PUBLIC POLITICAL PARTY,DELHI vs. DCIT, CENTRAL CIRCLE 31, DELHI

2.2 The Assessing Officer (AO), DCIT Central Circle-31, New Delhi, reopened the appellant's case for A.Y. 2015-16 under Section 147 and completed the reassessment under Section 143(3) vide order dated 27.03.2024. The AO added Rs. 19,15,269/- to the appellant's income under Section 68 as unexplained cash credits, citing the appellant's failure to substantiate the nature and source of these credits, alleged to be donations.

The AO further noted non-compliance with Section 13A, which governs tax exemptions for political parties, and relied on evidence from seized materials and the treasurer's statement recorded under Section 132(4) of the Act.

P a g e | 5 8 appeals Public Political Party (AY: 2015-16 to2017-18, 2021-22 & 2022-23) 2.3 Aggrieved by the AO's order, the appellant filed appeal before ld.

CIT(A), contesting: (1) the addition under Section 68, claiming the credits were exempt donations under Section 13A; (2) procedural irregularities, including insufficient response time to notices and the absence of a show- cause notice; and (3) the initial application of Section 115BBE for tax calculation (subsequently rectified).

3.1 Ld. CIT(A) called for remand report from the AO and a rejoinder of same was filed by the assessee and based on both the ld. CIT(A) concluded as follows;

P a g e | 6 8 appeals Public Political Party (AY: 2015-16 to2017-18, 2021-22 & 2022-23) “It is trite law that Under Section 68, any sum credited in the assessee's books of account must be satisfactorily explained as to its nature and source. The onus lies squarely on the appellant to provide verifiable evidence, including donor identities, their capacity to donate, and the genuineness of the transactions. The appellant's reliance on a "contribution report" submitted to the Election Commission is inadequate. The AO's order and remand report reveal that this report is a generic document lacking critical details such as donors' Permanent Account Numbers (PAN), addresses, or bank particulars. Moreover, no reconciliation was furnished between the bank statements and the books of account, a fundamental requirement to discharge the burden under Section 68. Seized materials further exposed discrepancies, such as mismatched donation dates and cheque clearance timelines, suggesting possible fabrication or backdating of entries.

10.2 To avail exemption under Section 13A, a political party must fulfill stringent conditions: • Maintain proper books of account, audited by a chartered accountant. • Record the name and address of every donor contributing more than Rs. 20,000. • File a return of income under Section 139(4B) of the Act.

P a g e | 7 8 appeals Public Political Party (AY: 2015-16 to2017-18, 2021-22 & 2022-23) 10.3 The appellant falls short on all counts. The seized books of account were incomplete and unaudited, lacking donor-specific details. The donation records submitted were vague, with many entries below Rs.20,000 suspiciously aggregated to evade detailed disclosure. Crucially, the appellant failed to file its income tax return for A.Y. 2015-16 by the due date, only submitting it on 13.01.2024 after receiving a notice under Section 148. This belated filing disqualifies the appellant from claiming exemption under Section 13A, as timely compliance is non-negotiable.

10.4 The search operation yielded damning evidence supporting the AO's findings. Analysis of PNB A/C No. 7789002100000321 showed credits of Rs.19,15,269 with no corresponding entries in the appellant's donation registers, indicating these were not legitimate donations. The coupons seized were undated, unsigned, and lacked donor identification, rendering them unreliable as evidence of genuine contributions. Seized vouchers disclosed unaccounted cash receipts not reported to the Election Commission, contradicting the appellant's claim of transparency. During the search, the appellant's treasurer admitted under Section 132(4) that some "donations" included cash from undisclosed sources, a statement recorded voluntarily and admissible under law. This admission directly corroborates the AO's conclusion that the credits were unexplained.

10.5 Judicial pronouncements reinforce the department's stance. In CIT vs. P. Mohanakala (2007), the Supreme Court held that vague or P a g e | 8 8 appeals Public Political Party (AY: 2015-16 to2017-18, 2021-22 & 2022-23) unsubstantiated explanations do not suffice under Section 68. In SumatiDayal vs. CIT (1995), the Apex Court ruled that claims must be backed by concrete evidence to rebut the presumption of unexplained income. The appellant's assertion that the credits are exempt donations under Section 13A is untenable. The "contribution report" lacks evidentiary value, and the absence of donor details, coupled with discrepancies in the seized records, justifies the AO's invocation of Section 68. The appellant's non-compliance with Section 13A further precludes any exemption. The addition of Rs.19,15,269/- as unexplained cash credits is fully warranted, and these grounds are dismissed.”

