I-T can look into Rahul, Sonia Gandhi's FY 11-12 returns: Delhi High Court

Trouble mounted for Congress president Rahul Gandhi and his mother Sonia Gandhi after an order by the Delhi High Court on Monday paved the way for the Income Tax Department to reopen their tax assessment for the year 2011-12. This means the HC has stamped its approval on the demand notice of Rs 249.15 crore raised against Rahul for not disclosing his income from Young India (YI) after it acquired Associated Journals Limited (AJL), the holding company that runs the National Herald.

Both the Gandhis, along with Congress leader Oscar Fernandes, were aggrieved by the demand notice issued by the Income tax Department to Young India and challenged it before the Delhi High Court. Dismissing their pleas, the bench of Justices S Ravindra Bhatt and AK Chawla said, "The writ petitions have failed." Senior advocates P Chidambaram and Arvind Datar represented the Congress leaders, while Additional Solicitor General (ASG) Tushar Mehta presented the government's case.

Finding no error in the procedure adopted by the I-T department, the bench said that the tax agency was well within its powers to re-assess the income after it was found that Rahul's shares in YI added his income to Rs 154 crore and not Rs 68 lakh, as professed by him in 2011-12. According to the department, the Congress chief had misappropriated AJL's assets while transferring the shares from AJL to YI. Rahul has been the director of YI since 2010.

With this order, the I-T authorities are free to take coercive steps against Rahul and Sonia.

On August 16, when the court reserved the orders, an oral assurance was obtained from ASG Mehta not to proceed against the petitioners until judgment was pronounced.

The case followed a private criminal complaint filed by BJP leader Subramanian Swamy in connection with the National Herald acquisition case. He accused both Sonia and Rahul, along with other Congress members, of conspiring to cheat and misappropriate funds through YI, which was incorporated in November 2010 with a capital of Rs 50 lakh. As YI acquired almost all shareholdings of AJL, it also acquired AJL's debt of Rs 90.25 crore, payable towards Congress party.

Chidambaram opposed such claims and said that Sonia paid Rs 1.9 lakh for her shares in YI and said it was "bizarre" that she had been slapped with a notice claiming her taxable income to be Rs 154 crore. He even attacked the formula applied by the tax department in calculating the tax liability, claiming that the debt of Rs 90 crore bought by YI from AJL was converted into equity and this would not result in any taxable income. I-T department valued the equity of Rs 90 crore to be worth Rs 407 crore.

Interestingly, the lawyers representing Congress leaders requested the HC to restrain media from reporting the proceedings as it dealt with confidential documents, but the court turned down the request. Besides Rahul, Sonia and Fernandes, former Congress treasurer Motilal Vora, Sam Pitroda and Suman Dubey were named in the complaint.

It is most likely that the Congress will move Supreme Court against the HC verdict.