Income-Tax Appellate Tribunal finds no error in Jagan firm\'s value

Hyderabad: A recent order of the Income-Tax Appellate Tribunal (ITAT), Hyderabad, dealing with the flow of investments into Andhra Pradesh Chief Minister Y.S. Jagan Mohan Reddy’s media house Sakshi, though indirectly, exposed the chinks in the armour of the Central Bureau of Investigation’s quid pro quo cases against him and investors in the companies.

Much to the delight of the YSR Congress supremo, the issues that came up for adjudication and the material evidence submitted by the I-T department, which mostly relied on the CBI chargesheets, only substantiated Jagan Mohan Reddy’s allegations that the quid pro quo cases were botched-up efforts of the then Congress-led UPA government to fix him for rebelling against the Gandhi family.

Jagan Mohan Reddy’s companies approached the tribunal challenging the levy of income-tax on about Rs 300 crore that they had received from investors after selling shares at a premium of Rs 350 each. Unlike in normal cases, the I-T department treated the investments into the companies as Jagan Mohan Reddy’s income and levied tax.

The argument the department put forth was that the price of each share was Rs 10 but was sold at a high premium. The ITAT dismissed the I-T department’s contention and made certain observations which may have a bearing on the CBI cases. It ruled that the allegation on share premium was bogus in nature and had no basis.

The chargesheets filed by the CBI revealed that the investigation agency had built its case mainly on Jagan Mohan Reddy receiving investments from the companies that in turn were benefited by the government and that illegal routing of money was done through suitcase companies. It also mentioned what it described as jacked up valuation of the media house to attract investments as a strong base to its case.

The I-T department reproduced the chargesheets as evidence to support its argument in front of the ITAT. The tribunal observed that, “nothing was brought on record to substantiate the fact that unaccounted income of the assessee (Sakshi) or the unaccounted income of the investor companies, (which are co-accused in quid pro cases), were utilised and brought in the garb of share capital and share premium in assessee company.”

Further, it said, “We find that the law is now very well settled that it has to be appreciated while evaluating evidence, contemporaneous genuine documentary evidence has to be given precedence over unsupported and uncorroborated statement.”

Dismissing questions raised against the creditworthiness of the investor companies, the tribunal said the companies did not indulge in cash transactions but invested from their available bank balances and some of the companies had net worth that was much more than their investment in Jagan Mohan Reddy’s companies.

With regard to suitcase companies, the material submitted by the I-T department itself revealed that the Central agencies, which alleged that some of the investing companies’ address could not be found, conveniently hid the fact that the companies did approach them providing new address but no effort was made to drop the allegation.

The tribunal referred to a report submitted by the Kolkata income-tax department wing about the genuine income source of companies, which were dubbed as suitcase entities of Jagan Mohan Reddy by the CBI.