Tax reassessments: Rahul Gandhi, Sonia Gandhi's plea rejected by Delhi HC

NEW DELHI: In a setback to Congress president Rahul Gandhi and his mother Sonia Gandhi , the Delhi high court on Monday justified re-opening of their tax assessments for 2011-12 relating to Associated Journals Ltd, the publisher of National Herald Dismissing their petitions challenging the move, a bench of Justices S Ravindra Bhat and AK Chawla said the Gandhis and Congress leader Oscar Fernandes had "the primary obligation to disclose the acquisition of shares" in Young Indian (YI). The rejection of the pleas of the Congress leaders will pave the way for the I-T department to scrutinise records for assessment year 2011-12.The I-T's demand for reopening of tax returns of senior Congress leaders, including Motilal Vora, is based on its previous assessment order, passed on YI in December 2017, where it has accused them of having "devised the scheme involving pre-ordinate 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 engaged in activities which were noncharitable in nature, according to the order.Recently, the Income Tax Appellate Tribunal (ITAT) had upheld the penalty imposed by the Income Tax department on YI.The HC noted the premise of the reassessment notices was that the non-disclosure of the taxing event - allotment of shares of YI - deprived the assessing officer of the opportunity to look into the records.Referring to Rahul's plea, the bench said, "Had he disclosed in his returns or any related documents about the event (share acquisition) the primary fact would have been on the record" allowing IT officials to take a call if they wish to investigate the acquisition or let it go."However, that is not the case. The TEP (petition filed by BJP MP Subramanium Swamy) and investigation reports - of subsequent vintage, therefore, constituted tangible material which justified reassessment," the HC noted, adding that in case of Sonia and Fernandes, the "returns filed by them were processed under Section 143 (1) which are not treated as "assessments".The Gandhis had come to court arguing they were under no legal obligation to disclose details of acquiring shares in YI since such shareholding is not "interest" in a company. They had claimed shareholding in YI, being a non-profit and charitable company, cannot result in any interest that needs disclosure as neither a director nor shareholder has any right to receive dividends in, or interest in the property of such a company.But the HC disagreed, pointing out "it cannot prima facie be held that an individual is exempted altogether from disclosing her or his interest in the acquisition of shares in the non-profit company." The judges underlined that a person who is a shareholder or a director in a company in an individual capacity is not exempted from disclosing it under the Income Tax Act On behalf of the Centre, additional solicitor general Tushar Mehta argued Swamy's petition and report of the I-T investigation wing showed the only purpose of incorporation of YI appeared to be to acquire properties of Associated Journals Ltd (AJL) having value of several hundred crores for the benefit of the assessees/shareholders through takeover of AJL.