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Facts
The Revenue's appeal challenges the CIT(A)'s deletion of an addition of Rs. 15,000/- made by the Assessing Officer under Section 69C. The addition was for alleged commission on bogus donation receipts. The assessee had initially claimed a deduction of Rs. 3,00,000/- for donation to a political party, which was later offered to tax during reassessment proceedings.
Held
The Tribunal held that Section 69C is applicable when the source of expenditure is not explained. In this case, the amount for which commission was allegedly paid was offered to tax by the assessee. Therefore, the source of the funds out of which the commission was presumed to have been paid stands explained from the assessee's disclosed and taxed income.
Key Issues
Whether the addition of Rs. 15,000/- under Section 69C for alleged commission paid for obtaining bogus donation receipt was justified, given that the assessee later offered the related amount to tax.
Sections Cited
69C, 80GGC, 132, 132(4), 148, 148A, 271AAC
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “H (SMC
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
ORDER PER OM PRAKASH KANT, AM
This appeal by the Revenue is directed against order dated 02.07.2025 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2019-2020, raising following grounds:
1. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 15,000/- made by the Assessing Officer under section 69C of the Income-tax Act, 1961 on Bhavin Kumar Rameshkumar Jain Bhavin Kumar Rameshkumar Jain Rashtriya account of commission paid to the political party Rashtriya account of commission paid to the political party Rashtriya Samajwadi Samajwadi Samajwadi Party Party Party (Secular) (Secular) (Secular) for for for arranging/facilitating arranging/facilitating arranging/facilitating bogus bogus bogus deduction u/s 80GGC, ignoring the evidence gathered by the deduction u/s 80GGC, ignoring the evidence gathered by the deduction u/s 80GGC, ignoring the evidence gathered by the Investigation Wing and the sworn statement of the ex gation Wing and the sworn statement of the ex gation Wing and the sworn statement of the ex-president of the political party recorded u/s 132(4) of the Act. the political party recorded u/s 132(4) of the Act.
2. That the Ld. CIT(A) erred in holding that the commission 2. That the Ld. CIT(A) erred in holding that the commission 2. That the Ld. CIT(A) erred in holding that the commission expenditure of Rs. 15,000/ expenditure of Rs. 15,000/- was incurred out of the assessee's was incurred out of the assessee's admitted income and th admitted income and therefore not liable to addition u/s 69C, erefore not liable to addition u/s 69C, without appreciating that the assessee had failed to offer any without appreciating that the assessee had failed to offer any without appreciating that the assessee had failed to offer any satisfactory explanation regarding such expenditure and that the satisfactory explanation regarding such expenditure and that the satisfactory explanation regarding such expenditure and that the transaction itself was sham, being linked to bogus deduction transaction itself was sham, being linked to bogus deduction transaction itself was sham, being linked to bogus deduction entries.
3. That the Ld. CI 3. That the Ld. CIT(A) erred in not appreciating that section 69C T(A) erred in not appreciating that section 69C specifically provides that where the source of expenditure is not specifically provides that where the source of expenditure is not specifically provides that where the source of expenditure is not explained satisfactorily, the same shall be deemed to be the income explained satisfactorily, the same shall be deemed to be the income explained satisfactorily, the same shall be deemed to be the income of the assessee, and in the present case, the assessee's explanation of the assessee, and in the present case, the assessee's explanation of the assessee, and in the present case, the assessee's explanation was neither genuine nor acceptable in view of the findings of the either genuine nor acceptable in view of the findings of the either genuine nor acceptable in view of the findings of the Investigation Wing regarding the modus operandi of the political Investigation Wing regarding the modus operandi of the political Investigation Wing regarding the modus operandi of the political party in providing accommodation entries. party in providing accommodation entries.
4. That the Ld. CIT(A) failed to appreciate that the assessee himself 4. That the Ld. CIT(A) failed to appreciate that the assessee himself 4. That the Ld. CIT(A) failed to appreciate that the assessee himself had revised his had revised his return of income in response to notice u/s 148 and return of income in response to notice u/s 148 and withdrew the bogus claim of deduction of Rs 3.00.000/ withdrew the bogus claim of deduction of Rs 3.00.000/ withdrew the bogus claim of deduction of Rs 3.00.000/- u/s 80GGC thereby admitting to having originally thereby admitting to having originally misreported income and misreported income and hence the assessing officer was justified in bringing to tax the hence the assessing officer was justified in bringing to tax the hence the assessing officer was justified in bringing to tax the commission el commission element of Rs. 15000 as unexplained expenditure ement of Rs. 15000 as unexplained expenditure under section.69C. under section.69C.
