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Congress requests no coercive action against party for pending Income Tax dues till elections are over – SG Tushar Mehta accepts after Court agrees for hearing in June

The cash-strapped Congress is facing difficulties as the Income Tax Department has sent multiple notices asking the party for pending payments of over 3,500 crores

On Monday, 1st April, Solicitor General Tushar Mehta, representing the Income Tax Department, informed the Supreme Court of India that the department would not take coercive action against the Congress party until the upcoming Lok Sabha Elections were over.

Furthermore, the SG pointed out that the total tax demand from the opposition party stands at Rs 3,567 crore. The matter has been listed for the next hearing on 24th July, over 1.5 months after the counting date of the General Elections, with counting scheduled for 4th June 2024.

Notably, a fresh notice by the IT department worth Rs 1,745 crore was sent to the Congress party on 30th March. A day before, on 29th March, the IT Department sent another notice of Rs 1,700 crore. The notices sent to the party were for the assessment years 1994-95 and 2014-15 to 2020-21. The total tax demand from Congress is Rs 3,567 crore. However, the department won’t take any coercive action against Congress till elections are over.

Speaking in court, SG Mehta said the impugned judgment was in 2016. Until the matter is heard, the department will not take any recovery steps as the elections are ongoing. He requested the court to set the date for the second week of June.

Senior Advocate AM Singhvi, representing Congress in the court, argued it is a political party, not a profit-making organisation. He questioned the merits of the tax demands from Congress.

Justice Nagarathna, in her order, said, “Issues which arise in these appeals are yet to be adjudicated upon. But having regard… department does not wish to precipitate matter in as much as the no coercive steps shall be taken by department over demand of 3500 crores. Needless to observe, the aforesaid demand of 3500 crores approx. is not strictly relatable to the controversy in these appeals and they touch upon other demands which arise as against the appellant herein.”

Notices by the IT Department to Congress

The cash-strapped Congress is facing difficulties as the Income Tax Department has sent multiple notices asking the party for pending payments of over 3,500 crores. The notices were for the assessment years 1994–1995, and 2017–18 to 2020–21.

The sources revealed that “third-party entries” recorded in diaries, taken from some of the Congress’ leaders by investigation agencies during searches, have also been levied against the party. The main opposition party announced on 29th March that the IT department issued letters demanding payment of approximately Rs 1,823 crore. A tax claim for prior years has already resulted in the tax authorities taking out Rs 135 crore from the party’s coffers.

Additionally, the Congress party disclosed a total corpus of Rs 657 crore, net assets of around Rs 340 crore and cash equivalents of about Rs 388 crore for a total estimated value of Rs 1,430 crore in its most recent income tax return for AY 2023–2024. The move was prompted by the IT Department’s assertion that it found “incriminating material” during searches on two corporate entities in 2019, exposing financial payments of approximately Rs 520 crore to the Congress party.

According to the Income Tax Department, there are inconsistencies in Section 13 (A) of the Income Tax Act that prevent Congress from obtaining an exemption from paying income tax. Due to inaccuracies in IT reports for the assessment year 2018–19, the Income Tax Department has retrieved Rs 135 crore from bank accounts belonging to Congress.

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