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1996 (4) TMI 385 - SUPREME COURTCumulative effect of the three statutory provisions, namely, section 293A of the Companies Act, 1956, section 13A of the Income-tax Act, 1961, and section 77 of the Representation of the People Act, 1951, is, to bring transparency into election-funding Held that:- Appeal allowed. The political parties are under a statutory obligation to file a return of income in respect of each assessment year in accordance with the provisions of the Income-tax Act. The political parties—referred to by us in the judgment—who have not been filing returns of income for several years have prima facie violated the statutory provisions of the Income-tax Act as indicated by us in the judgment. That the income-tax authorities have been wholly remiss in the performance of their statutory duties under law. The said authorities have for a, long period failed to take appropriate action against the defaulter political parties. The Secretary, Ministry of Finance, Department of Revenue, the Government of India, shall have an investigation/inquiry conducted against each of the defaulter political parties and initiate necessary action in accordance with law including penal action under section 276CC of the Income-tax Act. The Secretary, Ministry of Finance, Department of Revenue, Government of India, shall appoint an inquiring body to find out why and in what circumstances the mandatory provisions of the Income-tax Act, regarding filing of return of income by the political parties were not enforced. Any officer/officers found responsible and remiss in the inquiry be suitably dealt with in accordance with the rules. A political party which is not maintaining audited and authenticated accounts and has not filed the return of income for the relevant period, cannot, ordinarily, be permitted to say that it has incurred or authorised expenditure in connection with the election of its candidates in terms of Explanation 1 to section 77 of the Representation of the People Act, 1951. That the expenditure (including that for which the candidate is seeking protection under Explanation 1 to section 77 of the Representation of the People Act, 1951), in connection with the election of a candidate—to the knowledge of the candidate or his election agent—shall be presumed to have been authorised by the candidate or his election agent. It shall, however, be open to the candidate to rebut the presumption in accordance with law and to show that part of the expenditure or whole of it was in fact incurred by the political party to which he belongs or by any other association or body of persons or by an individual (other than the candidate or his election agent). Only when the candidate discharges the burden and rebuts the presumption he would be entitled to the benefit of Explanation 1 to section 77 of the Representation of the People Act, 1951 The expression "conduct of election" in article 324 of the Constitution of India is wide enough to include in its sweep, the power of the Election Commission to issue—in the process of the conduct of elections—directions to the effect that the political parties shall submit to the Commission for its scrutiny, the details of the expenditure incurred or authorised by the political parties in connection with the election of their respective candidates.
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