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Facts
The assessee, a private limited company, claimed a deduction of Rs. 25,00,000/- under Section 80GGC for a donation to Sardar Vallabhbhai Patel Party (SVPP) in AY 2019-20. The Assessing Officer (AO) disallowed this deduction and added Rs. 1,25,000/- as unexplained commission, finding the donation to be part of a bogus donation scam. The CIT(A) confirmed these additions.
Held
The Tribunal found that the CIT(A)'s order was brief and cryptic, failing to adequately address the assessee's contentions and judicial precedents. Therefore, the matter was restored to the CIT(A) for de-novo consideration with a direction to pass a detailed speaking order.
Key Issues
Whether the CIT(A) properly adjudicated the appeal by considering all facts and judicial precedents, or if a de-novo consideration is required due to a cryptic order.
Sections Cited
147, 132, 80GGC, 80GGB, 148, 13A, 29C, 69C, 270A, 271AAC, 272A(1)(d), 263, 80G
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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL
O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
These appeals have been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 04.06.2025 passed for A.Ys. 2019-20 & 2020-21.
The assessee has raised the following grounds of appeal:
(A.Y. 2019-20) “1. The Learned CIT(A) NFAC erred in law and on facts in confirming addition made by the learned ITO (Assessment Unit) of Rs. 25,00,000/- as bogus claim of deduction u/s 80GG and confirming addition of Rs. 1,25,000/- as unexplained expenditure u/s 69C of the Act by ex-parte Order. The Addition confirmed by the learned CIT(A) NFAC deserves to be deleted. The same be deleted now.
2. The Learned CIT(A) NFAC has erred in not properly appreciating the facts, various submissions, explanations and information submitted by the appellant during &1441/Ahd/2025 RHV Enterprise Pvt. Ltd. vs. ITO Asst.Years–2019-20 & 2020-21 - 2– the assessment proceeding which ought to have been considered in proper perspective before passing the impugned order.
3. The order passed by the Learned CIT(A) NFAC is invalid and bad in law. It be so held now. 4. The appellant craves leave to add, amend, alter, delete, change or modify any or all grounds of appeal
before at the time of the hearing.”
3. The brief facts of the case are that the assessee, a private limited company, filed its return of income for the Assessment Year 2019-20 declaring total income of ₹40,98,530/-. During the course of proceedings initiated under section 147 of the Income-tax Act, 1961 (Act), based on information gathered from a search and seizure action conducted on 07.09.2022 under section 132 of the Act in the case of various Registered Unrecognized Political Parties (RUPPs), including Sardar Vallabhbhai Patel Party (SVPP), it came to light that several parties were engaged in facilitating bogus donations to enable donors to claim wrongful deductions under sections 80GGC/80GGB of the Act. These donations were then routed back to the donors through cash or banking channels after deducting a commission. Based on the above findings, the Assessing Officer noted that the assessee had made a donation of ₹25,00,000/- to SVPP during the Financial Year 2018-19 and claimed deduction under section 80GGC in its return of income. The assessee was issued notice under section 148 of the Act and, in response, filed a return of income reiterating the same amount. During assessment proceedings, the assessee furnished bank statements, a donation receipt, and other supporting documents. However, upon verification, the Assessing Officer found that SVPP was one of the political parties covered in the search and had failed to comply with the statutory requirements under section 13A of the Act and section 29C of the Representation of People Act, 1951. More &1441/Ahd/2025 RHV Enterprise Pvt. Ltd. vs. ITO Asst.Years–2019-20 & 2020-21 - 3– specifically, SVPP had not filed the mandatory contribution report in Form 24A with the Election Commission of India for the relevant year, which is a prerequisite for claiming exemption under section 13A. Further, statements of certain key persons associated with SVPP, namely Shri Kalpesh Dashrath Parekh and Shri Jigar Kothiya, showed that the party was engaged in the racket of providing accommodation entries by way of bogus donations. The modus operandi involved routing the donation amounts through shell entities under the garb of political or social expenditure, with funds eventually returning to the donor after deducting a commission of 3.5% to 5%. Evidence in the form of incriminating documents, diaries, WhatsApp chats, and records of financial layering through intermediary entities was also found and relied upon by the Assessing Officer during the assessment proceedings. Though the assessee sought cross-examination of the individuals whose statements were relied upon, the request was rejected by the Assessing Officer on the ground that the case against the assessee was independently supported by documentary and digital evidence gathered during search. The Assessing Officer held that cross-examination was not necessary in this context and the Assessing Officer relied on several judicial precedents to support this position. Accordingly, the deduction of ₹25,00,000/- claimed under section 80GGC of the Act was disallowed and added to the total income of the assessee. Further, an amount of ₹1,25,000/- being 5% of the donation amount was estimated as unexplained expenditure incurred as commission for arranging the bogus donation transaction. This amount was also added to the assessee’s total income under section 69C of the Act. Penalty proceedings under sections 270A, 271AAC, and 272A(1)(d) of the Act were also separately initiated.
&1441/Ahd/2025 RHV Enterprise Pvt. Ltd. vs. ITO Asst.Years–2019-20 & 2020-21 - 4– 4. In appeal, CIT(Appeals) noted that the assessee failed to submit any credible evidence during the appeal proceedings to establish the genuineness of the donation or to counter the findings of the AO. The CIT(A) observed that nothing prevented the assessee from furnishing supporting documents or explanations during the proceedings, but no such effort was made. In view of the findings from the Investigation Wing and the lack of supporting evidence from the assessee, the CIT(A) held that the AO’s disallowance of the deduction of ₹25,00,000/- under section 80GGC was justified and upheld the same. Similarly, the addition of ₹1,25,000/- under section 69C, representing unexplained expenditure towards commission for arranging the bogus donation, was also confirmed. The general grounds of appeal, which did not require any specific adjudication, were dismissed. Accordingly, the appeal filed by the assessee was dismissed in full.
