The Congress has moved the Delhi High Court against an order of the Income Tax Appellate Tribunal (ITAT) refusing to stay the demand notice issued to the party by the Income Tax (IT) department for the recovery of over Rs 105 crores as outstanding tax.
Senior Advocate Vivek Tankha mentioned the matter before a bench of Acting Chief Justice Manmohan and Justice Tushar Rao Gedela. The Delhi High Court allowed the listing of the matter today.
Senior Advocate Vivek Tankha said that Congress’s accounts have been frozen and their stay application was rejected by the Income Tax Appellate Tribunal last week.
The Senior Advocate further argued that it is the peak time for elections and if the party does not have the money, then how will it fight? He added that earlier ITAT had protected the party but now that is gone. The Court stated that if the petition is in order by 11:30 AM, the matter will be listed today.
The Income Tax department had earlier issued notice to Congress for the recovery of Rs 105 crores as outstanding tax for the assessment year 2018-19. Earlier in an order passed on March 8, 2024, the ITAT ruled that the IT authorities had not made any error in denying the income tax exemption claimed by the Congress.
It also mentioned that Congress was unable to make out a strong prima facie case against such a denial of exemption by the IT authorities. In July 2021, the IT authorities had rejected the declaration of nil income by the Congress and demanded more than Rs 105 crores as tax.
It was stated that on the ground that the return had been filed beyond the prescribed time period and also that the party had received donations of Rs 14,49,000 from various persons, each being in excess of Rs 2,000. This was said to be in violation of Section 13A of the Income Tax Act which allows a political party to claim exemption from tax in certain cases.
In February 2024 after the Congress claimed that its bank accounts were frozen by the IT Department as cheques being issued by it were not being honoured. The party challenged IT department’s the proceedings before the income tax appellate tribunal (ITAT) alleging that recovery proceedings initiated on February 13 were aimed at creating hardships to the party in view of the upcoming parliamentary elections.
Nonetheless, the Department of Revenue of the Ministry of Finance informed the ITAT that it had not issued any order or direction to the banks for freezing the transactions related to accounts of Congress but only for a lien on the amount lying in the bank accounts upto the outstanding tax demand.
The IT authorities had also objected to the motive being attributed to the Assessing Officer and submitted that the proceedings have been pending since July 2021. In a detailed order passed last week, the ITAT opined that Congress was required to furnish its return of income by due date.
The ITAT noted that the law 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 bonds.
Furthermore, it also rejected the argument by Congress 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 the wholesale denial of exemption.
The ITAT concluded that they 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 them to intervene.