Raipur ITAT on Section 80GGC: No Disallowance Without Assessee-Specific Evidence in Political Donation Cases (AY 2019-20)

 

The controversy around bogus political donations and reopening of assessments under Section 147 has become one of the most litigated issues in recent times. Following large-scale search operations on certain Registered Unrecognised Political Parties (RUPPs), the Income Tax Department has reopened numerous cases where taxpayers claimed deduction under Section 80GGC.

In a significant and highly relevant ruling, the Income Tax Appellate Tribunal, in ITA No. 11/RPR/2026 (AY 2019-20), dismissed the Revenue’s appeal and upheld deletion of disallowance under Section 80GGC in the case of ACIT, Circle-1(1), Bilaspur vs. Anuj Prakash Gupta, order dated 05.02.2026.

Raipur ITAT Order.pdf None

This decision has wide implications for taxpayers who are facing reassessment proceedings solely on the basis of “general investigation findings.”

Background of the Case

The assessee had claimed deduction of ₹2,00,000 under Section 80GGC for donation made to Rashtriya Samajwadi Party (Secular) through banking channels.

Subsequently:

A search under Section 132 was conducted in the RUPPs group.

The political party was allegedly found to be involved in providing accommodation entries in the guise of political donations.

Based on information from the Investigation Wing, Ahmedabad, the case was reopened under Sections 147/148.

The Assessing Officer disallowed the entire deduction of ₹2 lakh under Section 80GGC.

The Revenue argued that once the political party was identified as a conduit for bogus donations, the onus shifted heavily onto the assessee to prove genuineness.

CIT(A) Deletes the Addition

The CIT(A)/NFAC deleted the addition on crucial factual findings:

Donation was made through banking channel.

Printed receipt was obtained.

No direct evidence showed refund of donation to the assessee.

No bank trail established return of funds.

No cross-examination opportunity was given regarding statements relied upon.

Disallowance was based only on general investigation findings.

The appellate authority clearly observed that disallowance in the hands of each donor requires primary evidence linking that specific assessee to non-genuine transactions.

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ITAT Raipur: Revenue Appeal Dismissed

The Judicial Member, Shri Partha Sarathi Chaudhury, upheld the CIT(A)’s order and dismissed the Revenue’s appeal.

The Tribunal noted:

The Assessing Officer did not bring any evidence that the assessee received money back.

No material showed commission arrangement.

No nexus established between assessee and alleged accommodation entry.

Mere allegation that the party was tainted is insufficient.

The ITAT concluded that in absence of assessee-specific corroboration, disallowance cannot be sustained.

Raipur ITAT Order.pdf None

Core Legal Principle Emerging

The ruling reinforces a fundamental principle of tax jurisprudence:

Suspicion, however strong, cannot replace evidence.

Even if:

A political party is found involved in irregularities,

Statements of key functionaries admit circular transactions,

Wider racket is detected,

Still, addition in the hands of a donor requires direct, cogent, and specific evidence.

Why This Decision Is Highly Relevant in 2026

This ruling is extremely important because:

1.  Massive Reopening of 80GGC Cases

After search actions on RUPPs, many taxpayers across India have received reassessment notices.

2.  Generalised Investigation Reports

Additions are often made based on “information from Investigation Wing” without direct linkage.

3.  Denial of Cross-Examination

In many cases, statements of third parties are relied upon without offering cross-examination.

4.  Mechanical Disallowance

Assessments frequently disallow 100% deduction merely because the political party is under scanner.

The Raipur ITAT has clearly drawn a line:

General findings cannot substitute individual evidence.

Burden of Proof – Where Does It Lie?

Section 80GGC allows deduction for donations made to political parties (other than cash donations).

Initial burden on assessee:

Payment through non-cash mode

Proof of donation

Valid receipt

Once these are established, the burden shifts to the Department to prove:

Donation was returned

Assessee was beneficiary of accommodation entry

Transaction lacked genuineness

In this case, the Department failed to discharge that burden.

Important Observations for Practitioners

Tax professionals handling 80GGC reassessments should carefully examine:

– Whether reopening is based solely on investigation report

– Whether any bank trail shows refund

– Whether assessee was given cross-examination opportunity

– Whether AO brought assessee-specific material

– Whether addition is based merely on presumption

If not, this Raipur ITAT decision becomes a strong defense precedent.

Practical Impact for Taxpayers

This judgment protects:

Genuine donors who made banking channel payments.

Taxpayers unaware of internal misconduct of political parties.

Cases where no money trail establishes refund.

However, it does not protect:

Cases where refund trail is established.

Cases where cash rotation evidence exists.

Cases with incriminating seized material linking donor.

CBDT Circular Argument Rejected Indirectly

Revenue also attempted to justify appeal beyond monetary limits citing CBDT Circular exceptions relating to organized tax evasion.

However, the Tribunal focused strictly on evidentiary failure in this specific case �.

Raipur ITAT Order.pdf None

This again highlights that:

Policy circulars cannot override evidentiary standards.

Conclusion: Evidence Over Allegation

The Raipur ITAT’s ruling sends a clear message:

Political donation cases must be assessed individually.

Department must establish direct nexus.

No disallowance can be sustained purely on third-party search findings.

In the current environment of aggressive reassessments under Section 147, this decision provides significant relief and clarity.

For taxpayers facing 80GGC scrutiny in 2026, the guiding takeaway is simple:

If donation was made through proper banking channel and there is no refund trail, the Department must bring concrete evidence before denying deduction.

Until then, presumption cannot replace proof.

The copy of the order is as under:

1770291689-erjczZ-1-TO