HC dismisses Sonia, Rahul's plea against tax reviewing

The Delhi High Court on Monday dismissed a plea by Congress leaders Sonia Gandhi and Rahul Gandhi against reassessment notice issued to them on March 31 by the Income Tax department for 2011-12.

A bench of Justices S Ravindra Bhat and A K Chawla rejected their plea that they were not required to disclose share acquisition in a not-for-profit and charitable company, Young India.

It was claimed that Young India, which was incorporated in November 2010 with a capital of Rs 50 lakh, had acquired almost all shareholdings of the Associated Journals Limited (AJL), which was running the National Herald newspaper.

In this process, Young India had also acquired AJL's debt of Rs 90 crore. The tax department had said the shares Rahul has in Young India would lead him to have an income of Rs 154 crore and not about Rs 68 lakh, as was assessed earlier.

It has already issued a demand notice for Rs 249.15 crore to YI for the assessment year 2011-12.

“Here a company acquired an asset on 13.12.2010 (i.e. assignment of a debt from AJL, to the tune of Rs 90.21 crores, for consideration).When the assessees acquired the shares through allotment, the taxing event, as it were, occurred on account of the differential between what is said to be market value and what was value paid by them. As a result, it is held that the primary obligation to disclose about the acquisition of shares, was not relieved,” the court held.

The court noted that the share allotment to Rahul (1,900 shares) and Oscar Fernandes (600 shares) on December 22, 2011, and the allotment of 1,350 shares to Sonia (which increased her holding to 1,900) on the same day is said to be the taxing event.

It said there was no contention that anyone of the tax department was hostile to the petitioners. It also noted that there was no allegation of personal mala fides against any official.

“Consequently, the mere circumstance that reassessment notice was issued on March 31 does not vitiate the notice or the proceedings,” it said.

The income tax cases against the Congress leaders have arisen from the probe into the private criminal complaint filed by BJP leader Subramanian Swamy before a trial court in connection with the National Herald case.

The move by the department followed its probe on a complaint claiming that the Gandhis had misappropriated AJL's assets while transferring their shares to the newly formed Young Indian.