Martin Sime, chief executive of the Scottish Council for Voluntary Organisations (SCVO), said increased use of so-called sanctions by the Department for Work and Pensions (DWP) was "scandalous" and figures showing half of those who appealed the decisions were successful demonstrated the system was unfair.
Recent figures show that between the introduction of the new regime in October 2012 and June 30 this year there were 53,270 sanctions applied in Scotland.
These result in those on jobseekers' benefits losing part or all of their payments for short periods or lengthier spells, for offences such as failure to stick to job-seeking agreements or missed appointments.
However, in an outspoken attack on the DWP, Mr Sime said punishing people by withdrawing their income did not work and the policy should be scrapped.
He added: "How in a civilised society can we justify stripping unemployed people of benefits and condemning them to complete destitution?
"People living in complex situations are finding it impossible to abide by DWP's stringent rules through no fault of their own.
"The high proportion of successful appeals against DWP is proof that its policies are being unfairly and poorly applied.
"It seems intent on punishing people who are already struggling to get from one day to the next."
Mr Sime claimed the application of sanctions was a deliberate shunting of costs from the benefits bill to the third sector in Scotland.
He said charities were being left to pick up the pieces when people are "wrongly" stripped of Job Seekers' Allowance (JSA). This puts great strain on shelters, food banks and emergency grants, he added.
Care and disability organisations, housing associations, Citizens Advice Bureaux and mental health charities are among the organisations facing increased pressure, Mr Sime said, but the need to deal with increasing numbers of clients facing crisis meant they were unable to do preventive work.
Sanctions do not work to help people back into work, he claimed, arguing that people pushed towards destitution are unlikely to be able to take up opportunities to retrain and access help to work. Families forced to focus on the basics of life such as food, shelter and heat, also struggle to move back towards employment.
"Rather than punishing people for being out of work, effort should be channelled into helping people to get back into sustainable employment and to contribute to their communities," he claimed.
"The third sector is working together to make sure that the DWP understands the horrific impact its sanctions are having on vulnerable people and families across Scotland. Surely then it will see sense and scrap unfair sanctions."
Dr David Webster, Honorary Senior Research Fellow in Urban Studies at Glagow University, submitted a report to the House of Commons using Government JSA sanction figures. It showed that of those who receive a sanction only 1.7% decide to take the decision to a tribunal, of which 42.2% appeals are successful.
Charities believe this is evidence that a large proportion of sanction decisions are unlawful, and many more could be overturned if more claimants took their cases to tribunal.
A spokesman for the DWP said sanctions were a last resort and those in genuine need could apply for hardship payments.
"A record 30 million people are in work and well over a million new jobs have been created since 2010," he added.
"It's only right people should do everything they can to find work in return for their Jobseekers Allowance. We make it clear to people at the start of their claim what the rules are and that they risk losing their benefits if they don't play by them."