GAURAV GIRISH DEDHIA,MUMBAI vs. INCOME TAX OFFICER - CIRCLE 41(1)(2), MUMBAI

The grounds of appeal are as under:-

Brief facts of the case are that the assessee an individual filed return of income declaring total income at Rs. 24,49,790/- after claimed deductions under chapter VI-A of Rs. 5,14,206/-. In this case information was received that during the year the assessee had taken deduction under section 80G/80GGC of the Act on donation of Rs. 5,25,000/- during the year under consideration, made to two political

In ground no.1 and additional ground, the assessee has contested the validity of reopening mainly on the plea that the information from third parties could not be made basis for reopening. Besides, the authorities concerned issued 148 of the Act notice without any application of mind. According to the assessement order, based on the above stated information, case of the assessee was reopened u/s 147 of the Act in terms of Explanation 1 thereof. An opportunity of being heard as per provision of section 148A(b) of the Act was provided to the assessee asking to show-cause in accordance with Section 148A (b) of the Act. The assessee in response submitted that he had donated Rs.2,00,000/-and not Rs.4,00,000/-to Yuva Jan Jagruti Party. Similarly, he donated Rs.1,25,000/- to All India Social Education Charitable Trust registered u/s 12A and 80G(5) of the Act. He filed return for the relevant year disclosing income of Rs. 24,49,790/-by paying tax of Rs. 6,24,177/-. The donations were made in good faith and no malafide intention. He filed bank statement evidencing the genuineness of the payment made to the organizations, donation

1 The AO observed that the submission of the assessee that the donations to the above said parties were given through bank was not disputed, was in line with the information available with the department that the donation was given by the assessee which was later returned back to him. As per the investigations, the parties had explained the modus operandi and stated that the donation received by them were returned back to the donors through dummy entities after deducting the commission of 2-3 %. The search operation and assessment proceedings revealed that the donation was received through cheque in the bank account of the Political Party or the Charitable organization. Thereafter. such amounts were routed to an intermediary in the form of payments for purchase of agricultural produce viz, rice, wheat, pulses etc. Such intermediaries were shell entities formed and controlled by the same persons running the political parties/charitable organizations. The purchase was bogus and non-genuine and this was done only to transfer the money into the account of the intermediary. Thereafter, the intermediary transfers such money, claiming them to be payment for purchase of agricultural produce, from various individuals/ proprietary

Before us, the ld.AR has merely relied on the grounds of appeal claiming that the reopening was bad in law.

On careful consideration, we find no infirmity in the action of the lower authorities. The AO had followed the due process as laid down in section 148A(b) as well section 148A(d) of the Act. Reopening was done after allowing the assessee opportunity of hearing and only after appreciation of the facts of the case and the submissions made, he issued notice u/s 148 of the Act after taking approval appropriate authority in terms of section 151 of the Act. His action is in harmony with the provisions of law and judicial decision of various courts of law. The Hon'ble P a g e | 7 A.Y. 2019-20 Gaurav Girish Dedhia information regarding bogus purchase by appellant received by DRI from CCE which was passed on to revenue authorities was 'tangible material outside record' to initiate valid reassessment proceedings. Similarly, the Hon'ble High Court of Gujarat in the case of Aaspas (Investigation) that assessee was beneficiary of accommodation entries by way of share application provided by a third party, same was justified. The Hon'ble High Court of Delhi in the case of Pratibha Finvest (P) Ltd. Vs ITO (2013) 29 taxmann.com 420 (Delhi) held that the reopening of assessment on basis of investigation report in case of search on third parties revealing accommodation entries received by assessee, was justified. Hon'ble Supreme Sup Court in the case of Raymond Woollen Mills Ltd. Vs Income-tax tax Officer [1999] 236 ITR 34 (SC) held that the Department can reopen a case on the basis of some prima facie material and sufficiency or considered at that stage. At the stage of issue of notice u/s 148 only question is whether there was relevant material on which a person could have formed a requisite belief, material conclusively reasonable proving escapement is not concerned at the time of reopening of assessment. In P a g e | 8 A.Y. 2019-20 Gaurav Girish Dedhia view of such legal position and lack of any substance in the submissions of the assessee ground of appeal is dismissed.