5. That the id. CIT A erred in holding that penalty proceeding That the id. CIT A erred in holding that penalty proceeding That the id. CIT A erred in holding that penalty proceeding initiated under Section 271AAC should be dropped merely because initiated under Section 271AAC should be dropped merely because initiated under Section 271AAC should be dropped merely because the addition under section.69C was deleted without the addition under section.69C was deleted without the addition under section.69C was deleted without appreciating that the deletion itself is not sustainable. that the deletion itself is not sustainable.
The facts, in brief, are that the assessee filed his return of The facts, in brief, are that the assessee filed his return of The facts, in brief, are that the assessee filed his return of income electronically on income electronically on 08.08.2019, declaring gross total income of , declaring gross total income of ₹36,29,172/- and total taxable income of and total taxable income of ₹29,17,550/ 29,17,550/-.
2.1 Subsequently, a search and seizure action under section 132 Subsequently, a search and seizure action under section 132 Subsequently, a search and seizure action under section 132 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) was tax Act, 1961 (hereinafter referred to as “the Act”) was tax Act, 1961 (hereinafter referred to as “the Act”) was conducted in the case of a political party, namely Rashtriya conducted in the case of a political party, namely conducted in the case of a political party, namely
Bhavin Kumar Rameshkumar Jain Bhavin Kumar Rameshkumar Jain Samajwadi Party (Secular) Samajwadi Party (Secular). During the course of the search, a la During the course of the search, a large number of incriminating materials were found and seized, including number of incriminating materials were found and seized, including number of incriminating materials were found and seized, including bogus donation receipts, diaries containing details of commission bogus donation receipts, diaries containing details of commission bogus donation receipts, diaries containing details of commission charged, loose papers reflecting vital information, and WhatsApp charged, loose papers reflecting vital information, and WhatsApp charged, loose papers reflecting vital information, and WhatsApp chats retrieved from the mobile phones of office bearers and key chats retrieved from the mobile phones of office beare chats retrieved from the mobile phones of office beare handlers of the political party. These materials revealed that the handlers of the political party. These materials revealed that the handlers of the political party. These materials revealed that the said political party was engaged in providing bogus deductions said political party was engaged in providing bogus deductions said political party was engaged in providing bogus deductions under sections 80GGB/80GGC of the Act to various beneficiaries. under sections 80GGB/80GGC of the Act to various beneficiaries. under sections 80GGB/80GGC of the Act to various beneficiaries.
2.2 During the course of the search proceedings, th During the course of the search proceedings, th During the course of the search proceedings, the documentary and digital evidence so gathered was confronted to key persons of and digital evidence so gathered was confronted to key persons of and digital evidence so gathered was confronted to key persons of the party, and their statements were recorded on oath under the party, and their statements were recorded on oath under the party, and their statements were recorded on oath under section 132(4) of the Act. In particular, the statement of Smt. section 132(4) of the Act. In particular, the statement of section 132(4) of the Act. In particular, the statement of Sandhya Singh, President of Rashtriya Samajwadi Part , President of Rashtriya Samajwadi Part , President of Rashtriya Samajwadi Party (Secular), was recorded on 07.09.2022. She stated that she had joined the was recorded on 07.09.2022. She stated that she had joined the was recorded on 07.09.2022. She stated that she had joined the party at the instance of her husband, Shri Bishwajeet Singh Shri Bishwajeet Singh, and party at the instance of her husband, that she was not aware of the affairs, finances, bank accounts, or that she was not aware of the affairs, finances, bank accounts, or that she was not aware of the affairs, finances, bank accounts, or expenditures of the party, which were being enti expenditures of the party, which were being entirely managed by rely managed by her husband.
2.3 Consequently, the statement of Consequently, the statement of Shri Bishwajeet Singh Shri Bishwajeet Singh was also recorded on oath under section 132(4) of the Act on the same also recorded on oath under section 132(4) of the Act on the same also recorded on oath under section 132(4) of the Act on the same date. He categorically admitted that the party was involved in a date. He categorically admitted that the party was involved in a date. He categorically admitted that the party was involved in a bogus donation racket across the co bogus donation racket across the country and that such activities untry and that such activities had been carried out since the inception of the party. He explained had been carried out since the inception of the party. He explained had been carried out since the inception of the party. He explained
Bhavin Kumar Rameshkumar Jain Bhavin Kumar Rameshkumar Jain the modus operandi, stating that donations were received through the modus operandi, stating that donations were received through the modus operandi, stating that donations were received through banking channels, commission was deducted, and the balance banking channels, commission was deducted, and the balance banking channels, commission was deducted, and the balance amount was returned to the donors amount was returned to the donors through cash withdrawals and through cash withdrawals and layered transactions involving dummy entities. He further disclosed layered transactions involving dummy entities. He further disclosed layered transactions involving dummy entities. He further disclosed that Shri Riteshkumar S. Shah Shri Riteshkumar S. Shah played a key role in arranging such played a key role in arranging such bogus donations through a network of chartered accountants bogus donations through a network of chartered accountants bogus donations through a network of chartered accountants across India.
