Deduction u/s 80GGC denied as donation to political party held to be bogus accommodation entry

Issue

Whether a deduction claimed under Section 80GGC for donations made to a political party is allowable when the Assessing Officer (AO) establishes that the donation was a “bogus” accommodation entry where cash was returned to the donor after layering through bank accounts.

Facts

Claim: For Assessment Year 2019-20, the assessee claimed a deduction under Section 80GGC for donations made to a political party.
AO’s Findings: The AO treated the donation as non-genuine/bogus. Investigations revealed that the bank accounts of the political party were managed by accommodation entry providers.
Modus Operandi: The donation was made by cheque, but the funds were subsequently layered through various bank accounts and ultimately returned to the donor in cash.
Assessee’s Defense: The assessee failed to produce sufficient evidence to rebut the findings regarding the cash-back arrangement or the genuineness of the donation.

Decision

Precedent Applied: The Tribunal relied on a Co-ordinate Bench decision in Saurabh Pravinbhai Patel & Brijesh Pravinbhai Patel AOP v. Assessment Unit (dated 30-04-2025), which dealt with an identical issue involving the same political party/modus operandi.
Bogus Nature: The Tribunal held that since the political party’s accounts were used to layer funds and return cash, the transaction was a clear accommodation entry merely disguised as a donation.
Lack of Evidence: In the absence of contrary evidence from the assessee proving the genuineness of the political activity or the utilization of funds, the findings of the lower authorities were upheld.
Ruling: The deduction under Section 80GGC was disallowed, and the addition was sustained in favour of the Revenue.

Key Takeaways

Genuine vs. Accommodation: Section 80GGC is intended for genuine political contributions. If the Department can trace a “cash-back” trail or prove that the political party is merely a shell entity for money laundering, the deduction will be denied.

Burden of Proof: Once the AO provides prima facie evidence of an accommodation entry ring, the burden shifts entirely to the assessee to prove the bonafides of the donation.

IN THE ITAT AHMEDABAD BENCH

Rajen Jayantilal Merchant

Assessment Unit, Juris. AO^*

DR. BRR KUMAR, Vice President
and T. R. Senthil Kumar, Judicial Member

ITA No. 1683 (Ahd) of 2025
[Assessment year 2019-20]

NOVEMBER 13, 2025

Rohit Aasudani, Sr. D.R. for the Respondent.

ORDER

T.R. Senthil Kumar, Judicial Member.- This appeal is filed by the Assessee as against the appellate order dated 02.07.2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the reassessment order passed under section 147 r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2019-20.

2. Brief facts of the case is that the assessee is an individual filed his Return of Income for the Asst. Year 2019-20 on 26-10-2019 declaring total income of Rs.8,25,580/- after claiming deduction under Chapter VIA of Rs. 3,17,858/- which is inclusive of donation of Rs.1,50,000/- u/s. 80GGC of the Act given to Political Parties. The assessment was reopened since the assessee has given donation of Rs.1,50,000/- to Rashtriya Samajwadi Party (Secular) which is the registered unrecognized political party and claiming bogus deduction u/s. 80GGC of the Act.

2.1. In response, the assessee filed Return of Income on 22-052023 claiming the same original return including donation of Rs.1,50,000/- u/s. 80GGC of the Act. The assessee was issued a show cause notice, in reply the assessee filed a donation receipt given by Rashtriya Samajwadi Party (Secular), copy of the relevant bank statement and Certificate of Registration of Rashtriya Samajwadi Party (Secular). The assessing officer considered the same and held that Post Search enquiries on registered unrecognized political parties group of Ahmedabad (23 registered unrecognized political parties), it was established that the donation made to such Registered Unrecognized Political Parties (RUPP) in the nature of scam claiming bogus deduction u/s. 80GGC/80GGB of the Act and intended to defraud the legitimate tax of the assessee. The amounts were returned to the donor after deducting certain percentage from it. As it was proved to be non-genuine and bogus, the same was disallowed and demanded tax thereon.

3. Aggrieved against the re assessment order, assessee filed appeal before Ld. CIT(A) who has confirmed the addition by detailed appellate order.

