Representative image
Credit: Reuters File Photo.
New Delhi: The Congress lost income tax exemption in 2018-19 due to extensive use of cash in the electoral process, sources said, justifying that Rs 135 crore tax recovery from the party was consistent with the provisions of the Income Tax Act.
Based on incriminating material seized by the Income Tax Department during search operations, specifically in April 2019, reflecting extensive use of cash in the electoral process, assessments of the party were reopened for seven years (AY 2014-15 to AY 2020-21), sources said.
Following the assessment, demand was raised in 2021, and communications to pay demand were sent many times, they said, adding that stay applications filed by the assessee were rejected during the proceedings.
Subsequently, even after 33 months of the assessment order and 10 months of the Commissioner Income Tax (Appeal) order, when the assessee had not complied with the demand raised, recovery proceedings under Section 226(3) of the Act were undertaken, sources said.
As a result, recovery proceedings to an extent of around Rs 135 crore of outstanding demand were initiated as per provisions of the Act, as the plea for stay was rejected by the Income Tax Appellate Tribunal (ITAT) and Delhi High Court.
Accordingly, recovery of Rs 135 crore has been made as per provisions of the IT Act, 1961, sources said.
However, the recovery process has not gone down well with the principal opposition party, as Congress has termed the action by the Department as "tax terrorism".
Congress president Mallikarjun Kharge accused the BJP-led Centre on Friday of misusing institutions like the income-tax department, ED and CBI to subvert democracy and belittle the Constitution, and asked why is the I-T department being used as a weapon to harass the principal opposition party.
Congress leader Rahul Gandhi also hit out at the BJP, accusing it of indulging in "tax terrorism".
However, sources said the action by the Tax Department was taken as the Congress did not get a reprieve from the ITAT and Delhi High Court in this matter.
An ample number of opportunities were given to the Congress to reply, especially with respect to various observations of the Delhi High Court, and after considering all the replies filed by the party, the department has completed the assessment of seven years, they noted.
In another matter related to the assessment year 1994-95, sources said the demand of Rs 53 crore raised by the department is pending before the Supreme Court.