In ground no.2, the assessee has agitated the disallowance of deduction claimed u/s 80GGC of the Act. As per information available and as mentioned in preceding paras, the donation of Rs. 2,00,000/-was made by the assessee to Yuva Jan Jagrity Party. Therefore, Sri Ronakbhai Prakashbhai Gohel, the National President was examined who affirmed the findings if the Investigation report admitting providing accommodation entries in respect of such bogus donations, in lieu of commission. As per the Election commission of India office site, it is also noted that the assessee party had not submitted a contribution report under sub section (3) of the section 29 of the Representation of People Act, 1951 to the Election Commission of India. Therefore, For the year, FY 2017-18, the party did not file the contribution report as prescribed in section 29C of Representation of People Act, 1951. Hence, there is no question of eligibility of any kind of exemption to the party on the income earned during the year. Hence, the income earned by the party over the years was liable to be brought to tax in the hands of the party i.e. Yuva Jan Jagriti Party without giving benefit of exemption. Therefore, it was clear that the party did not file the contribution report as prescribed in section 29C of Representation of People Act, 1951 for P a g e | 9 A.Y. 2019-20 Gaurav Girish Dedhia the F. Y. 2018-19. Hence, there is no question of eligibility of any kind of exemption to the party on the Income earned during the year.

1 Further, as per information available and as mentioned in preceding paras, the donation of Rs. 1,25,000/-was made by the assessee to All India Social Education Charitable Trust. A search and seizure action u/s 132 of the Act was conducted in the case of several political parties and charitable organizations including All India Social Education Charitable Trust (AISECT) who admitted such wrong doings in their deposed statements.

2 Accordingly, the AO concluded that as per from the details available in the form of investigation report and material collected, it was clear that the assessee has made a contribution which is a non- genuine one and it was a conscious one, well knowing the fact the same was a dubious one. Here it would be pertinent to consider that investigation has proved that platform of the said political party i.e. Yuva Jan Jagrity Party and All India Social Education Charitable Trust had been utilized for facilitation of bogus donations which are ultimately returned back to the donor. Further, the present proceedings are based on the information which suggests that income chargeable to tax has escaped assessment in the case of the assessee for AY 2019-20. Therefore, on the basis of the material gathered and circumstantial

In the subsequent appeal before the ld.CIT(A), the assessee contested the disallowance. The appellant furnished the various written submission along with documents in support of his claim. He observed that on perusal of the assessment order, it was noticed that the AO followed the due procedure for re-opening the case u/s. 147 and completed the assessment by making addition/ disallowance of Rs.2,62,500/- u/s. 80GGC of the Act vide his order u/s. 147 r.w.s. 144B of the Act after examining the details/documents available on record. The AO elaborately explained the modus operandi of the above stated parties, paper/dummy entities, facilitated accommodation entries to the donors by accepting the donations, the assessee was one of the amongst them. The case laws relied by the assessee were found distinguishable from the facts of the present case. After careful consideration of the assessment order and written submission of the assessee, the search findings in the case of RUPP's revealed that he had given donation to them is one of the parties that was accepting bogus donations, the search findings revealed. The action of the AO is in disallowing the donation

Before us, the ld.AR has reiterated the same contentions as made before the authorities below claiming that the impugned donations were made through proper banking channels, and the appellant holds valid receipts for the same. The assessee responded to all notices within the stipulated timeframes, submitting the requested documents and clarifications. The submissions included evidence of legitimate transactions, such as donation receipts and bank transfer details corroborating the donations made to the specified entities. Despite these submissions, the AO rejected the appellant’s claims, relying on statements and findings from third-party investigations against the donation receiving entities.

1 The AO concluded that the donations were non-genuine and part of the fraudulent accommodation entry scheme. It was alleged that these entities did not engage in any legitimate social or political work and instead operated solely to facilitate tax evasion. Consequently, addition of Rs.2,62,500/- was made to his income. The assessee asserted that the assessment order is arbitrary and based on unsubstantiated allegations. The AO failed to establish any direct link between the assessee and the alleged fraudulent activities of the entities.

2 We find that identical issue has been the subject of adjudication by various Coordinate Benches of ITAT in a plethora of cases. Reference could be made to the decisions in the cases of Mihir Bipinbhai Parekh Vs. DCIT (ITA No. 1173/Mum/2026),Milind Pankajbhai Shroff Vs. Pr. CIT-1, Rajkot (ITA No.93/RJT/2023), Ritesh Sugan Jain Vs. ITO (ITA No. 8546/Mum/2025),Rajen Jayantilal Merchant Vs. ITO (ITA No. 1683/Ahd/2025).Relevant parts of the ITAT order in the case of Manoj Jayram Sarang, Mumbai in ITA No.2531/Mum/2026 on 17 June, 2026. Hon'ble ITAT Surat Bench in ITA No.49/SRT/2024 upheld the disallowance of the claim of donation made to the political parties under section 80GGC of the Income Tax Act, 1961. Relevant extract of the order is reproduced hereunder: "...

