Delhi HC reserves order on Congress plea seeking stay on IT recovery proceedings

New Delhi [India], March 12 : The Delhi High Court on Tuesday reserved an order on a plea moved by Congress which sought a stay on the Income Tax notice for recovery of more than Rs 105 crore as outstanding tax.
The Congress has challenged the dismissal of its plea by the Income Tax Appellate Tribunal (ITAT) against the imposition of penalties for discrepancies in certain tax returns.
On Friday, the Income Tax Appellate Tribunal (ITAT) dismissed the stay plea against the Income Tax Department proceedings of recovery and freezing of their bank accounts.
The Division Bench of Justice Yashwant Verma and Justice Purushaindra Kumar Kaurav after hearing the submissions at length decided to reserve the order.
During arguments the bench orally observed and asked the petitioner Congress party if somebody had gone out asleep in the petitioner's office since 2021 it seems.
"The offer to deposit 20 per cent was made in 2021, there's a complete disregard to the system. The entire matter has been very badly handled by you (petitioner)," the bench observed.
The bench also stated that there does not appear to be any fundamental infirmity on the ITAT order passed on Friday.
The Income Tax Appellate Tribunal (ITAT) on Friday dismissed the plea moved by the Congress Party which sought a stay against Income Tax Department proceedings of recovery and freezing of their Bank accounts and said the Stay Application is without merit.
ITAT bench of GS Pannu, Vice President and Anubhav Sharma, Judicial Member on Friday passed the order and said, "We do not find that the recovery notice under Section 226(3) of the Act issued by the Assessing Officer on February 13, 2024 is lacking in bona fides, so as to require us to intervene."
At this stage, we may also refer to the reliance placed by the Senior Counsel on various judgments of the Coordinate Benches in order to support the proposition that it was an accepted practice at the level of the Tribunal that the taxpayer is entitled to a stay on the recovery proceedings on payment of 20 per cent of the demand during the pendency of the Appeal before the Tribunal.
"The aforesaid argument, in our view, is too general and does not merit acceptance," the bench said.
Moreover, as we have already discussed in each application for a stay has to be decided on its own facts and circumstances, and there can be no generalized approach. The Stay Application is without merit and, it is dismissed accordingly, said the bench in order.
The Bench in its order further stated that even after the rejection of the Appeal by the CIT (Appeals) on March 28, 2023, no recovery action seems to have been initiated by the Assessing Officer to recover the demand by February 13, 2024.
On the other hand, the assessee has also not demonstrated its keenness to expeditiously settle the issue inasmuch as the Appeal of the assessee pending with the Tribunal had come up for hearing on three occasions, viz., 21st September 2023, 28th November 2023 and 5th February 2024 and, on each of the occasion, the record of proceedings reveal that the appellant- assessee was not prepared and sought adjournment, the bench said.
Senior Advocate Vivek Tankha who appeared for Congress on Friday also requested the bench to keep the order in abeyance for 10 days so that the Indian National Congress (INC) can approach the concerned High Court.
However, the bench declined the same saying that it has no such provision or prayer before it.
Zoheb Hossain, Vipul Agrawal, Sanjeev Menon and Vivek Gurnani, Advocates appeared for the Income Tax Department in the matter before ITAT.
During arguments earlier, Congress's senior lawyer submitted that the hardship created for the assessee, which is a National Political Party, in view of the forthcoming Parliamentary Elections, alleging that the initiation of the recovery proceedings under section 226 (3) of the Act on 13th February 2024 are so timed that the assessee would not be left with enough resources to contest the Parliamentary Elections.
Attributing malice to the action of the Assessing Officer in exercising his power of recovery under Section 226(3) of the Act, the Senior Counsel Vivek Tankha further submitted that the intention is not merely to recover the outstanding demand, but to bring the activities of the assessee to a standstill, as it would not be able to meet out even the basic maintenance and establishment expenditure, noted the bench.
"If a stay is not granted then the party would be under a grave financial crunch ahead of the General Elections. So we need a protection order at this moment of time. Parties and elections will come and go but Revenue is a department of Govt of India, it has to go by law. If there's only one party then how will democracy survive?" asked Advocate Tankha.
Senior Advocate Vivek Tankha had also submitted that the compliance requirements have been met.
"Wrong interpretation has been given by Income Tax. Our bank account has been frozen and on February 16 our accounts were made lien. Last evening, they went and withdrew Rs 65 crore. We are one of the largest parties and we are on the eve of the election. If our accounts are frozen like this, how a democracy will survive," he said.
Advocate Zoheb Hossain appeared for the Income Tax Department had submitted that this is a regular recovery proceedings and no propoganda ahead of polls. IT Department also argued that the conduct of Congress is not correct as they have not paid these dues from several.
The counsel for the Income Tax Department defended the decision to recover the amount and submitted that there has been a breach of rules by Congress and, in such a scenario, the entity must be treated as a normal assessee.
He submitted that on July 6, 2021, the first notice of recovery was given. He said the Congress party filed an appeal for a complete stay on October 28, 2021, but for this, they had to deposit 20 per cent of the dues as per the IT Act. He said they were requested to pay 20 percent of the demand but it was not done.
The Income Tax Department further submitted before the Income Tax Appellate Tribunal (ITAT) that they acted with responsibility and their action was fully in line with the law to obtain demand drafts of Rs 65 crore from the bank accounts of the Congress party.
The Income Tax Department had recovered Rs 65 crore from the accounts of the Indian National Congress out of the total outstanding tax dues of Rs 115 crore.
The Congress has recently approached the Income Tax Appellate Tribunal (ITAT) against the recovery and has filed a complaint and sought a stay against Income Tax Department proceedings of recovery and freezing of their Bank accounts.
In the complaint, Congress said the Income Tax Department has enforced its law by encashing some of the balances lying with the banks without waiting for the outcome of the hearing scheduled before the bench. Congress appealed that the department should not proceed further till the disposal of the stay application.