Congress Loses Tax Battle: ITAT Upholds Demand On Undisclosed Rs 199 Crore

The Congress party has been dealt a major blow in its long-running tax dispute, as the Income Tax Appellate Tribunal (ITAT) rejected its appeal against a tax demand for the financial year 2017–18.

The party had challenged the Income Tax Department’s move to tax income over Rs 199 crore, asserting that the amount was sourced from donations and should qualify for exemption. However, the tribunal held firm, agreeing with the tax authorities that the exemption could not be granted due to procedural lapses and statutory violations, reported India Today.

Tribunal Cites Delayed Filing and Cash Donation Breach

The core of the dispute lies in the party’s delayed income tax filing. Congress submitted its return on February 2, 2019, declaring nil income while seeking exemption on Rs 199.15 crore under Section 13A of the Income Tax Act. However, this submission was made beyond the extended deadline of December 31, 2018, for that assessment year, as outlined under Section 139. The ITAT ruled that such exemptions require timely filing under Section 139(1), and Congress’ delay invalidated its claim.

Further scrutiny of the party’s finances during September 2019 revealed that Congress had collected Rs 14.49 lakh in cash donations from individual donors contributing more than Rs 2,000 each. This contravenes the rules introduced by the Finance Act, 2017, which mandates that political parties must accept such donations exclusively through banking channels under Section 13A(d).

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No Relief on Alternative Pleas Either, Tribunal Stands Firm

Despite reporting receipts of Rs 199.15 crore and expenses of Rs 197.43 crore — a surplus of Rs 1.71 crore — the July 2021 assessment order disallowed the exemption entirely, taxing the full amount. The Commissioner of Income Tax (Appeals) upheld the order in March 2023, and now the ITAT has also dismissed the party’s challenge.

The tribunal turned down Congress’ alternate plea to claim expense deductions, citing a 2016 Delhi High Court judgment involving the party, where similar violations were deemed to nullify exemption benefits. It reiterated that exemption provisions must be interpreted strictly and pointed to a clear breach of conditions under the Income Tax Act.

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