Offering relief to actors Shah Rukh Khan and Juhi Chawla, the Bombay High Court has stayed the show-cause notices issued to them by the Income Tax Department over alleged undervaluation of shares. In an interim order passed last Friday, a bench of Justices M S Sanklecha and R I Chagla held that the IT department's notices were prima facie not based on any concrete evidence or finding.
In March 2017, the IT department had issued notices to the Knight Riders Sports Pvt Ltd (KRSPL) and its directors Shah Rukh Khan, his wife Gauri Khan and Juhi Chawla. According to the notice, after the success of IPL, KRSPL issued 50 lakh shares to a firm in Mauritius and another 40 lakh shares to Chawla. These shares were allotted at a value of Rs 10, whereas the actual value of these shares was much higher.
The department claimed that Chawla then sold her shares to the same company in Mauritius for Rs 10 each. Thus, the foreign company was issued 90 lakh shares at par value, while the actual cost of share at the time of sale was around Rs 86 to Rs 99 per share. This resulted in a loss of foreign exchange to the extent of Rs 73.6 crore.
The bench, however, noted that in 2013, an assessing officer of the IT department had looked into the above allegations, and after being satisfied that there was no wrongdoing, he had closed the case. However, the department issued fresh notices in 2017 after going through a change of opinion and decided to reopen the case.
"The assessing officer being satisfied with the valuation of shares, submitted by the assessee, did not seek any further information. Therefore, when on the same basis, without any reasons in support of the re-opening, the notice proceeds, it prima facie appears merely to be change of opinion," the bench said.
"We are of the view that the reasons in support of the impugned notice, prima facie, proceed on a change of opinion and, therefore, prima facie, lacks jurisdiction," it added. Khan, along with Chawla and others, owns IPL team Kolkata Knight Riders.
