Manas Dasgupta
NEW DELHI, Apr 1: Amidst allegations of “tax terrorism,” the Income Tax department in the Supreme Court provided great relief to the Congress assuring that it would not take any ‘coercive steps’ against it on tax demands to the tune of about Rs 3,500 crores raised in March in view of Lok Sabha elections.
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. The matter, the court said, will be heard next on July 24.
The Congress had approached the Supreme Court after it received notices from Income Tax department, seeking payment of tax dues amounting to a whopping ₹ 3,567 crore. The Opposition party has accused the ruling BJP of “tax terrorism” and alleged the Income Tax department’s move as an attempt to choke it financially in the run-up to polls. The party has said this was disrupting the level-playing field for the polls and also urged the Election Commission to intervene.
Earlier, tax authorities withdrew a sum of ₹ 135 crore from a party’s accounts for dues from previous years. The Solicitor General told the court, “They were given an option to pay 20 per cent in 2024, ₹ 135 crore (was) recovered. ₹ 1,700 crore demand has been raised later. Therefore, the matter pertains to ₹ 1,700 subsequently raised. This whole matter can be fixed for post elections. We will not take any action till then,” he said.
When the court asked if the Centre was pausing the tax demand, Mr Mehta replied, “No, we are just saying that we will not take any action till the election.” Appearing for the Congress, Mr Singhvi said the Centre has collected ₹ 135 crore by attaching properties. “We are not a profit-making organisation, only a political party.”
The Solicitor General said he has much to say on the merits. The court noted that the issues arising in the appeals were yet to be adjudicated upon and that the matter would be heard on merits going forward.
For now, however, the Congress has reason to feel relieved. The Congress had earlier said the ruling BJP was in serious violation of tax laws, but the Income Tax department was not acting against it.
Congress leader Rahul Gandhi had warned that when the government changes, exemplary action would be taken to ensure no one dares to take such steps again. “When the government changes, action will definitely be taken against those who have disrobed democracy. And such exemplary action will be taken that no one will dare to do all this again. This is my guarantee,” he said in a post on X.
Senior party leader Jairam Ramesh alleged that efforts were being made to financially cripple the Congress, “but we are not going to be cowed down.” Party leader Ajay Maken said the Congress was being selectively targeted. “What we are saying is that there should be a level-playing field. This action was designed to choke the Congress financially and prevent, stop, delay and disable any election-related expenditure by the party on advertisements, travel, salaries, agencies etc. It is indeed appalling that the financial years assessed go back to 1993-94, when the late Sitaram Kesri was the party’s treasurer,” he said.
“These orders are based on manufactured and planted diaries and so-called raids by the BJP’s frontal organisation on third parties. Several of these raided third parties enjoy stay orders from courts based on vitiated search procedures by I-T department,” he had alleged. Maken claimed, adding that the same interim relief was not being granted to the Congress.
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.
