The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) has held that a deduction claimed for a donation to a political party cannot be disallowed merely on the basis of statements recorded from third parties when the taxpayer was neither confronted with the material nor given an opportunity to cross-examine the persons concerned.

The Bench of Kuldip Singh (Judicial Member) and Annapurna Gupta (Accountant Member) remanded the taxpayer’s claim for deduction under Section 80GGC of the Income Tax Act, 1961, to the Assessing Officer for fresh adjudication and granted relief in respect of deductions claimed towards Employees’ Provident Fund contributions, medical expenditure incurred for a senior-citizen parent and a charitable donation. The taxpayer’s house rent allowance exemption was also directed to be reconsidered after verification.

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The appeal arose from the assessment completed for Assessment Year 2019-20. The taxpayer challenged the order dated February 12, 2026, passed by the National Faceless Appeal Centre, which had upheld various disallowances made by the Assessing Officer.

The controversy concerning the political donation arose from search proceedings conducted at the premises of three registered unrecognised political parties—Manvadhikar National Party, Kishan Adhikar Party and Kisan Party of India—and two charitable organisations, All India Social Education Charitable Trust and Aadhar Foundation.

According to the Revenue, these organisations received donations through cheque, RTGS or NEFT, after which the money was allegedly routed through several layers and returned to the original donors in cash after deducting a commission ranging from 3.5% to 5%.

On the basis of information gathered during those proceedings, the Assessing Officer alleged that the taxpayer had obtained an accommodation entry in the form of a ₹1 lakh political donation to Manvadhikar National Party and had consequently claimed a deduction under Section 80GGC.

The taxpayer, however, produced the donation receipt, bank statement and documents relating to the political party’s registration under Section 29A of the Representation of the People Act, 1951. The bank statement showed payments of ₹90,000 and ₹10,000 through banking channels.

The Tribunal observed that the Assessing Officer and the Commissioner of Income Tax (Appeals) had proceeded on the basis of statements made by Ram Bhawan Ojha and Tribhawan Ramkalp Ojha, who were associated with the political parties under investigation.

It noted that neither authority had conducted an independent inquiry into the taxpayer’s transaction. The taxpayer was also not given an opportunity to cross-examine the persons whose statements were relied upon to treat the donation as an accommodation entry.

The ITAT further found that the authorities had not recorded any finding on the documentary evidence submitted by the taxpayer. There was no specific finding explaining how the taxpayer had participated in obtaining a fictitious deduction or demonstrating that the concerned political party did not exist.

“Merely on the basis” of the statements given by the two persons, the addition could not be sustained, the Tribunal held.

Accordingly, the Bench restored the Section 80GGC issue to the Assessing Officer, with a direction to decide it afresh after considering the material submitted by the taxpayer.

The taxpayer had claimed a deduction of ₹1,38,400 under Section 80C for contributions deposited in his Employees’ Provident Fund account. Both the Assessing Officer and the first appellate authority had disallowed the claim.

On examining the EPF passbook and Form 16 issued by the employer, the Tribunal found that the contribution of ₹1,38,400 was duly recorded in both documents.

The Tribunal observed that the lower authorities had disallowed the claim without properly examining the EPF passbook and the employer-issued documents placed on record. It consequently directed that the deduction be allowed.

Although one portion of the order refers to the deduction as being under Section 80G, the nature of the claim, grounds of appeal and supporting discussion establish that the deduction related to the taxpayer’s EPF contribution under Section 80C.

The taxpayer had also claimed an exemption of ₹2,54,000 under Section 10(13A) against rent of ₹2,91,000 paid during the relevant year. He submitted that he was residing in rented premises in Mumbai for employment purposes.

In support of the claim, he produced the rent agreement, rent receipts containing the landlord’s name, address and PAN, and Form 16 issued by his employer. The employer had taken the rent payment into account and allowed an exemption of ₹2,54,000 under Section 10(13A).

The Tribunal described these documents as “self-speaking” and observed that the Assessing Officer and the Commissioner (Appeals) had not discussed them before disallowing the exemption.

Holding that the exemption was otherwise admissible, the ITAT directed that the claim be allowed subject to verification by the Assessing Officer.

Another issue concerned a deduction of ₹50,000 claimed under Section 80D for medical expenditure incurred on the taxpayer’s father, who was a senior citizen suffering from Parkinson’s disease.

The taxpayer submitted a doctor’s prescription, his father’s Aadhaar card and relevant bank entries. The documents indicated expenditure on medicines as well as payments of ₹1.95 lakh made by the taxpayer to his father for medical treatment. His father subsequently died in August 2021.

After examining the evidence, the Tribunal held that the documents established that the taxpayer’s senior-citizen father suffered from Parkinson’s disease and required regular medical treatment.

The Bench concluded that the Commissioner (Appeals) had erred in confirming the disallowance of ₹50,000 and directed that the deduction under Section 80D be allowed.

The taxpayer had further donated ₹1 lakh to Baldeodas Bhagirathi Shah Trust, Mumbai, and claimed a deduction of ₹50,000 under Section 80G.

The authorities disallowed the claim on the stated ground that the taxpayer had not furnished the donation receipt or the trust’s Section 80G approval.

Before the Tribunal, the taxpayer pointed to the Section 80G approval and the donation receipt already forming part of the record. The payment had also been made through banking channels.

The ITAT found that the documentary evidence had, in fact, been submitted and that the lower authorities had erred in proceeding on the premise that it was unavailable. It directed the Assessing Officer to allow the ₹50,000 deduction after due verification.

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