National security cover for political party donations!

Two months ago, I had written in this column about my struggle to get information about the number of donors (mind you, the number, not their names) who fund political parties and claim 100 per cent income tax exemption in return (DH 26/02/2023). The Income Tax (I-T) Department had sent stock replies twice claiming that such information cannot be retrieved from the fully automated income tax returns (ITR) filing system.

Earlier that month, the Revenue Department, under which the I-T Department functions, informed the Lok Sabha that 2.09 crore taxpayers aged between 18-35 years filed ITRs and paid income tax to the tune of Rs 93,318 crore during FY 2022-23.

Six days ago, the I-T Department used data analytics to put on notice 8,000 taxpayers who had made large donations to charitable trusts between 2017 and 2021. These contributions, allegedly, were not in line with their declared income. Many of them, said to be small businesses, have apparently used this method to lower the income tax slab applicable to them or get full tax exemption, stealthily.

The “completely automated” ITR filing system seems to have a tendency to become unhinged occasionally and reveal many kinds of interesting data about ordinary taxpayers and those who make donations to NGOs and charitable trusts. But it quickly clams up into a shell when quizzed about details of donors to political parties. Is it machine learning or artificial intelligence of a dubious kind which bars public scrutiny of only those who give to political parties?

In its latest reply, the I-T Department has taken information denial under the RTI Act to another plane. When questioned about the methodology adopted to calculate the amount of revenue foregone because of tax exemptions claimed by individuals and corporates for their political party donations, the Central Public Information Officer (CPIO) replied that such information was in (sarkari) files connected with budgetary processes. Citing a 16-year-old decision of the Central Information Commission, issued when the RTI Act was barely two years old, the CPIO replied that matters connected with the budget are essentially part of the legislative process; it is not possible for the Finance Ministry (of which the I-T Dept is a part) to furnish any answers about how that process was completed and various approvals were taken. Disclosure of such information would be prejudicial to the State’s interest, he argued! This despite the RTI Act’s foundational principle, mentioned in Section 8, that information which cannot be denied to parliament must not be denied to a citizen.

So, the national security exemption has been invoked to turn into a sarkari secret simple information about how the tax foregone figures are calculated. These figures are mentioned in Annex-7 of the Receipt Budget, which parliament approves year after year.

The CPIO did not stop at mentioning just one ground to reject the request for information. This officer of Joint I-T Commissioner rank went on to claim the exemption on the basis of fiduciary relationship (because the files are apparently confidential!) under Section 8(1)(e), and also commercial confidence, trade secrets and intellectual property rights under Section 8(1)(d) to fortify his reply! The Sarkar’s officers sure know how to muster such “iron-clad” arguments to protect the interests of their political masters.

In the era of Electoral Bonds, when anonymous donations are fast displacing more transparent methods of giving to political parties, disclosure of information about such matters definitely serves the public interest better. But some readers might not find such a philosophical position attractive enough or may even fear that the revelation of such data might reveal the truth about their very patriotic political leaders, which would be uncomfortable to bear. The tax revenue foregone by the State between 2012 and 2021 on account of political party donations is Rs 4,766.95 crore. I trust these revenue impact figures – and what they reveal of the colossal amounts of money being secretly donated to political parties – may be more appealing and reason enough for them to demand greater transparency.