4. Aggrieved against the same, assessee is in appeal before us raising the following Grounds of Appeal:

That the re-opening of the assessment by the Jurisdictional Assessing Officer by issuing the notice us 148 is bad-in-law and the assessment order passed by the Faceless Assessing Officer also bad-in-law on two grounds viz. (a) the notice was issued without the A.O. recording his own satisfaction about the escapement of an income and (b) the notice should have been issued by the Faceless Jurisdictional A.O. in view of the provisions of section 151A of the Act as also the CBDT notification no. 18/2022 dt. 29-3-2022.

That the A.O. erred in not allowing deduction of Rs. 150,000/- claimed by the appellant in respect of a donation to a registered political party by NEFT/RTGS in spite of fulfilling all the pre-conditions laid down under the said section and producing the Donation receipt issued by the said political party. It is submitted that on the basis of the evidences produced by the appellant and the facts mentioned in the Statement of Facts, the said deduction is clearly admissible, particularly in the absence of any cogent evidence produced by the A.O. against the appellant and supporting the return of donation money to the appellant and hence, the same be allowed.

That the A.O. also erred in not allowing the deduction claimed u/s 80-GGC in violation of the principles of natural justice by not furnishing the copies of the statements recorded relied upon by him and by not allowing the cross-examination opportunity to the appellant.

5. Ld. Chartered Accountant appearing for the assessee request for adjournment as he is busy with preparation and submission of Tax Audit Report which is falling due on 10-11-2025, the adjournment request was rejected.

6. Further careful consideration of the grounds of appeal, it is noted that the identical issue was considered by Co-ordinate Bench of this Tribunal in Saurabh Pravinbhai Patel and Brijesh Pravinbhai Patel AOP v. Assessment Unit, Income Tax Department [IT Appeal No. 1017 (Ahd) of 2023,dated 30-4-2025] 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 eyeopening facts came in notice in the case of Pavan Anil Bakeri v. 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 provider where donation received by cheques were layered though various bank accounts and ultimately cash was returned back, donation claimed under section 80GGC was merely accommodation entry and thus, disallowance of deduction under section 80GGC was proper. The sequence of events in the above case are “The assessee paid donation of Rs 52,00,000/- to Rashtriya Samajwadi Party (Secular) To verify the genuineness and utilization purpose of the donation, a notice u/s 133(6) was issued on 5-10-2018 to Rashtriya Samajwadi Party (RSP) There was no representation from RSP Therefore another opportunity was granted vide letter dated 16-10-2018 Again there was no response from RSP. Therefore a summon u/s 131(1) of the Act was issued to Shri S.N. Chaturvedi, National President, RSP to attend the office on 19-11-2018 to produce the requisite the donation details. No one attended the office of the said date of hearing.

21 RSP is a political party registered with Election Commission of India. The Assessing Officer called for the bank details of RSP with Oriental Bank of Commerce, New Naroda Branch. From the perusal of the bank statement, it was observed there was a credit entry of Rs. 52,00,000/-on 07-10-2015 which is donation given by the assessee and there was two debit entries amounting to Rs. 27.00,000/- and Rs 25,00,000/- respectively on the same day On further enquiry from the Oriental Bank of Commerce the amount of Rs. 27,00,000/- credited to Sterlite Inc and Rs 25,00,000/-credited to Shah And Co. on 7-10-2015.

2.2. On examination of the RSP bank statement, it was found that it is a general practice of crediting huge cash and subsequently transfering to another party on same day. Further analysis of the transaction particulars reveals that the cash was transferred to mainly four parties namely Guru Enterprise, Unique Trading, Mahavaisnavi and KK Indersriz. It was also observed that no cash withdrawal for expenses like rent, electricity, water, newspaper, fuel etc of RSP and is not reflecting in the bank account. There is an Inspector of Income-tax was deputed to visit the premises of RSP at UG-8. Harekrishna Complex, C.TM Char Rasta, Amraiwadi, Ahmedabad-380026 on 15-11-2018 The Inspector submitted his report that RSP office situated on 2nd Floor of 3 storey building which is a small shop and shutter of which was half closed on that day. Nearby peoples 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 RSP back to the donator. Thus the assessee gave Rs. 52,00,000/- to RSP in the form of donation which was transferred to accounts of Shri Mukesh Mehta who claimed to be a businessman. Again the said amount was transferred to Sapan Traders and Waheguru Enterprise. Thus the donation claimed to be paid by the assesse is found to be bogus and the same is disallowed u/s. 80GGC of the Act and added back to the total income of the assessee and also initiated penalty proceedings u/s. 271(1)(c) of the Act for concealment of income.”

