ITAT Upholds IT Department’s Decision, Rejects Congress’s Tax Exemption Claim
The Income Tax Appellate Tribunal (ITAT) declined the Congress party’s request for a stay on the demand notice issued by the Income Tax (IT) department, which sought recovery of over ₹105 Crore in outstanding taxes for the assessment year 2018-19. The Delhi Bench, comprising Vice President GS Pannu and Judicial Member Anubhav Sharma, asserted that the IT authorities had appropriately denied the income tax exemption claimed by Congress and found no strong prima facie case in favor of the party.
The IT authorities had rejected Congress’s declaration of Nil income in July 2021 and demanded the outstanding tax, citing that the return was filed beyond the prescribed time period. Additionally, they pointed out that the party had received donations exceeding ₹2,000 from various individuals, which was deemed a violation of Section 13A of the Income Tax Act, a provision that allows political parties to claim tax exemption under certain conditions.
Congress alleged that the initiation of recovery proceedings in February 2024 was politically motivated, especially considering the upcoming parliamentary elections. However, the IT authorities argued that the proceedings had been ongoing since July 2021 and denied any undue haste in their actions. The ITAT dismissed the notion of undue haste, deeming it a subjective interpretation and chose to evaluate the case on its merits.
Examining the merits, the ITAT scrutinized Congress’s eligibility for tax exemption under Section 13A, emphasizing the prerequisites outlined in the law. It concluded that Congress failed to comply with the conditions, particularly regarding the timely filing of income tax returns and adherence to donation regulations.
Despite Congress’s argument that the donations exceeding ₹2,000 constituted only a small fraction of the total contributions, the ITAT upheld the denial of exemption. It found no lack of bona fides in the IT department’s actions and thus declined to intervene.
Previously, a controversy arose when Congress claimed that its bank accounts were frozen by the IT Department. However, the Department of Revenue clarified to the ITAT that it had not directed the banks to freeze the accounts entirely but had imposed a lien on the amount to cover the outstanding tax demand.
Representing the Indian National Congress were Senior Advocate Vivek Krishna Tankha along with Advocates Vipul Tiwari and Inder Dev Singh, while the IT authorities were represented by Senior Standing Counsel Zoheb Hossain and Vipul Aggarwal, along with Junior Standing Counsel Sanjeev Menon and advocate Vivek Gurnani.
If you wish to have your News, Deals, Columns, or Press Releases showcased on The Courtroom, we kindly invite you to complete the form available through the provided link.
