Delhi High Court rejects Congress plea for stay on Income Tax notice

The Delhi High Court on Wednesday rejected the plea filed by Indian National Congress (INC) against an order of the Income Tax Appellate Tribunal (ITAT) rejecting its plea for stay on the demand notice issued by Income Tax (IT) department for recovery of nearly ₹105 crore in outstanding taxes. .A division bench of Justices Yashwant Varma and Purushaindra Kumar Kaurav said there was no reason to interfere with the ITAT order.As per the statement made in Court, the total amount with interest is now nearly ₹135 crore.However, the Court allowed Congress to move a fresh application for stay before the ITAT bearing in mind the developments which have occurred in the meanwhile including that an amount of ₹65.94 crores having been recovered from the party. "Whether the aforesaid circumstance would merit protective measures being granted in respect of the balance outstanding demand, and if so to what extent, is an issue which must necessarily be considered by the ITAT in the first instance it being the tribunal which is in seisin of the principal appeal. We thus refrain from rendering any conclusive opinion in this respect and leave this aspect open for the consideration of the ITAT," the Court said. It further asked the ITAT to consider the application, if moved, with due expedition. .While hearing the case on March 12, the Court had remarked that there appeared to be no fundamental infirmity in the ITAT order.Noting that the proceedings against the party had started in the year 2021, the bench had said that someone in the Congress party office "went to sleep." The entire matter has been very badly handled, the Bench said."As we read this order (ITAT order), the petitioner has itself to blame. The demand is of 2021...It seems you made no efforts to securitise the demand...Someone in petitioner's office has remained asleep since 2021," it added..The IT department had issued notice to the Congress party for recovery of ₹105 crore in outstanding tax for the assessment year 2018-19. The IT authorities had in July 2021 rejected the declaration of nil income by the Congress and demanded over ₹105 crore in 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.The Congress challenged the 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.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.In a detailed judgement passed on March 8, the ITAT opined that Congress was required to furnish its return of income by ‘due date’.This led to the present plea before the High Court..Senior Advocate Vivek Tankha appeared for Congress and said that the party's accounts have been frozen and if this continues, the party will collapse.He said that the schedule for the 2024 Lok Sabha elections is to be announced in a few days. In this context, he questioned how a national party can contest the polls if it cannot use its money."I am told that seven to eight years of my assessment have also been reopened... It is now for the constitutional courts to protect us," he stated.However, the bench remarked on March 12 that this was a spectre created in 2021 and that merely because someone woke up in February 2024, it would not change anything..On the other hand, advocate Zoheb Hossain appeared for IT department and argued that the impression sought to be created that the IT proceedings have begun just before elections, is wrong."We have shown that these proceedings have been going on since 2021. This is routine recovery. For four years you don't pay up, then every fifth year there is going to be an election," he said.Hossain stated that with interest, the total demand against the Congress party is ₹135 crore, of which ₹65.9 crore has been recovered.He added that no financial hardship is being caused to the party and that its cumulative assets amount to nearly ₹1,400 crore."It can't be an argument that because we have to fight the elections, we won't pay," Hossain stressed..Senior Advocates Vivek K Tankha and Ravi Shankar Jandhyala along with advocates Prasanna S, Vipul Tiwari, Inderdev Singh, Kanishka Singh, Nikhil Bhalla and Tarannum Cheema appeared for the Congress party. IT department was represented through advocates Zoheb Hossain, Vipul Agrawal, Sanjeev Menon, Sakshi Shairwal, Abhipriya, Vivek Gurnani and Rajat Sen. .[Read Judgment]