Section 80GGC: A Bank Payment Is Not Always Enough-But a General Allegation Is Not Enough Either
Political donations and tax deductions under section 80GGC have recently become an important area of litigation. Lot many taxpayers across country are approaching me either for filing an appeal before CIT (A) or ITAT. Few are also approaching for exploring other options. Let us have an overview of the issue at appellate level.
Some Tribunal decisions have rejected claims where the Revenue produced specific investigation material linking the political party and the donor to an accommodation-entry arrangement. Some tribunals has allowed the deduction where the Revenue could not produce assessee-specific evidence.
A useful illustration is the recent decision of the Rajkot Bench of the Income Tax Appellate Tribunal in Nitin T. Bhuptani v. ACIT, AY 2019-20, order dated 11 September 2026. The Tribunal allowed the deduction of ₹1.80 lakh claimed under section 80GGC in respect of a donation to Yuva Jan Jagruti Party (YJJP).
But the decision becomes particularly interesting when compared with two recent Mumbai Tribunal rulings—Mihir Bipinbhai Parekh v. DCIT and Ritesh Sugan Jain v. ITO.
The three cases demonstrate an important principle:
A banking-channel payment and donation receipt are relevant evidence, but they are not an absolute guarantee of deduction. At the same time, a general allegation against a political party cannot automatically establish that every donation made to that party is bogus.
The Bhuptani Case: ₹1.80 Lakh Donation Allowed
The assessee, Nitin T. Bhuptani, filed his return for AY 2019-20 declaring total income of ₹11,94,480. He claimed a deduction of ₹1,80,000 under section 80GGC for a donation made to Yuva Jan Jagruti Party.
The donation was made through the banking channel.
The assessment was subsequently reopened to examine the genuineness of the deduction. During the reassessment proceedings, the Assessing Officer alleged that YJJP was involved in a bogus-donation arrangement under which donations were received through banking channels and subsequently routed back to donors through cash, RTGS, NEFT or other banking channels. On that basis, the AO disallowed the entire ₹1.80 lakh deduction.
The CIT(A) upheld the disallowance. The matter then reached the Rajkot ITAT.
What Evidence Did the Revenue Produce?
This became the decisive aspect of the case. The Tribunal noted that the Revenue essentially relied upon the allegation regarding the activities of YJJP. The Departmental Representative reiterated the position taken by the Assessing Officer.
However, the Revenue could not demonstrate any additional material specifically connecting this assessee with the alleged accommodation-entry mechanism.
There was no material establishing that the ₹1.80 lakh paid by the assessee had actually come back to him. There was no identified cash repayment.
There was no specific fund trail connecting the assessee with a return of the donation.
There was no material showing that the assessee had paid any commission.
In these circumstances, the Tribunal followed its earlier decision in Nihil Nitinbhai Bhuptani v. ITO, ITA No. 479/Rjt/2025, which had followed the Delhi ITAT decision in
Ashish Dubey v. ACIT, ITA No. 222/Del/2020. The Rajkot Bench accordingly allowed the appeal.
Ashish Dubey: Documentary Evidence Supported the Claim
The earlier Ashish Dubey decision involved a donation to Rashtriya Komi Ekta Party.
The assessee had produced the donation receipt, PAN of the political party, evidence of its registration under section 29A of the Representation of the People Act, the party’s return of income, confirmation and bank statement showing payment through banking channels. The Tribunal found that the documentary evidence established the payment of donation to the registered political party. The fact that the political party subsequently failed to properly account for the donation in its own return was not considered sufficient, by itself, to deny the donor’s deduction. The Rajkot Bench subsequently relied upon this reasoning in Nihil Nitinbhai Bhuptani and then again in Nitin T. Bhuptani. But does that mean that every donation made through banking channels must be allowed?
Certainly not.
Two recent Mumbai decisions demonstrate why.
Mihir Parekh: The Surrounding Circumstances Changed Everything
In Mihir Bipinbhai Parekh v. DCIT, ITA No. 1173/Mum/2026, order dated 12 May 2026, the assessee claimed a deduction of ₹25 lakh under section 80GGC for a donation to Kisan Party of India. His returned income was ₹49.02 lakh.
At first glance, the assessee had the familiar documents:
• donation receipts;
• payment through banking channels; and
• registration of the political party.
Yet the Tribunal did not accept the claim.
Why?
Because the Revenue’s case was supported by specific search and investigation material. The Kisan Party of India had been covered by search proceedings under section 132. The Revenue relied upon material indicating that the party was involved in circuitous transactions involving bogus donations and return of money to donors through intermediaries.
The Tribunal also found other circumstances significant.
The political party was registered in Bihar, and there was no material showing its presence in Maharashtra, particularly Mumbai, where the assessee lived and was assessed. The assessee was a trader in chemicals and had explained that the party approached him because of its work for agriculturists. The Tribunal found this explanation difficult to accept in the surrounding circumstances.
Another important factor was the quantum of donation.
The ₹25 lakh donation represented approximately 40% of the assessee’s net profit before tax. The Tribunal considered the size of the donation along with the other surrounding circumstances and concluded that the claim did not inspire confidence.
Thus, bank payment + receipt did not end the enquiry.
