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Facts
The assessee challenged an order by the CIT(A) that sustained the disallowance of a Rs. 2,00,000 donation claimed under Section 80GGC. The donation was made to the Rashtriya Samajwadi Party (Secular) via account payee cheque. Investigations revealed that the political party was involved in a bogus donation scam, where donations were rerouted back to donors after deducting commission, and the party's registration and contribution reports were questionable.
Held
The Tribunal held that the donation was bogus as the political party engaged in a fraudulent modus operandi. The principle that 'fraud vitiates everything' was applied, making the transaction void ab initio. The assessee was aware of the nefarious activities and was thus not entitled to the deduction.
Key Issues
Whether the donation made to a political party was eligible for deduction under Section 80GGC, given the party's alleged involvement in a bogus donation scam and questionable compliance with statutory requirements.
Sections Cited
Section 80GGC, Section 13A, Section 29A of the Representation of People Act, 1951, Section 132(4), Section 29C of R.P. Act, 1951, Section 80G(5)
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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SANDEEP GOSAIN
Date of Hearing 04.11.2025 Date of Pronouncement 07.01.2026 ORDER PER SANDEEP GOSAIN, JM:
These appeal has been filed by the assessee challenging the different impugned order dated 12.06.2025 passed under section 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre (NFAC) / CIT(A) for the assessment year 2019-20. The assessee has raised the following grounds of appeal:
1. That the order passed by the learned CIT(A) is bad in law and against the facts and circumstances of the case.
2. That the learned CIT(A) erred in sustaining the disallowance of Rs.2,00,000/- claimed under Section 80GGC despite:
Donation being made by account payee banking channel, Political party being duly registered under Section 29A of the Representation of People Act, 1951, and Documentary evidence (receipt, PAN, registration certificate) being furnished.
3. That the learned authorities erred in disregarding binding precedents where donations to political parties through banking channel were held eligible for deduction under Section 80GGC: ACIT vs. Armee Infotech - ITAT Ahmedabad, 2018 The ITAT Ahmedabad upheld the CIT(A)'s decision, noting that once the political party is registered under Section 29A of the Representation of the People Act, and payment is not in cash, the donor isn't liable to verify how the party uses the funds. Deduction under Section 80GGC should, therefore, be allowed. Sri Deepak Mittal Vijayawada vs. ACIT, ITAT, 2019 The ITAT held that the law only requires registration under Section 29A of the Representation of the People Act, and not recognition. Since the donation was made by cheque, and required documentation (receipt, Form 24A, registration proof) was provided, the disallowance was reversed.
4. That the disallowance is based on conjectures and surmises without any contrary evidence produced by the Department.
That the appellant, being a salaried person, had no motive to inflate deductions, and the donation was made in good faith.
The appellant craves leave to add, alter, or amend any ground of appeal at the time of hearing.
Prasad Siddharth Thorat., Mumbai. At the very outset, I noticed that there is delay of 2 2. days in filing the present appeal and in this regard Ld. AR explained the circumstances before the bench because of which the assessee was prevented in filing the appeal before the ITAT.
On the other hand Ld. DR refuted the contentions of the assessee and requested for dismissal of the appeal as the same is time barred.
Considering the entire factual position as explained before us and also keeping in view, the principles laid down by Hon’ble Supreme Court in the case of Land Acquisition Collector Vs. Mst. Katiji& Ors., [1987] AIR 1353 (SC),wherein it has been held that where substantial justice is pitted against technicalities of non-deliberate delay, then in that eventuality substantial justice is to be preferred. In our view the principals of advancing substantial justice is of prime importance. Hence considering the explanation put forth by the Assessee by justifiably and properly explaining the delay which occurred in filing the appeal and construing the expression "sufficient cause" liberally I am inclined to condone the delay in filing the appeal. Therefore I condone the delay and admit the appeal to be heard on merits.
5. Ground No. 1 to 6 all the grounds raised by the assessee are interrelated and interconnected and relates to challenging the order of Ld. CIT(A) in sustaining the
6. Ld. AR appearing on behalf of the assessee reiterated the same arguments as were raised by him before the revenue authorities. It was submitted that assessee is one of such beneficiary who had made donations amounting to Rs. 2,00,000/- to Rashtriya Samajvadi Party (Secular) and thus is entitled to claim deduction u/s 80GGC of the Act for the donation of Rs. 2,00,000/-. It was submitted that AO and Ld. CIT(A) erred in sustaining the disallowance of Rs. 2,00,000/- claimed u/s 80GGC of the Act despite the fact that the assessee had made donations through account payee cheque through banking channels to the political party which was duly registered u/s 29A of the representation of peoples Act 1951.
