Political Donation Penalty Deleted: Income Tax Authorities Cannot Levy Penalty Just by Mentioning “Misreporting”

The ITAT Ahmedabad held in favour of Niket Maheshbhai Shah by quashing an order dated October 14, 2025. The tribunal held that mere referencing a word misreporting is not sufficient to initiate penalty proceedings.

The assessee, Niket Maheshbhai Shah, had made a donation of Rs 3.71 lakh to a political party, namely the Manav Adhikar National Party, and thereafter claimed a deduction under section 80GGC of the Income Tax Act.

Later, the assessment was reopened under section 147, where Assessing Officer (AO) disallowed the donation claimed under section 80GGC. The assessee accepted the disallowance and paid the raised tax demand.

However, the AO thereafter levied a penalty of about Rs 2.31 lakh, which was 200 per cent of the assessee’s tax. The assessee, being aggrieved by the penalty order, filed an appeal before the CIT(A); however, the same was dismissed.

After that, the assessee approached the ITAT Ahmedabad, claiming that the CIT(A) had mistakenly confirmed the penalty of Rs 2.31 lakh. In support of his claims, he also cited three earlier judgements in cases titled G R Infraprojects Ltd vs ACIT, Prem Brothers Infrastructure LLP vs NFAC and Abhishek Jayketu Joshi vs AC Cir 42(2)(1), all based on similar issues.

When the tribunal analysed the case, it held that “in the absence of such particulars, the mere reference to the word ‘misreporting’ by the respondents in the penalty order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary. In the present case also, the assessing officer has not mentioned the proper limb or has not given the details while imposing the penalty. Therefore, the penalty does not sustain.”

In conclusion, the tribunal has allowed the assessee’s appeal by setting aside the impugned order dated October 14, 2025.