No coercive action against Congress over tax demand notices in view of Lok Sabha polls: I-T Dept to Supreme Court

Amidst allegations of ‘tax terrorism’, the Income Tax department in the Supreme Court on April 1 stated its resolve to not take any ‘coercive steps’ against the Indian National Congress on tax demands to the tune of approximately ₹3,500 crore raised in March in view of the General Elections.

Congress gets fresh I-T notice of over ₹1,745 crore, total tax demand rises to ₹3,567 crore

At the very outset of the hearing before a Bench headed by Justice B.V. Nagarathna, Solicitor General Tushar Mehta stated that “since election is going on, we do not want any problem to arise for any political party… We will not take any coercive steps till the case is heard again on July 24, 2024”.

“He [Mehta] has rendered me speechless…” senior advocate A.M. Singhvi, for the Congress, reacted to the unexpected turn of events.

I-T department freezes Congress bank accounts over 2018-19 returns; appellate tribunal provides partial relief

Trouble had been mounting for the Congress with fresh notices from the Income Tax department raising a tax demand of ₹1,745 crore for the assessment years 2014-15 to 2016-17. With the latest notice, the Income Tax department had raised a total demand of ₹3,567 crore from the Congress. The fresh tax notices related to 2014-15 (₹663 crore), 2015-16 (around ₹664 crore) and 2016-17 (around ₹417 crore). The authorities had ended the tax exemption available to political parties and had taxed the party for gross receipt based on a Delhi High Court order of March 2016.

The Congress has challenged the High Court order that gross receipt was taxable. “Gross receipt is never taxable. Only total income is taxable. We are a political party, not a profit-making organisation,” Mr. Singhvi argued. He raised the issue that Section 13A of the Income Tax Act provided tax exemption to political parties.

Mr. Mehta said the total of over ₹3,500 crore was a “block assessment” of the past seven years. This was excluding the ₹135 crore recovered from the party through attachment.

He said the department had willingly made the “concession” to avoid coercive measures in view of the prevailing circumstances of the elections. He made it a point to state that the leeway had been allowed to the Congress despite the fact that the tax demands of March 2024 for over ₹3,500 crore were not strictly relatable to the appeals pending in the Supreme Court.

Posting the case for hearing on merits, the top court recorded in its order that “the issues which arise in these appeals are yet to be adjudicated, but statement has been made by the Solicitor General that the Income Tax department does not wish to precipitate the matter in as much as no coercive steps shall be taken with regard to the demand of ₹3,500 crore approximately”.

The court further recorded the statement of the department that the Congress need not have any “apprehensions regarding any coercive steps”.

The Congress had raised the issue that the slew of tax notices issued on the eve of the Lok Sabha polls would tilt the level playing field in favour of the ruling BJP.