2020 (1) TMI 1735 - AT - Income Tax

Disallowance of deduction claimed u/s 80GGC - donations purportedly given to the political parties - CIT(A) denied the relief to the assessee on the ground that despite several opportunities given to the assessee the onus placed on the assessee to substantiate the bonafides could not be discharged HELD THAT - Co-ordinate bench of the Tribunal Shri Vinodchandra Narendrarai Bhatt 2020 (1) TMI 1734 - ITAT AHMEDABAD has remanded the issue back to the file of the AO a political party is an organized group of people meant to play crucial role in facilitating governance policy making etc. and consequently in defining the way of life of common citizen on continued basis. It is hard to imagine that such parties registered with Election Commission and so essential to our democratic form of Government would not abide by declared law of country and would seek an escape from providing vital information on contributions received under enquiry. Such leeway to a registered political party would to be fatal and would set a bad example to the society at large. Therefore we consider it just and equitable to restore the issue back to the file of the AO for de novo examination in accordance with law after making suitable enquiry with political parties as may be considered expedient and after providing proper opportunity to the assessee. The assessee shall be at liberty to adduce such evidence as he may think fit to substantiate the bonafides of donations made and prove eligibility of deduction u/s 80GGC of the Act. In parity the issue is remanded back to the file of the AO on identical terms and directions. Appeal filed by the assessee is allowed for statistical purposes.

Summary

ISSUES:

Whether the deduction claimed under section 80GGC of the Income Tax Act, 1961 for donations made to political parties is allowable when the assessee furnishes receipts, registration certificates, and bank statements, but notices under section 131 remain uncomplied with by the political parties.Whether the assessee has discharged the onus to substantiate the bonafides of the donations and eligibility for deduction under section 80GGC.What is the appropriate course of action when political parties do not respond to statutory notices issued under section 131 of the Act during scrutiny of donations?

RULINGS / HOLDINGS:

The deduction under section 80GGC cannot be allowed merely on the basis of receipts and bank statements if notices issued under section 131 to the political parties remain uncomplied with, as the bonafides of the donations remain unsubstantiated.The assessee failed to discharge the onus placed on him to substantiate the bonafides of the donations despite several opportunities, justifying the denial of deduction under section 80GGC.Given the essential role of political parties and their registration with the Election Commission, failure to respond to statutory notices under section 131 is significant; however, the issue requires de novo examination by the Assessing Officer with suitable enquiries and opportunity to the assessee to adduce evidence.

RATIONALE:

The legal framework centers on section 80GGC of the Income Tax Act, 1961, which permits deduction for donations made to political parties, subject to proof of bona fide payments.Section 131 empowers the Assessing Officer to summon persons or entities for information relevant to assessment; non-compliance by political parties undermines the verification process.The Tribunal emphasized the importance of political parties as registered entities under the Election Commission and their obligation to comply with statutory inquiries, reflecting a doctrinal stance that non-cooperation by such parties is "fatal" to the claim of deduction.In line with precedent, the matter was remanded for fresh examination, allowing the Assessing Officer to make suitable enquiries and the assessee to furnish additional evidence, thus ensuring adherence to principles of natural justice and thorough scrutiny.