SC to hear plea on cash donations received by political parties

New Delhi: The Supreme Court is scheduled to hear on August 31 a plea which has challenged the validity of a provision of the Income Tax Act that allows political parties to receive cash donations below Rs 2,000.

According to the apex court’s cause list of August 31, the plea would come up for hearing before a bench comprising justices Vikram Nath and Sandeep Mehta.

On November 24 last year, the top court had agreed to hear the petition and sought responses from the Centre and others on it.

The plea claimed that 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.

The petition, filed by Khem Singh Bhati, 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.

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

“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 said.

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political parties under the Election Symbol Order, 1968, as to why the reserved symbol shall not be suspended or withdrawn for the failure to submit Form 24A contribution reports with full particulars within a prescribed period.

It has 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 the provisions of the Act for the last five years.

The plea said the CBDT should be directed to initiate appropriate proceedings for 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 injury to the public is the violation of the fundamental right to information of the voter, as guaranteed under Article 19(1)(a) of the Constitution. This violation is primarily caused by Section 13A(d) of the Income Tax Act, 1961, which allows political parties to receive anonymous cash donations below Rs 2,000,” the plea said.

The plea also referred to the apex court’s 2024 judgement, which had 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.