Filing Return By Due Date U/s 139 Is Mandatory For Political Party To Claim Exemption U/s 13A: Delhi ITAT Refuses To Stay Recovery Against Congress Party

At the same time, on the merits of the matter, the ITAT ruled that compliance with the conditions prescribed in Section 13A regarding furnishing of return by due date as per Section 139 is mandatory for a Political Party in order to be eligible for the claim of exemption u/s 13A of the Income tax Act.

The Division Bench comprising G.S. Pannu (Vice-President) and Anubhav Sharma (Judicial Member) observed that “it is incongruent for a Political Party to canvass that inspite of accepting Donations in cash exceeding Rupees two thousand each, clause (d) is not violated merely because it has maintained the details as per clause (b) of the first Proviso. Each of the conditions laid down in clauses (a), (b), (c) and (d) of the first Proviso are to be mandatorily complied with in order to claim exemption under Section 13A of the Act”. (Para 41)

The brief facts of the case:

The Applicant is a Political Party registered under Section 29A of the Representation of the People Act, 1951, and its assessment was completed at an income of Rs.1,99,15,26,560/- against Nil income declared in its return, thereby resulting in demand of Rs.105,17,29,635/- which is inclusive of interest u/s 234A, 234B, 234C & 234F. The difference between the returned and assessed income was solely on account of assessee's claim for exemption u/s 13A, which was denied by the AO. This exemption was denied on two grounds, namely:

i) that the return of income filed by the assessee on Feb 02, 2019 u/s 139(4) contravenes the time limit prescribed in the third Proviso to Section 13A; and

ii) that clause (d) of the first Proviso to Section 13A was violated since the assessee has received donations of Rs.14,49,000/- in cash from various persons, which was in excess of Rs.2,000/-.

However, the Applicant is before the ITAT seeking plea that pending disposal of its appeal, the recovery of tax demand arising on account of the assessment order dated July 06, 2021 be stayed.

Findings of ITAT:

Referring to the decisions of Apex Court in the case of Income-tax Officer, Cannanore Vs. M.K. Mohammed Kunhi – [1969] 71 ITR 815 (SC), as well as Assistant Collector of Central Excise Vs. Dunlop India Ltd. And Ors. – 1985 AIR 330, the Division Bench discerned that while exercising the power of stay, it is imperative for the Tribunal to not only consider factors, such as, existence of a prima facie case, balance of convenience and irreparable loss/hardship but also to be circumspect; and, that the stay on the recovery proceedings should not be granted as a matter of course or in a routine manner.

For the purpose of the present controversy, the Bench explained that the words “……………after considering the merits of the application ………..” in the first Proviso to Section 254(2A), would mean that only in cases where the merits of the application have been made out, the Tribunal would be justified in exercising its power of grant of stay on the recovery proceedings.

Going on to the merits of the matter, the Bench emphasized that the pre-requisites for a political party to exclude its voluntary contributions received and other incomes from the total income is subject to the fulfilment of the conditions prescribed u/s 13A.

The Bench thereafter went on to observe that the due date for the purpose of Section 139 is defined in terms of Explanation 2 below Section 139(1) of the Act and that such 'due date' is not controlled by the provisions of sub-section (4) of Section 139, which merely permits filing of belated returns.

The Bench took note of the amendments made in Section 13A by the Finance Act, 2017, and a clarification issued by the CBDT dated 23rd April, 2019 clarifying that the time allowed for filing of return of income as per the newly inserted clause (ba) for the trusts was the time allowed to file belated returns under Section 139(4) of the Act.

“Ostensibly, the reference to the 'due date' in third Proviso to Section 13A has implications quite distinct than the provisions of clause (ba) of Section 12A(i) of the Act. The “due date” for furnishing a return of income is prescribed in Section 139(1) read with Explanation (2) thereof, whereas the “time allowed” for furnishing a return of income is prescribed in Section 139(4) of the Act, which permits filing of the belated returns”, added the Bench.

Hence, the Bench concluded that once the mandatory requirements contained in Section 13A is violated, there is no discretion with the income tax authorities to give any relaxation in allowing the exemption envisaged in the said provision.

As far as claim of hardship is concerned, the Bench stated that chronology of events starting from the passing of the assessment order on July 06, 2021 and culminating with the issuance of notice u/s 226(3) on Feb 13, 2024, does not justify an inference that the recovery proceedings have been done in an undue haste.

The ITAT therefore dismissed the stay application and refused to interfere in the recovery notice issued u/s 226(3) by the Assessing Officer on Feb 13, 2024.

Counsel for Appellant/ Taxpayer: Advocates Vivek Krishna Tankha, Vipul Tiwari & Inderdev Singh

Counsel for Respondent/ Department: Advocates Zoheb Hossain, Vipul Agarwal, Sanjeev Menon & Vivek Gurnani

Case Title: Indian National Congress Verses Deputy Commissioner of Income Tax

Case Number: Stay Application No.61/Del/2024

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