Congress' accounts not frozen, only temporary lien to extent of tax dues: Sources

The Income Tax Department has not frozen the bank accounts of the Congress party, as some of its members are claiming; it has only placed a temporary lien on its accounts to the extent of ₹115 crore, which is the tax amount due from the party. This action is in keeping with an ad interim order of the Income Tax Appellate Tribunal (ITAT),  as per a clarification coming in from sources in both the government and the Income Tax (I-T) Department.

CNBC-TV18 learned that the ITAT order of a lien, which followed a hearing of Congress’ challenge to I-T Department’s action, is temporary in nature, and will stay in effect till the next hearing on February 21. Till then, Congress can access and use any amount in excess of ₹115 crore in its various accounts. The I-T Department has also claimed that such a blocking or withdrawing of dues from bank accounts is in keeping with routine procedure and that it will continue to follow the normal course of action when it comes to tax recoveries.

The case pertains to Assessment Year 2018-19, in which the tax department raised a demand of ₹103 crore in tax, and ₹32 crore in interest on this tax, taking the total due to ₹135 crore. This tax was computed after the assessing officer decided that the exemption claimed by the Congress party under Section 13A of the Income Tax Act, 1961, could not be allowed.

Section 13A says any income a political party receives from voluntary contributions or any interest, dividend, or rent from its assets is not included in the party’s total income for taxation. However, there are conditions to avail of these exemptions, one of them being that it must not have received any donation of more than ₹2,000 in the form of cash.

The I-T Department also held that Congress filed its income tax returns late. And so, on the assessment completed on July 6, 2021, the assessing officer fixed Congress’ income at ₹199 crore, and raised a tax demand of ₹105 crore. This was challenged by Congress with the Commissioner Income Tax-Appeals (CIT(A)). However, the I-T Department claims that instead of paying the requisite 20% of the tax demand when appealing it (which would work out to around ₹21 crore), Congress paid only ₹78 lakh. Subsequently, CIT(A) dismissed Congress’ appeal.

Congress then moved the Income Tax Appellate Tribunal (ITAT) for relief in May 2023, and in October 2023, paid an additional ₹1.72 crore. This appeal is still being heard by the ITAT.

While the ITAT is still hearing the case, sources say Congress’ appeal does not seek a stay on the recovery process; nor has the ITAT ordered such a stay. So the IT Department, as a matter of routine procedure, has placed a lien on the ₹115 crores due. This temporary lien has been sanctioned by the ITAT. Government sources added that at no time have operations of Congress’ bank accounts been halted, meaning the party has the financial infrastructure to continue its activities. So sources further argue that Congress’ allegations that this is a move by the government to stifle its activities ahead of the general elections are baseless and false.