“(a) Because the Ld. CIT (Appeals) has failed to appreciate that the Assessing Officer (AO)/Deputy Commissioner of Income Tax (DCIT) has acted against the principles of natural justice, as he has passed the assessment order without affording proper opportunity to the Assessee. As such, the assessment order as well as the impugned order is liable to be set aside on this ground alone. (b) Because the Ld. CIT (Appeals) failed to appreciate that the AO has passed the assessment order in a hasty manner and also seems to be confused while passing the assessment order, in as much as, initially AO held the Appellant guilty under Sections 68 and 69A of the Act and later on modified its own assessment order during the pendency of appeal before the CIT (Appeals) and stated that normal tax could be levied on the Appellant in place of Section 68 and 69A of the Act.

P a g e | 9 8 appeals Public Political Party (AY: 2015-16 to2017-18, 2021-22 & 2022-23)

(c) Because the Ld. CIT (Appeals) ignored the fact that the AO had passed the assessment order in a hurry manner and without considering the legal aspects in favour of the Assessee and as such, the assessment order as well as the impugned order is liable to be set aside.”

5.1 Ld. DR relied the orders of ld. Tax authorities below.

“4.5 Non-genuine claim of exemption u/s 13A of the Act:

P a g e | 10 8 appeals Public Political Party (AY: 2015-16 to2017-18, 2021-22 & 2022-23)

As per sub-section 3 of 29C of Representation of the People Act, 1951, a political party has to compulsorily submit a report in the prescribed format i.e. Form 24A

(Contribution Report) under Rule 85B of Conduct of Elections Rule, 1961, before the due date for furnishing the IT return of that financial year under section 139 of the Income-tax Act, 1961, to the Election Commission. The form calls for details like name, PAN, amount donated, mode of donations etc., of all the donors donating amounts more than Rs. 20,000/-. The said form has to be submitted by all the registered political parties to the Hon'ble Election Commission of India, before filing their return of income for the corresponding FYs.

4.5.1 The table below mentions the date of filing of original ITR u/s 139(4B), audited books & contribution report (before ECI) and status of 'Keeping and maintaining such books of account and other documents as would enable the Assessing Officer to properly deduce its income' by PPP over the years:

A.Y. Original ITR filed u/s Contribution Report Audit report filed on Keeping and 139(RB) on maintaining such books of account and other documents as would enable the Assessing

P a g e | 11 8 appeals Public Political Party (AY: 2015-16 to2017-18, 2021-22 & 2022-23)

Officer to properly deduce its income (Yes/No) Date of Due date Date of Due date Date of Due date Yes/No filing filing filing

2015- Not filed 30.09.2025 04.12.2019 31.10.2015 Not filed 31.10.2015 No 2016- Not filed 17.10.2016 29.10.2019 17.10.2016 Not filed 17.10.2016 No 17

2017- Not filed 07.11.2017 04.12.2019 07.11.2017 Not filed 07.11.2017 No 2018- 31.10.2018 31.10.2018 11.11.2018 31.10.2018 20.09.2018 31.10.2018 No 19

2019- 24.08.2019 31.10.2019 Not filed 31.10.2019 19.08.2019 31.10.2019 No 2020- 15.01.2021 31.01.2021 07.03.2022 31.01.2021 09.01.2021 31.12.2020 No 2021- 19.11.2021 15.03.2022 07.03.2022 15.03.2022 12.11.2021 15.02.2022 No.

2022- Not filed 07.11.2022 07.02.2023 07.11.2022 Not filed 07.10.2023 No.

On perusal of the above table, it is seen that across the AYs(2015-16 to 2022-23), the assessee has not fulfilled mandatory conditions for claiming exemption u/s 13A

P a g e | 12 8 appeals Public Political Party (AY: 2015-16 to2017-18, 2021-22 & 2022-23) of the IT Act such as timely filling of original ITR u/s 139(4B), audited books & contribution report (before ECI) and Keeping and maintaining books of account and other documents as would enable the Assessing Officer to properly deduce its income(including invoices/vouchers/ledgers).

