Facts of the Case

The assessee, an individual, filed his return of income for Assessment Year 2019-20 on 17.07.2019 declaring total income of ₹36,07,440. Subsequently, reassessment proceedings were initiated based on information arising out of a search and seizure action dated 07.04.2022 conducted on 23 Ahmedabad-based registered unrecognised political parties. The Assessing Officer alleged that the assessee had claimed bogus deduction under Section 80GGC in respect of donations aggregating to ₹10,00,000 made through banking channels to such political parties. Notice under Section 148A was issued, followed by notice under Section 148 on 16.04.2023. The reassessment was completed by disallowing the entire donation of ₹10,00,000 claimed under Section 80GGC and making an addition. The CIT(A), NFAC dismissed the assessee’s appeal, confirming the reassessment and the additions.

Issues Involved

Whether the reopening under Sections 147 and 148A was valid in law, whether the sanction under Section 151 was proper, whether reassessment proceedings travelled beyond the scope of the show cause notice under Section 148A(b), and whether disallowance of donation under Section 80GGC could be sustained when documentary evidence was furnished and the additions were based primarily on investigation wing inputs and third-party statements.

Petitioner’s Arguments

The assessee contended that the reopening was invalid as the notice under Section 148A(b) was issued without furnishing complete relied-upon material and without proper disposal of objections. It was argued that the Assessing Officer travelled beyond the scope of the show cause notice and sanction granted under Section 151. On merits, the assessee submitted that the donations were made through banking channels, supported by donation receipts, bank statements and registration details of political parties with the Election Commission of India. It was contended that disallowance was made solely on the basis of investigation wing reports and alleged third-party statements without providing copies thereof or granting cross-examination, amounting to borrowed satisfaction and violation of principles of natural justice.

Respondent’s Arguments

The Revenue relied upon the orders of the Assessing Officer and the CIT(A), contending that the reopening was valid and that the donations claimed under Section 80GGC were bogus accommodation entries unearthed during search proceedings conducted on unrecognised political parties.

Court Order / Findings

The ITAT Ahmedabad held that the reopening under Sections 147 and 148A was valid, as the information relating to donations made by the assessee to registered unrecognised political parties was specifically available from the investigation records and the reassessment proceedings did not travel beyond the scope of the show cause notice. Accordingly, the legal grounds challenging jurisdiction and sanction were dismissed.

On merits, the Tribunal observed that the assessee had furnished bank statements, donation receipts and registration details of political parties, which were not properly examined or appreciated by the Assessing Officer or the CIT(A). The Tribunal noted that the disallowance was made primarily on the basis of investigation wing inputs and alleged third-party statements without granting opportunity of cross-examination. Holding that such material requires proper verification and adjudication, the Tribunal set aside the issue relating to disallowance under Section 80GGC and restored it to the file of the Assessing Officer for fresh consideration in accordance with law after taking cognizance of the documentary evidence furnished by the assessee.

Important Clarification

The Tribunal clarified that while reassessment proceedings based on tangible information may be validly initiated, additions on merits cannot be sustained solely on investigation wing reports or third-party statements without independent examination of evidence produced by the assessee and without adherence to principles of natural justice.

Final Outcome

The appeal filed by the assessee was partly allowed for statistical purposes. The validity of reopening under Sections 147 and 148A was upheld. However, the disallowance of ₹10,00,000 claimed under Section 80GGC was set aside and restored to the file of the Assessing Officer for fresh adjudication on merits after proper verification of evidence and granting due opportunity of hearing to the assessee.

 

Link to download order https://www.mytaxexpert.co.in/uploads/1769064163_TUSHARVIPINCHANDRASHUKLAAHMEDABADVS.THEITOWARD532AHMEDABAD.pdf  

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