We have considered the rival submission of both the parties and perused the materials available on record carefully. We have also deliberated on various case law relied by Ld. AR for the assessee and Ld. relied DR for the Revenue. We have also seen the various documents/papers Sr-DR filed on record by assessee. We find that the assessing officer disallowed the claim of assessee under section 80GGC by taking view that notice under section 133(6) to the said political party, which failed to furnish their bank showing the transaction during the relevant financial year and copy 24A to Election Commissioner of India. The assessing officer also of Form-24A held that the genuineness of the transaction and existence of said political party is not P a g e | 14 A.Y. 2019-20 Gaurav Girish Dedhia established by the assessee. The Assessing Officer further held that only copy of ITR by said political party was filed on 10.08.2017, wherein in the statement of income for the period ended on 31.03.2016 31.03 they have shown nil amount regarding voluntary contribution, Further, as per information on ITBA portal about ITR of said political party, they have mentioned that no contribution is received. The Assessing Officer further preceding year, the assessee has paid similar held that even in the preceding contribution of Rs.35.00 lakh to the same political party, which is also more than 40% of the gross total income. The Assessing Officer took his view that assessee is contributing almost 50% of his income in all two years to said political party and such political party has not contested any election nor they have any presence in the Regional or at National level. On the basis of such adverse report /material gathered by Assessing Officer, disallowed the entire donation of Rs. 50.00 lakh the Assessing Officer disallowed under section 80GGC.

We find that before ld CIT(A) the assessee has not given any specific evidence or pleaded facts otherwise than pleaded before assessing officer except on relying on certain case laws, which has been distinguish by Id which CIT(A) on the basis of specific facts of those cases. We find that the Id CIT(A) held that the Assessing Officer brought sufficient information and evidence before issued show cause notice to assessee. The assessee has gross total income of Rs. 1.08 crores out of which Rs.50.00 lakh earned gross was donated to unrecognized political party. There is no evidence that said political party is active or ever contested any regional election in state or national level. The assessee has not explained as to how he came with the contract with such political party and why such huge donation made to them. P a g e | 15 A.Y. 2019-20 Gaurav Girish Dedhia donation to six different entity including to the said political party of Rs. 55.00 lakhs. Besides that, the said assessee also paid contribution/donation to Akhil Bhartiya Hindu Mahasabha, Lok Jan Shakti and other Charitable organisation. That assessee has paid total 10 donation of Rs. 6.79 Crore to various organisation and the donation to impugned political party is only 8 or 9% of their total donation. The said assessee is corporate entity, on the other hand the assessee is individual and has allegedly donated his 50% of his total income. Moreover, in the donated said case the assessing officer has not brought such adverse material against the political as has been brought in the present case. In other case relied by the assessee in Soni Ishwarlal Political Party. However, in the present case, the impugned political party is an unrecognized political party. Thus, we do not find any merits in the submissions of the Id AR for the assessee. In the result, the grounds of appeal raised by the assessee are dismissed.”

3 The Coordinate Bench of Ahmedabad in the case of Atul M Parmar Vs. DCIT in ITA No.319/Ahd/2026 held as below:

It is now well settled by the Hon'ble Supreme Court in the cases of CIT v. Durga Prasad More (1971) 82 ITR 540 (SC) and Sumati Dayal v. CIT (1995) 214 ITR 801 (SC) that the taxing authorities are not required to put on blinkers while examining a transaction merely because it is supported by documentary evidence. They are entitled to look beyond the apparent, examine the surrounding circumstances, apply the test of human probabilities and ascertain the real nature of the transaction. Where the cumulative facts and attending circumstances establish that the apparent is not the real, the Revenue is justified in drawing an inference based on the preponderance of probabilities. In the present case, the investigation material, statements recorded under section 132(4), bank trail analysis and the established modus operandi of the recipient political party constitute a complete chain of circumstances which overwhelmingly demonstrate that the impugned donation was merely an accommodation entry and not a genuine contribution eligible for deduction under section 80GGC of the Act.”

4 In view of the foregoing discussion, the materials brought on record by the Revenue, the findings emerging from the investigation and respectfully following the consistent view taken by the Co-ordinate Benches of this Tribunal in identical matters, we hold that the assessee

Ground No.3 relates to initiation of penalty proceedings u/s. 270A of the Act. On perusal of the assessment order, it was noticed that the AO has only initiated penalty proceedings u/s. 270A of the Act and not levied the penalty against the appellant. This ground is consequential in nature and hence this ground is dismissed.

In the result, the appeal of the assessee is dismissed.