TMI Blog2024 (3) TMI 821X X X X Extracts X X X X X X X X Extracts X X X X ..... isites for the assessee-Political Party to exclude its voluntary contributions received and other incomes from the total income is subject to the fulfillment of the conditions prescribed therein. The scope and nature of the conditions prescribed in Section 13A of the Act has been a subject-matter of consideration by the Hon'ble Delhi High Court in assessee s own case [ 2016 (3) TMI 879 - DELHI HIGH COURT] relevant discussion in the judgment of the Hon ble High Court compliance with the conditions prescribed in Section 13A of the Act is mandatory for a Political Party in order to be eligible for the claim of exemption under Section 13A of the Act.Assessee s case for exemption u/s 13A has to be examined in the aforesaid light. The first case by the Assessing Officer is qua the third Proviso to Section 13A - The compliance with the third Proviso can be understood as being two-fold. First, that a Political Party is required to furnish its return of income in accordance with the provisions of sub-section (4B) of Section 139; and, second that such return is to be furnished on or before the due date under that Section . So far as the first essential is concerned, the same has been com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of sub-section (4) of Section 139, which merely permits filing of belated returns. As per the CBDT, the trusts who have filed return under Section 139(4) of the Act need not be refused the exemption for the reason that the return of income filed was not within the due date of filing of the return. It has been canvassed by the learned Senior Counsel that the two provisions being pari materia, similar reasoning should govern the understanding of the condition prescribed in the third Proviso to Section 13A of the Act with regard to the due date of furnishing of the return. In our view, the plea of the assessee to seek treatment on par with Trusts, is misplaced having regard to the pronouncement of Hon'ble Delhi High Court in assessee s own case. It is incongruent for a Political Party to canvass that inspite of accepting Donations in cash exceeding Rupees two thousand each, clause (d) is not violated merely because it has maintained the details as per clause (b) of the first Proviso. Each of the conditions laid down in clauses (a), (b), (c) and (d) of the first Proviso are to be mandatorily complied with in order to claim exemption under Section 13A of the Act, as per the rati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enial of exemption under Section 13A of the Act, the same is liable to be treated as income from other sources . Thereafter, the question of allowability of expenditure incurred by a Political Party for attaining its aims and objects was declined by the Hon'ble Delhi High Court. Recovery proceedings - The chronology of events, which have been canvassed before us starting from the passing of the assessment order on 6th July, 2021 and ulminating with the issuance of notice under section 226(3) of the Act on 13th February, 2024, in our view, does not justify an inference that the recovery proceedings have been done in an undue haste. We do not find that the recovery notice under Section 226(3) of the Act issued by the Assessing Officer on 13th February, 2024 is lacking in bona fides, so as to require us to intervene. It was an accepted practice at the level of the Tribunal that taxpayer is entitled to a stay on the recovery proceedings on payment of 20% 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. Moreover, as we have already discussed in the earlier paragraphs, each Applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the first Proviso to Section 13A of the Act has been violated since the assessee has received donations of Rs. 14,49,000/- in cash from various persons, each donation being in excess of Rs. 2,000/-. 4. The learned Senior Counsel for the Applicant opened his arguments by stressing upon 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 Act, the learned Senior Counsel 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. 5. This was countered by learned Standing Counsel for the Revenue by asserting that the assessee was unnecessarily attributing motives to the action of the Assessing Officer, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he demand; however, assessee failed to pay and took no steps to challenge the rejection of its stay application as per law. It was thus submitted that the allegations of malice made against the action of the Revenue for initiating recovery proceedings were unfounded and baseless. 7. Next, in order to establish a prima facie case with regard to the issue in dispute, the learned Senior Counsel referred to various provisions of the Act regulating the filing of returns by the Political Parties, and submitted that the income-tax authorities below have failed to appreciate the scheme of Section 13A read with sub-section (4B) of Section 139 of the Act in its correct perspective. The learned Senior Counsel took us through the Memorandum explaining the provisions of Finance Bill, 2017, and pointed out that before the third Proviso was inserted below Section 13A of the Act with effect from 1st April, 2018, the filing of Return of income by a Political Party was not a condition precedent for availing the exemption under the said Section, and the purpose of the said Proviso was to mandate the Political Parties to henceforth file their returns of income for availing the exemption under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that effect has been made under the Act, for instance, Sections 10A(1A), 10B and 80AC of the Act. 9. This has been countered by the learned Senior Standing Counsel for the Revenue by heavily relying on the judgment of the Hon ble High Court of Delhi in the case of assessee itself reported as Commissioner of Income-tax Vs. Indian National Congress (I)/All India Congress Committee (and vice versa) - [2016] 383 ITR 99, to contend that the provisions of Section 13A and sub-section (4B) of Section 139 of the Act as amended by the Finance Act, 2017 have to be applied in letter and spirit. He also referred to the judgement of Hon ble Supreme Court of India in Common Cause Vs. Union of India and Ors. - [1996] 2 SCC 752 to contend that a statutory obligation is cast on the Political parties to file their returns of income, and it is only as a fall out of the aforesaid Supreme Court judgment, that necessary amendments were brought in the Act. Section 13A of the Act was further amended by introduction of third Proviso by the Finance Act, 2017 with effect from 1st April, 