Supreme Court nod to reassess tax paid by Sonia Gandhi, Rahul Gandhi in 2011-12

The Income Tax department got a crucial go ahead from the Supreme Court on Tuesday to reopen the tax assessment of Congress President Rahul Gandhi, his mother Sonia Gandhi, and senior Congress leader Oscar Fernandez for the year 2011-12. However, any order against them will not be implemented till the court decides on the appeals filed by the Gandhis.

The three Congress leaders were asked by the I-T department to explain why their income for the year 2011-12 did not disclose the acquisition of shares in Associated Journals Limited (AJL) – the holding company of National Herald. This order was challenged by the trio before the Delhi High Court which dismissed the petitions on September 10, 2018 following which the matter reached Supreme Court.

The bench of Justices AK Sikri, Ashok Bhushan, and S Abdul Nazeer told the lawyers appearing for the Congress leaders and I-T department that the hearing cannot conclude before the court breaks for winter vacation. As the assessment is to be done before December 31, the I-T department sought permission to proceed with the re-assessment.

Senior advocates P Chidambaram and Kapil Sibal, appearing for the Gandhis, suggested that while the assessment could proceed, the order cannot be implemented till the issue is pending before this court. The bench agreed and directed the assessment order to be passed, but not to be given effect to. The matter will now be taken up on January 8.

The case was an outcome of the National Herald case, where the trio had been accused of conspiring to cheat and misappropriate funds by using Young Indian Limited (YIL) to acquire the debt that Herald owed to the Congress Party. Using Rs 50 lakh, the YIL run by Rahul Gandhi as Director, paid Rs 50 lakh to acquire a debt of Rs 90.25 crore, which the Associated Journals Ltd owed to the Congress party.

The tax department had said the shares Rahul has in YIL would increase his income to Rs 154 crore and not Rs 68 lakh, based on which his income was assessed in the financial year of 2011-12. The department issued a demand notice for Rs 249.15 crore accruing to YIL for the same assessment year.

The HC agreed with the I-T department. Its judgment said, "The entire premise of the reassessment notices in this case is that the nondisclosure of the taxing event, i.e. allotment of shares (and the absence of any declaration as to value) deprived the Assessing Officer of the opportunity to look into the records. In the case of Mr. Rahul Gandhi...had he disclosed in his returns or any related documents about the event (share acquisition) the primary fact would have been on the record. The investigation reports – of subsequent vintage (after completion of Mr. Gandhi's assessment), therefore, constituted tangible material which justified reassessment."

Hidden Figures

I-T department said the shares Rahul has in YIL would increase his income to Rs 154 crore and not Rs 68 lakh, based on which his income was assessed in the financial year of 2011-12. The department issued a demand notice for Rs 249.15 crore.