VANDANABEN RAJBHAI PARIKH,AHMEDABAD vs. THE PR.CIT, AHMEDABAD-1, AHMEDABAD

In view of these findings, the Principal CIT held that the twin conditions required for invoking section 263, namely that the assessment order was erroneous and prejudicial to the interests of the Revenue, were duly satisfied. Accordingly, the assessment order dated 30.08.2022 passed under section 143(3) read with section 144B was set aside to the extent of the issue relating to deduction under section 80GGC, with a direction to the Assessing Officer to pass a fresh assessment order after proper verification and in accordance with law, after giving the assessee a reasonable opportunity of being heard.

The assessee is in appeal before us against the order passed by Pr. CIT u/s 263 of the Act.

Before us, the Counsel for the assessee submitted that the matter had been examined in detail by the Assessing Officer during the course of assessment proceedings. The Counsel for the assessee further placed reliance on the case of Ahmedabad ITAT in Vitthaldas Nathubhai Shah vs. Principal Commissioner of Income-tax [2025] 178 taxmann.com 632 (Ahmedabad – Tribunal), wherein ITAT held that where assessee claimed deduction under section 80GGC for donation to a political party and Assessing Officer, after verifying supporting documents and evidences, accepted claim in assessment, but PCIT invoked section 263 solely due to a later search on political party with no direct incriminating material against assessee, assumption of jurisdiction for revision was unsustainable in law.

In response, the Ld. DR placed reliance on the observations made by the Principal CIT in his order.

We have heard the rival contentions and perused the material on record.

The brief facts of the case, as borne out from the record, show that the assessee had claimed deduction under section 80GGC in respect of substantial donations allegedly made to four political parties. While the assessment was completed by the Assessing Officer under section 143(3) read with section 144B of the Act accepting the returned income, the subsequent examination of records by the Principal CIT revealed serious factual infirmities in the claim of deduction, particularly in respect of donations aggregating to Rs. 30,00,000/- made to Bhartiya Jan Parshad, Kisan Adhikar Party and Manavadhikar National Party.

A crucial factual finding recorded by the Principal CIT is that these entities were found to be bogus or non-genuine and were allegedly involved in large-scale tax evasion through the mechanism of bogus political donations. This is not a case where the genuineness of the donee political parties was never in doubt or where the donation was made to a well- recognised political party alone. The Principal CIT has also specifically pointed out discrepancies in the donation receipts, including instances where the donor’s name appearing on the receipt did not match the name of the assessee. These discrepancies go to the very root of the claim of deduction and clearly demonstrate that the Assessing Officer had not verified the basic and foundational facts relating to the identity of the donee, the genuineness of the donation and the eligibility of the political parties under section 80GGC of the Act.

On a careful reading of the assessment order, we find that although general details and documents were called for under Chapter VI-A, there is nothing on record to show that the Assessing Officer made any meaningful or effective inquiry into the genuineness of the political parties in question or examined whether the donations were real, lawful and eligible for deduction. Mere calling for donation receipts and bank statements, without examining glaring inconsistencies and without verifying the status and activities of the donee political parties, cannot be equated with a proper and complete inquiry. The failure of the Assessing Officer to examine the issue in its entirety has resulted in allowance of a deduction which, prima facie, was not admissible, thereby causing underassessment of income and loss of revenue.

We find that the reliance placed by the assessee on the decision of the Ahmedabad Tribunal in the case of Vitthaldas Nathubhai Shah vs. Principal Commissioner of Income-tax [2025] 178 taxmann.com 632 is misplaced and distinguishable on facts. In that case, the Tribunal recorded a clear finding that the Assessing Officer had carried out a detailed verification of the donation claim and that the revision under section 263 was based solely on a subsequent search action on the political party, without any direct incriminating material or discrepancy relating to the assessee’s own donation. The Tribunal, therefore, held that section 263 could not be invoked merely on the basis of a change of opinion or subsequent developments unconnected with the assessee’s assessment.

In the present case, however, the revision under section 263 is not founded on a mere change of opinion or on a later external event alone. It is based on concrete factual discrepancies found in the assessment record itself, including incorrect donation receipts and lack of verification of the genuineness and eligibility of the donee political parties. The Principal CIT has demonstrated, with reference to the material on record, that the Assessing Officer failed to examine vital aspects of the claim and did not go into the issue of deduction under section 80GGC in respect of the entire amount claimed. Therefore, the factual matrix of the present case is materially different from that in Vitthaldas Nathubhai Shah and the ratio of that decision does not come to the aid of the assessee.

We also find merit in the reliance placed by the Principal CIT on the judgment of the Hon’ble Supreme Court in the case of BSES Rajdhani Power Ltd., wherein it has been held that non-examination of an issue in respect of the whole claim constitutes an error amenable to revision under section 263. In the present case, the Assessing Officer’s failure to verify the genuineness of the political parties and the correctness of the donation receipts has clearly rendered the assessment order erroneous. Since such error has resulted in allowance of an inadmissible deduction and consequent loss of revenue, the order is also prejudicial to the interests of the Revenue. Thus, the twin conditions for invoking section 263 stand fully satisfied.

In view of the detailed factual findings recorded by the Principal CIT, which remain uncontroverted by any cogent evidence before us, and in light of the clear distinction between the facts of the present case and the case relied upon by the assessee, we find no infirmity in the order passed by the Principal CIT.

Accordingly, we uphold the order of the Principal CIT and dismiss the appeal filed by the assessee.