On Friday, the Income Tax Appellate Tribunal (ITAT) denied the Congress’s request for a stay of action against the Income Tax (IT) department’s demand letter, which sought to recover over ₹105 crore in unpaid taxes for the assessment year 2018–19.
Vice President GS Pannu and Judicial Member Anubhav Sharma’s Delhi Bench determined that the IT authorities had not erred in rejecting the income tax exemption that Congress had sought.
In July 2021, the IT authorities rejected the Congress’s report of zero income and demanded a tax of more than ₹105 crore.
The claim was made on the grounds that the return was filed after the deadline and that the party had received “donations” of ₹14,49,000 from many parties, each of which had given more than ₹2,000.
It was claimed that this was against Section 13A of the Income Tax Act, which permits a political party to request an exemption from paying taxes under specific circumstances.
The Congress claimed before the ITAT that the recovery processes, which were started on February 13, were meant to cause difficulties for the party because of the upcoming parliamentary elections.
The IT authorities countered that the proceedings had been ongoing since July 2021 and opposed to the Assessing Officer’s motivation being given credit.
The ITAT stated in the order it issued today that the aspect was “quite subjective” and that it solely took the matter’s merits into consideration.
The chronology of events, which have been canvassed before us starting from the passing of the assessment order on 6th July, 2021 and culminating with the issuance of notice under section 226(3) of the Act on 13th February, 2024, in our view, does not justify an inference that the recovery proceedings have been done in an undue haste,” court said.
The ITAT examined the narrow question of Congress’ request for a stay of recovery proceedings while its appeal against the assessment ruling dated July 6, 2021 was pending, taking into account the opposing arguments on the merits.
Firstly, the ITAT cited Section 13A, which provides that any income of a political party falling under one of the following categories—”income from house property,” “income from other sources or capital gains,” or “income by way of voluntary contributions received” from any individual—must not be included in the political party’s total income provided it satisfies the requirements specified.
After reviewing the requirements, the ITAT concluded that they are necessary before a political party can assert legal exemption.
In light of this, the ITAT continued to investigate the Congress’s request for an exemption and determine if the political party had met with the requirements.
Regarding the return filing matter, the ITAT expressed its opinion that Congress had a “due date” to provide the income return.
Regarding the contributions that Congress has received, the ITAT has observed that the legislation “restricts a political party from receiving donations in excess of two thousand rupees otherwise than by an account payee cheque or bank draft or through electronic clearing system or through electoral bond.”
Congress’s contention that such individual donations exceeding ₹2,000 should not be subject to a blanket denial of exemption because they constituted a mere 0.1 percent of the overall contribution was also rejected.
In these circumstances, we do not find that the recovery notice under Section 226(3) of the Act issued by the Assessing Officer on 13th February, 2024 is lacking in bona fides, so as to require us to intervene,” The ITAT came to an end.
Last month, a dispute erupted when the Congress asserted that the IT Department had frozen its bank accounts because the checks it was writing were not being honored.
Nevertheless, the Ministry of Finance’s Department of Revenue subsequently informed the ITAT that it had not given the banks any instructions or orders to halt activities pertaining to Congress accounts.
The Indian National Congress was represented by Senior Advocate Vivek Krishna Tankha and Advocates Vipul Tiwari and Inder Dev Singh.
The IT authorities were represented by advocate Vivek Gurnani, junior standing counsel Sanjeev Menon, senior standing counsel Zoheb Hossain, and Vipul Aggarwal.
CASE NAME – INDIAN NATIONAL CONGRESS VS DEPUTY COMMISSIONER OF INCOME TAX
NAME – KARUBAKI MOHANTY, B.A.LLB, SOA NATIONAL INSTITUTE OF LAW, BHUBANESWAR, INTERN UNDER LEGAL VIDHIYA.
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