Congress moves Delhi High Court against IT notice for recovery of ₹105 crore outstanding tax

The Congress party has approached the Delhi High Court against an order of the Income Tax Appellate Tribunal (ITAT) refusing to stay a demand notice issued to the political party by the Income Tax (IT) department for the recovery of more than ₹105 crores as outstanding tax. .The matter was mentioned before a bench of Acting Chief Justice Manmohan and Justice Tushar Rao Gedela after which the Court allowed the listing of the matter today. .Senior Advocate Vivek Tankha mentioned the matter. He said that Congress' accounts have been frozen and their stay application was rejected by the Income Tax Appellate Tribunal last week."This is the peak time for elections. If we do not have the money, how will we fight? ITAT had protected us but now that is gone," Tankha argued.The Court said that if the petition is in order by 11:30 AM, the matter will be listed today. .The IT department had earlier issued notice to Congress for the recovery of ₹105 crores as outstanding tax for the assessment year 2018-19.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 further said that Congress was unable to make out a strong prima facie case against such a denial of exemption by the IT authorities..The IT authorities in July 2021 had rejected the declaration of nil income by the Congress and demanded over ₹105 crores 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 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 cases.Controversy broke in February 2024 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.The Congress challenged IT department's the proceedings before the ITAT alleging that recovery proceedings initiated on February 13 were aimed at creating hardships to the party in view of the upcoming parliamentary elections..However, the Department of Revenue of Ministry of Finance 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.".The IT authorities 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 judgement passed last week, the ITAT opined that Congress was required to furnish its return of income by ‘due date’.With regard to the contributions received by the party, 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 the 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 had concluded.