ITAT Mumbai Quashes Tax Reopening Over Political Donation, Allows Section 80GGC Deduction

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has quashed reassessment proceedings initiated against a taxpayer for AY 2019–20, holding that the disallowance of political donation under Section 80GGC was unsustainable.

Section 80GGC of the Income Tax Act, 1961 (the Act) allows individuals and HUFs (not companies/firms) to claim a 100% tax deduction on donations made to registered political parties or electoral trusts, provided the contribution is not in cash and is through banking channels, promoting transparency in political funding.

The appeal was decided by a Bench comprising Judicial Member Amit Shukla and Accountant Member Makarand Vasant Mahadeokar, who held that the mandatory procedure under Section 148A of the Act was violated. The Bench stated, Mere suspicion, conjectures, or application of human probabilities, in the absence of any corroborative material, cannot be a ground to deny a statutory deduction expressly provided under the Act.

The taxpayer had filed his return of income declaring total income of ₹1.48 crore. He claimed a deduction of ₹5 lakh under Section 80GGC for a donation made by cheque to Kisan Party of India, a political party registered under Section 29A of the Representation of the People Act.

The return was initially processed under Section 143(1). Subsequently, reassessment proceedings were initiated based on investigation inputs alleging that certain registered but unrecognised political parties were engaged in providing accommodation entries in the guise of political donations.

A notice under Section 148A(b) was issued to the taxpayer, followed by an order under Section 148A(d) and a reassessment order under Section 147, disallowing the Section 80GGC deduction.

The taxpayer contended that the donation was made through banking channels, supported by a valid donation receipt, and that the political party was duly registered. It was further argued that no material was supplied along with the Section 148A notice and that cross-examination of third-party statements relied upon by the Assessing Officer was denied.

The Tribunal noted that the Section 148A(b) notice proceeded on an incorrect factual premise. While the taxpayer had made a donation only to Kisan Party of India, the notice repeatedly alleged non-genuine transactions with Aadhar Foundation, an entity to which the taxpayer had never donated.

The ITAT noted that even the Assessing Officer later admitted that the reference to Aadhar Foundation in the notice was an inadvertent error.

The Tribunal held that once the foundational notice under Section 148A(b) is issued on incorrect facts, the assumption of jurisdiction under Section 147 itself stands vitiated and cannot be sustained in law.

The ITAT further observed that although the Assessing Officer relied upon statements recorded during search proceedings under Section 132, copies of such statements or material were never furnished to the taxpayer.

It held that merely referring to “information” or “statements” without supplying the underlying material renders the opportunity under Section 148A meaningless and illusory.

In this context, the Tribunal relied on the judgment of the Bombay High Court in Anurag Gupta v. Income Tax Officer, which held that reassessment proceedings are invalid if the material relied upon is not supplied along with the notice.

The ITAT also noted contradictions in the Assessing Officer's reasoning, where on one hand it was alleged that the political party had no political activity, while on the other hand reliance was placed on statements acknowledging that the party had contested elections.

Without prejudice to the jurisdictional finding, the Tribunal held that even on merits, the disallowance under Section 80GGC could not be sustained.

It noted that the taxpayer had furnished the donation receipt, bank statement evidencing cheque payment, and registration proof of the political party. No material was brought on record by the Revenue to show that the donation amount was returned to the assessee.

The ITAT held that mere suspicion, investigation inputs or application of human probabilities cannot override clear documentary evidence or be a basis to deny a statutory deduction.

Accordingly, the Tribunal quashed the reassessment proceedings as invalid and also allowed the Section 80GGC deduction. The taxpayer's appeal was allowed in full.

Case Title: Abhishek Jayketu Joshi vs AC CIR-42(2)(1)
Case No.: ITA No. 5775/Mum/2025
Citation: 2026 LLBiz ITAT(MUM)10
Appearance for the Assessee: M. M. Golvala, Ld. AR
Appearance for the Department: Surendra Mohan, Ld. DR