Ld. AR also drawn my attention to the fact that the requisite documentary evidences regarding receipt, PAN, registration certificate had already been furnished during the proceedings before the revenue authorities and also relied upon the decision of the Coordinate bench in the case of ACIT Vs. Armyee Infotech in decided on 11.01.2022 and the decision in the case of Deepal Mittal Vs. ACIT.
I have heard the counsels for both the parties, perused the material placed on record, judgments cited before me and also the orders passed by the revenue authorities. From the records I noticed that the assessee had filed his Return of Income for A.Y. 2019-20 on 24.07.2019 declaring total income of Rs.7,31,630/-. The ITR filed by the assessee was processed u/s. 143(1) of the Act.
As per the facts of the present case, the AO received information from DDIT(Inv) regarding scam in the form of donations to political parties for claim of bogus donations u/s 80GGC / 80CCB of the Act which were rerouted back to the owner in cash RTGS / NEFT or other banking channels. Since the Rashtriya Samajwadi Party (Secular) was one of the main entity and covered in the RUPPs Group of Ahmadabad. As per records this party was established on 21.10.2008 and its registered address as per its website is Samruddhi Complex, Opp- Sakar-3, Income Tax Page | 5 Miling P. Shroff Circle, Ahmedabad. However, during pre-search enquiry, no party office was found at the aforesaid address. Therefore, further analysis was carried out from the data available with department/open source. During the analysis, it was revealed that in accordance with PAN
Prasad Siddharth Thorat., Mumbai. database/facebook page of the party, its addresses were found as: (i) UG 8 Harekrishna Complex Nr CTM Cross Road Amraiwadi Ahmedabad (receipts of donation submitted by the assessee contains this address) and (ii) A/104, Rajshree Avenue, B/h. -Nr. Dinesh Hall, Ashram Road, Ahmedabad, respectively. However, during the pre- search enquiry, no party office was found at these addresses also. Smt. Sandhya Singh is the national president of SVPP.
Therefore after evaluating the records, I found that the modus-operandi of this political party was that the donation was received through cheque in the bank account of the party and then routed through intermediary(ies) (which is generally shell entity(ies) controlled by either the persons running the party or by any other person) in the garb of various purchases or other payments, which are found to be bogus in nature. This money was then re-routed through various layers, and returned to the original donors, primarily in the form of cash, in lieu of some commission that ranges from 3.5% to 5%. It is pertinent to mention here that the political party doesn't pay any tax since it is exempt u/s 13A of the Act.
During the search proceedings, on 07.09.2022, statement on oath u/s 132(4) of the I.T. Act, was recorded of Smt. Sandhya Singh, National Party
Prasad Siddharth Thorat., Mumbai. President of the Rashtriya Samajwadi Party (Secular).As evident from the declaration made on oath by Smt. Sandhya Singh that although she was national party president of the party, however, all the work related with was being looked-after by her husband Shri Bishwajeet Singh. She was not aware about any activity of the party. Further, vide Q.No. 18 and 19, she was categorically asked regarding details of bank accounts, books of accounts, nature and quantum of the expenditures of the Rashtriya, Samajwadi Party. In reply to the same, she again stated that she was not aware of any details regarding these subjects. She stated that all these things are being handled by her husband Shri Bishwajeet Singh.
The statement of Shri Bishwajeet Singh, on oath u/s 132(4) of the I.T. Act, was recorded on 07.09.2022. However, during the statement proceedings, Shrí Bishwajeet Singh admitted the fact that on his instance, his wife Smt. Sandhya Singh joined RSP, as president. During the statement proceedings, Shri Bishwajeet Singh also revealed that the party i.e. RSP was involved in bogus donations scam across India and founder of party i.e. Shri Surya Nath Chaturvedi carried out bogus donations scam since inception of the party. He further stated that after deducting certain commission donations were being returned to the donors. Shri Bishwajeet Singh further explained the modus-operandi of the bogus
Prasad Siddharth Thorat., Mumbai. donation scam. He stated that Shri Riteshkuraar S Shah arranges bogus donations for the party as Ritesh Shah had wide network of CAs across India. Thus he used to convinces CAs for bringing bogus donations to the party and Ritesh Shah was keeping and issuing donations receipts to the donors through these CAs. Bishwajeet, Singh further stated that his own number had been registered in the Bank Account of the party which was maintained with Punjab National Bank.
