Political Donations

In an interesting case, documents seized from raids on an income tax assessee were relied upon solely to implicate another assessee in a political donations matter, which was added to their taxable income.

In the first place any documents, without independent corroboration, cannot substantiate the claim of unexplained investment.

Secondly Section 69 is invoked only if:

1. The investment is not recorded in the assessee's books of account, and

2. The assessee either provides no explanation regarding the nature and source of the investment or the explanation is deemed unsatisfactory

Dductions under Sections 80C and 80D were disallowed because the assessee did not submit the necessary documents, despite claiming payments were made via banking channels. Disallowance based solely on procedural non-compliance is unjustifiable if the substantive eligibility for the deduction can be verified.

1. Failure to establish a clear nexus between the seized material and the assessee's income.

2. Procedural lapses in issuing the Section 148 notice.

3. Lack of incriminating material specific to the AY

4.    No "reason to believe" that income had escaped assessment based on tangible material

Hence the appeal was allowed.