2.4 Based on the se Based on the seized material, bank statements, and data ized material, bank statements, and data available on the Insight Portal, the Investigation Wing prepared a available on the Insight Portal, the Investigation Wing prepared a available on the Insight Portal, the Investigation Wing prepared a list of beneficiaries who had availed bogus deductions under section list of beneficiaries who had availed bogus deductions under section list of beneficiaries who had availed bogus deductions under section 80GGC/80GGB of the Act. 80GGC/80GGB of the Act.
2.5 Upon receipt of information through the Insight Por Upon receipt of information through the Insight Por Upon receipt of information through the Insight Portal, the Assessing Officer examined the return of income filed by the Assessing Officer examined the return of income filed by the Assessing Officer examined the return of income filed by the assessee and found that the assessee had claimed a deduction of assessee and found that the assessee had claimed a deduction of assessee and found that the assessee had claimed a deduction of ₹3,00,000/- under section 80GGC under section 80GGC on account of donation made to on account of donation made to Rashtriya Samajwadi Party (Secular). Rashtriya Samajwadi Party (Secular).
2.6 In view of the fin In view of the findings of the Investigation Wing and the dings of the Investigation Wing and the statements recorded under section 132(4) of the Act, proceedings statements recorded under section 132(4) of the Act, proceedings statements recorded under section 132(4) of the Act, proceedings under section 148A were initiated. After granting an opportunity of under section 148A were initiated. After granting an opportunity of under section 148A were initiated. After granting an opportunity of being heard under section 148A(b), an order under section 148A(d) being heard under section 148A(b), an order under section 148A(d) being heard under section 148A(b), an order under section 148A(d) was passed on 30.03.2023 03.2023, followed by issuance of notice under , followed by issuance of notice under section 148 on 31.03.2023 31.03.2023.
Bhavin Kumar Rameshkumar Jain Bhavin Kumar Rameshkumar Jain 2.7 In response to the notice under section 148, the assessee filed In response to the notice under section 148, the assessee filed In response to the notice under section 148, the assessee filed a return of income and voluntarily offered the amount of a return of income and voluntarily offered the amount of a return of income and voluntarily offered the amount of ₹3,00,000/-, being the earlier claimed deduction under sec being the earlier claimed deduction under sec being the earlier claimed deduction under section 80GGC, for taxation. Consequently, no addition was made by the 80GGC, for taxation. Consequently, no addition was made by the 80GGC, for taxation. Consequently, no addition was made by the Assessing Officer on account of the bogus donation during the Assessing Officer on account of the bogus donation during the Assessing Officer on account of the bogus donation during the reassessment proceedings. reassessment proceedings.
However, relying on the statement of Shri Amitkumar Shri Amitkumar 2.8 However, relying on the statement of Chaturvedi, former President of Rashtriya Sa , former President of Rashtriya Samajwadi Party , former President of Rashtriya Sa (Secular), recorded on 15.12.2022, wherein it was stated that (Secular), recorded on 15.12.2022, wherein it was stated that (Secular), recorded on 15.12.2022, wherein it was stated that commission ranging from 4.5% to 5% was charged on such bogus commission ranging from 4.5% to 5% was charged on such bogus commission ranging from 4.5% to 5% was charged on such bogus donations, the Assessing Officer made an addition of ₹15,000/- donations, the Assessing Officer made an addition of donations, the Assessing Officer made an addition of (being 5% of ₹3,00,000/ 3,00,000/-) under section 69C of the Act, ) under section 69C of the Act, treating the same as unexplained expenditure towards commission. Penalty same as unexplained expenditure towards commission. Penalty same as unexplained expenditure towards commission. Penalty proceedings under section 271AAC of the Act were also initiated. proceedings under section 271AAC of the Act were also initiated. proceedings under section 271AAC of the Act were also initiated.
