Bogus Political Donations Busted! ITAT Rejects Taxpayer’s Appeal

In a recent development, an Association of Persons engaged in real estate and rental services filed its return of income for AY 2020–21, declaring a total income of Rs. 25,93,260. They claimed a deduction of Rs. 1,13,51,000 for donations to the Rashtriya Samajwadi Party (Gujarat) and the Kisan Party of India (Bihar) under Section 80GGC of the Income Tax Act. The notices sent by the Assessing Officer under Section 133(6) to the political parties’ registered emails also bounced. The assessee was also given a notice to show cause, but they did not file a reply to the same. The AO pointed out that both political parties were mentioned in income tax departmental alerts and news reports about possible round-tripping of funds and suspicious political donations. A number of political parties, including those in question, were deemed inactive and in violation of their statutory duties by the Election Commission. Hence, the claimed deductions were denied. Aggrieved, the assessee company went into appeal before CIT (A).

CIT(A) Proceedings: The CIT(A) upheld the AO’s findings, referring to the ITAT’s previous decision in Pavan Anil Bakeri vs. DCIT involving similar facts. In that case, a detailed investigation revealed that donations were routed back to donors via layers of transactions. The CIT(A) found that the assessee had not produced any new evidence to support its claim and concluded that both political parties were likely used to facilitate accommodation entries rather than being genuine political donations.

Issue Raised: Whether or not political party donations under Section 80GGC could be deducted when the recipients were suspected to be involved in financial irregularities, and the assessee was unable to provide proof of the donations.

Appellant Authority’s (ITAT) Final Ruling:

The ITAT found no merit in the appeal. It noted that the assessee merely repeated submissions made earlier and failed to provide any fresh documentary evidence. The Tribunal concurred with the lower authorities that the political parties acted as conduits, and the donations were part of a structured financial manoeuvre. Accordingly, the appeal was dismissed.

To Read Judgment, Download PDF Given Below.