ITAT Mumbai Upholds PCIT’s Revision Over ₹30 Lakh Political Donation Claim

Background

The Mumbai Bench of the Income Tax Appellate Tribunal has dismissed the appeal filed by Vijay Raaz, thereby upholding the revisionary order passed by the Principal Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961, for Assessment Year 2020–21. The Tribunal held that the Assessing Officer had failed to conduct necessary enquiries into the assessee’s claim of deduction under Section 80GGC, rendering the assessment order erroneous and prejudicial to the interests of the Revenue. The case arose from the assessee’s claim of a ₹30 lakh deduction towards donation made to Apna Desh Party. Although the original assessment under Section 143(3) accepted the returned income, the PCIT invoked revisional jurisdiction after noting that no meaningful enquiry had been conducted into the genuineness of the donation, despite the case being selected for limited scrutiny, which included verification of Chapter VI-A deductions.

Failure to Enquire Justifies Section 263 Action

Before the Tribunal, the assessee argued that all relevant documents such as donation receipts and bank statements had been furnished during assessment proceedings and that the political party was registered under Section 29A of the Representation of the People Act, 1951. It was contended that the revision amounted to a mere change of opinion and violated settled law laid down in decisions such as Malabar Industrial Co. Ltd. v. CIT and CIT v. Max India Ltd.

Rejecting these submissions, the Tribunal observed that while the assessee had furnished basic documents, the Assessing Officer did not carry out any enquiry into the genuineness of the donation, the compliance status of the political party under Section 13A of the Act, or the alleged modus operandi highlighted by the Investigation Wing, Ahmedabad. The Bench noted that the assessment order was completely silent on the donation issue, despite it being part of the scrutiny mandate.

Relying on Explanation 2 to Section 263(1), which deems an order erroneous if passed without necessary enquiries or verification, the Tribunal held that the twin conditions for invoking Section 263 were clearly satisfied. Mere furnishing of receipts was held insufficient to establish genuineness, particularly in light of investigation reports pointing to alleged misuse of political donations for tax evasion.

Accordingly, the ITAT found no infirmity in the PCIT’s order directing a fresh assessment and dismissed the assessee’s appeal.