14 Furthermore, Bishwajeet Singh had also examined the modus-operandi regarding generation of cash, which was subsequently returned to the donors. He stated that after layering of fund through bank accounts of various dummy entities, donated amounts are being credited in the bank accounts of APMCshops. From the accounts of APMC shops, the cash iswithdrawn to return it to the original donors. He stated that these were also being handled by the Shri Ritesh Shah. Bishwajit Singh submitted list of some bogus entities used for cash generation, which is reproduced by the assessing officer in the assessment order.
15 During the post search inquiries, statement of Amitkumar Chaturvedi (AHLPC7736R), past president of political party was also recorded, he categorically admitted that the party was engaged in bogus donations scam. He explained the modus operandi of the party with Prasad Siddharth Thorat., Mumbai. respect to donation received by the party. He stated that the party arranges donations through CAs/commission agents from, various individuals. On receipt of such donations, party follows the following two modus:
The party withdraws cash from its bank account and returns donated amount to the donors either directly or through angadiya/CAs/commission agents after deducting certain commission.
Donated, amount was transferred to bank accounts of various dummy entities. The amount was transferred for layering purpose and to show that such entities had facilitated in purchase of agro-based products e.g. wheat, rice, vegetables etc, from the vendor of APMC market. At last, the donated amounts were transferred to accounts of vendor of APMC Market. From these accounts, cash was withdrawn and returned to donors after deducting certain commission. He had categorically stated that these transactions were sham transactions and reflected only on paper. He further stated that no goods were ever being purchased from any entities. He had also mentioned that cash were being withdrawn from the accounts of vendors of APMC Market as there was no restriction of cash with drawal on the bank accounts of vendors of APMC Market.
It is pertinent to refer to the fact that on verification with the website of regional Chief Electoral Officer where
Prasad Siddharth Thorat., Mumbai. the party was registered i.e. CEO, Gujarat State, it was been found that Rashtriya Samajwadi Party (Secular) had not filed any contribution report, since F.Y. 2013-14 onward (details with respect to filing of contribution report was available on the state CEO's website from F.Y. 2013-14 to 2021-22).
It is thus evident that the conditions laid down in section 13A of the Income Tax Act was clearly not fulfilled by the party since F.Y. 2013-14. Accordingly, the party was not entitled to claim exemptions on the income earned since F.Y. 2013-14. In this connection, details of ITR and the date of filing of report u/s 29C of R.P. Act since 2017-18.
From the entire facts as discussed by me above I found that its crystal clear that not only had the party been claiming wrong and invalid exemption, over the years under section 13A of the I.T. Act but it had also been, mentioning in its Income Tax Return of F.Y. 2018- 19 that no contribution report had been filed u/s 29C of the R.P. Act, 1951.
In view of the facts discussed above, I am of the view that donation received by "Rashtriya Samajwadi Party(Secular) was bogus and cash had been received back by the assessee in lieu of cheque. The entire modus operandi of said political party was discussed by the AO as well which clearly indicates that donation given by assessee was bogus.
I also observed that there was no retraction of statements given by Smt. Sandhay Singh, Shri Bishwajeet Singh and Shri Amit Kumar, hence their statements were correct and valid.
Since it has been established that the donations received by Rashtriya Samajvadi Party (Secular) was bogus, therefore the assessee was not entitled to claim deduction u/s 80GGC of the Act and 80G(5) of the Act and in this regard reliance has also been placed upon the decision of the Coordinate Bench of ITAT Pune in the case of Abhishek Ashok Lohade, which is reproduced below:
"There is yet one more reason as to why we are inclined to confirm the addition made by Assessing Officer, in view of the well settled principle of law that fraud vitiate everything and even principle of natural justice have no application and such transaction is void ab initio. The Hon'ble Supreme Court in the case of Friends Trading Co. vs. Union of India in Civil Appeal No.5608 of 2011 vide order dated 23.09.2022 held in the context of availment of alleged forged DEPB under the Customs Act, wherein, it was found DEPB licenses were forged and it was held that the exemption benefit availed on such forged DEPB are void ab initio on the principle that fraud vitiate everything and the period of limitation was held to have no application and the Department was held to be justified in invoking the extended period of limitation and the fact that whether the beneficiary had no knowledge of about the fraud/forged and fake DEPB licenses have no bearing the imposition of custom duty. The ratio of judgement is squarely applicable to the transaction under consideration before us.
