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Delhi High Court dismisses Congress party’s petition challenging IT Department’s reassessment proceedings, read details of the case

The IT Department has found credible evidence linking Congress allies to the party's cash donations and transactions in different states including Madhya Pradesh and Karnataka since 2019

The Delhi High Court on 22nd March rejected the Congress party’s appeals against the Income Tax Department’s three-year reassessment proceedings, dealing a major blow to the nation’s main opposition party ahead of the Lok Sabha election. “We dismiss the writ petitions,” declared a bench of Justices Yashwant Varma and Purushaindra Kumar Kaurav while pronouncing the significant judgement.

The political party submitted appeals against the tax reassessment actions that the authorities had started against it in the fiscal years 2014–15, 2015–16 and 2016–17. Congress argued that limitations prevented these proceedings. The high court had already reserved its order on 20th March. The Congress party’s senior counsel, Abhishek Manu Singhvi had contested that the IT department could have gone back to a maximum of six assessment years and that tax reassessment actions were bound by limitation.

According to the IT department, however, the Congress has “escaped” with around Rs 520 crore in income. After the revenue was estimated to be more than Rs 199 crore, the assessing officer submitted a tax demand of more than Rs 100 crore for the assessment year 2018–19.

Previously, the High Court rejected to intervene in the Income Tax Appellate Tribunal’s (ITAT) decision to not stay the IT department’s notice to Congress to collect over Rs 100 crore in overdue taxes. Purushaindra Kumar Kaurav and Justice Yashwant Varma announced that there was no reason to tamper with the 8th March order. However, the Delhi High Court had granted liberty to Congress to move the ITAT again in case of any change of circumstances.

The development transpired the day after the Congress accused the Narendra Modi administration in a press conference of severely damaging the party’s finances in the run-up to the Lok Sabha poll.

What is the tax case

The IT Department has found credible evidence linking Congress allies to the party’s cash donations and transactions in different states including Madhya Pradesh and Karnataka since 2019, according to a report in News18.

As a result, the IT Department initiated reassessment procedures for the assessment years of Congress returns from 2014–15 to 2020–21. The department believes that there were infractions pertaining to the Section 13 (A) tax exemptions claimed in those years as well. If proven, an extensive notice might also be served shortly to Congress.

According to sources, Congress has not been assisting with the case till now and has not responded to inquiries from IT regarding the merits, even though notices and summonses containing damning material have been sent to the party for clarification. Congress might have failed to complete its audited book of accounts, which would be a serious breach of Section 13(A) and subject the total income from 2014 to 2021 to taxation, per the IT Department’s reservations.

Sources highlighted that Congress filed writ petitions against each of the seven years. On 20th March the Delhi High Court heard the pleas for the first three years and junked the motion two days later.

Other two cases

According to sources, Congress lost its exemption from taxes for the assessment year 2018–19 since it submitted its returns 33 days later than expected and acknowledged receiving financial donations totalling Rs 14.49 lakh. The Congress had asked for that year’s income of Rs 199 crore to be excused.

Sources reported that there is no legal provision for a lower penalty once you lose your exemption under Section 13 (1), putting all of your income subject to tax. As a result, the IT Department served the Congress with a notice worth Rs 105 crore in 2021, requiring that it pay Rs 21 crore or 20% of the total to halt the full recovery. However, Congress only deposited Rs 78 lakh and the Commissioner of Income Tax (Appeals) rejected its request. The Delhi High Court also denied the Congress party’s plea on 13th March.

Therefore, on 16th March, the IT Department was able to retrieve Rs 135 crore from Congress bank accounts, which comprised a demand of Rs 102.66 crore and interest of Rs 32.4 crore.

 IT Department served Congress with a demand notice for Rs 53 crore related to the 1994–1995 assessment year. Sources pointed out that the IT Department raised the alarm about this particular financial year’s assessment as early as 1997, citing the denial of the Section 13(A) exemption for a lack of audited accounts. Before the High Court decided in favour of the IT Department in 2016, the case was pending in IT tribunals and the High Court for several years.

According to sources, Congress has filed an appeal with the Supreme Court in this case, and the hearing is scheduled for 1st April. They added that the IT Department has been “lenient” with Congress in the past because the party has been granted a lot of time and certain lawsuits have been dragged out for years. The High Court’s strong verdicts which have criticised Congress for acting leisurely to resolve these issues were also mentioned by the sources.

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