20, a contribution to Rashtriya Samajwadi Party (Secular) and information received from the Investigation Wing regarding alleged accommodation entries. The Co-ordinate Bench recorded in paragraph 4 as under: "The Department allegation was that the....
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...., ITA No.49/SRT/2024, order dated 28.03.2024, relied upon by the authorities below, is distinguishable on material facts. In that case, the donation was made to a different political party, namely Rashtriya Komi Ekta Party. The donation of Rs. 50,00,000/- constituted almost half of the assessee's gross total income. The Co-ordinate Bench further found that the relevant bank details had not been furnished before the authorities below and that the recipient political party had not acknowledged the contribution in its return. Paragraph 10 of the said order records: "We have independently examined the facts of the present case. We find that the assessee has not replied to basic question and the objection raised by the assessing officer about his doubt on the genuineness of contribution to such political party, except claiming that 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 poli....
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....dings under section 263. Before any transaction of a particular assessee can be treated as fraudulent, the foundational facts connecting that assessee with the fraud must first be established. A general conclusion regarding the activities of the recipient cannot, by itself, establish participation by every donor. 39. The disallowance under section 80GGC and the addition under section 69A stand on different statutory foundations. Even if the material available with the Revenue was sufficient to initiate an inquiry into the genuineness of the donation, an addition under section 69A could be made only after establishing that the assessee was found to be the owner of money which was not recorded in the books of account, if any, and in respect of which the explanation offered was not satisfactory. 40. No money was found in the possession of the assessee. There is no statement specifically alleging delivery of cash to the assessee and no documentary or digital evidence recording such delivery has been identified. The ownership and receipt of Rs. 2,85,000/- have been inferred merely by reducing commission of 5% from the contribution of Rs. 3,00,000/-. Such an arithmetical inference ....