In a significant blow to the Congress party, the Income Tax Appellate Tribunal (ITAT) has dismissed its appeal against a tax demand for the financial year 2017–18. The party had contested the Income Tax Department’s notice, which sought to tax over ₹199 crore in income, asserting that the amount was received as donations and should be exempt under Section 13A of the Income Tax Act.
However, the party had failed to file its income tax return by the stipulated due date.
Tribunal Cites Late Filing, Cash Donation Violation
The ITAT upheld the tax authorities’ assessment, ruling that the exemption cannot be granted due to delayed filing and violation of provisions under the Income Tax Act. The Congress party filed its return on February 2, 2019, declaring nil income after claiming an exemption of ₹199.15 crore under Section 13A. This filing was done after the extended deadline of December 31, 2018, for the assessment year 2018–19, as per Section 139.
A scrutiny initiated in September 2019 revealed that Congress had accepted ₹14.49 lakh in cash donations exceeding ₹2,000 per donor — a direct violation of Section 13A(d), which mandates political donations above ₹2,000 to be made through banking channels following the Finance Act 2017 amendment.
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Despite declaring receipts of ₹199.15 crore and expenses of ₹197.43 crore, the assessment order issued on July 6, 2021, denied the exemption, rendering the entire amount taxable.
The Commissioner of Income Tax (Appeals) upheld the order on March 28, 2023. Congress then approached the ITAT, which had earlier refused interim relief in 2024. In its final verdict, the tribunal dismissed the party’s appeal.
The ITAT clarified that Section 139(4B) requires political parties to file returns within the due date mentioned in Section 139(1), a requirement stricter than that applicable to charitable trusts under Section 12A.
The tribunal also dismissed Congress’s argument seeking leniency under Section 139(4), stating that exemption provisions must be interpreted strictly. It further rejected the party’s alternative plea to allow deductions for expenses from the gross receipts, citing a 2016 Delhi High Court judgment in a similar case involving the party, where the court held that any violation of Section 13A’s third proviso bars such relief.
