Cash fails twice over. On the party's side, s.13A denies it the exemption unless no donation exceeding two thousand rupees is received otherwise than by an account payee cheque, an account payee bank draft, electronic clearing system, another prescribed electronic mode or an electoral bond. On the donor's side, contributions in cash do not qualify under s.80GGB or s.80GGC at all. What is being litigated now is not cash but genuineness: officers are using s.133(6) enquiries and search material to disallow donations routed through registered unrecognised parties that return the money.
Section 13A exempts the income of a political party registered under s.29A of the Representation of the People Act, 1951 if it satisfies a set of conditions, and the conditions are where the cash limits live. The party must keep 'such books of account and other documents as would enable the Assessing Officer to properly deduce its income therefrom'. It must keep, 'in respect of each such voluntary contribution other than contribution by way of electoral bond in excess of twenty thousand rupees, ... a record of such contribution and the name and address of the person who has made such contribution'. And the operative bar: 'no donation exceeding two thousand rupees is received by such political party otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed or through electoral bond'. The accounts must be audited, the report under the Representation of the People Act filed, and the return filed by the due date.
The donor's provision is s.80GGC: 'In computing the total income of an assessee, being any person, except local authority and every artificial juridical person wholly or partly funded by the Government, there shall be deducted any amount of contribution made by him, in the previous year, to a political party or an electoral trust.' Section 80GGB is the same relief for an Indian company. 'Political party' for both sections means a party registered under s.29A of the Representation of the People Act, 1951. Contributions in cash are outside both sections. Note a limit of the sourcing here: the departmental page for s.80GGC, as fetched, does not print the sub-section barring cash contributions, and the statement that cash is ineligible is taken from commentary - check the bare section for the year before advising.
The donation to a charitable institution is a different provision with a different cash line: s.80G, where a cash donation above Rs 2,000 gets no deduction. That is covered by the library's concepts 80g-donations-categories-ceiling-and-cash-limit and 80g-approval-and-what-the-donor-gets.
What practitioners are actually meeting is the genuineness enquiry. The pattern in the orders is consistent: the donation is paid by bank transfer to a registered unrecognised political party, a search or survey on the party shows it returning the money in cash after a commission, and the deduction is disallowed notwithstanding the banking trail. In Jayeshkumar Gopalbhai Akbari v. DCIT (2025) 132 ITR 407 (Surat)(Trib.) a Rs 50 lakh contribution, about half the donor's gross total income, was disallowed after a s.133(6) enquiry showed the party untraceable, unresponsive, and filing nothing with the Election Commission for seven years. In Kanal Sanatkumar Raval v. ITO the Ahmedabad Bench held that 'mere payment through banking channels and production of donation receipts cannot, in the facts of the present case, override the overwhelming evidence demonstrating that the recipient political party was engaged in providing accommodation entries through a systematic layering of funds'. Orders of the Mumbai Bench in Ritesh Sugan Jain v. ITO and Manoj Jayram Sarang v. ITO are to the same effect.
That is the shape of the defence too. The banking channel is necessary and not sufficient. What the donor is being asked is how he came to the party, why he gave that proportion of his income, and what he can show of the party's existence and activity.
These disallowances are being made in bulk on search-derived lists, often with a s.148 notice and a s.270A penalty behind them, and the donor's instinct - to produce the receipt and the bank statement - is precisely what the Tribunal orders say is not enough. On the party's side the two thousand rupee line in s.13A is absolute and its breach costs the exemption, not just the donation.
The AO has taxed our society's transfer fees and non-occupancy charges. Is that right?
The bank has a s.133(6) notice asking for customer loan-repayment details and there is no assessment pending on anyone. Can the officer do that?
The department has asked my bank for the names and addresses of every customer whose cash transactions or deposits crossed one lakh over the last three years. There is no assessment or enquiry pending against anybody. Can a notice under section 133(6) be issued at large like this?
Our company came out of the NCLT under an approved resolution plan. The department now says it will not recover anything but wants to complete the assessment for an earlier year to build a case against the old promoters. Can it?
I hold a valid TRC. Can the AO go behind it and reopen my assessment for lack of substance?
We are exempt from deducting tax on these deposits. Does that also mean we need not give the information?
We are a co-operative bank. The TDS officer says we should have deducted tax under s.194A on fixed deposit interest paid to co-operative housing societies that are not our members, and has treated us as an assessee in default. Is he right?
Our counsel wants to cite a Bombay case that says s.133(6) cannot be used for a fishing enquiry. Is it still good?
Every page in this library links to what it was written from, so you can check it rather than take our word for it.
