SC to hear plea concerning cash donations received by political parties

The Supreme Court is scheduled to hear on Monday a plea which challenged the validity of a provision of the Income Tax Act that allows political parties to receive “anonymous” cash donations below Rs 2,000.

The plea said this lack of transparency undermines the purity of the election process as it deprives voters of the crucial knowledge about the source of political funding, including the donors and their motives, preventing them from making a rational, intelligent and fully informed decision while casting their vote.

According to the top court cause list, a bench of Justices Vikram Nath and Sandeep Mehta is likely to hear the matter. The top court had earlier issued notices to the Centre, Election Commission and others seeking their responses on the petition.

The plea filed by petitioner Khem Singh Bhati has also sought a direction to the poll panel to prescribe as a condition for registration of a political party and allotment of the election symbol that no amount can be received in cash by any political party.

The plea sought the striking down of Clause (d) of section 13A of the Income Tax Act, 1961, as unconstitutional, and also referred to the apex court’s 2024 judgement which scrapped the electoral bonds scheme.

“The petitioner is seeking direction that the political parties must disclose the name and all other particulars of the person paying any amount of money to it, and no amount can be received in cash so as to maintain transparency in the political funding,” the plea, filed said.

Section 13A of the Act deals with the special provision relating to the incomes of political parties.

The plea said Section 13A was introduced in the Act and income of a political party received by way of interest on securities, income from house property or income from other sources and any income by way of voluntary contributions are exempted from the computation of total income.

The plea has also sought a direction to the poll panel to scrutinise Form 24A contribution reports of all recognised political parties and to require them to deposit the amount received by way of contributions for which address and/or PAN have not been furnished.

It said the EC should be directed to issue notices to the defaulting political parties under the Election Symbol Order, 1968, as to why the reserved symbol shall not be suspended or withdrawn for failure to submit Form 24A contribution reports with full particulars within a prescribed period.

The plea said the poll panel should be directed that accounts of all political parties shall be maintained in such form as may be prescribed and audited by independent auditors appointed by it.

It has also sought a direction to the Central Board of Direct Taxes (CBDT) to scrutinise the income tax returns and audit reports filed by political parties under sections 142 and 143 of the Income Tax Act for the last five years.

The plea said the CBDT should be directed to initiate appropriate proceedings for the levy of tax, penalty and prosecution for failure to comply with the requirements of Section 13A of the Income Tax Act read with Section 29C of the Representation of the People Act, 1951.

Section 29C of the Representation of the People Act deals with the declaration of donations received by political parties.

The plea also referred to the apex court’s 2024 judgement, which struck down the electoral bonds scheme.

The scheme, which was notified by the Government on January 2, 2018, was pitched as an alternative to cash donations made to political parties as part of efforts to bring in transparency in political funding.