The court emphasized the necessity for the taxpayer to provide substantial evidence for claims of deductions, particularly concerning political donations, which were deemed accommodation entries without genuine support.

आदेश/ORDER

PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

This appeal is filed by the Assessee as against the appellate order dated 12-10-2023 passed by Commissioner of Income Tax [Appeals], National Faceless Appeal Centre arising out of the assessment order passed under section 143[3] of the Income Tax Act, 1961 [hereafter referred as the Act] relating to the Assessment year 2021-21.

2. Brief facts of the case is that the assessee is an Association of Person (AOP) engaged in the business of real estate and renting services. The assessee filed its Return of Income for the Asst. Year 2020-21 on 30-03-2021 declaring total income of Rs.25,93,260/-. The assessee made the following donations and claimed deduction u/s. 80G and 80GGC of the Act. To verify the genuineness of the donations made by the political parties namely Kisan Party of India and Rashtriya Samajwadi Party (S) notices u/s. 133(6) were issued to confirm the receipt of donations along with the relevant details on the official email of these political parties. The same were bounced. Therefore a show cause notice was issued to the assessee to justify the claim of deduction u/s. 80GGC of the Act.

3. The assessee failed to make any response to the show cause notice. Further verification made by the A.O. observed as follows:

“4. Meantime, from the Article on a news portal it is gathered that 3 parties raising over Rs.1000 crore in poll donations under lens. Three little known political parties that allegedly managed to mobilise over Rs. 1000 crore in election donations are now said to be in the dock for serious financial fraud, including round tripping the money back to the donors after claiming income tax exemptions Gujarat based Manav Adhikar National Party Apna Desh Party from Uttar Pradesh and Kisan Party of India from Bihar are currently said to be under scanner of the revenue department and the case of these three parties has not been referred by the poll panel to the government for legal and criminal action.

Contributions received by these political parties including Registered Unrecognized Political Parties (RUPPs) are 100% exempt from income tax as an incentive to parties for strengthening the electoral democracy. Prima facie assessments, however, indicate that these political parties raised crores in donation and received income tax exemption. They are alleged to have engaged in heavy round tripping of the funds received and diverted it to non-electoral expenses. In nearly 1,500 cases, it could be traced that the money sent in as 'donation' to these political parties was returned to them by way of purchase or transfer. As many as 25 conduits including chartered accountants were found involved.

In case of one party, two different persons have allegedly signed on as president, tax exemptions have been taken without due contribution reports and the mode of donation has not been disclosed by another

5.1 From the portal of Election Commission of India it is seen that the commission has declared some of the political parties inactive, as they have not responded to the letter/notice delivered to them and have not contested a single election either to the General Assembly of a State or the Parliament Election 2014 & 2019. These RUPPS have failed to comply with statutory requirements for more than 16 compliance steps since 2015 and are continuing to default.

5.2 Therefore, from the above, it is apparent that the political parties require to offer voluntary contributions received from any person in the returns of income and claim exemption u/s 13A subject to fulfilment of certain condition laid down for this purpose. These political parties are seems to have been engaged in heavy round tripping of the funds received and diverted it to non- ele