Ritesh Sugan Jain: Search Evidence and Statements
The decision in Ritesh Sugan Jain v. ITO, ITA No. 8546/Mum/2025, dated 27 April 2026, goes even further. The assessee claimed ₹9.90 lakh under section 80GGC in respect of a donation to Rashtriya Samajwadi Party (Secular). The Revenue’s case was not based merely on a general allegation. A search and seizure action under section 132 had been conducted in the RUPP group. Statements were recorded from persons associated with the political party. The Revenue relied upon statements indicating that donations were received through banking channels, routed through intermediary entities and ultimately returned to donors after charging commission.
The Revenue also relied upon material identifying intermediary/layering entities and statements of persons managing the party’s affairs. The Tribunal noted that the facts were covered by its earlier decision in Milind Pankajbhai Shroff, and upheld the disallowance.
Thus, the presence of a bank transaction and a donation receipt could not override the specific evidence showing the alleged accommodation-entry mechanism.
So, Which Principle Emerges?
These decisions are not necessarily contradictory. They illustrate two different evidentiary situations.
| Situation | Approach emerging from the cases |
| Donation through banking channel + receipt + registered political party, with no specific adverse evidence against donor | Deduction may be allowed |
| General allegation that recipient party was involved in bogus donations, without donor-specific evidence | May not be sufficient by itself |
| Search material specifically naming/implicating party and revealing modus operandi | Claim requires much greater scrutiny |
| Statements of party functionaries/admissions regarding bogus donations | Can materially support disallowance |
| Identified intermediary or layering entities and fund trail | Strong adverse evidence |
| Evidence that money was returned to donor after commission | Banking payment/receipt may not protect the deduction |
| Donation disproportionately large in the surrounding factual circumstances | May become a relevant factor, though not conclusive by itself |
The Important Distinction: Party-Level Allegation vs Donor-Level Evidence
This distinction is perhaps the most useful takeaway.
Suppose the Department establishes that a particular political party was involved in an accommodation-entry arrangement.
That may justify investigation into donations received by that party.
But there is still a further question:
Did this particular assessee participate in that arrangement?
The answer may require evidence such as:
• return of money to the donor;
• fund trail;
• statements naming the donor;
• communication between donor and intermediary;
• evidence of commission;
• identification of the intermediary through which the funds were routed; or
• other material connecting the particular donation with the alleged accommodation-entry mechanism.
The Bhuptani decision proceeded on the absence of such specific material, whereas Mihir Parekh and Ritesh Sugan Jain involved materially stronger Revenue evidence.
Is Section 80GGC Documentation Still Important?
Absolutely. A taxpayer claiming deduction under section 80GGC should maintain a proper documentary trail, including:
1. Donation receipt issued by the political party;
2. Name and details of the political party;
3. Evidence of its registration under section 29A of the Representation of the People Act;
4. Bank statement showing the payment;
5. Date and mode of payment;
6. Correspondence, if any, relating to the donation; and
7. Other material establishing the genuineness and purpose of the contribution.
But documentation should not be viewed as an absolute shield.
If the Department possesses credible evidence showing that the donation was merely an accommodation entry and the money ultimately returned to the donor, the Tribunal can examine the substance of the transaction rather than merely its banking form.
What Should Taxpayers and Professionals Check Before Relying on Bhuptani?
The Bhuptani ruling should therefore not be cited mechanically in every section 80GGC dispute. Before relying upon it, one should examine the assessment and reassessment record carefully. The key questions are:
– Is there any search material specifically concerning the recipient political party?
– Is there any statement under section 132(4) or section 131 naming the assessee or the particular donation?
– Has the Revenue identified any commission rate?
– Is there evidence of money being returned to the assessee?
– Is there a fund trail through intermediary or layering entities?
– Is there an earlier Tribunal decision concerning the same political party and the same modus operandi?
– Are there unusual circumstances surrounding the donation, including its quantum in relation to the assessee’s income and financial profile?
If the answer to all these questions is negative, Bhuptani becomes materially more relevant. If, however, the assessment record contains specific search evidence, statements, fund trails or other material connecting the donor with the alleged arrangement, the factual foundation of Bhuptani may be substantially different.
The TAX Talk:
The recent section 80GGC litigation teaches a simple but important lesson:
The genuineness of a political donation cannot be decided merely by looking at either the bank statement or the political party in isolation. The entire evidentiary chain has to be examined.
Nitin T. Bhuptani demonstrates that a general allegation against a political party, without material connecting the particular donor to the alleged accommodation-entry arrangement, may not be enough to deny the deduction.
Mihir Parekh and Ritesh Sugan Jain, on the other hand, demonstrate that where the Revenue brings specific investigation/search material, statements, identified intermediaries and other surrounding circumstances, a banking transaction and donation receipt may not be sufficient to establish genuineness.)
Therefore, the real question in a section 80GGC dispute is not merely:
“Was the donation paid through the bank?”
It is:
“What evidence exists connecting-or disconnecting-the donor from the alleged accommodation-entry arrangement?”
That distinction may well determine the outcome of the litigation.
Author may be contacted at nareshjakhotia@gmail.com / 9422860300
The copy of the order is as under:
