Congress President Mallikarjun Kharge stated, "Our bank accounts have been seized so that we are not able to contest the elections on an equal basis," on March 21, 2024, at a press conference in Delhi. A risky maneuver has been employed to prevent a political party from running for office. The BJP government's election expenditures are not disclosed. The BJP expects taxes from us but never pays any.

In actuality, the Income Tax Department has handed Congress tax demand notices totaling Rs 3,567 crore in multiple phases up until March 30, 2024. The Supreme Court considered the Congress's appeal contesting this on April 1.

Until the Lok Sabha elections are over, the Income Tax Department has stated in court that it will not pursue any punitive measures to collect taxes from the Congress. While the Congress is greatly relieved in the short term, it may have to deal with significant demands for income tax once more once the Lok Sabha elections are over.

In Bhaskar Explainer, we will discover what error Congress made to result in notices totaling Rs 3,567 crore when political parties were granted income tax exemptions.
Which income tax regulations exempt political parties?
Registered political parties are not required to pay income tax on their earnings under Section 13A of the Income Tax Act, 1961. Subject to specific restrictions, Section 13A states that any political party's revenue from real estate, other sources, capital gains, and voluntary contributions from individuals shall not be included in the party's total income for the prior year. Must be finished.

Why did Congress receive a Rs 3,569 crore income tax notice?
Congress is accused of breaching the income tax exemption laws in three primary situations.

First example: In 2018–19, Congress filed its income tax return one month late.

Congress filed the income tax return for 2018–19 on February 2, 2019, more than a month after it was due on December 31, 2018.
Out of the Rs 142.83 crore in donations it received this year, the Congress withheld information about gifts totaling Rs 14.49 lakh. This money had been given to him in cash.
The Income Tax Department sent letters to Congress in September 2019 and again in January and March 2020 for failure to comply with the exemption requirements.
These notifications requested income tax in the amount of Rs 94.44 crore on Congress's total after-assessment income of Rs 199.15 crore for the fiscal year 2018–19.
In August 2021, Congress filed a challenge to this assessment order. An application to halt the Income Tax Department's recovery of Rs 94.44 crore was submitted in October 2021. An assessment officer resolved the dispute in August 2021 and ordered the Congress to pay 20% of its outstanding tax bill. This command said that Congress would be regarded as a defaulter if it failed to comply.
Congress contributed just Rs 78 lakh, as opposed to this 20% amount. Following this, in January 2023, Income Tax sent a letter to Congress. Congress was once again called to pay its debts in this case. Congress did not receive any relief when it appealed this instruction before the Income Tax Commissioner (Appeals) and the Income Tax Appellate Tribunal.
Additionally, Congress filed an appeal with the High Court against the income tax demand. The High Court denied the Congress's petition on March 13, 2024. In addition, he declared that "people in the Congress office have been sleeping since the year 2021" and attacked Congress for not managing this issue appropriately.
The Income Tax Department retrieved Rs 135 crore from Congressmen's bank accounts on March 16, 2024. Of this, Rs 102.66 crore in taxes and Rs 32.4 crore in interest were demanded.
Second case: A reassessment of Congress's earnings from 2014 to 21 revealed irregularities.

The Congress received letters from Income Tax for seven assessment years, 2014–21, before the Lok Sabha elections. These notifications pertain to the party's use of hundreds of crores of rupees in cash, as per media sources.
Evidence of this was discovered by the Income Tax Department in April 2019 while conducting raids on individuals connected to former Madhya Pradesh Chief Minister and Congress leader Kamal Nath.
The Income Tax Department claims to have material linked to monetary donations and transactions that Congress has confiscated. It asserts that Congress has broken the income tax exemption rules even in recent years.
For the past seven years, the Congress has been contesting the Income Tax Department's reassessment through cases filed with the Delhi High Court. On March 20, 2024, the Delhi High Court considered the petitions for a period of three years.
Third instance: Thirty-year-old case: demand notice for Rs 53 crore to be sent to Congress

The Congress alleged that the Income Tax Department had sent it a demand notice for Rs 53 crore over the 1994–1995 assessment, thirty years after the assessment was made. Congress referred to it as the Center's retaliatory move.
Congress had already received a warning from the IT Department about the 1994–1995 evaluation year. This case was brought before the Delhi High Court and the IGT authorities numerous times, but no one ever ruled in the Congress party's favor.
Congress filed an appeal with the Supreme Court in this case, and the court heard the case on April 1, 2024.
High Court hearings: Every petition to Congress was denied.

