Assessment order passed on taxes of Rahul, Sonia but not given effect, I-T informs Supreme Court

New Delhi | The Income Tax department informed the Supreme Court on Tuesday that an assessment order (AO) with respect to the tax of top Congress leaders Rahul Gandhi and Sonia Gandhi for 2011-12 in connection with the National Herald case has been passed but not being given effect.

The top court allowed the AO, passed on December 31, 2018 raising the tax demand from Congress president Rahul, his mother Sonia and others, to be placed on record after the I-T department insisted on it but said that it would not form any opinion on the merits of the case on its basis.

A bench of Justices A K Sikri, S Abdul Nazeer and M R Shah also asked Sonia and Rahul to file an affidavit and place on record in four weeks a CBDT circular which was issued on December 31, 2018 to clarify about taxes on valuations, but was recalled on January 4.

The court asked the I-T department to file its reply to the affidavit and the circular to be filed by the Congress leaders within a week thereafter. The bench said that interim order passed earlier by the court will continue and posted the matter for further hearing on January 29. The tax matter is related to the National Herald case in which the Congress leaders are also facing criminal proceedings.

Senior advocate P Chidambaram, appearing for the Gandhis, said the CBDT had on December 31 issued a circular clarifying applicability of section 56(2)(viia) of the I-T Act for issue of shares by a company. “This circular December 31, 2018, clarified the point of receive of share. However, interestingly four days later, the CBDT withdrew the circular saying the matter is sub-judice”, he said.

Chidambaram said he would like to place the circular before the court but Solicitor General Tushar Mehta, appearing for I-T department, objected to it saying that the Gandhis need to file an affidavit giving the reasons before placing any material on record.

Chidambaram said that as per the CBDT circular of December 31, 2018, fresh issuance of shares are not taxable and would file an affidavit. “My point is simple. If CBDT is still examining the provision of I-T Act, then I-T officers can’t give their views in court as they are subordinate to the board,” he said.

The bench then asked Mehta what would he like to say on the view taken by CBDT. Mehta replied, “I will place the view as required under law provided they file the CBDT circular on affidavit. Irrespective of CBDT examining the provision, the assessing officer cannot sit tight on any matter and will proceed as per the existing provisions under law. He said that time to time CBDT keeps examining the provisions of the Act based on the feedbacks received from the stakeholders but that does not mean that assessing officers cannot proceeds under the existing provisions of law. “But, I must make one thing clear that the circular in question is not relevant in the present case,” Mehta said and sought to place on record the AO passed on December 31, 2018.

On December 4, last year the apex court had allowed the Income Tax Department to re-assess the tax of top Congress leaders in connection with the National Herald case. The apex court had however, restrained the department from “giving effect” to its order.

The Gandhis and senior Congress leader Oscar Fernandes have challenged the Delhi High Court’s September 10 verdict which dismissed their plea against the re-assessment of their tax for 2011-12.

The apex court had not issued formal notice on the petitions filed by Rahul, Sonia and Fernandes as the I-T department was represented by its counsel. The I-T probe against the Congress leaders has arisen from the investigation into a private criminal complaint filed by BJP leader Subramanian Swamy before a trial court here in connection with the National Herald case, in which the trio is out on bail.

Sonia and Rahul were granted bail in the case by the trial court on December 19, 2015. A tax evasion petition (TEP) was also addressed to the finance minister by Swamy.

In the complaint before the trial court, Sonia, Rahul and others have been accused of conspiring to cheat and misappropriate funds by paying just Rs 50 lakh, through which Young Indian (YI) had obtained the right to recover Rs 90.25 crore that Associated Journals Ltd (AJL) owed to the Congress party. It was alleged that YI, which was incorporated in November 2010 with a capital of Rs 50 lakh, had acquired almost all the shareholding of AJL, which was running the National Herald newspaper.

The I-T 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. It has already issued a demand notice for Rs 249.15 crore to YI for the assessment year 2011-12.

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