ITAT Delhi Upholds Disallowance of Section 80GGC Deduction on Rs 3 Lakh Political Donation Treated as Accommodation Entry

The Income Tax Appellate Tribunal, Delhi, held that mere proof of payment through banking channels and production of donation receipts would not, by themselves, establish the genuineness of the claim.

The assessee is a salaried employee and he donated Rs 3 lakh to the Rashtriya Samajwadi Party (Secular) and claimed a deduction under Section 80GGC of the Income Tax Act, 1961 for assessment year 2019-20. The contribution was made through the banking channel using NEFT and was supported by a donation receipt issued by the political party. The AO however, disallowed the deduction and further made an addition of Rs 15 thousand under Section 69C read with Section 115BBE on the presumption that commission had been paid for obtaining accommodation entries.

Aggrieved by the assessment order, the assessee preferred an appeal to the Tribunal.

The Revenue argued that search proceedings conducted on the political party had revealed that there is a systematic mechanism whereby donations received through banking channels are often routed through multiple entities and ultimately returned in cash. Statements recorded from the President and key office-bearers of the party allegedly admitted to such activities. Accordingly, the Department argued that the donation claimed by the assessee was merely an accommodation entry and that the deduction under Section 80GGC had rightly been denied.

The Tribunal referred to judicial precedents and observed that several coordinate benches had consistently upheld the rejection of deductions under Section 80GGC in cases involving donations made to the same political party. The Tribunal observed that the AO had brought on record material indicating that bank accounts of the political party had been used for facilitating accommodation entries. The assessee, on the other hand, failed to furnish any fresh evidence or material capable of rebutting those findings.

The Tribunal held that no infirmity existed in the order passed by the lower authorities. Accordingly, it upheld the disallowance of the deduction claimed under Section 80GGC and dismissed the appeal filed by the assessee.