ITAT Jaipur holds reassessment on political donation invalid due to limitation despite Section 148A steps

1. Background and essence of the ruling

The Jaipur Bench of the Income Tax Appellate Tribunal, in the case of Piyush Maheshwari Vs Assessment Unit (ITAT Jaipur), has held that where the reopening of assessment is founded on material arising from a third-party search, and such a case falls within the exclusion carved out in the first proviso to Section 148A, the Revenue cannot rely on the Section 148A procedure to extend the statutory time limit prescribed under Section 149.

The controversy stemmed from reassessment proceedings for AY 2019-20 relating to a political contribution of ₹2,50,000 claimed as deduction under Section 80GGC, which the Department alleged to be a bogus donation based on a search in the case of a group of Registered Unrecognised Political Parties in Ahmedabad.

The Tribunal ultimately set aside both:

  • the Section 148 notice dated 12.04.2023, and
  • the reassessment order dated 23.01.2025,

on the sole ground that the reopening was barred by limitation. Consequently, the Tribunal did not adjudicate upon the genuineness of the political contribution or the allowability of the deduction under Section 80GGC.

2. Factual matrix in brief

2.1 Return of income and claim under Section 80GGC

  • The assessee, an individual drawing salary income, filed the return of income for AY 2019-20 on 29.07.2019, declaring a total income of ₹63,47,300.
  • In this return, the assessee claimed a deduction of ₹2,50,000 under Section 80GGC towards a contribution made to Rashtriya Samajwadi Party (Secular) [“RSP(S)”], a Registered Unrecognised Political Party.

2.2 Search on political parties and departmental findings

  • A search under Section 132 was carried out on 07.09.2022 in Ahmedabad on a group of 23 Registered Unrecognised Political Parties, which included RSP(S).
  • As recorded in the assessment order, the Department’s investigation post-search allegedly revealed that these parties received donations through banking channels and then returned the funds, mainly in cash, to the respective donors after retaining a commission.
  • Based on this, the Department treated such political contributions as accommodation entries.

2.3 Information flowing to the AO via the Insight Portal

  • Information relating to the assessee’s contribution to RSP(S) was flagged on the Insight Portal on 27.03.2023, under the CBDT’s Risk Management Strategy.
  • The Assessing Officer (“AO”) issued a show cause notice under Section 148A(b) on 30.03.2023, calling upon the assessee to explain why proceedings under Section 148 should not be initiated.
  • The assessee filed a reply on 06.04.2023.
  • Thereafter, the AO passed an order under Section 148A(d) on **12.04.2023and simultaneously issued a notice underSection 148` on the same date.
  • The assessee filed a return in response to this notice on 11.05.2023.

3. Reassessment order and CIT(A)’s confirmation

3.1 AO’s reasoning in the reassessment

In the reassessment framed under Section 147 read with Section 144B, the AO:

  • Accepted that:
    • the assessee’s contribution to RSP(S) was routed entirely through banking channels; and
    • RSP(S) continued to be a registered political party.
  • Nevertheless concluded, based on the search material and the appraisal report relating to RSP(S), that the assessee’s donation was not genuine but part of a broader accommodation entry structure.
  • Disallowed the deduction of ₹2,50,000 under Section 80GGC and recomputed the total income at ₹65,97,300 vide order dated 23.01.2025.

3.2 Order of the CIT(A)

The assessee’s appeal before the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, was dismissed vide order dated 31.08.2025.

The CIT(A):

  • upheld the validity of the reopening under Section 147, and
  • confirmed the disallowance of the Section 80GGC deduction of ₹2,50,000 along with the consequential interest under Section 234B and Section 234C.

4. Grounds and arguments before the ITAT

4.1 Key grounds raised by the assessee

Among several grounds, the assessee prominently challenged:

  • Jurisdiction and limitation:
    • Attack on the legality of the Section 148 notice dated 12.04.2023 as being time-barred under Section 149(1)(a) because the standard three-year period from the end of AY 2019-20 expired on 31.03.2023.
    • Contention that the allegedly escaped income was only ₹2,50,000, far below the Section 149(1)(b) threshold of ₹50 lakh, making the extended 10-year time limit unavailable.
    • Submission that the case was covered by the first proviso to Section 148A (third-party search), where the Section 148A procedure itself is excluded. Accordingly, the Revenue could not rely on the time consumed in Section 148A(b) proceedings to extend limitation.
  • Procedural issues (kept in the alternative):
    • Allegation that the sanction under Section 151 was accorded by an inappropriate authority.
    • Alleged non-compliance with Section 151A.
  • Merits of disallowance:
    • Claim that the contribution was bona fide, made to a registered political party by bank transfer.
    • Argument that no material specific to the assessee was brought on record to show any actual cash-back or commission.

4.2 Reliance placed by the assessee

For the limitation proposition, the assessee relied particularly on: