Income Tax Department Targets Political Party Donors Over Fraudulent Deductions
Ahmedabad, Dec 11, 2024
Dept asks donors to parties why their I-T deductions shouldn’t be scrapped
Taxpayers who donated to Registered Unrecognised Political Parties (RUPP) to claim deductions under Sections 80GGC/80GGB of the Income Tax Act have started getting show-cause notices from the department. These notices question why the deduction should not be disallowed, as these political parties have confessed that most of the donation was returned to the ‘donors' after taking a cut. Chartered accountants said that donors will be required to reply to these notices soon, and it is likely that the department will issue orders before the end of March.
An official from the income tax department said, "Some RUPPs were involved in scams, which their office-bearers confessed to. Assessment process is ongoing and show-cause notices are being sent to ‘donors' to these parties, asking why the deductions they claimed should not be disallowed."
Sulabh Padshah, a chartered accountant, said, "Taxpayers are receiving show-cause notices from the tax department. They will need to submit their replies soon, and we believe that the department will issue orders in this matter before the end of March." Sources said that the donors have maintained that their contributions were made to parties officially registered with the Election Commission of India (ECI), asserting they have not violated any laws.
In Sep 2022, the I-T department carried out searches at the offices of 23 such RUPPs, 35 intermediaries and three exit providers in Gujarat. "The extensive operation was prompted by compelling evidence pointing to a pervasive scam involving political party donations, employed to claim phoney deductions under Sections 80GGC/80GGB of the Income Tax Act. Subsequently, the funds were illicitly rerouted back to the donors through cash, RTGS, NEFT or other banking channels," said a reliable source in the IT department.
Unrecognised political parties can be newly registered parties or those that have not secured enough percentage of votes in the assembly or general elections to fulfil the criteria to become a state party. They can also be parties that have never contested elections since their registration. Some office-bearers of RUPPs in Gujarat had earlier admitted to engaging in fraudulent donation activities, charging commissions ranging from 4.50% to 5%, said sources.
[The Times of India]
