The Delhi High Court  reserved orders in the petitions filed by Congress President Rahul Gandhi and Congress leaders Sonia Gandhi and Oscar Fernandeschallenging the Income Tax Department’s move to re-assess their tax liability for the assessment year (AY) 2011-2012.

The order will be pronounced by a Division Bench of Justices S Ravindra Bhat and AK Chawla on September 10.

Appearing for the Income Tax Department, Additional Solicitor General Tushar Mehta gave an oral assurance to the Court that no coercive action would be initiated against the Gandhis and Fernandes in the meantime.

The IT department issued a notice to Rahul Gandhi on March 31, 2018 for allegedly concealing information on his status as a Director of Young Indian Pvt Ltd. Gandhi’s shares in Young Indian allegedly resulted in an income of Rs. 154 crore, as opposed to the earlier assessed income of Rs. 68 lakh.

A similar notice was issued to Sonia Gandhi and Fernandes on the same day for allegedly not disclosing income arising out of their status as shareholders in Young Indian for the AY 2011-2012.

It is the IT Department’s case that the value of shares held by the Gandhis and Fernandes in Young Indian should have been calculated on the basis of its subsequent acquisition of the assets of Associated Journals Ltd.

Hence, the Income Tax Department sought to re-open the assessment to compute the “fair market value” of the said shares.

ASG Mehta urged the Court not to interfere with the IT Department’s decision to re-open the assessment, saying,

“The High Court cannot replace the prima facie opinion of the Assessing Officer (that some income has escaped assessment) at this stage.”

At this stage, the Assessing Officer need not “write a judgement” to support his prima facie opinion, Mehta further said.

Rebuking the allegations of mala fides behind issuance of a notice at 11.28 pm on the night of March 31, Mehta argued that mere “promptitude” to adhere to the time frame stipulated by law does not suggest a lack of application of mind or mala fide intention on the part of the Assessing Officer.

It was further argued that the petitioners’ stand that a company registered under Section 25 of the old Companies Act entails a “hands-off” approach with respect to income tax proceedings, was legally untenable.

Young Indian is at the center-stage of what is called the National Herald misappropriation case. The matter is related to the assignment of a Rs. 90 crore loan advanced by the Congress party to Associated Journal Ltd – owner of National  Herald – to Young Indian for a consideration of Rs. 50 lakh. The debt of Rs. 90 crore was subsequently converted into equity.

Litigation with respect to a demand notice for Rs 249.15 crore to Young Indian for the assessment year 2011-12 is already pending before the High Court.

Rahul Gandhi was represented by Senior Advocate Arvind Datar.

Sonia Gandhi and Oscar Fernandes were represented by Senior Advocate P Chidambaram.

As carried in BB