Political Donation Deduction Allowed Despite Allegations Against Party: ITAT Raipur Clarifies Scope of Section 80GGC
In an important ruling on deduction of political donations, the Raipur Bench of the Income Tax Appellate Tribunal has held that deduction under Section 80GGC cannot be denied merely on the basis of general investigation reports against a political party unless a direct link to the assessee is established.
In the case of ACIT, Circle-1(1), Bilaspur vs Shri Anuj Prakash Gupta, the Tribunal upheld deduction of ₹2,00,000 claimed by the assessee towards donation made to a registered political party and dismissed the Revenue’s appeal.
The decision reinforces a crucial litigation principle – tax additions must be based on specific evidence, not suspicion or third-party allegations.
Background of the Case
The assessee had claimed deduction under Section 80GGC for donation made to Rashtriya Samajwadi Party (Secular). The payment was made through banking channels and supported by a donation receipt.
During assessment proceedings, the Assessing Officer disallowed the deduction relying on investigation findings which allegedly suggested that the political party was involved in providing accommodation entries.
However, no specific evidence was brought on record to show that the assessee had received any benefit, refund, or cash-back in connection with the donation.
Issue Before the Tribunal
The key question before the Tribunal was:
Can deduction under Section 80GGC be denied merely because the recipient political party is under investigation, even when the donor’s transaction is genuine and supported by records?
The Tribunal answered this in favour of the taxpayer.
Tribunal’s Findings
The ITAT observed that the assessee had discharged his burden by producing documentary evidence supporting the donation.
The Tribunal noted:
• Payment was made through proper banking channels
• Valid receipt from the political party was produced
• No evidence showed that money returned to the assessee
• No investigation material linked the assessee to any accommodation entry scheme
• The assessee was never confronted with adverse material nor given cross-examination opportunity
The Bench emphasised that deduction cannot be denied on the basis of broad investigation findings unless a specific nexus with the assessee is demonstrated.
Violation of Natural Justice
A key factor in the decision was the failure of the department to confront the assessee with the investigation material relied upon.
The Tribunal held that if the department intends to rely on third-party statements or reports, the assessee must be given:
• Opportunity to rebut the material
• Right to cross-examine relevant persons
• Clear disclosure of evidence relied upon
Without such opportunity, the addition becomes unsustainable.
Legal Principle Emerging from the Ruling
The decision reinforces an important rule applicable to deduction disputes:
Individual tax liability must be determined on individual evidence.
Irregularities alleged against a recipient entity do not automatically invalidate the donor’s claim.
Suspicion cannot replace proof.
Investigation reports cannot be applied mechanically without establishing a money trail.
This principle has wide relevance beyond political donations and applies to many accommodation entry cases.
Why This Ruling Matters for Taxpayers and Professionals
Disallowance of deductions based on general investigation inputs has become common in recent years.
This ruling provides useful guidance that:
• Genuine donations through banking channels remain eligible
• Burden shifts to the department once primary evidence is produced
• Department must establish direct nexus with the taxpayer
• Procedural fairness remains essential in assessment proceedings
For professionals handling litigation, this decision strengthens the defence where additions are based only on suspicion.
Conclusion
The ITAT Raipur ruling reiterates that deduction under Section 80GGC cannot be denied merely because the political party receiving the donation is under scrutiny.
Unless the department establishes a direct link between the donor and any alleged irregularity, the claim cannot be disallowed.
In tax assessments, evidence must be specific, not general — and suspicion alone cannot defeat a legally supported deduction
The copy of the order is as under:
