Rs 40k added to man’s income for political donation; he wins in ITAT Rajkot
Got income tax notice for political donation? Man wins as ITAT upholds Section 80GGC tax deduction despite allegations of bogus donations
Feb 9, 2026
Synopsis
A man's Rs 4 lakh donation to a political party for an 80GGC tax deduction was flagged as suspicious. The Income Tax Appellate Tribunal (ITAT) added Rs 40,000 to his income, noting the party provided accommodation entries. While the man was not directly implicated in the scam, the ITAT made a 10% addition to plug revenue leakage.
On January 12, 2026, the Income Tax Appellate Tribunal (ITAT) added Rs 40,000 income to Mr Patel’s income after it was found that the political party to whom he donated Rs 4 lakh, was running an elaborate scheme of providing accommodation entries. The Income Tax Department’s investigation showed that this political party to whom Mr Patel had donated money are engaged in providing accommodation entries to the various beneficiaries of bogus tax deduction claims made under Section 80GGC.
As a result, the income tax department alleged that Mr Patel was also a beneficiary of a false tax deduction racket. However, ITAT observed that it was possible that Mr Patel had donated the money in good faith while the political party was enngaged in its own misconduct with no direct connection to him.
ITAT Rajkot observed in his judgement: “I also note that so far allegation of accommodation entry is concerned, the said political party manages its own affairs and the affairs of the said political parties is not in the control of the assessee who has given the donation in good faith to the political party. I also find that there is no direct or indirect corroborative evidence against the assessee that he is involved in such scam.”
How the tax deduction dispute due to political party donation started?
Mr Patel filed his ITR on June 28, 2019 declaring a total income of Rs 16 lakh (16,06,910). However, the Income Tax Department’s investigation wing discovered that he had donated Rs 4 lakh to a Secular party who is also a Registered Unrecognized Political Party (RUPP), and claimed tax deduction under Section 80GGC/80GGB.
Based on this information, a comprehensive investigation was carried out on these RUPPs, revealing they are involved in providing accommodation entries to various beneficiaries for bogus claims made under Section 80GGC.
Thus Mr Patel’s case was reopened under Section 147 by issuing notice under Section 148 on April 14, 2023. In the assessment order, the assessing officer (AO) held that the alleged donation of Rs 4 lakh was not genuine and therefore, the claim of deduction made under Section 80GGC was disallowed.
Consequently, his assessment under Section 147 which was finalized on March 24, 2025 indicated a total taxable income at Rs 20 lakh (20,06,910).
ITAT Rajkot analysis and discussion
ITAT Rajkot said that they have noted the addition of income made by the A.O. by disallowing deduction under 80GGC to the tune of Rs 4 lakh.
ITAT Rajkot also noted that the assessee (Mr Patel) has submitted that he has made a genuine donation without any involvement in the alleged scam. There is no single piece of evidence against the assessee and despite this, the addition was made by the A.O based on assumption alone.
ITAT Rajkot said they also observed that in order to claim the deduction of donation under Section 80GGC made to political parties, by and large two conditions should be fulfilled viz, the political parties should be registered with Election Commissions and second the donation should not be made in cash.
Mr Patel made this donation via proper banking channels and the political party was duly registered under Section 29A of the Representation of the People Act, 1951.
ITAT Rajkot says the allegations of accommodation entry are not directly linked. The said political party manages his own affairs and it affairs is not in the control of the assessee who gave a donation in good faith to the political party. ITAT Rajkot said they found no direct or indirect corroborative evidence against the assessee (Mr Patel) proving that he was involved in such a scam.
ITAT Rajkot judgement
However, to meet the end of justice, and considering the smallness of the amount of Rs 4 lakh “on money” an estimated addition @ 10% of Rs 4 lakh is made in the hands of the assessee to plug the leakage of revenue.
Therefore, I direct the A.O. to make an addition in the hands of the assessee Rs 40,000, (10% of Rs 4,00,000) by applying normal rate of income tax.
This adjudication is made considering the smallness of the amount and hence this should not be treated as a precedent in the previous years and the subsequent years.
In the result, the appeal filed by the assessee is partly allowed in above terms. Order pronounced in the open court on 12/01/2026.
[The Economic Times]
