Indian congress accuses BJP of 'tax terrorism' amidst Tk2,396 crore notice

Income Tax authorities (IT) have served the Congress a fresh notice to pay ₹1,823.08 crore(Tk2,396 crore), citing arrears in Fiscal Year (FY) 94 and between FY17 and FY20, the opposition party announced on Friday as it accused the government of "tax terrorism" three weeks before the general elections kick off.

The new notice came weeks after the party paid ₹135 crore for another tax demand last month.

A livid Congress announced nation-wide protests against "continuing tax terrorism of the Modi government on @INCIndia" over the weekend and party treasurer Ajay Maken dubbed the IT department as "BJP's frontal organisation" and said the Congress will approach the Supreme Court on Monday.

The Delhi high court has already rejected the party's petitions for a reassessment of a previous dispute, which erupted last month and pertained to assessment year (AY) 2018-19.

"Efforts are being made to financially cripple the Congress, but we are not going to be cowed down," party general secretary Jairam Ramesh said. "We will not be scared of these notices. We will be more aggressive and fight these polls," he added.

The party also alleged that the BJP should be probed for an alleged default of ₹4,617.58 crore because it allegedly failed to disclose the name and address of various donors in form 24A to avail tax benefits. "We have analysed all the submissions of the BJP to the Election Commission (EC). The party has faltered every year," Maken said.

The BJP dismissed the allegations and said the Congress should follow legal procedures and fulfil its tax obligations instead of levelling allegations against the Income Tax Department and the judiciary.

Former Congress president Rahul Gandhi said that if the government changed, exemplary action would be taken against those who tried to disintegrate democracy. "When the government changes, action will be taken against those who 'disintegrate democracy'! And such action will be taken so that no one will have the courage to do all this again," he posted on X.

The IT notice asked for ₹53.9 crore for FY94, ₹181.99 crore for FY17, ₹178.73 crore for FY18, ₹918.45 crore for FY19 and ₹490.01 crore for FY20.

Legal experts close to the IT department said on the condition of anonymity that key matters pertain to AY2014-15 to AY2020-21 (assessment years are one year after the fiscal year, so the assessment year for FY16-17 will be AY17-18).

"Based on incriminating material seized, during search operations specifically in April 2019, reflecting extensive use of cash in electoral process, assessments of INC were reopened for seven years (AY 2014-15 to AY 2020-21). Notices under section 153C of Income Tax Act were issued in March 2023. The assessment proceedings for these seven years were getting time barred on 31.03.2024 as per law," one of them said, requesting anonymity.

Registered political parties are exempted from paying tax on specified income such as voluntary contributions, house property, income from other sources and capital gains, under section 13A of the Income Tax Act. But this exemption is subject to a set of stipulations, including maintenance of books of account, records of each contribution of more than ₹20,000 and audit reports by a chartered accountant. Additionally, political parties must not receive donation of more than ₹2,000 otherwise than by way of cheque, demand draft or through bank account. Parties must also furnish their verified return of income for the previous year.

The Congress's claim of full exemption was earlier rejected by the IT department on two grounds. One, the party did not submit its return of income within the time limit and two, the Congress received cash donations to the tune of ₹14.49 lakh in excess of ₹2,000. The Congress has rejected the allegation, saying it submitted returns within the stipulated time and the money received was from party legislators and office-bearers, and therefore could not be construed as "donations" under the IT Act.

The notice for ₹1,823 crore is the second such tax dispute that the party finds itself embroiled in. The IT department has already initiated recovery proceedings for ₹135 crores of "outstanding demand" after the income tax appellate tribunal and the Delhi high court dismissed petitions by the Congress to stay the recovery process. The party has alleged that it is unable to fund poll expenses because of the tax action.

The legal experts cited above said that the IT department had followed the principle of natural justice. "As per the law, it is very much in the domain of the department to consider all the evidence available before the initiation of reassessment proceedings as well as the evidences collected during the reassessment proceedings while making any additions subject to following the principle of natural justice. All the evidences available with the department were given to INC. Ample number of opportunities were given to INC to reply especially with respect to various observations of Delhi HC. After considering all the replies filed by the INC, the department has now completed the assessment of seven years," said one of the experts, requesting anonymity,

On Friday, Maken said the party's finances will suffer a huge blow due to the new notice. "The party is not able to spend its own money for the election," he said.

In the press conference, the opposition party also hurled fresh allegations at the BJP, based on what it said were its "internal, AI-based calculations".

It said that in FY18, 92 names were missing in the donors list of the BJP and the total donations taken without names was ₹4.5 lakh. In the same financial year, Maken alleged, the address of 1,297 donors of the BJP were missing and the total donations taken without address were ₹42 crores. "Both the name and address were missing for three donors and the total donations taken without both name and address stood at ₹1.50 lakh," he said.

Form 24A is filed with the Election Commission before the due date for furnishing a return of the political party's income of the concerned financial year under section 139 of the Income-tax Act, 1961 (43 of 1961) and a certificate to this effect should be attached with the Income Tax Return to claim exemption.

"A certain family of the Congress party believes that they should be exempted from rules and that special laws should apply to them, but it is not feasible in modern India," BJP national spokesperson Zafar Islam said in an apparent reference to the Gandhi family.

The Congress maintained that the tax action was an attempt to "paralyse the functioning of the party during the Bharat Jodo Nyay Yatra".

"This action was designed to choke the Congress financially and prevent, stop, delay, and disable any election-related expenditure on ads, travel, salaries, agencies...Is this how a fair election is supposed to be conducted? Is the idea of a level playing field only on paper? Why is the Election Commission a mute spectator to this?" asked Maken.

The tax dispute involving the Congress has drawn international attention in recent weeks. The US state department on Wednesday doubled down on its call for fair legal processes to deal with the Congress's allegations that tax authorities had frozen its bank accounts ahead of general elections, drawing strong censure from the ministry of external affairs.