Setback to Gandhis: ITAT upholds Income Tax Order against Young Indian [Read Order]

The Income Tax Appellate Tribunal, Delhi bench on Thursday upheld the case against the Gandhi family in connection with commercial immovable properties worth more than Rs 800 crore by incorporating Young Indian having a share capital of Rs 5 lakh and by taking hawala entry of Rs 1 crore from a shell company of Kolkata.

The controversy had started with the acquisition of shares of Associated Journals Ltd on February 26, 2011. The AJL was incorporated as a public limited company on November 20, 1937 under the Indian Companies Act, 1913, for the purpose of publication of newspapers in different languages, and started publishing newspapers such as "National Herald" in English, "Navjivan" in Hindi and "Qaumi Awaz" in Urdu.

Earlier, the assessee challenged the assessment orders before the Delhi High Court twice wherein the Court dismissed both the writ petitions. The order of the Income Tax authorities levying tax of Rs 249.15 crore has already been confirmed by the CIT(A) in the first appeal on December 6, 2018. The whole process of takeover of commercial property of the AJL was completed within three months from the date of incorporation of Young Indian without paying any taxes and stamp duty. The Income Tax Department had levied tax of Rs 249.15 crore on the benefit of Rs 414.40 crore accrued to Gandhi family through this "fraudulent transaction" by order dated December 27, 2017.

Young Indian has challenged the order of the CIT (A) before Income Tax Appellate Tribunal (ITAT), and its second appeal was disposed of by the ITAT, by order dated March 31, 2022, confirming the order of the assessing officer and first appellate authority holding hat benefit of Rs 395 crore accrued to Gandhi family, as against the benefit determined at Rs 414.40 crore by the the Income Tax Department, giving small relief of approximately Rs 17 crore to the Gandhi family.

“If we succinctly analyse the sequence of events, then it can be seen that, the appellant company was incorporated on 23.11.2010 and the first step which has been taken was the assignment of loan of Rs.90.21 crores by AICC to Young Indian by journal entry; and then this loan has been assigned on a very paltry sum of Rs.50,00,000/-, which too appellant did not had the funds when the loan was assigned. Subsequently, after two three months, an account was opened in the name of appellant company and loan is received from a Kolkata based company named Dotex for a sum of Rs.1 crore and that amount is given to AICC for assignment of loan. Immediately thereafter, the entire shareholding of AJL is allotted, i.e., 9.021, crore equity shares in lieu of assignment of loan of Rs.90.21 crores,” the Tribunal said.

“Simultaneously the authorized share capital of AJL was raised to Rs.10 crores from Rs.1 crore. It is not a case here that by acquiring the entire stake in AJL, the appellant company has infused certain funds to revive the business or any finance was arranged to raise capital of AJL so that it can revive its business. This itself goes to substantiate the conclusion and finding of the Assessing Officer that the entire scheme was to acquire the assets of AJL by the appellant company and there was no other motive, which has been clamored by the appellant that it was purely for charitable purposes. Because, not a single instance of carrying out any charitable activities was found to be carried out right from the year 2011 till the cancellation of its charitable status or till the passing of the impugned assessment order,” the Tribunal added.

To Read the full text of the Order CLICK HERE

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