The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. Before us, the Counsel for the assessee submitted that CIT(Appeals) has passed a very cryptic order without taking into consideration judicial precedents which have also held in favour of the assessee on this issue. Accordingly, the Counsel for the assessee submitted that in the interests of justice the matter may be restored to file of CIT(Appeals) to give a detailed finding after taking into consideration the submissions of the assessee on this issue.
In response, the Ld. DR placed reliance on the observations made by the Assessing Officer and Ld. CIT(Appeals) in their respective orders. The Ld. DR placed reliance on the case of Ahmedabad ITAT in the case of Shah Rakesh Bhikhabhai (HUF) in wherein the ITAT &1441/Ahd/2025 RHV Enterprise Pvt. Ltd. vs. ITO Asst.Years–2019-20 & 2020-21 - 5– upheld the revision order passed by the PCIT under Section 263 of the Act. The main issue was regarding the assessee's claim of deduction of ₹30 lakhs under Section 80GGC (donation to a political party) and ₹2.25 lakhs under Section 80G (donation to a trust). The PCIT found that the Assessing Officer (AO) had not properly examined these donations during assessment. The political party in question Rashtriya Samajwadi Party (Secular) was found to be involved in a bogus donation scam, as revealed during search operations and statements of key individuals, including the party president and others. These statements confirmed that the donations were not genuine and were part of a fraudulent scheme to claim fake deductions. The assessee argued before Principal CIT that he had submitted all necessary documents during assessment, and relied on some case laws. However, the ITAT held that mere submission of documents is not enough if the AO fails to conduct any real enquiry or apply his mind. Also, the case law relied upon by the assessee was found to be not applicable, while the case cited by the Department (Milind Pankajbhai Shroff) was found to be directly relevant. The ITAT held that in tax matters, the AO has a dual role he must act as both investigator and adjudicator. Since the AO did not investigate the donations at all, the order was held to be erroneous and prejudicial to the interest of the Revenue, satisfying both conditions under Section 263. The appeal of the assessee was dismissed, and the revision order of the PCIT was upheld.
We have heard the rival contentions and perused the material on record. The core issue pertains to the disallowance of deduction under section 80GGC of the Act amounting to ₹25,00,000/-, and an addition of ₹1,25,000/- under section 69C, made on the basis of allegations that the donation was not &1441/Ahd/2025 RHV Enterprise Pvt. Ltd. vs. ITO Asst.Years–2019-20 & 2020-21 - 6– genuine but a part of a larger accommodation entry arrangement involving a political party, namely Sardar Vallabhbhai Patel Party (SVPP). The CIT(Appeals), while confirming the additions made by the Assessing Officer, in our view has passed a rather brief and cryptic order without adequately dealing with the contentions raised by the assessee or the judicial precedents on the subject as applicable to the assessee’s set of facts. Accordingly, in the interest of justice and fair play, we are of the view that the CIT(Appeals) should pass a detailed speaking order after taking into consideration the submissions of the assessee and discussion of applicable judicial precedents on the subject. We, therefore, set aside the order of the CIT(Appeals) and restore the matter to his file for de-novo consideration. The CIT(Appeals) shall consider all submissions and evidences placed on record by the assessee and pass a reasoned and speaking order after granting adequate opportunity of being heard. The CIT(Appeals) shall also take into account judicial precedents on the subject (also judicial precedents cited by the Ld. DR before us) as applicable to the specific facts of the assessee’s case. The assessee is directed to cooperate in the proceedings and file necessary documents as may be required.
In the result, the appeal of the assessee is allowed for statistical purposes.
Now we come to ITA No. 1441/Ahd/2025(A.Y. 2020-21) 9. The assessee has raised the following grounds of appeal:
&1441/Ahd/2025 RHV Enterprise Pvt. Ltd. vs. ITO Asst.Years–2019-20 & 2020-21 - 7– (A.Y. 20202-21) “1. The Learned CIT (A) NFAC erred in law and on facts in confirming addition made by the learned ITO (Assessment Unit) of Rs. 30,00,000/- as bogus claim of deduction u/s. 80GC and confirming addition of Rs. 1,50,000/- as unexplained expenditure u/s 69C of the Act by ex-parte Order. The Addition confirmed by the learned CIT(A) NFAC deserves to be deleted. The same be deleted now.
2. The Learned CIT(A) NFAC has erred in not properly appreciating the facts, various submissions, explanations and information submitted by the appellant during the assessment proceedings which ought to have been considered in proper perspective before passing the impugned order.
The order passed by the Learned CIT (A) NFAC is invalid and bad in law. It be so held now.
The appellant craves leave to add, amend, alter, delete, change or modify any or all grounds of appeal
before or at the time of the hearing.”
10. We observe that the facts and issues for consideration for A.Y. 2020-21 are identical to A.Y. 2019-20 and accordingly, the appeal of the assessee is also allowed for statistical purposes for A.Y. 2020-21 as well.
In the combined result, the appeals of the assessee are allowed for statistical purposes. This Order pronounced in Open Court on 17/09/2025