Facts of the Case

The assessee, Sunil Piyush Shah, an individual, filed his return of income for Assessment Year 2019-20 declaring total income of ₹9,73,730 after claiming deduction of ₹1,05,000, including ₹1,00,000 under Section 80GGC towards donation to Manvadhikar National Party. Based on information received from DCIT, Central Circle-2(3), Ahmedabad, it was alleged that the assessee was a beneficiary of bogus donations routed through the said political party. A search and seizure action under Section 132 was conducted on 02.02.2021 in cases of various political parties and charitable organisations, during which the National President of Manvadhikar National Party admitted in a statement under Section 132(4) that the party was engaged in providing accommodation entries by way of bogus donations.

Reassessment proceedings were initiated and notice under Section 148A(b) along with order under Section 148A(d) dated 02.05.2023 was issued. After considering the reply of the assessee, the Assessing Officer completed reassessment under Section 147 read with Section 144B and disallowed the deduction of ₹1,00,000 claimed under Section 80GGC, holding the donation to be bogus. The CIT(A), NFAC dismissed the assessee’s appeal. Aggrieved, the assessee preferred an appeal before the Tribunal.

Issues Involved

Whether the reassessment proceedings initiated under Sections 147 and 148A were valid in law, whether denial of opportunity to cross-examine third-party witnesses vitiated the reassessment, and whether deduction claimed under Section 80GGC towards donation to a political party was allowable on facts.

Petitioner’s Arguments

The assessee contended that the reassessment proceedings were void ab initio as no incriminating material specific to him was furnished and he was not granted opportunity to cross-examine the persons whose statements were relied upon. It was argued that Manvadhikar National Party was duly registered under the Representation of the People Act and therefore donation to the said party was eligible for deduction under Section 80GGC. The assessee also challenged initiation of penalty proceedings under Section 270A and denial of immunity under Section 270AA.

Respondent’s Arguments

The Revenue relied upon the assessment order and the order of the CIT(A), contending that reassessment proceedings were initiated after following due procedure under Section 148A and that the disallowance was based on investigation findings and the conduct of the assessee, not merely on third-party statements.

Court Order / Findings

The ITAT Ahmedabad observed that the notice issued under Section 148A(b) and the consequential order under Section 148A(d) dated 02.05.2023 clearly recorded the information received from the Investigation Wing and that the assessee was granted opportunity to respond. The Tribunal noted that the Assessing Officer had not relied solely on third-party statements but also considered the conduct of the assessee, as recorded in the reassessment order.

On merits, the Tribunal observed that the assessee failed to furnish any cogent evidence either before the Assessing Officer or before the CIT(A) to establish the genuineness of the donation or to rebut the findings that the amount donated was returned in cash after deduction of commission. In the absence of any material to substantiate the claim, the Tribunal held that the disallowance of deduction under Section 80GGC was justified. Accordingly, the Tribunal upheld the reassessment and the order of the CIT(A).

Important Clarification

The Tribunal clarified that where reassessment proceedings are initiated after following due procedure under Section 148A and the assessee fails to substantiate the genuineness of political donations found to be accommodation entries based on investigation findings, deduction under Section 80GGC cannot be allowed merely on the basis of registration status of the political party.

Final Outcome

The appeal filed by the assessee was dismissed. The disallowance of ₹1,00,000 claimed under Section 80GGC was upheld and the reassessment order stood confirmed.

 

Link to download order https://www.mytaxexpert.co.in/uploads/1769151326_SUNILPIYUSHSHAHAHMEDABADVS.NFACDELHIPRESENTJURIS.THEITOWARD.pdf
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