On further appeal Ld. CIT (A) observed in the case “The Assessing Officer has clearly brought out facts that bank accounts of above political party have been used by the accommodation entry provider where the donation received by cheques were layered through various bank accounts and ultimately cash was returned back. I therefore, agree with the findings given by the AO that donation of Rs. 52,00,000/-claimed u/s. 80GGC is merely accommodation entry. The Honorable ITAT Ahmedabad in the case of Pavankumar M. Sanghvi v. ITO, Wd. 3(1)(2), Baroda on the issue of accommodation entry has observed as under-

“8. As I proceed to deal with genuineness aspect, it is important to bear in mind the fact that what is genuine and what is not genuine is a matter of perception based on facts of the case vis-a-vis the ground realities. The facts of the case cannot be considered in isolation with the ground realities. It will, therefore, be useful to understand as to how the shell entries, which the loan creditors are alleged to be, typically function, and then compare these characteristics with the facts of the case and in the light of well settled legal principles. A shell entity is generally an entity without any significant trading, manufacturing or service activity, or with high volume low margin transactions to give it colour of a normal business entity used as a vehicle for various financial manoeuvers. A shell entity, by itself, it not an illegal entity but it is their act of abatement, of, and being part of financial manoeuvring to legitimize illicit monies and evade taxes, that takes it actions beyond what is legally permissible These entities have every semblance of a genuine business its legal ownership by persons in existence, statutory documentation as necessary for a legitimate business and a documentation 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 camed 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 one Shri Mukesh Mehta proprietor of two firms and he transferred it to Waheguru Enterprise and Sapan Traders, which is clearly a systematic financial maneuver to legitimate illicit moneys and evade taxes. It is appropriate to follow the Hon’ble Supreme Court judgment, wherein SLP filed by the assessee is dismissed confirming the Tribunal’s decision to come to the conclusion that the entire loan transaction was not genuine, in the case of Pavankumar M. Sanghvi v. ITO (SC) which held as follows:

Assessee received certain sum as loan from two companies -Assessing Officer having found that said lender companies were shell entities added loan amount to income of assessee under section 68-Bank statement of lender companies revealed high transactions during day and a consistently minimal balance at end of working day-Further day when assessee was given loan there were credil entries of almost similar amounts, and balance after these transactions was a small amount Tribunal taking into account bank statements of lender companies and fact that assessee failed to produce these lenders for verification held that alleged loan transactions were not genuine -High Court by impugned order held that since Tribunal had given elaborate reasons to come to conclusion that entire loan transaction was not genuine, appeal filed before it was to be dismissed Whether Special Leave Petition against impugned order was to be dismissed.

5.2 In the absence of any evidence from the assessee, the grounds raised by the assessee are untenable and therefore the same is rejected. The findings given by the lower authorities does not require any interference and the addition is sustained.

It is pertinent to mention here that out of two political parties to whom the appellant paid total donation of Rs. 1,13,51,000/- the modus operandi of the one political party named the Rashtriya Samajwadi Party (Secular) has already been discussed in details in the preceding paragraphs of the instant order. It can be safely presumed that the modus operandi of other political party named Kisan party of India is also indulging only in providing accommodation entry as can be ascertained from various newspaper reports and enquiries which is being conducted by various institutions.

In view of the findings in the above case I am inclined 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. Nothing new documents or evidences filed before us to deviate from the findings of the Lower Authorities. The Ld AO has clearly brought out facts that bank accounts of above political parties have been used by the accommodation entry provider, where the donation received by cheques were layered through various bank accounts and ultimately cash was returned back. The same is not disputed by the assessee with relevant materials. Further the Ld AO made a detailed enquiry of RSP and its Bank accounts and transfer of funds to one Shri Mukesh Mehta proprietor of two firms and he transferred it to Waheguru Enterprise and Sapan Traders, which is clearly a systematic financial maneuver to legitimate illicit moneys and evade taxes. In the absence of any fresh materials in support of the assessee’s claim. The Grounds raised by the assessee is devoid of merits and liable to be dismissed.”

6.1. Respectfully following the above decision of the Co-ordinate Bench, the grounds raised by the assessee are devoid of merits and the same are hereby dismissed.

7. In the result, the appeal filed by the Assessee is dismissed.