Slapping Rs 407cr tax liability in YI case mala fide, Gandhis tell SC

NEW DELHI: Challenging the income tax department’s decision to reopen their tax assessments for 2011-12 relating to Associated Journals Ltd, Congress leaders Rahul Gandhi, Sonia Gandhi and Oscar Fernandes told the Supreme Court on Tuesday that the department’s action was “mala fide” and called the slapping of Rs 407 crore tax liability on them “illogical, perverse and irrational”.
Senior advocate P Chidambaram, appearing for Sonia Gandhi, told a bench of Justices D Y Chandrachud and Hemant Gupta that the IT department decided to reassess the income without application of mind and the decision defied common sense as it came to the conclusion that she had “escaped income” of over Rs 141 cr for getting 1900 shares in a non-profitable organisation- ‘Young Indian’.
“It is a totally perverse order and intended to saddle the petitioners with huge tax liability. It is illogical and perverse and no reasonable person would come to such conclusion,” Chidambaram contended.
The court, however, set the next hearing for August third week, saying the income tax tribunal should first decide on the issue.
The Congress leaders approached the apex court after the Delhi High Court turned down their plea and justified re-opening of their tax assessments for 2011-12. Dismissing their petitions, the HC had said the Gandhis and Congress leader Oscar Fernandes had "the primary obligation to disclose the acquisition of shares" in Young Indian (YI).
The I-T department’s demand for reopening of tax returns of Congress leaders is based on its previous assessment order, passed on YI in December 2017, in which it accused them of having "devised the scheme involving preordinate artificial and fraudulent steps to take over AJL". The tax demand was imposed on YI after the department cancelled the tax exemption of the company - which had shown nil income for 2010-11 - as it had been found to be engaged in activities which were allegedly non charitable in nature.
Chidambaram contended that only asset of the company was the debt of Rs 90 crore and YI did not pay even one rupee to the shareholders. He also challenged the IT department’s decision on the ground that no valid notice was served to them within the limitation period for reassessing the income and the department had retrospectively withdrew the tax exemption given to Young Indian.
Senior advocate Kapil Sibal, appearing for Rahul Gandhi, informed the court that the total tax liability fixed on three Congress leaders is Rs 407 crore.
As Chidambaram questioned the IT department’s withdrawal of tax exemption retrospectively, additional solicitor general Sanjay Jain and lawyer Zoheb Hossain, appearing for the IT department, told the bench that law permits granting of tax exemption from retrospective date and there was nothing wrong in withdrawing exemption from earlier dates. They urged the court to decide the issue as any decision of IT tribunal would be further challenged in the high court and the proceedings would be delayed. But the bench said that the issues are intrinsically linked and adjourned the hearing.
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