In a massive setback to the Congress party ahead of the Lok Sabha elections, the Delhi High Court on Friday dismissed its pleas challenging the reassessment proceedings initiated against it by the Income Tax Department, saying the tax authority has collated "substantial and concrete" evidence warranting further scrutiny and examination.
A bench of Justices Yashwant Varma and Purushaindra Kumar Kaurav said the party had challenged the assessment proceedings at a belated stage as it is to be completed by March 31, 2024. The party filed the petitions only on March 19, it said.
The high court said while the notice was issued to the party by the I-T Department on March 7, 2023, the satisfaction note by the assessing officer (AO) appeared to have been provided to the petitioner on June 28 and 30, 2023.
The court said the statutory time-frames mandate assessment to be completed within 12 months from the time when the books of accounts or material are handed over to the AO of the non-searched person.
“This would mean that in the present case and taking the date of handing over or recordal of satisfaction as constituting the date from which that period is liable to be reckoned, the assessment is liable to be completed by March 31, 2024,” the bench said.
It said, “The writ petitioner has thus chosen to approach this court only a few days before the time for completion of assessment would expire and at the proverbial fag end of the proceedings. We consequently find no justification to interdict the assessment proceedings at this belated stage by invoking our jurisdiction under Article 226 of the Constitution.”
The court, however, left open the question as to whether the delay in commencement of proceedings would be fatal to the assessment.
It said on a prima facie examination, it is evident that the authorities appear to have collated substantial and concrete evidence warranting further scrutiny and examination under the I-T Act.
The Congress has challenged initiation of proceedings under Section 153C (assessment of income of any other person) of the Income Tax Act for assessment pertaining to assessment years 2014-15 to 2016-17.
It has contended that Section 153C action was based on searches which were conducted on four individuals in April, 2019. It said that on the basis of the material which was gathered in those searches, the AO also drew corresponding satisfaction notes for initiation of proceedings against the Congress party.
The petitioner's counsel submitted that the assessment which was proposed to be undertaken for Assessment Years (AY) 2014-15, 2015-16 and 2016-17 would be barred by the period of limitation and the I-T department could have gone back to a maximum of six assessment years.
The counsel contended that assessment under Section 153C of the Act could have at best covered the period of AYs 2017-18 to 2020-21 and the three additional AYs 2014-15, 2015-16 and 2016-17 would be barred by limitation.
The I-T department, however, asserted there was no violation of any statutory provision by the tax authority and that as per the material recovered, the "escaped" income of the party is more than Rs 520 crore.
The high court, in its judgment, said the material which is taken note of in the satisfaction note referred to unaccounted transactions with respect to the Lok Sabha Elections 2019, Madhya Pradesh assembly elections 2018 and MP assembly polls 2013.
“The search documents recovered from the MEIL Group appear to indicate unaccounted transfers to the political party during AYs 2017-18 to 2020-21. The material which forms part of the satisfaction note also captures details of disbursements made to candidates vying in upcoming elections together with signed receipts. There is a detailed reference to payments allegedly made to MPs/MLAs and candidates," the court said.
It added that the note also carries material suggesting payments and contributions made by government departments and corporations, liquor manufacturers, industry entities and individuals to the petitioner.
It said the Congress has "woefully failed" to establish that the material which forms the bedrock for recordal of satisfaction is not founded on any data, material evidence or documentation pertaining to three assessment years from 2014-15 to 2016-17.
“We also take into consideration the indubitable fact that the cumulative figure attributed to income which has allegedly escaped assessment would stand at approximately Rs 520 crores, the bench said.
Recently, the high court had refused to interfere with the order of the Income Tax Appellate Tribunal declining to stay a notice issued by the Income Tax department to the Congress for recovery of outstanding tax of more than Rs 100 crore.
The assessing officer had raised a tax demand of more than Rs 100 crore for the assessment year 2018-19 when the income was assessed to be more than Rs 199 crore.
