Delhi High Court Reserves Judgment On Congress' Plea Against ITAT Order Refusing Stay On Recovery Of Outstanding Tax

The Delhi High Court on Tuesday reserved judgment on the plea moved by Indian National Congress challenging an order passed by the Income Tax Appellate Tribunal (ITAT) on March 08 refusing to stay a demand notice issued to it for recovery of outstanding tax for the assessment year 2018-19.

A division bench comprising Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav reserved the verdict and said that the order will be out by tomorrow.

Senior Advocate Vivek Tankha appeared for Indian National Congress, whereas Advocate Zoheb Hossain appeared for the income tax authorities.

While reserving the order, the court remarked that though the demand was of 2021, a reading of the impugned order showed that Congress did not take the stand of seeking to securitize the demand or even offered to securitize the same.

The bench added that it was a “badly handled matter” and that somebody from Congress' office “went off to sleep” right from 2021.

Hossain submitted that though Congress was offered to pay 20 percent of the demand way back in 2021, the same was not done since then and thus, in such situations, the entire amount becomes recoverable.

“I can show a large number of cases who don't pay 20 percent, we recover 100 percent,” he said.

Furthermore, Hossain added that Congress has 120 bank accounts and more than Rs. 1400 crores are kept in them. He said that the party did not plead or demonstrated or argued financial hardship before the Tribunal.

However, Tankha said that as per his instructions, Congress has Rs. 300 crores in its bank accounts. 

“Every account they have seized… they are making it difficult for national parties to fight elections,” he said.

He also said that the authorities have reopened the assessment of the last 7 to 8 years and that in such situation, only constitutional courts will protect Congress.

“With all due respect, Mr. Tankha, merely because someone chose to wake up in February won't change the facts,” the court remarked.

As the bench hinted that it will remand the matter back to ITAT, Senior Advocate Vivek Tankha appearing for Congress requested that its appeal be directed to be disposed of expeditiously.

About Impugned Order

The assessment of Congress party 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.

The difference between the returned and assessed income was solely on account of Congress' claim for exemption under Section 13A of the Income Tax Act, which was denied by the Assessing Officer.

The exemption was denied on two grounds, that the return of income filed by the political party on February 02, 2019, contravened the time limit prescribed and that clause (d) of the first Proviso to Section 13A was violated since Congress had received donations of Rs.14,49,000 in cash from various persons, which was in excess of Rs.2,000.

Congress thus prayed before the ITAT that pending disposal of its appeal, the recovery of tax demand arising on account of the assessment order dated July 06, 2021, be stayed.

The ITAT dismissed Congress' plea for stay and observed that once the mandatory requirements contained in Section 13A are violated, there is no discretion with the income tax authorities to give any relaxation in allowing the exemption envisaged in the said provision.

It further said that the authorities did not make any error in denying the income tax exemption claimed by the Congress party and that no prima facie case was made against denial for the said exemption.

“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,” the Tribunal had said.

Title: INDIAN NATIONAL CONGRESS v. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL-19 & ORS.