Tribunal upholds tax demand on Congress for 2017–18 over donation irregularities
In a setback to the Congress party, the Income Tax Appellate Tribunal (ITAT) dismissed its appeal against a tax demand for the year 2017-18. The party had opposed the Income Tax Department’s notice, which asked it to pay tax on income of over Rs.199 crore. Congress had claimed that the amount came from donations and should be exempt from tax. However, the party failed to file its tax returns by the due date.
The IT tribunal upheld the decision of the tax authorities, ruling that the party must pay income tax.
The Congress party filed its income tax return on February 2, 2019, and declared nil income after claiming a Rs.199.15 crore exemption under Section 13A of the Income Tax Act. However, this was filed after the extended due date of December 31, 2018, for the assessment year 2018-19, as prescribed under Section 139.
During scrutiny in September 2019, the Assessing Officer found that the party had accepted Rs.14.49 lakh in cash donations exceeding Rs.2,000 per donor, which violates Section 13A(d), which mandates all such donations be received through banking channels post the Finance Act 2017 amendment.
Though Congress reported total receipts of Rs.199.15 crore against Rs.197.43 crore in expenses, leaving a surplus of Rs.1.71 crore, the assessment order dated July 6, 2021, denied the exemption entirely, rendering the full amount taxable.
The Commissioner of Income Tax (Appeals) upheld this decision on March 28, 2023, leading Congress to approach the Income Tax Appellate Tribunal (ITAT). In 2024, the IT tribunal refused interim relief and, in its latest ruling, dismissed the party’s appeal. The IT tribunal said that the exemption provisions must be interpreted strictly. It ruled that Section 139(4B) requires political parties to file returns within the due date under Section 139(1), unlike charitable trusts under Section 12A, which have broader leeway.
The tribunal also rejected Congress’ argument that late filing under Section 139(4) should be allowed. Furthermore, the tribunal found a clear breach of Section 13A(d), which strictly prohibits cash donations above Rs.2,000. Congress’ alternative request to allow expense deductions from gross receipts was also rejected. Citing a 2016 Delhi High Court ruling in a similar case involving the party, the tribunal noted that violation of Section 13A’s third proviso bars such relief.
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Can there be any relief from any intensional wilful wrong doing ? Cannot recall any instance in bhagavatham or ramayana or mahabharat.
What does it mean? How much is the amount of tax payable on the income of 199 Cr. will it also attract penalty and interest? or is there a way to deploy the delay artists and drag on for another 1o years.