New Delhi, Aug. 15 -- The Income Tax Appellate Tribunal (ITAT), Ahmedabad, has cancelled a Rs.2.31 lakh penalty imposed on a taxpayer who had claimed a Rs.3.71 lakh deduction for a political donation under Section 80GGC of the Income-tax Act. The tribunal held that merely disallowing a deduction does not automatically mean the taxpayer had under-reported or misreported income, particularly when the tax department had not specified the precise basis for imposing the penalty.

The ruling came in the case of Niket Maheshbhai Shah for assessment year 2019-20.

Shah had claimed a deduction of Rs.3.71 lakh under Section 80GGC for a donation made through a recognised banking channel to Manav Adhikar National Party. He also had a certificate from...