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4.2.1. This proposal drew unanimous approval from all the
participants at the seminars as well as from several
persons, parties and organisations which responded to the
Law Commission's working paper. There was no dissenting
voice. On the contrary, Shri K.K. Venugopal, Senior
Advocate, observed that while the Law Commission has
rightly recommended the introduction of section 78A, it had
not provided for the consequences of non-compliance with
the said provision or for the consequences that flowed if
it was found that any false statement had been made in the
accounts submitted by a political party. He tressed the
necessity of publication of such accounts by the Election
Commission which would enable any individual or party to
point out the falsity of any of the particulars in the
accounts. In this connection, he referred to section 13A
of the Income Tax Act which was inserted on 1.4.1979. The
said section provides that the income received by a
political party under the head "Income from house property"
or "income from other sources" or "any income by way of
voluntary contributions received by it from any person"
shall not be included in the total income of the previous
year of such political party provided that (a) such
political party keeps and maintains such books of accounts
and other documents as would enable the assessing officer
to property deduce its income therefrom; (b) in respect of
each such voluntary contribution in excess of ten thousand
rupees, such political party keeps and maintains a record
of such contribution and the name and address of the person
who has made such contribution and (c) the accounts of such
political party are audited by an accountant as defined in
the Explanation below sub section (2) of section 288 of the
said Act. The explanation appended to the section says
that for the purpose of the said section "political party"
means an association or body of individual citizens of
India registered with the Election Commission of India as
apolitical party under paragraph 3 of the Election Symbols
(Reservation and Allotment) Order 1968 and includes a
political party deemed to be registered with that
Commission under provision to sub paragraph (2) of that
paragraph. (It, however, appears that para 3 of the said
Symbols Order has been omitted by Notification No. OM
21(E) dated 23.2.1992 with effect from 25.3.1992) Mr. K.K.
Venugopal pointed out that until Shri H.D. Shourie of the"Common Cause" filed a Public Interest Petition in the
Supreme Court(the decision in which case is reported in
1996 (2) SCC 752) the said provision was not being followed
by the parties or enforced by the Income Tax Department.
As a matter of fact, except the two Communist parties and
two other political parties, no other political party had
complied with the said section nor did they file their
return of income stating that they had complied with the
three conditions specified in the said section. Mr.
Venugopal was of the opinion that such a failure would
attract penalty provided by section 276-CC of the Income
Tax Act. Mr. Venugopal further pointed out that even
though the Supreme Court directed in the aforementioned
decision that the Secretary to the Ministry of Finance
should conduct an investigation and inquiry against each of
the defaulting political parties and initiate necessary
action against them according to law, no action whatsoever
appears to have been taken so far nor any party or person
had been prosecuted. All this proves the old adage that"some men are more equal than others". While a small
income-tax payer who fails to file his return is prosecuted
and penalised, the political parties which are in receipt
of huge funds which they spend on elections and other
occasions are not being touched. The parties too do not
appear to have realised that if they themselves do not
follow the law, not only it sets a bad example to others,
they will not have the face to tell others to abide by law.
4.2.3. The necessity of such a requirement was indeed
emphasised by the Supreme Court in its recent decision in
Gajanan Bapat v. Dattaji Meghe (1995 (5) SCC 347) where it
observed pertinently as under:"We wish, however, to point out that though
the practice followed by political parties in not
maintaining accounts of receipts of the sale of
coupons and donations as well as the expenditure
incurred in connection with the election of its
candidate appears to be a reality but it certainly
is not a good practice. It leaves a lot of scope
for spoiling the purity of election by money
influence. Even if the traders and business men do
not desire their names to be published in view of
the explanation of the witnesses, nothing prevents
the political party and particularly a national
party from maintaining its own accounts to show
total receipts and expenditure incurred, so that
there could be some accountability. The practice
being followed as per the evidence introduces the
possibility of receipts of money from the candidate
himself or his election agent for being spent for
furtherance of his election, without getting
directly exposed, thereby defeating the real
intention behind Explanation 1 to section 77 of the
Act. It is, therefore, appropriate for the
legislature or the Election Commission to intervene
and prescribe by Rules the requirements of
maintaining true and correct account of the receipt
and expenditure by the political parties by
disclosing the sources of receipts as well. Unless
this is done, the possibility of purity of election
being soiled by money influence cannot really be
ruled out. The political parties must disclose as
to how much amount was collected by it and from
whom and the manner in which it was spent so that
the court is in a position to determine "whose
money was actually spent" through the hands of the
party. It is equally necessary for an election
petitioner to produce better type of evidence to
satisfy court as to "whose money it was" that was
being spent through the party. Vague allegations
and discrepant evidence may only create a doubt but
then the charge of corrupt practice cannot be held
to be proved on mere lurking suspicion or doubts.
However, undesirable and objectionable the practice
might be, the fact remains that the evidence led by
the election petitioners in this case doe not
establish the charge levelled by them at all."
4.2.4. We have already pointed out hereinbefore the
provisions of the German Law on Political Parties of 1967,
Section V whereof creates a statutory obligation upon all
the political parties to maintain clear and correct
accounts, have them audited and submit the same to the
President of the German Bundestag. These accounts are
directed to be circulated by the Bundstag as "Bundstag
Papers". The Law further requires that the Bundstag shall
examine whether the statement of accounts is in accordance
with the requirements of the said law and that the result
of such scrutiny shall be recorded in the report in
accordance with the paragraph 5 of the said article
(article 23). The German law provides in great detail the
particulars which such accounts should contain including
the sources from which amounts are received and the items
upon which expenditure has been incurred. It is absolutely
essential that there should be a law on the same lines.
Rules can be made elaborating and elucidating the
requirements in the proposed section 78A in the light of
and keeping in mind the several provisions in the said
German Law.
4.2.5. This proposal was also supported by Shri P.P. Rao,
Senior Advocate, Shri N. Ram (Editor, Frontline) and Shri
C.R. Irani (Editior, The Statesman), Shri Inderjit, Senior
Journalist, Shri Shivraj V. Patil(former Speaker, Lok
Sabha), Dr. K.L. Shivaramakrishnan(Centre for Policy
Research) and Shri H.K. Dua, senior journalist, among
others. Even in the responses received by various persons
and organisations pursuant to the circulation of the
'working paper', there has been no dissenting voice.
4.2.6. Accordingly, the Law Commission reiterates that a
new section as proposed in the working paper (section 78A)
should be inserted in the R.P.Act of 1951. It is further
recommended that the provision as suggested should be
numbered as sub-section (1) and sub-sections (2), (3) and
(4) as proposed hereinafter should also be inserted in the
said section.
(2) A political party which does not comply with any of
the requirements of sub-section (1) shall be liable to pay
a penalty of Rs. 10,000/- for each day of non-compliance
and so long as the non-compliance continues.
If such default continues beyond the period of 60
days, the Election Commission may de-recognise the
political party after affording a reasonable opportunity to
show cause.
(3) If the Election Commission finds on verification,
undertaken whether suo motu or on information received,
that the statement of accounts filed under sub-section (1)
is false in any particular, the Election Commission shall
levy such penalty upon the political party, as it may deem
appropriate besides initiating criminal prosecution as
provided under law.
(4) Any orders passed under sub-sections (2) or (3)
shall be directed to be published in the press and other
media, for public information."
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