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TMI Blog1996 (4) TMI 385X X X X Extracts X X X X X X X X Extracts X X X X ..... parties and by candidates in the process of election. It is contended that the mandatory provisions of law are being violated by the political parties with impunity. During the elections crores of rupees are spent by political parties without indicating the source of the money so spent. According to Mr. Shourie, the elections in this country are fought with the help of money-power which is gathered from black sources. Once elected to power, it becomes easy to collect tons of black money which is used for retaining power and for re-election. The vicious circle, according to Mr. Shourie, has totally polluted the basic democracy in the country. Section 293A of the Companies Act, 1956 (the Companies Act), is as under: "293A(1) Notwithstanding anything contained in any other pro vision of this Act, - (a)no Government company ; and (b)no other company which has been in existence for less than three financial years, shall contribute any amount or amounts, directly or indirectly, - " (i) to any political party; or (ii) for any political purpose to any person. (2) A company, not being a company referred to in clause (a ) or clause (b) of sub-section (1), may contribute any amount or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation below sub-section (2) of section 288. Explanation. - . . ." Section 77 of the Representation of the People Act, 1951 (the RP Act), is in the following -term: "77. Account of election expenses and maximum thereof. - (1) Every candidate at an election shall, either by himself or by his election agent, keep a separate and correct account of all expenditure in connection with the election incurred or authorised by him or by his election agent between the date on which he has been nominated and the date of declaration of the result thereof, both dates inclusive. Explanation 1. - Notwithstanding any judgment, order or decision of any court to the contrary, any expenditure incurred or authorised in connection with the election of a candidate by a political party, or by any other association or body of persons or by any individual (other than the candidate or his election agent) shall not be deemed to be, and shall not ever be deemed to have been, expenditure in connection with the election incurred or authorised by the candidate or by his election agent for the purposes of this sub-section." It is averred in the petition that most of the political parties in the country ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... January 17, 1996. Shri Sita Ram Kesri, Treasurer of the party, has filed an affidavit dated February 16, 1996, stating that the returns of income relating to the assessment years 1993-94, 1994-95 and 1995-96 have been filed on December 14, 1995. The Janata Dal did not file any return of income for all these years. Despite notices issued by the Department on September 21, 1995, and January 17, 1996, the return of income has not been filed. The Janta Party (JP) and the Revolutionary Socialist Party have not been filing returns of income. The All India Anna Dravida Munnetra Kazhagam (AIADMK) has filed returns of income for the assessment years 1979-80 to 1986-87. The party has not filed the returns for the years 1987-88 to 1995-96, however, the party has filed on January 10, 1996, a list of donations of Rs. 10,000 or more received during the period relevant to the assessment years 1988-89 to 1995-96. The Dravida Munnetra Kazhagam (DMK) has filed the returns of income from 1979-80 till 1995-96. Some of the returns, however, are not valid and some were filed belatedly. Section 13A of the Income-tax Act was introduced by way of amendment which came into force on April 1, 1979. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dited accounts by the political parties is mandatory and has to be strictly enforced. It was obligatory for the income-tax authorities to have strictly enforced the statutory provisions of the Income-tax Act. We may refer to sections 139(4B), 142(1) and 276CC of the Income-tax Act, which are relevant: " 139.(4B) The chief executive officer (whether such chief executive officer is known as Secretary or by any other designation) of every political party shall, if the total income in respect of Which the political party is assessable (the total income for this purpose being computed under this Act without giving effect to the provisions of section 13A) exceeds the maximum amount which is not chargeable to income-tax furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act, shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1)." "142. Enquiry before assessment. - (1) For the purpose of making an assessment under this Act, the Assessing Officer may serve on any person who has made a retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year; or (b) the tax payable by him on the total income determined on regular assessment, as reduced by the advance tax, if any, paid, and any tax deducted at source, does not exceed three thousand rupees." The political parties, therefore, are under a statutory obligation to furnish a return of income for each assessment year. To be eligible for exemption from income-tax they have to maintain audited accounts and comply with the other conditions envisaged under section 13A of the Income-tax Act. Admittedly most of the parties have done neither. It is not a matter where the parties have overlooked to file a return of income by accident once or twice. The political parties have - in patent violation of law -neither maintained audited accounts nor paid tax since 1979-80. Sub-section (4B) of section 139 of the Income-tax Act makes it obligatory for the chief executive officer of every political party to furnish a return of income for each year in accordance with the provisions of the Income-tax Act. Section 142(1) provides for inquiry before assessment. It is not disputed that notices under section 142(1) were issued by the income-tax authorities to the defaulting po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following words: "I maintain a savings bank account, and from this account drew crossed account payee cheques of varying sums of money towards election expenses of candidates I felt would serve the public cause. Armed with my bank pass book, I have discussed the question of elections and corruption with almost all important office holders since Jawaharlal Nehru. From these discussions, I have drawn the conclusion that most politicians are not interested in honest money funding for elections. Honest money entails accountability. Honest money restricts spending within legally sanctioned limits (which are ridiculously low). Honest money leaves little scope for the candidate to steal from election funds. Honest money funding is limiting. While the politicians want money for election, more importantly, they