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Updated: Aug 16, 2018 21:57 IST

The income tax department on Thursday told the Delhi high court that Congress leader Rahul Gandhi’s tax assessment for the year 2011-12 was reopened as material facts were concealed.

The department’s contention was made before a bench of Justices S Ravindra Bhat and AK Chawla by additional solicitor general (ASG) Tushar Mehta.

The bench, after hearing the arguments for two hours, reserved its order for September 10 on the pleas of Rahul, his mother Sonia Gandhi and Congress leader Oscar Fernandes, all of whom have challenged reopening of their tax assessments for the same year (2011-12).

While reserving the order, the bench orally asked the tax department not to take any coercive step against Sonia, Rahul and Fernandes till pronouncement of its verdict.

When the bench was about to pass a written interim direction on this, Mehta said there was no need to pass a written order and assured that no coercive action would be taken in the meantime. After which senior advocate P Chidambaram, appearing for Sonia Gandhi, said he had faith in the oral statement made by the ASG.

ASG Mehta argued that the Congress leaders had alleged malafide on the part of the tax department but had not made any averments in this regard.

Regarding the leaders’ argument that a notice was sent to them by the department at 11:28 pm on March 31, 2018, the law officer said adhering to rules cannot be termed ‘malafide exercise’.

“I (assessing officer) will be guilty of dereliction of duty if I do not send the notice,” he argued.

Chidambaram said the notice issued by the tax department informing the reopening of assessment was “perverse” and sent with “non-application of mind” and urged that it be set aside.

He also said that the Congress leader paid Rs 1.9 lakh for her shares in Young Indian (YI) and now she was told that Rs 154 crore was taxable income. He termed it a “bizarre” argument.

During the hearing, the ASG argued that Rahul’s assessment was reopened as income from other sources had escaped and material facts, including that he was a director of YI since 2010, was concealed by him.

“He (Rahul) failed to full and true disclosure of material facts,” he said.

“The assessing officer got to know through some sources and she conducted her own enquiry and was of prima facie view that this income has escaped the assessment and it must be looked into after which the assessment was reopened,” he said.

Earlier, Sonia’s lawyer had told the high court that the tax department had “wrongly invoked and applied” the formula for calculating her tax liability after reopening her assessment for the year 2011-12.

Another objection raised by her lawyer was that the debt of Rs 90 crore bought by YI from Associated Journals Ltd (AJL), which owns National Herald newspaper, was converted into equity and this would not result in any income which was taxable.

The lawyer said even if the equity resulted in taxable income, it would not go into the hands of YI’s shareholders like Sonia, Rahul and Fernandes. YI, which was incorporated in November 2010 with a capital of Rs 50 lakh, had acquired almost all shareholdings of the AJL. In this process, YI had also acquired AJL’s debt of Rs 90 crore.

Senior advocate Arvind Datar, appearing for Rahul, had earlier said that arguments during the hearing may be reported and urged the court to order that confidentiality be maintained regarding the contents of the petitions.

However, the bench had declined to issue any such direction saying “we cannot go into all this” as it would be akin to going on a “wild goose chase”. Chidambaram had questioned how a debt of Rs 90 crore which was converted into equity acquired a value of Rs 407 crore as claimed by the tax department.

The court had earlier also rejected the oral plea of Rahul’s lawyers to prohibit the media from reporting or publishing the court proceedings. The income tax department had said the shares Rahul has in YI would lead him to have an income of Rs 154 crore and not about Rs 68 lakh, as was assessed earlier.

The tax department has already issued a demand notice for Rs 249.15 crore to YI for the assessment year 2011-12. The IT department’s move followed its probe on a complaint alleging that the Gandhis had misappropriated AJL’s assets while transferring their shares to the newly formed Young Indian.

BJP MP Subramanian Swamy, in a private criminal complaint filed before a trial court, had accused Sonia, Rahul and others of conspiring to cheat and misappropriate funds by paying just Rs 50 lakh, through which the YI had obtained the right to recover Rs 90.25 crore which the AJL owed to the Congress party.

All the accused, including Motilal Vora, Oscar Fernandes, Suman Dubey and Sam Pitroda, have denied the allegations levelled against them.