India's Congress accuses Modi of 'tax terrorism' after authorities demand $218m

Opposition party's bank accounts have already been frozen over alleged tax evasion

India's Congress party leaders Rahul Gandhi and Priyanka Gandhi Vadra on the campaign trail in the west coast city of Mumbai this month. AFP

Indian National Congress on Friday accused Prime Minister Narendra Modi’s government of resorting to “tax terrorism” after the federal authorities demanded over 18.2 billion rupees ($218m) from the main opposition party – weeks before the country goes to the polls.

Congress, the main challenger of the ruling Hindu nationalist Bharatiya Janata Party, had its bank accounts frozen last month over alleged tax evasion, prompting allegations that Mr Modi’s government was abusing its authority to financially “cripple” opponents ahead of the April vote.

But the party said it had received fresh demand notices from the tax authorities demanding an amount of 18.2 billion rupees for alleged tax violations dating back to the year 1993-94.

“We have received a demand notice for assessment year 1993-94 ... The income tax demand is for 53 crore rupees (530 million rupees),” Congress treasurer Ajay Maken said at a press conference in New Delhi.

“The total tax demand is of 1,823 crore rupees (18.23 billion rupees) for five different assessment years. They’re preparing demand notices for three more assessment years,” he said.

The federal Income Tax Department, part of the Department of Revenue under the Ministry of Finance, last month demanded 2.1 billion rupees from the party, saying it had failed to pay taxes between 2017 and 2019 and froze party accounts.

A tribunal ordered a partial defreeze, ordering the party to keep 21 billion rupees as collateral in the bank accounts.

The party has denied any wrongdoing and accused the government of resorting to arm-twisting tactics and crippling it financially ahead of the national elections.

"The notices are being sent to cripple us financially. This is tax terrorism, and this is being used to attack Congress. This has to stop," Jairam Ramesh, another Congress leader, told reporters.

"We will not be scared of these notices. We will be more aggressive and fight these polls."

India's Congress party leader Rahul Gandhi addresses a press conference in New Delhi. AFP

Congress is the main opposition party that ruled the country for a decade before Mr Modi stormed to power in 2014. The party has produced three Indian prime ministers since independence from British rule in 1947.

The world’s largest democracy will undertake a seven-phase poll starting April 19 to elect a new government. The results will be announced on June 4.

Mr Modi has been accused of unleashing federal investigative agencies and financial institutions against political rivals to intimidate and weaken them.

India’s financial police, the Enforcement Directorate, had last week arrested Delhi’s Chief Minister Arvind Kejriwal over allegations of kickbacks in bringing a now-scrapped alcohol policy to the Indian capital.

Mr Kejriwal, whose Aam Aadmi Party is an ally of Congress, has since been in the custody of the financial police.

An election poster for India's ruling Bharatiya Janata Party featuring Prime Minister Narendra Modi, in Varanasi, in the northern state of Uttar Pradesh. AFP

The alleged targeting of Mr Modi’s political rivals has triggered a diplomatic row. New Delhi summoned top German and US officials following remarks by their countries over the cases.

The US State Department issued statements over the opposition allegations, saying it would “continue to follow these actions closely, including the arrest of Delhi CM Arvind Kejriwal”.

State Department spokesman Matthew Miller said: “We are also aware of the Congress party's allegations that tax authorities have frozen some of their bank accounts in a manner that will make it challenging to effectively campaign in the upcoming elections."

India’s Foreign Ministry on Thursday rejected the statements by the foreign governments, saying modern states are “expected to be respectful of the sovereignty and internal affairs of others”.

Stephane Dujarric, spokesman for UN Secretary General Antonio Guterres has also asked for a “free and fair atmosphere” in the country.

“What we very much hope is that in India, as in any country that is having elections, that everyone’s rights are protected, including political and civil rights, and everyone is able to vote in an atmosphere that is free and fair,” Mr Dujarric said on Thursday.