The Income Tax Appellate Tribunal (ITAT) on Friday dismissed a stay application moved by the Congress against the demand notice issued to it by the Income Tax (IT) department for recovery of more than ₹105 Crore as outstanding tax for the assessment year 2018-19.The Delhi Bench of Vice President GS Pannu and Judicial Member Anubhav Sharma ruled that the IT authorities had not made any error in denying the income tax exemption claimed by Congress.It further said that Congress was unable to make out a strong prima facie case against the denial of exemption.The IT authorities in July 2021 had rejected the declaration of Nil income by the Congress and demanded over ₹105 Crore as tax.The demand was raised on the ground that the return had been filed beyond the prescribed time period and also that the party has received “donations” of ₹14,49,000 in case from various persons, each being in excess of ₹2,000.This was stated to be in violation of Section 13A of the Income Tax Act which allows a political party to claim exemption from tax in certain casesBefore the ITAT, the Congress alleged that recovery proceedings initiated on February 13 were aimed at creating hardships to the party in view of the forthcoming parliamentary elections.However, the IT authorities objected to the motive being attributed to the Assessing Officer and submitted that the proceedings have been pending since July 2021.In the order passed today, the ITAT said the aspect was “quite subjective” and it considered the matter only on merits. “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,” it said.Considering the rival contentions on merits, the ITAT considered the limited issue relating to Congress’ prayer for stay on recovery proceedings during pendency of its appeal against the assessment order of July 6, 2021.The ITAT first referred to Section 13A which states 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 fulfils the conditions prescribed.Having examining the conditions, the ITAT opined that they are prerequisites for a political party claiming exemption under the law.In this backdrop, the ITAT proceeded to examine the claim made by Congress for exemption and see whether the political party had complied with the conditions.On the issue related to filing of return, the ITAT opined that Congress was required to furnish the return of income by ‘due date’.With regard to the contributionsreceived by Congress, the ITAT noted that the law “restricts a political party from receiving donation 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."It also rejected the argument by Congress that since such individual donations in excess of ₹2,000 were only 0.1 percent of the total contribution, the same should not invite wholesale denial of exemption."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 concluded.A controversy had broken out last month after the Congress claimed that that its bank accounts were frozen by the IT Department as cheques being issued by it were not being honoured.However, the Department of Revenue of Ministry of Finance later told the ITAT that it had not issued any order or direction to the banks for freezing the transactions relate to accounts of Congress “but only for a lien on the amount lying in the bank account(s) upto the outstanding tax demand".Senior Advocate Vivek Krishna Tankha with Advocates Vipul Tiwari and Inder Dev Singh represented the Indian National Congress.Senior Standing Counsel Zoheb Hossain and Vipul Aggarwal, Junior Standing Counsel Sanjeev Menon and advocate Vivek Gurnani represented the IT authorities.
TAGS: Income Tax Appellate Tribunal (ITAT) Congress Stay application Demand notice
