Most of the public funds spent by political parties to fight elections are "unaccounted", the Delhi High Court said on Wednesday as it called for a slew of legislative measures to effectively check the influence of such money on the electoral process.
The court said proper auditing of accounts of political parties was "imperative and critical" for free and fair elections as they dealt in large sums of public money. This would also "infuse transparency and accountability" in functioning of these parties.
"Considering that political parties are an essential part of our democracy and are dealing in large sums of public money, much of which is unaccounted, the proper auditing of the accounts of the political parties is both imperative and critical to the conduct of free and fair elections," a bench of justices S Muralidhar and Vibhu Bakhru said.
The order came on a plea by Indian National Congress (I) (INC) for exemption from paying income tax for the assessment year (AY) 1994-95.
The court said in the instant case "demonstrates need for a slew of legislative measures that need to be put in place for an effective check on the influence of money on the electoral process".
The INC had challenged an Income Tax Appellate Tribunal (ITAT) order which had held that the accounts of the assessee for 1994-95 were incomplete and therefore, the exemption under the Act was not available to it.
The court held that "INC was not entitled to claim exemption from paying income tax for AY 1994-95 since it failed to maintain properly audited accounts for the said AY, thereby not fulfilling the mandatory condition for claiming such exemption".
"Consequently, on this aspect, it is held that the voluntary contributions received by the INC during the AY in question has to be treated as 'income from other sources'," it added.
The bench referred to recommendations of Law Commission of India (LCI) in a March 2015 report which had suggested that "only up to Rs 20 crore or 20 per cent of total contribution of a political party's entire collection, whichever is lesser, can be anonymous".
Apart from this, LCI had also suggested that details and amounts of all donations and donors, including PAN cards, need to be disclosed by political parties, regardless of their source or amount.