Political Donation Deduction under Section 80GGC Allowed in Absence of Assessee-Specific Evidence – ITAT Raipur Judgment Explained

Political donations made by individuals have traditionally enjoyed tax benefits under Section 80GGC of the Income Tax Act, 1961. However, in recent years, such donations—especially those made to Registered Unrecognized Political Parties (RUPPs)—have come under intense scrutiny by the Income Tax Department.

In a significant ruling, the Income Tax Appellate Tribunal (ITAT), Raipur Bench, in the case of ACIT, Circle-1(1), Bilaspur vs. Shri Anuj Prakash Gupta (AY 2019-20), held that deduction under Section 80GGC cannot be denied merely on general investigation findings in the absence of assessee-specific evidence.

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Legal Background – Section 80GGC

Section 80GGC allows individuals to claim deduction for donations made to political parties or electoral trusts, subject to the following conditions:

• The political party must be registered under Section 29A of the Representation of the People Act, 1951
• The donation must not be made in cash
• Proper banking trail and donation receipt must be available

Once these statutory conditions are fulfilled, the deduction is ordinarily allowable unless the Revenue establishes otherwise through concrete evidence.

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Facts of the Case

• The assessee claimed a deduction of Rs. 2,00,000 under Section 80GGC
• Donation was made to Rashtriya Samajwadi Party (Secular)
• Payment was made through banking channels
• A valid donation receipt was obtained

Subsequently, a search under Section 132 was conducted in the case of the RUPPs Group, Ahmedabad, wherein certain political parties were alleged to be involved in providing bogus accommodation entries in the guise of political donations.

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Assessment Proceedings and Revenue’s Stand

Based on investigation inputs, the Assessing Officer reopened the assessment under Sections 147/148 and disallowed the deduction under Section 80GGC, alleging that:

• The political party was involved in circular accommodation transactions
• Statements of party functionaries suggested refund of donations after commission
• The burden shifted to the assessee to prove genuineness

However, the Assessing Officer failed to produce:

• Any bank trail evidencing refund of donation
• Any statement specifically implicating the assessee
• Any opportunity of cross-examination

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Findings of the CIT(A) / NFAC

The Commissioner of Income Tax (Appeals) deleted the disallowance with the following observations:

• Donation through banking channels was undisputed
• Receipt issued by the political party was valid
• Investigation findings were general and third-party based
• No assessee-specific evidence was brought on record
• Disallowance based purely on presumption is unsustainable in law

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Revenue’s Arguments Before ITAT

The Revenue contended that:

• The political party was part of a larger accommodation entry racket
• Once the recipient entity is tainted, deduction should automatically fail
• The case fell under exceptions mentioned in CBDT Circular No. 05/2024

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Observations of the ITAT Raipur Bench

The ITAT upheld the order of the CIT(A) and made the following key observations:

• No evidence showed that money was returned to the assessee
• No direct nexus between the assessee and alleged accommodation entry was established
• General investigation findings cannot be applied universally
• Assessee-specific corroborative evidence is mandatory

The Tribunal reiterated the settled principle that suspicion, however strong, cannot take the place of proof.

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Final Decision

• The appeal filed by the Revenue was dismissed
• Disallowance of Rs. 2,00,000 under Section 80GGC was deleted
• Deduction was allowed in full

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Key Legal Takeaways

• Political donation deduction cannot be denied mechanically
• Third-party investigation reports alone are insufficient
• Assessee-specific evidence is indispensable
• Principles of natural justice must be followed

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Author’s Comments

This ruling provides significant relief to genuine taxpayers who have made political donations in compliance with the law. While the Department’s efforts to curb misuse of Section 80GGC are justified, tax liability cannot be fastened on the basis of borrowed suspicion or generalized investigation reports.

From a litigation perspective, this judgment will be extremely useful in cases where donations are made through banking channels and no evidence of refund exists.

Every tax addition must stand on its own evidence—not on assumptions.

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Authored by:
CA Manthan Gandhi
Chartered Accountant | Income-tax & GST Litigation Specialist

This article is for educational purposes and does not constitute legal advice.