I-T cracks down on unrecognised political parties

NEW DELHI/MUMBAI: The income-tax department on Wednesday conducted countrywide searches at more than 110 locations in connection with multiple registered unrecognised political parties (RUPPs).
The coordinated action came after the I-T authorities built on the information received from the Election Commission in May this year, pointing to financial impropriety, attempts at wilful tax evasion, receipt of bogus donations and money laundering by some of the entities.
The department, after receiving the “evidence” from EC against some RUPPs -- that, interestingly, had little or negligible political activity to show and also failed to submit timely contribution reports and annual audit reports to EC, as required under provisions of Representation of the People Act -- started working on the information and launched the searches on Wednesday, officials said.
According to a PTI report, the locations searched on Wednesday are spread across Gujarat, Delhi, Uttar Pradesh, Maharashtra, Madhya Pradesh, Chhattisgarh and Haryana, among others.
“So far, our investigation points to, among other financial improprieties, layering of transactions and money laundering through receipt of bogus donations followed by cash returns,” a tax officer told TOI.
Days after Rajiv Kumar took over as the Chief Election Commissioner, EC initiated graded action against errant RUPPs, as part of which it took action against three RUPPs and delisted 87 “non-existent” RUPPs. It later delisted 111 more RUPPs.
EC had in May also written to the department of revenue, stating how such RUPPs were claiming 100% tax exemption allowed for donations made to political parties, without meeting statutory requirements under RP Act, and called for suitable action against them under extant laws.
About 250 I-T officials of Mumbai and Gujarat were involved in the raids, a source told TOI in Mumbai. Two of the raided RUPPs are in Mumbai, including one that operates from a slum at Sion Koliwada and another from a tiny flat at Borivali. The two parties had collected donations of Rs 150 crore in the past two years, helping their associates (hawala operators) to evade tax and then returning them the money in cash. The presidents of the two parties would get 0.01 % of the total amount rotated through their parties as commission.
Officials recorded the statement of the presidents of the two Mumbai-based unrecognised political parties, who said they formed the parties on suggestion of a Gujarat-based hawala operator who handles the entire finance of their parties.
I-T officials suspect that these political parties helped hawala operators evade tax on thousands of crore rupees after showing it as donations.
Explaining the modus operandi, a tax officer alleged that hawala operators would rope in their contact for forming a political party and getting it registered. The operators would transfer huge amounts to these political parties showing donation. Afterwards, the money got routed through different accounts showing various expenses. The operators layered the money further with help of shell companies before withdrawing it in cash for themselves.
TOI had in June 2022 reported how a study of financial documents of some of the RUPPs revealed some glaring irregularities, including documents listing two different persons as party president, tax exemptions being claimed without filing of contribution report as required by the law, money laundering complaints by rebellious office-bearers of the party coinciding with demonetisation in 2016, mismatch between consecutive balance sheets pointing to alleged siphoning off of funds, one political party donating to another and receipt of most donations from states other than where the party is registered.
Apna Desh Party, which received contributions totalling Rs 232 crore between 2017-18 and 2019-20, had its registered address in Sultanpur, UP but letters by one Abdul B Razak Pathan, claiming to be its president, cite a different party address at Jamalpur, Ahmedabad.
Jan Raajya Party, with its registered address in Prayagraj, UP, received contributions totalling over Rs 11.65 crore between 2017-18 and 2020-21 but is in the list of defaulters for contribution reports for three years, i.e., FYs 2017-18, 2018-19 and 2019-20, as per the UP CEO’s website.
There are also curious instances like same chartered accountant appointed by two different parties based in Maharashtra – Sardar Vallabh Bhai Patel Party and Jantawadi Congress Party, that too on the same day and with the same reference number in the letter.