The Income Tax Appellate Tribunal (ITAT) on Friday dismissed an application filed by the Congress party, challenging the Income Tax department notice seeking recovery of more than Rs 105 crore as outstanding tax for the assessment year 2018-19.
The order was passed by the Delhi Bench of Vice President GS Pannu and Judicial Member Anubhav Sharma.
The Bench observed that the IT authorities did not make any error in denying the Income Tax exemption claimed by Congress, adding that the political party was unable to make out a strong prima facie case against the denial of exemption.
On July 6, 2021, the IT authorities had rejected the declaration of Nil income by the Congress and demanded over Rs 105 crore as tax on the grounds that the return had been filed beyond the prescribed period.
The IT department further said that the political party had received donations of Rs 14,49,000 in cash from various persons, each in excess of Rs 2,000.
This was stated to be in violation of Section 13A of the Income Tax Act, which allowed a political party to claim exemption from tax in certain cases, it added.
The Congress party alleged before the ITAT that recovery proceedings initiated on February 13, 2024, aimed at creating hardships for the party in view of the forthcoming Parliamentary elections.
Rejecting the argument, the IT authorities submitted that the proceedings have been pending since July 2021.
The ITAT said on Friday that it was considering on merits, the limited issue relating to the Congress’ prayer for a stay on recovery proceedings during the pendency of its appeal against the assessment order of July 6, 2021.
It said the chronology of events canvassed before the Tribunal starting from the passing of the assessment order on July 6, 2021 and culminating with the issuance of notice under Section 226(3) of the Income Tax Act on February 13, 2024, did not justify an inference that the recovery proceedings have been done in an undue haste.
The Tribunal referred to Section 13A, which stated that any income of a political party under the head – ‘income from house property’, ‘income from other sources or capital gains’ or ‘income by way of voluntary contributions received’ from any person shall not be included in the total income of such political party if it fulfilled the conditions prescribed.
After examining the conditions, it opined that they were prerequisites for a political party claiming exemption under the law and proceeded to examine the claim made by Congress for exemption and see whether the political party had complied with the conditions.
The ITAT, on the issue related to the filing of returns, ruled that Congress was required to furnish the return of income by the ‘due date’.
Over the contributions received by the political party, it noted that the law restricted a political party from receiving a donation in excess of Rs 2,000 otherwise than by an account payee cheque or bank draft or through electronic clearing system or through electoral bond.
It also rejected Congress’ argument that since such individual donations in excess of Rs 2,000 were only 0.1 percent of the total contribution, the same should not invite wholesale denial of exemption.