want money for the mselves-to spend, to hoard, to get rich. And this they can do only if the source of money is black. The corruption in quest of political office and the corruption in the mechanics of survival in power has thoroughly vitiated our lives and our times. It has sullied our institutions...The corrupt politician groomed to become the corrupt minister, and, in turn, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iling the return of income before the income-tax authorities cannot justifiably plead that it has incurred or authorised any expenditure in connection with the election of a party candidate. The expenditure "incurred or authorised in connection with the election of a candidate by a political party" can only be expenditure which has a trans parent source. Explanation 1 to section 77 of the Representation of the People Act, 1951, does not give protection to expenditure which comes from an unknown or black source. The bulk of the income of a political party by way of contributions/donations is from companies. Section 293A of the Companies Act makes it mandatory that such contributions/donations are made in a transparent manner as provided under the said section. Similarly, section 13A of the Income-tax Act lays down that all income derived from contributions/donations is exempt from income-tax, only if a political party satisfies that: (i) it keeps and maintains such books of account and other documents as would enable the Assessing Officer to properly deduce its income therefrom ; (ii) it keeps and maintains a record of each voluntary contribution in excess of Rs. 10,000 and of the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is what rule of evidence is to be followed to attract the provisions of Explanation 1 to section 77 of the Representation of the People Act, 1951 ? The said Explanation is in the nature of an exception to sub-section (1) of section 77. A candidate in the election who wants to take the benefit of Explanation 1' to section 77 of the Representation of the People Act, 1951 - in any proceedings before the court - must prove that the said expenditure was in fact incurred by the political party and not by him. Any expenditure in' connection with the election of a candidate which according to him has been incurred by his political party shall be presumed to have been authorised by the candidate or his election agent. But the presumption is rebuttable. The candidate shall have to show that the said expenditure was in fact incurred by a political party and not by him. The candidate shall have to rebut the presumption by the evidentiary standard as applicable to rebuttable presumptions under the law of evidence. An entry in the books of account of a political party maintained in accordance with section 13A of the Income-tax Act- showing that the party has incurred expenditure in connection w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a political party, for example, is not laid at its disposal by the candidate or his election agent that Explanation 1 would apply. In other words, it must be shown, in order that Explanation 1 may apply, that the source of the expenditure incurred was not the candidate or his election agent. What is important is to realise that Explanation 1 does not create a fiction. It deals with the realities of political situations. It does not provide that the expenditure in fact incurred or authorised by a candidate or his election agent, shall not be deemed to be incurred or authorised by them, if the amount is defrayed by a political party. That would be tantamount to creating a fiction. The object of the Explanation is to ensure that the expenditure incurred, for example, by a political party on its own, that is, without using the funds provided by the candidate or his election agent shall not be deemed to be expenditure incurred or authorised by the candidate or his election agent. If the expenditure is incurred from out of the funds provided by the candidate or his election agent, section 77(1) and not Explanation 1 would apply." (emphasis supplied). Before parting with the point und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat if competent legislation is enacted as visualised in article 327 the Commission cannot shake itself free from the enacted prescriptions. After all, as Mathew, has observed in Indira Gandhi's case, AIR 1975 SC 2299 (at page 523) (SCC page 136, paras 335-336) : 'In the opinion of some of the judges constituting the majority in Bharati's case, AIR 1973 SC 1461, rule of law is a basic structure of the Constitution apart from democracy. The rule of law postulates the pervasiveness of the spirit of law throughout the whole range of Government in the sense of excluding arbitrary official action in any sphere.' And the supremacy of valid law over the Commission argues itself. No one is an imperium in imperio in our constitutional order. It is reason able to hold that the Commissioner cannot defy the law armed by article 324. Likewise, his functions are subject to the norms of fairness and he cannot act arbitrarily. Unchecked power is alien to our system. Even so, situations may arise which enacted law has not provided for. Legislators are not prophets but pragmatists. So it is that the Constitution has made comprehensive provision in article 324 to take care of surprise situations. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ordering a repoll for a whole constituency under compulsion of circum stances may be directed for the conduct of elections and can be saved by article 324-provided it is bona fide necessary for the vindication of the free verdict of the electorate and the abandonment of the previous poll was because it failed to achieve that goal. While we repel Sri Rao's broad side attack on article 324 as confined to what the Act has conferred, we concede that even article 324 does not exalt the Commission into a law unto itself. Broad authority does not bar scrutiny into specific validity of the particular order. Our conclusion on this limb of the contention is that article 324 is wide enough to supplement the powers under the Act, as here but subject to the several conditions on its exercise we have set out." Superintendence and control over the conduct of election by the Election Commission include the scrutiny of all expenses incurred by a political party, a candidate or any other association or body of persons or by any individual in the course of the election. The expression "conduct of elections" is wide enough to include in its sweep, the power to issue directions-in the process of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 1 to section 77 of the Representation of the People Act, 1951. 6. 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 7. 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 partie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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