Many political parties on ECI radar for siphoning off money | Investigation Part 1

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The Election Commission of India (ECI) is cracking its whip on political parties across states for activities such as black money and hawala transactions and illegal tax benefits.

Parties from Uttar Pradesh, Delhi, Tamil Nadu, Maharashtra, Gujarat, and Madhya Pradesh are on the ECI radar.

One of the first things Chief Election Commissioner (CEC), Rajiv Kumar did after taking charge was to order delisting of unrecognised political parties.

CEC RAJIV KUMAR TIGHTENING NOOSE AROUND FRAUDULENT POLITICAL PARTIES

After taking over as CEC, Rajiv Kumar got an investigation done into unrecognised political parties.

After scrutiny, the ECI has taken action against more than 2,100 registered unrecognised political parties for flouting rules.

Uttar Pradesh-based Apna Desh Party, the political wing of the Popular Front of India (Social Democratic Party of India), and Maharashtra-based Sardar Vallabh Bhai Patel Party(SVBP Party) are all on the ECI Radar.

“Political parties have been siphoning off crores of rupees under various heads. Investigations have unearthed many glaring irregularities. Our investigation is an ongoing process, we will clean the entire system, “an ECI source told India Today.

The Election Commission of India ordered the deletion of 111 registered unrecognised political parties that it found to be non-existent.

This is the second such action by the Election Commission in the recent past against registered parties that have been found violating the Representation of the People Act, 1951. On May 25, the ECI deleted 87 non-existent registered unrecognised political parties.

“Political parties across the country have been claiming tax benefits under section 13 A of the Income Tax Act. However, investigations have found that most of the parties have been indulging in illegal activities”, the ECI source said.

CBDT QUIET ON PARTIES FALSELY CLAIMING TAX EXEMPTIONS

While political parties get full Income Tax exemption on donations under Section 13 A of the IT Act, the donors get full deduction of the donated amount under Sections 80GGB and 80 GGC of the income-tax Act.

Investigations into accounts of these parties by India Today highlight that most political parties in their annual audit accounts had no prescribed schedule, detailing heads of income/expenditure account, or of balance sheet, or cash flow statement. Complete details in the donor list have not been filed with contribution reports by most parties.

Despite glaring irregularities, these parties have been claiming tax benefits running into crores under Section 13 A of the IT Act year after year.

The Election Commission has asked the Central Board of Direct Taxes (CBDT) to take appropriate action against these parties.

INVESTIGATION ON POLITICAL PARTIESApna Desh Party

An extensive investigation by India Today shows that Uttar Pradesh-based Apna Desh Party has two different persons as its president.

Verification shows the name of the party president is different from the one who signs the documents.

One A. Razak, claiming to be the party president, is signing the letters forwarding financial documents including a belated and incomplete contribution report for the party and showing that donations were received. However, the annual audit account has been signed by Abdul B Razak Pathan as treasurer of the party.

The address of the party mentioned on the letter of A Razak is 428, 4th floor, Shital Varsha Mahavir Business Park, Jamalpur, Ahmedabad, whereas the registered address of the party is Sultanpur Uttar Pradesh.

The auditor, however, continues to use the registered address of 457, Majorganj, Sultanpur, UP, in the audit report, as per the audit report signed by one Jyoti Motwani.

For the FY 2018-2019, the name of Abdul Mabood has been mentioned in the verification part of Form 24 A of the Conduct of Election Rules, 1961, saying, “I Abdul Mabood, as President..”, but signed by one A Razak as president.

One Abdul Mabood, claiming to be the national president of the Apna Desh Party, has mentioned in two different letters that the party, for FYs 2016-17, 2017-18, 2018-19 and 2019-20 didn’t receive any membership or money cooperation and income and expenditure both were zero during these years.

Despite claiming not to receive any membership or money cooperation, the party has shown Rs 37.16 crore as contribution in FY 2017-18. And out of these Rs 37.16 crore, Rs 27.47 crore and Rs 9.46 crore have been shown to be spent towards publicity expenses and public welfare expenses, respectively. No details of those who have billed the party or to whom the money has been transferred are given, even the mode of payment is not given. To top it all, the auditor has not commented on the verification and genuineness of expenditure/ outflow.

The party has claimed tax exemption on Rs 80.06 crore in FY 2018-19, and on Rs 115 crore in FY 2019-20. This, despite there is no proper documentation.

The party has not filed a contribution report but tax exemption has been claimed.

SOCIAL DEMOCRATIC PARTY OF INDIA

Social Democratic Party of India or SDPI is a Delhi-based party founded on 21st June 2009 at New Delhi and was registered with the Election Commission of India on 13 April 2010.

The party is often referred to as the political wing of PFI (Popular Front of India).

Investigations have found out that the party gets major donations from Southern India.

