The Supreme Court has paved the way for income-tax assessments of the two businessman sons of former Chief Justice of India (CJI) YK Sabharwal over share transactions linked to their purchase of a prime property on Delhi’s Sikandra Road in 2010, news agency PTI reported.A bench comprising Justices JB Pardiwala and K Vinod Chandran dismissed four appeals filed by the two brothers – Chetan and Nitin Sabharwal – as it upheld income tax reassessment notices issued for assessment years 2008-09 and 2009-10.The court held that the Income Tax Department's March 31, 2015, notice was backed by valid "reason to believe" under Sections 147 and 148 of the Income Tax Act, 1961.In its judgment, passed on October 28, the Supreme Court said the investigation report submitted by the director general provided tangible material for the Assessing Officer to reasonably believe that income chargeable to tax had escaped assessment. The bench noted that "reason to believe" refers to the existence of a cause or justification and does not require the officer to conclusively establish that income had escaped assessment.It observed that courts cannot examine the sufficiency of the reasons and rejected the argument that overvaluation cannot result in escaped income. "The escapement of income at the hands of the seller of the shares, the proceeds of which were later utilised to acquire capital assets to thus claim deduction, could as well be a diversion of income, assessable to tax under the guise of sale proceeds which, in the present case, assumes relevance for reason of the sale proceeds being far above the actual value of the shares...," the Supreme Court said in its judgment, PTI reported.It added, "The present case is not one wherein it could be said that the Assessing Officer had only a vague feeling on the basis of which he recorded that proper investigation was necessary.
We are of the view that a conclusion that the truth of the alleged transactions needs to be investigated is not the same thing as having reasons, post investigation, to issue a notice."The matter traces back to October 2007, when the Sabharwal brothers and two other shareholders agreed to sell shares of Pawan Impex (P) Ltd and SVIIT Software (P) Ltd to GYS Real Estate Pvt Ltd, PTI said in its report.Prices agreed upon for the transaction were Rs 195 crore and Rs 60 crore, with each seller entitled to 25 per cent of the proceeds.Chetan Sabharwal's assessment for 2008-09 was completed in December 2010 and his returned income was accepted.The Income Tax Department completed Chetan Sabharwal's assessment for 2008-09 in December 2010 and accepted the income declared in his return.A subsequent probe by the department questioned the share valuation, noting that the sale consideration appeared significantly higher than the value justified by the underlying land and buildings.It also found that a significant portion of the sale proceeds was used to purchase a property on Sikandra Road in April 2010.The brothers had claimed exemption from capital gains tax on the investment under Section 54F of the Income Tax Act.Justice YK Sabharwal served as India's 36th Chief Justice from November 1, 2005, to January 14, 2007. His judicial career spanned the Delhi High Court, Bombay High Court and the Supreme Court.- Ends(Based on inputs from PTI)