Explained: Why Did Income Tax Department Freeze Congress Party's Bank Accounts, How Were They Unfrozen Within Hours?

The Congress party on Friday said that its bank accounts had been frozen by the Income Tax (IT) Department. The accounts were, however, unfrozen within hours.

In what the party termed as a "deep assault on democracy", Congress Treasurer Ajay Maken said that the IT Department had frozen the accounts on "flimsy grounds". Within hours of the announcement, however, the party approached the Income Tax Appellate Tribunal which unfroze the accounts. The next hearing in the case at the tribunal will take place next week.

The news of freezing of Congress party's bank account comes just weeks before the expected announcement of 2024 general elections. The party said all political activities had to stop because of the freezing.

In an apparent reaction to the development, Congress leader Rahul Gandhi said that the party will not bow "before the dictatorship". He further said, "Congress is not the name of money's power, it is the name of people's power."

Here we explain what we know about the freezing of the Congress party's bank accounts and what it means ahead of the parliamentary elections.

What Did Congress Say About Bank Account's Freeze?

In a press conference on Friday, senior party leader and Congress Treasurer Ajay Maken said that the party learnt two days ago that the banks were not honouring the cheques that were being issued for various party-related purposes.

Upon inquiries into the matter, the party learnt all of its accounts were frozen, said Maken.

Maken said that accounts of both Congress and Youth Congress were frozen. He said no party-related activity could take place as the funds were frozen, including paying electricity bills or paying salaries to party employees.

"For the first time in the country's history, accounts of the principal opposition party have been frozen by the tax authorities on flimsy grounds, barely two weeks before the announcement of general elections," said Maken.

Separately, Maken said in a tweet that the Congress has been asked by the tax authorities to ensure that Rs 115 crores have to be kept in the banks. But he said this was more than the funds with the party.

"This 115 crore is the lien marked in the Bank Accounts. We can spend an amount over and above that. This means that Rs 115 crores have been frozen. This Rs 115 crores is much more than we have in our Current Accounts," said Maken.

Further saying that the situation is like a "one-party rule" as the principal Opposition party has been rendered inoperable, Maken said the party seeks justice from the judiciary, media, and the people.

Why Were Congress Funds Frozen?

The Congress party's accounts have been frozen over a 45-day delay in filing of tax returns in 2018-19, according to Maken.

While Maken acknowledged the delay, he said it was extreme measure and argued "that there have been cases and precedents where such actions were not taken", according to NDTV.

Moreover, Maken said that the IT Department has imposed a penalty of Rs 210 crore on the party for the delayed filing of tax returns in 2019-19, reported The Quint.

Maken also said that while the incident happened in 2019, the action by the IT Department has been taken now just weeks before the elections.

"We were late by 40-45 days. But a lot of the income tax payees often delay the submission of returns by a few days. There is a penalty. But it doesn't mean you freeze the accounts...This happened back in 2018-19. And now they are doing this just two weeks before the announcement of the elections," said Maken, as per The Quint.

Hours later, however, the Congress party said that the Income Tax Appellate Tribunal had allowed the party to access the funds. Vivek Tankha, a Rajya Sabha MP and a lawyer, appeared for the party before the tribunal. Confirming the relief, he said, "Very graciously the ITAT has said that there will only be a lien on the bank account, there is no restriction on the bank account, we can operate it."

Congress Warns Of 1-Party Rule, Alleges Political Targeting

The Congress party also drew a distinction between its case and that of the Bharatiya Janata Party (BJP). The party said that while the BJP continues to use the unconstitutional money raised from electoral bonds, the party was being denied the funds raised through crowdfunding.

It was a reference to the electoral bonds scheme that the Supreme Court on Thursday held as unconstitutional. Under the scheme, the parties were not required to disclose the funds received through these bonds. It was criticised for its opacity among other reasons. The BJP, as per reports, received funds more than the funds of all other parties combined through bonds.

Maken alleged that the freezing of the accounts was a politically-motivated act and pushed the country towards a single-party rule.

Calling for a nationwide agitation to "free" the democracy again in the country, Maken said, "Do you think democracy is alive in our country? Don't you think that it is going towards just a one-party system where only one party is allowed to exist and the rest are not...I'm very sorry to say that democracy does not exist anymore in our country. It is just one-party rule, one-party democracy in our country."

Speaking on similar lines, Congress President Mallikarjuna Kharge said that there will not be any elections in the future and that's why the party will take the fight to the streets "against this autocracy". He also called Prime Minister Narendra Modi "power drunk" over the freezing of accounts.

Kharge said, "Power drunk Modi Govt has frozen the accounts of the country’s largest Opposition party -the Indian National Congress- just before the Lok Sabha elections. This is a deep assault on India's Democracy! The unconstitutional money collected by the BJP would be utilised by them for elections, but the money collected by us through crowd-funding shall be sealed!

"That is why, I have said that there won't be any elections in the future. We appeal to the Judiciary to save the multi-party system in this country and protect India's Democracy. We will take to the streets and fight strongly against this autocracy!"

The episode of Congress party's accounts is the latest in the line of incidents where central agencies have had Opposition parties and leaders on the radars. In recent years, central agencies like the Enforcement Directorate (ED) and Central Bureau of Investigation (CBI) pursued a number of top Opposition leaders, which has led to allegations of their operations being politically-motivated. Lately, former Jharkhand Chief Minister Hemant Soren was taken into custody by ED and Delhi CM Arvind Kejriwal is also facing summons from the ED. Top Aam Aadmi Party (AAP) leader Manish Sisodia is in jail for almost a year now. Congress leaders Rahul Gandhi and mother Sonia Gandhi are also under the scanner in the National Herald case.