The Congress' petitions contesting the Income Tax Department's reassessment procedures for the three fiscal years 2014–15, 2015–16, and 2016–17 were denied by the Delhi High Court on March 22. The court had also inquired as to whether the evaluation would be impacted by the postponement of the proceedings.
Four further pleas from the Congress were denied by the Delhi High Court on March 28. In these, the Income Tax Department challenged the decision to reopen the tax assessment proceedings for the four fiscal years 2017–18 to 2020–21.
Supreme Court case: Congress is granted relief until the Lok Sabha elections

A panel consisting of Justices BV Nagarathna and Augustine George Masih was deliberating over Congress's appeal contesting the Income Tax Department's tax demands on April 1, 2024.
Senior attorney Abhishek Manu Singhvi, who is representing the Congress at the Supreme Court, stated that the primary civil appeal filed there has to do with the notice sent to the Congress in 2007 concerning the 1994–1995 assessment year.
According to Singhvi, the Income Tax Department has already amassed Rs 135 crore through property attachments. Congress is merely a political party; it is not a business. We argue that Congress cannot be taxed on its whole income.
Following this, the Supreme Court was given an assurance by the Income Tax Department that it would not use "coercive steps" to obtain Rs 3,569 from Congress prior to the conclusion of the 2024 Lok Sabha elections.
"Please record my statement that we will not take any punitive action until the next hearing of the case," said Solicitor General Tushar Mehta, who is representing the Income Tax Department in the matter, to the bench. Until the elections are concluded, we won't take any severe measures.
The Income Tax Department's promise has been noted by the court, which has set July 24, 2024, as the next date of the case's hearing.
Singhvi added, "I am rarely speechless," characterizing the current income tax posture as benign. My knowledgeable friend's intervention has rendered me mute. Please take a closer look at this in July.
The Supreme Court's relief to Congress is important, but what comes next?
Senior Supreme Court attorney Ashish Kumar Pandey claims that although the court can join a criminal case in addition to the victim, the Congress income tax matter falls outside the purview of civil cases. In order to preserve the elections, one side in this case has granted the plaintiff (Congress) a temporary stay of action. In civil cases, this is permissible. The next hearing's court proceedings won't be affected in any way by this.

According to Ashish, the Supreme Court explicitly said in its ruling that the Congress has not received relief from the Rs 3,569 crore demand notice despite the compromise made. The Income Tax Department's right and grounds to issue a notice against the Congress remain unaffected by the compromise made, the Court has noted.

Income tax notices have also been sent to CPI and CPI (M).
A news article from The Wire on March 29, 2024, states that income tax notices have also been sent to CPI and CPI (M).

CPI was requested to pay the outstanding tax of Rs. 11 crore in the notification that was sent to it. The party has utilized an "old PAN card," according to this notice.

A tax demand notice for Rs 15.59 crore for the assessment year 2016–17 has been sent to CPI (M). This notification is being sent because the party's income tax return for that year did not include information regarding a bank account.

Two regional political organizations with a presence in Tamil Nadu and Andhra Pradesh deposited money in cooperative banks, and certain inconsistencies were discovered in them, according to an Income Tax official cited by the Economic Times on April 2, 2024. According to the official, a party deposited money in banks using the accounts of two of its leaders. Upon being questioned by IT, those leaders were unable to provide an explanation.

Explainer by Bhaskar: The Income Tax Department is requesting Rs 3,567 crore from Congress. Congress created a dilemma when it exempted parties from income tax.