Therefore, it is crystal clear that PPP has been claiming wrong and invalid exemption over the years under section 13A of the IT Act.

4.5.2 During the course of the search operation it was found that the Public

Political Party was not filing timely annual contribution reports in the stipulated proforma as per the Representation of People's Act, 1951 before the Hon'ble

Election Commission of India which is a prerequisite for claiming exemption u/s 13A of the Act, 1961. It was further revealed that the said entities do not have a political presence and only exist to facilitate bogus donations. These unaccounted receipts are recorded in the records/diaries/ digital data which were retrieved and seized during the search action.

4.5.3 The party has been receiving large amount of funds as donation in its bank accounts. The following table gives a clear picture as to how much tax evasion the party has facilitated over the years (F.Ys.) by receiving the donations in its bank account and returning the same after deducting applicable commission.

Account No. 2014- 2015- 2016- 2017- 2018-19 2019- 2020- 2021- 2022- Grand 15 16 17(Rs 18 (Rs) 20 21 22 (Rs) 23 Total

P a g e | 13 8 appeals Public Political Party (AY: 2015-16 to2017-18, 2021-22 & 2022-23)

(Rs) (Rs.) ) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) 3796599653 1,65,05, 1,10,06 1,89,92 4,65,03, 3 600 ,100 ,201 901 2201100012 65,98,0 15,00,0 80,98,0 15 00 00 00 1200013008 11,56,0 11,56,0 42 00 00 3222002100 12,300 20,000 32,300 003000 4519020000 11,00,0 84,36,0 95,36,0 0333 00 00 00 4623002100 10,001 10,001 002790 5500021002 50,000 45,30,0 27.00,0 72,80,0 42683 71 00 71 6847790525 4,06,05 2,07,54 1,42,02 18,51,0 1,66,67, 1 3 ,500 00 094 7166630104 87,77,0 1,50,00 89,27,0 20 0 20 2010030667 500 26,54,0 37,07,1 63,61,6 52 00 00 00

7789000100 99,04 8,74,62 9,16,6 12,52,7 73,850 10,9,10 7,40,44 21,44,2 17,83,6 89,84,4

006090 3 9 68, 49 5 1 29 89 03

7789002100 18,16, 1,01,65 63,76, 1,08,87 1,11,74, 1,32,23 3,73,63 5,88,15 5,88,57 20,86,8

000321 227 ,610 246 ,774 1345 ,914 ,317 ,972 ,051 0,246

Grant Total 19,15, 1,10,40 72,92, 1,21,40 2,77,75, 3,23,83 5,88,23 9,22,23 7,86,40 32,22,3 270 ,239 914 ,523 886 ,670 ,502 ,791 ,840 6,636

P a g e | 14 8 appeals Public Political Party (AY: 2015-16 to2017-18, 2021-22 & 2022-23) 7. These facts in remand report were countered by the assessee by submitting comments/rejoinder copy of which is made available at page 38 - 48 of the paper book and relevant para is reproduced below:

“6. As regards, Para 4.4 and 4.5, assessee maintained its books of account to enable the AO to assess the income and as submitted above, the Assessee is entitled to 100% tax exemption under Section 13A of the Act.

that founder/treasurer of the Assessee, Lokesh Kumar Srivastava is not having his good health and is also looking and sitting at the registered office of the party at Pratapgarh, U.P. Thus, it is quite difficult for him to travel frequently to Delhi, but have complied with filing ITRs, contribution reports etc. with the concerned authorities. As such, it wrong to state that assessee did not fulfill the mandatory conditions for claiming exemption under Section 13A of the Act and is guilty under Section 68 of the Act. It is submitted that provisions of Section 68 of the Act do not apply at all to the assessee, since there is no undisclosed

P a g e | 15 8 appeals Public Political Party (AY: 2015-16 to2017-18, 2021-22 & 2022-23) income on reason on the basis of which, provision of Section 68 of the Act, can be attributed to the case of the assessee.”