2.9 On appeal, the learned Commissioner (Appeals) deleted the On appeal, the learned Commissioner (Appeals) deleted the On appeal, the learned Commissioner (Appeals) deleted the addition of ₹15,000/ 15,000/-. The CIT(A) observed that although . The CIT(A) observed that although the assessee had initially claimed deduction under section 80GGC, the assessee had initially claimed deduction under section 80GGC, the assessee had initially claimed deduction under section 80GGC, the amount of ₹3,00,000/ 3,00,000/- had subsequently been offered to tax in the had subsequently been offered to tax in the return filed in response to notice under section 148. It was further return filed in response to notice under section 148. It was further return filed in response to notice under section 148. It was further observed that the source of the alleged commission observed that the source of the alleged commission stood explained out of the assessee’s own disclosed income, and therefore, the out of the assessee’s own disclosed income, and therefore, the out of the assessee’s own disclosed income, and therefore, the provisions of section 69C were not attracted. provisions of section 69C were not attracted.
We have heard the learned Departmental Representative and We have heard the learned Departmental Representative and We have heard the learned Departmental Representative and perused the material available on record. Despite service of notice, perused the material available on record. Despite service of notice, perused the material available on record. Despite service of notice, none appeared on behalf of the assessee, and therefore, the appeal none appeared on behalf of the assessee, and therefore, the appeal none appeared on behalf of the assessee, and therefore, the appeal was heard ex-parte qua the assessee qua the assessee.
3.1 The only issue arising for our consideration is whether the The only issue arising for our consideration is whether the The only issue arising for our consideration is whether the addition of ₹15,000/- - under section 69C of the Act towards alleged commission paid for obtaining bogus donation receipt was justified. commission paid for obtaining bogus donation receipt was justified. commission paid for obtaining bogus donation receipt was justified.
3.2 Section 69C of the Act provides for deeming unexplained Section 69C of the Act provides for deeming unexplained Section 69C of the Act provides for deeming unexplained expenditure as income where the assessee either offers no expenditure as income where the assessee either offers no expenditure as income where the assessee either offers no explanation about the source of such expenditure or the explanation about the source of such expenditure or t explanation about the source of such expenditure or t explanation offered is found unsatisfactory. A plain reading of the explanation offered is found unsatisfactory. A plain reading of the explanation offered is found unsatisfactory. A plain reading of the provision makes it abundantly clear that the sine qua non for provision makes it abundantly clear that the sine qua non for provision makes it abundantly clear that the sine qua non for invoking section 69C is the absence of explanation regarding the invoking section 69C is the absence of explanation regarding the invoking section 69C is the absence of explanation regarding the source of the expenditure. of the expenditure.
3.3 In the present case, the am In the present case, the amount of ₹3,00,000/ 3,00,000/- originally claimed as deduction under section 80GGC has been admittedly claimed as deduction under section 80GGC has been admittedly claimed as deduction under section 80GGC has been admittedly offered to tax by the assessee in the reassessment proceedings. offered to tax by the assessee in the reassessment proceedings. offered to tax by the assessee in the reassessment proceedings. Thus, the source of funds out of which the alleged commission is Thus, the source of funds out of which the alleged commission is Thus, the source of funds out of which the alleged commission is presumed to have been paid stands f presumed to have been paid stands fully explained from the ully explained from the assessee’s disclosed and taxed income. Once the source is assessee’s disclosed and taxed income. Once the source is assessee’s disclosed and taxed income. Once the source is explained, no separate addition under section 69C can be explained, no separate addition under section 69C can be explained, no separate addition under section 69C can be sustained.
Bhavin Kumar Rameshkumar Jain Bhavin Kumar Rameshkumar Jain 3.4 The addition made by the Assessing Officer is purely based The addition made by the Assessing Officer is purely based The addition made by the Assessing Officer is purely based solely solely solely on on on generalized generalized generalized statements statements statements recorded recorded recorded during d d search proceedings in the case of third parties proceedings in the case of third parties. But otherwise, the source otherwise, the source of such alleged expenditure stands explained of such alleged expenditure stands explained as out of cash as out of cash received back by the assessee from the concerned political party. received back by the assessee from the concerned political party received back by the assessee from the concerned political party 3.5 In view of the above facts and legal position In view of the above facts and legal position In view of the above facts and legal position, we find no infirmity in the order of the learned Commissioner (Appeals) in infirmity in the order of the learned Commissioner (Appeals) in infirmity in the order of the learned Commissioner (Appeals) in deleting the addition. . Accordingly, the same is upheld. , the same is upheld.
The grounds raised by the Revenue are dismissed dismissed. 3.6 The grounds raised by the Revenue are
In the result, the appeal of the Revenue is dismissed. In the result, the appeal of the Revenue is dismissed. In the result, the appeal of the Revenue is dismissed.