Salaried employee earning Rs 68 lakh donates Rs 12 lakh to political party, claims tax deduction; I-T dept denies it; he contests but loses in ITAT Ahmedabad

Mr Bhatt, a salaried employee from Bhavnagar, Gujarat, donated Rs 12 lakh to a secular political party in AY 2019-2020 (FY 2018-19) and claimed a Section 80GGC income tax deduction under the old tax regime. His income tax return (ITR) was selected for scrutiny. He contested it but lost the case before the Income Tax Appellate Tribunal (ITAT) Ahmedabad.

According to the submission, Bhatt earned a salary of Rs 68.79 lakh in FY 2018-19 (AY 2019-2020) and filed his ITR on August 28, 2019. He claimed a deduction of Rs 12 lakh under Section 80GGC for the donation made to that political party, reducing his declared taxable income to Rs 56.79 lakh.

However, the Income Tax Assessing Officer rejected Mr Bhatt's tax deduction claim and added of Rs 12 lakh to his (Bhatt's) total taxable income. This disallowance was subsequently confirmed by the CIT(A).


Feeling aggrieved, Bhatt appealed before the ITAT Ahmedabad. Before the tribunal, Bhat contended that he made this donation in FY 2018-19 under a bona-fide belief and that the political party's participation in the 2019 elections proved the genuineness of his contribution. He further argued that he had not received any communication from the political party regarding the return of the donated amount from the said political party and could not be expected to prove a negative fact, namely, that he had never received the money back.

The ITAT Ahmedabad did not accept Bhatt's argument, and thus, he lost the case on July 7, 2026. Chartered Accountant Ashish B. Kanabar and Chartered Accountant Om Kanabar represented Bhatt in ITAT Ahmedabad.

Also read: Rs 7 lakh income, Rs 2 lakh donation to a political party: How fake contributions led to Section 80GGC tax deduction claim rejection

Keep reading to know why Bhatt lost the case.

Summary of the judgement

Chartered Accountant Suresh Surana told ET Wealth Online that in this, the ITAT Ahmedabad dealt with the allowability of deduction under section 80GGC in respect of a donation made by the taxpayer to a secular political party.

The taxpayer (Bhatt) contended that the donation was genuine, as it was made through banking channels, supported by donation receipts, and the recipient political party was registered under Section 29A of the Representation of the People Act, 1951. It was argued that the taxpayer had acted under a bona fide belief and that there was no direct evidence to show that the donated amount had been returned to him in cash. The taxpayer also relied on judicial precedents to contend that once primary evidence was furnished, the burden shifted to the revenue.

The Income Tax Department, however, relied on extensive investigation conducted in relation to the recipient political party. The investigation included search proceedings, examination of bank accounts, statements of office bearers recorded under Section 132(4), and tracing of funds through intermediary shell entities.

According to the Income Tax Department, the political party was engaged in a systematic accommodation entry mechanism, where donations received through cheques were routed through various shell entities before being converted into cash, Surana said.

Surana said that the tax tribunal held that a deduction under Section 80GGC is available only in respect of a genuine voluntary contribution made for genuine political activity. Mere payment through banking channels, production of donation receipts, or the legal registration of the political party was not sufficient where the surrounding facts indicated that the transaction was part of a pre-arranged accommodation entry arrangement.

The ITAT observed that the genuineness of the contribution, and not merely the existence of the recipient political party, is material for claiming a deduction.

The tax tribunal also said that in cases involving tax evasion and accommodation entries, direct evidence of cash being returned may not always be available.

Surana said: "Therefore, the tax authorities are entitled to consider the surrounding circumstances, bank trail, statements recorded during the search, and the test of human probabilities."

Also read: Made a political donation? Income Tax Dept launches Tax Assist to help you respond to an income tax notice

Why Mr Bhatt lost the case

Surana said that the taxpayer (Mr Bhatt) lost primarily because he could not rebut the revenue's evidence showing that the recipient political party was involved in providing bogus donation entries.

Surana said that the ITAT Ahmedabad also distinguished the decisions relied upon by the taxpayer, observing that those cases were based on different facts and did not involve the same level of investigation material.

Surana said that the ITAT Ahmedabad also relied on the principles laid down by the Supreme Court in the case of Durga Prasad More and Sumati Dayal, and on this ground the tax tribunal held that tax authorities are not required to accept a transaction at face value merely because it is supported by documents; they may look beyond the apparent form to determine the real nature of the transaction.

Accordingly, the ITAT Ahmedabad upheld the disallowance of Rs 12 lakh claimed under Section 80GGC and dismissed the taxpayer's (Mr Bhatt's) appeal.

Surana said: "The case reiterates that, to claim a deduction for political donations, taxpayers must be able to demonstrate not only the mode of payment and documentary trail but also the substantive genuineness of the donation."

Mihir Tanna, associate director, S.K Patodia LLP says that with reference to Income Tax, Political donation tax deduction continued to be litigative matter

Tanna says: "Recently, Ahmedabad ITAT confirms disallowance u/s 80GGC on account of contribution to a political party disregarding the registration of the political party under Section 29A of the Representation of the People Act. The tax tribunal also rejected the argument that there is no direct evidence showing cash receipt by the assessee, stating that in matters involving tax evasion and accommodation entries, direct evidence is rarely available."

According to Tanna, early this year in February 2026, Deductions for political donations were not allowed after considering a few important aspects by Hon'ble Mumbai ITAT:

(1) Investigation wing found modus operandi of political party is not proper and no party address was found at given address. (2)The statement recorded by the investigation party regarding the above modus operandi was not retracted (3) The political party did not file a contribution report with the Chief Electoral Officer, and this omission was also noted in the party's ITR.

However, Tanna says that in the same month, a similar issue arose before the Hon'ble Raipur ITAT in the case of Anuj Gupta and it was held that "A.O had not brought out any evidence which suggests that the said political party has derived commission and has paid money back to the assessee through backdoor. Nothing has been brought on record by the A.O to establish the direct nexus regarding benefit derived by the assessee from the said political party while making the said donation"