The SDPI is a political party founded in 2009. It is the political offshoot of the Islamist outfit PFI.

This party has given its address as C-4, Hazrat Nizamuddin West, New Delhi-13.

The party collected contributions of Rs 2,86,18,513 in FY 2020-21, Rs 3,74,31,710 in FY 2019-20, Rs 5,17,96,819. In FY 2018-19, according to documents submitted by the party on the Chief Electoral Office-Delhi website.

This political party with registration in Delhi collected almost Rs10 crore from three southern states of Tamil Nadu, Kerala, and Karnataka.

The Kerala High Court has observed that PFI and SDPI were “extremist organisations” but not banned.

“No doubt, SDPI and PFI are extremist organisations indulging in serious acts of violence. All the same, those are not banned organisations,” Justice K Haripal had observed in a recent order.

SARDAR VALLABH BHAI PATEL PARTY

Another party on the ECI radar is Maharashtra-based SVBP (Sardar Vallabh Bhai Patel Party), whose national president is Dashrath Bhai Parekh.

An investigation by India Today shows that two consecutive years balance sheets are not matching, hinting towards money being siphoned off.

Apart from what prima facie looks like money being siphoned off, the party also invested in gold. The question is: why does a political party need to invest in gold?

The party submitted an audited balance sheet by letter dated 27/2/21.

The audited balance sheet along with audit report for FYs 2014/15, 15/16,16/17,17/18,18/19,19/20 and 20/21 shows income by donation in –

IN F.Y. 2018-19, AT 29.87 CR., IN F.Y. 2019-20, AT 41.19 CR.

Documents showed that two consecutive years balance sheets are not matching. However, details of years ending on 31st March 2019, the bank balance was Rs 1,63,67,837 and cash in hand was Rs 42,899. Total of both is Rs 1,64,10,736. However, other than the capital account closing amount of Rs 85,158, no other balance sheet head was given. Therefore, the balance sheet was not complete.

Moreover, next year, an income surplus of Rs 78,869 was there. But, the balance-sheet total was only Rs 49,25,37. Out of which Rs 48,35,141 was cash and bank balance, a reduction of Rs 1,15,75,595, with no explanation, points towards siphoning off of this amount, and thereby making the audited account financial statements completely unreliable and bogus

By a letter dated 05/01/2021 (Ref. No.-0001), party appoints M/s Kashyap Patel Associates (CA Kashyap Kumar Ishwar Bhai Patel, Membership No. 198827) as the auditor.

Interestingly, the same CA (Kashyap Kumar Ishwar Bhai Patel) has been auditing other parties too. Documents show he was appointed on the same day by the same reference, showing the possibility of the same people running 3 parties.

BALANCE SHEET NOT MATCHING

Two consecutive years balance sheets submitted by the party are not matching.

Details of years ending on 31st March 2019, the bank balance was Rs 1,63,67,837 and cash in hand was Rs 42,899. Total of both is 1,64,10,736. However, other than the capital account closing amount of Rs 85,158, no other B/S head was given. Therefore, the balance-sheet was not complete.

For FY 2018-19, the audited balance sheet and P&L Account have been signed by one Mixit Naresh Kumar Kothari with Membership No. 152936.

Strangely, the balance sheet does not give assets and liabilities of earlier years as opening balance making it highly suspect , if it has actually been signed by a CA. Further, this report was signed without UDIN on 26/10/2019, i.e. after the cut-off date of 01/07/2022.

The same auditor also signed another audit report of a party by the name of BHARTIYA KISAN PARIVARTAN PARTY for FY 2018-19.

The address of the party was mentioned only as ‘1,FIROZABAD, FIROZABAD’. In addition to usual non-compliance of even basic auditing norms, out of 3.84 crores of donation, myriad expenses were booked. Party is even showing an investment of Rs1.78 crore in gold.

Even at first glance the audit reports and audited balance sheets and P&L Accounts of SVBP Party are devoid of even basic due diligence by the auditor, and don’t give a true and fair account of the financial affairs of the entity in question. The Cash Flow Statement has not been provided.

There is no emphasis on the materiality of the information given. No proper schedules, as prescribed, for the balance sheet and P&L item heads were given. For example, there is outgo of crores in 5-6 major expenditure heads, however, no detail or schedule has been given by the auditor, neither he has commented on the genuineness of the expenditure.

The Contribution Report as required in Representation of People Act, 1951 was not there on the website of CEO Maharashtra For FY 2019-20, the name of the party was in the defaulter at S.No. 120 list for non-filing of the Contribution Report.

Sources in the Election Commission told India Today, “The Commission has been investigating parties since May this year and appropriate action is being taken. The entire system needs to be cleaned. A list of parties has been sent to CBDT, for further action. From fraudulent documents to incomplete one, to instances of parties investing in gold many glaring irregularities have come to fore. More action will follow in days to come.”

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