The Congress Party stands to face substantial financial repercussions if violations under Section 13(1) of Income Tax Act are proved.
The Congress party finds itself embroiled in a series of tax challenges, with the Income Tax Department delving into its financial records from 2014-15 to 2020-21. These investigations stem from the discovery of potential irregularities related to cash donations and transfers unearthed during searches conducted since 2019 across various states.
In a significant turn of events, the party stands to face substantial financial repercussions if violations under Section 13(1) are identified in the assessed years. The government has not frozen the party’s bank accounts, but it has successfully recovered what it deems legally owed, totalling Rs 135 crore.
Sources have highlighted three distinct tax matters looming over the party, with all political parties held to the same standards for tax exemptions. However, to claim these exemptions, a party must adhere to the provisions outlined in Section 13(1) of the law, which the Congress is accused of flouting.
First Case: Assessment Year 2018-19
The Congress lost its tax exemption for the 2018-19 assessment year due to a 33-day filing delay and acceptance of cash donations amounting to Rs 14.49 lakh. This loss of exemption meant that the entire income became taxable, resulting in a hefty notice of Rs 105 crore from the Income Tax Department in 2021. To halt complete recovery, the party was asked to pay 20% of this amount (Rs 21 crore). However, the Congress only paid Rs 78 lakh, leading to further legal battles. Recently, the Delhi High Court dismissed the party’s appeal, culminating in the recovery of Rs 135 crore from Congress bank accounts.
Second Case: Re-Opening of Assessment Years 2014 to 2021
The Congress faces a potentially larger concern with the re-opening of assessments for the years spanning 2014-15 to 2020-21. The Income Tax Department reportedly uncovered incriminating material during searches on Congress associates, leading to suspicions of violations regarding tax exemptions under Section 13(A). The Congress’s lack of cooperation and failure to respond to queries have intensified the situation. The party’s reluctance to furnish audited accounts may expose its income from 2014 to 2021 to taxation.
Third Case: Assessment Year 1994-95 Matter
A significant historical matter for the Congress involves a demand notice of Rs 53 crore for the assessment year 1994-1995, recently termed as “vendetta politics” by the party’s leadership. However, sources clarify that this issue arose in 1997 due to the denial of Section 13(A) exemption owing to unaudited accounts. The case has lingered in I-T tribunals and the High Court until a 2016 ruling in favour of the I-T Department. The Congress has appealed to the Supreme Court, with the next hearing scheduled for April 1.
Conclusion
The Congress party’s tax challenges are multi-faceted and evolving, with legal battles unfolding across various fronts. As these cases progress, the party’s financial standing and adherence to tax laws remain under scrutiny. The Income Tax Department’s actions highlight the importance of compliance within the political landscape, emphasizing the need for transparency and accountability in financial dealings.
To Access the CBDT Notification 33/2024 CLICK HERE
To Access the CBDT Notification 34/2024 CLICK HERE
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