2018, which was intended to fill the lacuna left out. He emphasized that the third Proviso specifically mandates that the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded that assessee itself has described the impugned sums received as Donations and that no distinction between a Contribution and/or a Donation has been maintained by the assessee in its account books. He also referred to a report dated 28th September, 2018, filed by the Treasurer of the assessee to the Election Commission of India under Section 29C(1) of The Representation of the People Act, 1951, which has also been relied by the Assessing Officer, to point out that the subject of the report itself makes it evident that the report is being filed in respect of Contributions/Donations received in excess of Rs. 20,000/-. Thus, according to learned Senior Standing Counsel, it is clear that the assessee has received cash donations also in excess of Rs. 2,000/- each as a part of Contributions and thus, the violation of clause (d) of the first Proviso stood established. He emphasized that so far as clause (d) of the first Proviso is concerned, there is an express bar on receipt of Donations in excess of Rs. 2,000/- in cash. 13. Countering the distinction sought to be made by the learned Senior Counsel between clauses (b) and (d) of the first Proviso, the learned Senior Standing Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute of the assessee with the Revenue, which is the subject-matter of the appeal pending with the Tribunal vide ITA No.1609/Del/2023. The said appeal is listed for hearing before the regular Bench on 23rd April, 2024. In the instant proceedings, the limited issue relates to the plea of the Applicant that pending disposal of its appeal, the recovery of tax demand arising on account of the assessment order dated 6th July, 2021 (supra) be stayed. 17. So far as the power of the Tribunal to stay the recovery proceedings is concerned, the same has been judicially well-recognized, being an inherent power, and, it has also been impliedly imparted statutory acceptance by way of insertion of first and second Provisos below Section 254(2) of the Act. The Hon'ble Supreme Court in the case of Income-tax Officer, Cannanore Vs. M.K. Mohammed Kunhi [1969] 71 ITR 815 (SC) expressly opined that the Tribunal has power to grant stay, considering it to be a power which is incidental or ancillary to its appellate jurisdiction. In this context, we may refer to the following discussion by the Hon'ble Supreme Court : It could well be said that when section 254 confers appellate jurisdiction, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ider factors, such as, existence of a prima facie case, balance of convenience and irreparable loss/hardship but also to be circumspect; and, that the stay on the recovery proceedings should not be granted as a matter of course or in a routine manner. Thus, each Application would have to be decided on its own merits, having regard to the facts and circumstances of the case. 21. We may also refer to the first Proviso below Section 254(2A) of the Act, which reads as under :- Provided that the Appellate Tribunal may, after considering the merits of the application made by the assessee, pass an order of stay in any proceedings relating to an appeal filed under sub-section (1) of section 253, for a period not exceeding one hundred and eighty days from the date of such order and the Appellate Tribunal shall dispose of the appeal within the said period of stay specified in that order: 22. Shorn of other details, for the purpose of the present controversy, it would suffice to note the words after considering the merits of the application .. appearing above, reinforces our earlier premise that it is only in cases where the merits of the application have been made out, that the Tribunal woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f fails to submit a report under sub-section (3) of section 29C of the Representation of the People Act, 1951 (43 of 1951) for a financial year, no exemption under this section shall be available for that political party for such financial year: Provided also that such political party furnishes a return of income for the previous year in accordance with the provisions of sub-section (4B) of section 139 on or before the due date under that section. Explanation. For the purposes of this section, political party means a political party registered under section 29A of the Representation of the People Act, 1951 (43 of 1951). Relevant portion of Section 139(1) 139. (1) Every person, (a) being a company or a firm; or (b) being a person other than a company or a firm, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e complied with:- (i) that such Political Party must keep and maintain such books of account and other documents as would enable the Assessing Officer to properly deduce its income therefrom; (ii) that in respect of each such voluntary contribution other than by way of electrical bond in excess of Rs. 20,000/-, such Political Party keeps and maintains a record of such contribution and the name and address of the person who has made such contribution; (iii) that the accounts of such Political Party are audited by the Accountant as defined in Explanation below Section 288(2) of the Act; (iv) that it ought not to accept Donations exceeding Rs. 2,000/- otherwise than by an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank or through electoral bond; (v) that the Treasurer of such Political Party or any other person authorized in this behalf shall submit the report under Section 29C(3) of The Representation of the People Act, 1951; and, (vi) that such Political Party furnishes a Return of income for the relevant year in accordance with the provisions of Section 139(4B) of the Act on or before the due date under that Section. 26. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht. The first case by the Assessing Officer is qua the third Proviso to Section 13A of the Act. The compliance with the third Proviso can be understood as being two-fold. First, that a Political Party is required to furnish its return of income in accordance with the provisions of sub-section (4B) of Section 139; and, second that such return is to be furnished on or before the due date under that Section . So far as the first essential is concerned, the same has been complied with inasmuch as there is no dispute that assessee has filed its return of income; in order to examine the second essential of the Proviso, one has to decipher the meaning of due date for furnishing of return as envisaged in the third Proviso to Section 13A of the Act. For this purpose, we may go to sub-section (1) of Section 139, which requires an assessee to furnish its return of income on or before the due date . Explanation 2 thereof enumerates the due date applicable to the different category of assessees, and, insofar as the due date applicable in the instant case is concerned, there is no dispute between the parties that the same is 31st December, 2018 (since extended from 30th September, 2018). Ostensi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33. In our view, the said argument is quite misplaced as it would negate the purpose for which the third Proviso has been inserted by the Finance Act, 2017. Moreover, the third Proviso contains the expression the due date under section 139 and a plain reading of the provisions shows that the due date for the purpose of Section 139 is defined in terms of Explanation 2 below Section 139(1) of the Act and that such due date is not controlled by the provisions of sub-section (4) of Section 139, which merely permits filing of belated returns. 34. The above premise gets further strengthened by the following discussion. For that, we may advert to another plea of learned Senior Counsel, based on a CBDT Clarification dated 23rd April, 2019, which related to the assessees claiming exemption under Section 11 and 12 of the Act. In this context, it is to be noted that when the amendments were made in Section 13A of the Act by the Finance Act, 2017, simultaneously, clause (ba) was inserted in sub-section (1) of Section 12A, which reads as under:- (ba) the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of sub-section (4A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han the provisions of clause (ba) of Section 12A(i) of the Act. The due date for furnishing a return of income is prescribed in Section 139(1) read with Explanation (2) thereof, whereas the time allowed for furnishing a return of income is prescribed in Section 139(4) of the Act, which permits filing of the belated returns. Thus, the difference in the phraseology clearly shows that in order to claim exemption under Section 13A of the Act, it is necessary to furnish return of income by the due date as per Section 139, whereas, in order to claim exemption under Section 11 and 12, the trusts are permitted to furnish their return of income within the time allowed under Section 139 of the Act, which would include the extended period prescribed by sub-section (4) of Section 139 of the Act. Therefore, the third Proviso to Section 13A, though providing for a condition similar to that in clause (ba) of Section 12A(1) for the trusts, is more onerous. The reason for the same can be understood from the judgment of the Hon'ble Delhi High Court in assessee s own case itself, which has explained the background, nature and scope of the conditions prescribed in Section 13A of the Act, which we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d rupees, a Political Party is required to keep and maintain a record of such contribution including the Name and address of the person who has made such contribution; whereas clause (d) of the first Proviso mandates that no Donation exceeding two thousand rupees ought to be received by the Political Party otherwise than by an account payee cheque or bank draft or through electronic clearing system or through electoral bond. Thus, while clause (b) obligates a Political Party to maintain the record and details of the voluntary contributions recorded in excess of twenty thousand rupees, clause (d) restricts a Political Party from receiving Donation in excess of two thousand rupees otherwise than by an account payee cheque or bank draft or through electronic clearing system or through electoral bond. 41. In our considered view, it is incongruent for a Political Party to canvass that inspite of accepting Donations in cash exceeding Rupees two thousand each, clause (d) is not violated merely because it has maintained the details as per clause (b) of the first Proviso. Each of the conditions laid down in clauses (a), (b), (c) and (d) of the first Proviso are to be mandatorily complied wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an National Congress (I) to place before the Assessing Officer, or even before the Commissioner of Income-tax (Appeals), acceptable audited accounts, from which the Assessing Officer could deduce the taxable income of the assessee, the court has no hesitation to hold that the mandatory requirement of the proviso to section 13A of the Act was not fulfilled by the assessee. Such a failure could not have been condoned either by the Commissioner of Income-tax (Appeals) or the Assessing Officer. 44. Therefore, the Revenue is justified in relying on the findings of the Assessing Officer to the effect that the assessee has complied with the provisions of clause (b) but still violated the provisions of clause (d) of first proviso to section 13A of the Act which clearly prohibit receipt of donation in excess of Rs. 2,000/- in cash . 45. On the basis of the aforesaid discussion, and having regard to the legal position and the material on record, it is reasonable to conclude that the income tax authorities have not made any error in denying the exemption claimed by the assessee under Section 13A of the Act due to violation of clause (d) of the first Proviso as well as third Proviso to Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e return as originally filed and treat that as income from other sources. 126. Consequently, the court disagrees with the decision of the Commissioner of Income-tax (Appeals) restricting the expenditure of the assessee to 60 per cent. of the amount claimed and order of the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal to that extent are set aside. (underlined for emphasis by us) 47. We may now refer to the opening argument made by the learned Senior Counsel for the Applicant on the issue of hardship created for the assessee by the recovery proceedings initiated under Section 226(3) of the Act on 13th February, 2024. According to him, the action of the Assessing Officer was lacking in bona fides as it had been initiated close to the ensuing Parliamentary Elections. This aspect of the matter is quite subjective, and we have considered the same only for the limited purpose of evaluating the merit of the extant interim Application before us. The chronology of events, which have been canvassed before us starting from the passing of the assessment order on 6th July, 2021 and culminating with the issuance of notice under section 226(3) of the Act on 13th Febru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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