8.1 The statements of the donors relied by the AO and are part of the remand report and the statement of Shri Lokesh Kumar Shrivastava founder of assesse Political party, recorded u/s 132(4) of the Act establish that the cash was released to the donors after deducting the commission in the range 5-8%. It can be observed that AO has examined the cash withdrawals from the bank account by the assessee political party without plausible justification or corroborated by any political activity and in fact when Shri Lokesh Kumar Srivastava was asked to furnish the details of expenditure incurred and the list of vendors along with details of expenses like printed material, electronic

P a g e | 16 8 appeals Public Political Party (AY: 2015-16 to2017-18, 2021-22 & 2022-23) media/advertisement and hoarding etc. Shri Lokesh Kumar Shrivastava categorically admitted that these details have not been maintained by them and no invoices are maintained for such transactions.

8.2 Thus apart from above fact of non-compliance of mandate of law to avail benefit of exempt income provisions we are of the considered view that when the donors are established to be bogus and donations are accepted merely to help the donors gain deductions u/s 80GGB/80GGC of the Act to reduce the taxable income of the entity/individual that in itself is sufficient to deny the political party benefit of Section 13A of the Act.

P a g e | 17 8 appeals Public Political Party (AY: 2015-16 to2017-18, 2021-22 & 2022-23) “77. Although the above argument appears attractive at the first blush, on a careful perusal of the entire scheme of the Act, it is not possible to accept it. As rightly pointed out, Section 13A of the Act is not a computation section. It is only a provision that tells us what types of receipts of a political party would not be included in determining its taxable income. While it is true that income by way of voluntary contributions is not identified as a separate head of income in Section 14 of the Act, the legislative intent was not to exclude it altogether from the taxable income. It would be excluded only subject to fulfilment of the conditions stipulated under Section 13A of the Act. It could never have been the legislative intention that voluntary contributions received by a political party that does not satisfy the requirement of Section 13A of the Act - viz., maintaining books of accounts, keeping a record of voluntary contributions in excess of Rs. 10,000 and getting the accounts audited - would be exempt from tax. If the above conditions are not fulfilled, the income of a political party by way of voluntary contributions would be included in the taxable income.”

P a g e | 18 8 appeals Public Political Party (AY: 2015-16 to2017-18, 2021-22 & 2022-23) 78. If that was the legislative intent, the question that arises is whether there is an anomaly in not specifying income by way of voluntary contributions as a head of income under Section 14 or not even deeming it to be income for the purposes of Section 2(24)(iia) of the Act? This requires the discussion to turn to what is meant by 'income from other sources'. An elaboration of this expression occurs in Section 56 of the Act.

"56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head "Income from other sources", if it is not chargeable to income-tax under any of the heads specified in Section 14, items A to E".

Voluntary contributions are not capital receipt

P a g e | 22 8 appeals Public Political Party (AY: 2015-16 to2017-18, 2021-22 & 2022-23) 88. The situation here is hardly comparable. What is sought to be exempted for the purposes of Section 13A of the Act is not expenditure by way of a donation but income by way a voluntary contribution.

“92. At the outset it should be noted that there is a distinction between accounts needing to be maintained and audited, and, the requirement that an auditor's report should be filed. In other words, the filing of an auditor's report is distinct from the filing of audited accounts. There is no option for a political party not to file audited accounts as far as Section 13A of the Act is concerned. It is only when the accounts, duly certified by a chartered accountant who satisfies the description in terms of the Explanation to sub-section (2) of Section 288 of the Act, are filed that the AO may reasonably deduce the taxable income of the political party therefrom. In other words, the requirement of P a g e | 23 8 appeals Public Political Party (AY: 2015-16 to2017-18, 2021-22 & 2022-23) maintaining the audited accounts and furnishing those accounts in terms of the proviso to Section 13A of the Act is not merely directory.

“123. Here it is important to address another submission made on behalf of the Revenue which finds favour with the Court. Under the head 'income from other sources', no expenditure can be allowed as a deduction on the ground that the expenditure has been incurred by a political party for attaining the aims and objects of political party. As rightly pointed out, the only deduction is under Section 57(iii) of the Act and this cannot be granted since the INC did not place on record the factual basis for such a claim.

Order pronounced in the open court on 17.12.2025