Rs 10,000-cr tax evasion through fake parties; why is Modi silent, asks Cong

The Congress on Wednesday, 9 September alleged that more than Rs 10,000 crore in black money had been generated through “fake” registered unrecognised political parties (RUPPs), accusing the BJP-led government of turning a blind eye to a racket allegedly designed to facilitate tax evasion.

Addressing a press conference, senior Congress leader and former MP Shakti Singh Gohil claimed that around 3,260 RUPPs had been used as conduits through which individuals and companies could claim tax deductions on political donations, with a portion of the money allegedly returned to donors in cash after commissions were deducted.

“More than Rs 10,000 crore of black money has been generated through these fake political parties. There has been an open loot of tax revenue,” Gohil alleged. He said donations to political parties qualify for tax benefits under provisions of the Income Tax Act, including sections 80GGC and 80GGB.

The alleged racket, Gohil claimed, worked by routing donations through RUPPs, whose associates retained commissions ranging from 2-15 per cent, and returned the balance to donors in cash.

Gohil said taxpayers with incomes exceeding Rs 5 crore could face an effective tax burden of more than 42 per cent after accounting for income tax, surcharge and cess, making such arrangements an attractive route for tax evasion.

He claimed that tax authorities and tribunals had already detected instances of such alleged fraud, but questioned why criminal prosecution and penalties had not followed. “If deliberate false entries are made for tax evasion, the law provides for stringent penalties and prosecution,” Gohil said, referring to sections 276C(1) and 277 of the Income Tax Act.

He alleged that despite violations being detected, neither the 200 per cent penalty nor criminal prosecution, including provisions for imprisonment of up to seven years, had been pursued in the cases he cited.

The Congress leader also questioned the role of the Election Commission of India, referring to its 2014 guidelines on transparency and accountability in political funding. He said the guidelines required political parties to disclose details of donations and expenditure and for relevant information to be shared with the Income Tax Department.

Gohil alleged that these safeguards had not been effectively enforced and demanded action against those involved in creating and operating such political parties.

He also sought an explanation from Prime Minister Narendra Modi over what he described as the government’s “selective” approach to tackling black money. “Modiji remains silent on black money while the country is being run on what we call fake GDP figures,” Gohil said, accusing the BJP government of adopting a “dual approach” on the issue of black money.