Further, the application of principle of the fraud under judicial Acts was considered by the Hon'ble Supreme Court in the case of Smt. Badami (Deceased) By her L.R. vs. Bhali in Civil Appeal No.1723 of 2008 dated 22.05.2012, wherein, the Hon'ble Apex Court held as follows: In S. P. Chengalvaraya Naidu (dead) by L.Rs. v. Jagannath (dead) by L.Rs. and others [AIR 1994 SC 853] this court commenced the verdict with the following words:-
"Fraud-avoids all judicial acts, ecclesiastical or temporal observed Chief Justice Edward Coke of England about three centuries ago. It is the settled proposition of law that a judgment or decree obtained by playing fraud on the court is a nullity and non est in the eyes of law. Such a judgment/decree by the first court or by the highest court - has to be treated as a nullity by every court, whether superior or inferior. It can be challenged in any court even in collateral proceedings.
In the said case it was clearly stated that the courts of law are meant for imparting justice between the parties and one who comes to the court, must come with clean hands. A person whose case is based on falsehood has no right to approach the Court. A litigant who approaches the court, is bound to produce all the documents executed by him which are relevant to the litigation. If a vital document is withheld in order to gain advantage on the other side he would be guilty of playing fraud on court as well as on the opposite party.
In Smt. Shrist Dhawan v. M/s. Shaw Brothers [AIR 1992 SC 1555] it has been opined that “fraud and collusion vitiate even the most solemn proceedings in any civilised system of jurisprudence. It has been defined as an act of trickery or deceit. The aforesaid principle has been reiterated in Roshan Deen v. Preeti Lal [AIR 2002 SC 33], Ram Preeti Yadav v. U. P. Board of High School and Intermediate Education and other [(2003) 8 SC 311] and Ram Chandra Singh v. Savitri Devi and others [(2003) 8 SCC 319]”.
In State of Andhra Pradesh and another v. T. Suryachandra Rao [AIR 2005 SC 3110] after referring to the earlier decision this court observed as follows:-
"In Lazaurs Estate Ltd. v. Beasley [(1956) 1 QB 702] Lord Denning observed at pages 712 & 713, "No judgment of a Court, no order of a Minister can be allowed to stand if it has been obtained by fraud. Fraud unravels everything." In the same judgment Lord Parker LJ observed that fraud vitiates all transactions known to the law of however high a degree of solemnity. Yet in another decision in the case of Hamza Haji v. State of Kerala & Anr. [AIR 2006 SC 3028] it has been held that no court will allow itself to be used as an instrument of fraud and no court, by way of rule of evidence and procedure, can allow its eyes to be closed to the fact it is being used as an instrument of fraud. Therefore basic principle is that a party who secures the judgment by taking recourse to fraud should not be enabled to enjoy the fruits thereof. "
Prasad Siddharth Thorat., Mumbai. 25. In view of the above discussion I have no hesitation in confirming the order of Ld. CIT(A) since in this case shan transactions have undertaken by Rashtriya Samajwadi Party (Secular) along with the assessee and assessee was fully aware above the nefarious / illegal activities being carried out by the Rashtriya Samajwadi Party (Secular) and was thus part of the tax fraud scam.
I once again reiterated that fraud vitiated even the most solemn proceedings and even the principles of natural justice have no application. I am also of the view that justice / laws are meant for imparting justice between the parties and one who comes to the court, must come with clean hands, head and heart, therefore a person whose case is based on falsehood has no legal right to approach the court and no court will allow itself to be used as a instrument of fraud and no court can allow its eyes to be closed to the fact that it was being used as an instrument of fraud.
Therefore, considering the overall facts and circumstances as discussed in detail above the decisions relied upon by the assessee are not at all applicable to the facts of the present case and are factually distinguishable. Therefore considering the overall circumstances I am of the considered view that orders passed by Ld. CIT(A) are legally correct and even no new facts or circumstances have been brought on record before
Prasad Siddharth Thorat., Mumbai. us in order to controvert or rebut the findings so recorded by Ld. CIT(A). Therefore, I see no reasons to interfere into or to deviate from the lawful findings so recorded by Ld. CIT(A). Hence, the grounds raised by the assessee stands dismissed.
In the result the appeal filed by the assessee stands dismissed.