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New Delhi: At the heart of questioning of Congress leader Rahul Gandhi by the Enforcement Directorate (ED) lies the acquisition of 1900 (or 38%) shares of Young Indian, a company incorporated on November 23, 2010.
The ED on Tuesday is questioning Rahul Gandhi for the second consecutive day.
On Monday, Gandhi’s questioning took place in two sessions with a lunch break spread over an hour in between.
According to documents seen by this reporter, as per the memorandum of association (MoA) of Young Indian, dated October 14, 2010, it was subscribed by two directors initially - Suman Dubey (550 equity shares) and Satyan Gangaram Pitroda, also known as Sam Pitroda (again 550 equity shares). Young Indian was incorporated under section 25 (making it a non-profit company)of the Companies Act, 1956 with an authorised share capital of Rs 5,00,000. The paid-up capital of the company was 1,100 shares of Rs 100 each of Rs 1.1 lakh.
The main object of the company was: “To inculcate in the mind of India’s Youth commitment to the ideal of a democratic and secular society for its entire populace without distinction as to religion, caste or creed and to awaken India’s youth to participate in activities that may promote the forgoing objective in any manner whatsoever including limitation, participating in all democratic activities through open and transparent electoral process, so as to conform to the ideal of the founding fathers of India, Mahatma Gandhi and Pandit Jawaharlal Nehru.”
On December 13, 2010, the first managing committee meeting of Young Indian took place and Rahul Gandhi was appointed non-shareholder director of the company. Late Motilal Vora and Late Oscar Fernandes came on board as ordinary members. On January 22, 2011, Young Indian made a fresh allotment of its shares - 1900 shares to Rahul Gandhi, 1350 shares to Sonia Gandhi, 600 shares to Vora and 50 shares to Fernandes. Later, Suman Dubey remained a director but transferred his shares in Young Indian to Sonia Gandhi, following which she held 1900 shares in total. Similarly, Pitroda too transferred his shares to Oscar Fernandes, bringing his total shares to 600. Thus, Sonia Gandhi and Rahul Gandhi were majority shareholders as they held 76% of the share capital of the Young Indian. The company was registered under section 12A of the IT Act and thus enjoyed the benefit of tax exemption.
The second company in the saga is Associated Journals Limited (AJL) which was originally incorporated on November 20, 1937, by Pandit Jawaharlal Nehru for the publication of newspapers - National Herald (English), Navjivan (Hindi) and Quami Awaz (Urdu). Documents show that the publication of newspapers was suspended on many occasions due to financial difficulties and labour problems but the publication of newspapers finally stopped on April 2, 2008, and all the employees of the company availed voluntary retirement scheme from the same date.
Since then the company was earning income from its real estate only, the IT department alleged. Vora and Fernandes were Managing Director and Director of the company, respectively.
The properties held by the company were – 1. 5-A, Bahadur Shah Zafar Marg in Delhi and in Village Phulwari of Patna as leasehold land. It had freehold land on Bishweswhwar Nath Road in Lucknow, C-17, Sector-6 of Panchkula and on Part Aliyavar Marg in Bandra of Mumbai. The company had two buildings - on the land it held in Delhi and Lucknow while capital work was in progress in Mumbai, Panchkula and Patna when the case started.
National Herald building on Bahadur Shah Zafar Marg in DelhiCharges levelled by Income Tax department
The IT department in its investigation claimed that most of these properties were acquired by the AJL by sale or lease from Central and State Governments for purpose of publication of newspapers. But after the closure of the newspaper business in 2008, the AJL started the “business of construction of buildings for commercial purpose and had let out its existing building on rent”.
The IT department in its proceedings said the All India Congress Committee or AICC, the apex body of Indian National Congress Party had advanced loans to AJL from time to time and on October 16, 2010, the entire loan amount stood at Rs 90.21 crore. On the same day, the AICC transferred the entire loan due to the AJL in favour of Young Indian for only Rs 50 lakh. The loan assigned to Young Indian was converted into shares of the AJL and the company allotted over nine crore shares to Young Indian in lieu of the loan. Consequently, the authorised capital of the AJL was increased from Rs 1 crore to Rs 10 crore and thus 99% shares of the AJL were transferred to the Young Indian.
The IT department further held that Young Indian didn’t have funds to buy a loan of the AJL that was due to the AICC. Therefore, it took loan of Rs 1 crore from a Kolkata-based company, Dotex Merchandise Private Limited.
The IT department contended that when the cheque of Rs 1 crore (dated December 24, 2010) was received from Dotex, Young Indian did not even have a bank account where the cheque could be deposited.
It was on December 28, 2010 (about 10 days after the assignment of the loan), a formal deed of assignment was executed by the AICC assigning the loan of Rs. 90.21 crore in favour of Young Indian. The IT sleuths further claimed that a bank account was opened by Young Indian with Citibank only on February 14, 2011, and the cheque dated December 24, 2010, issued by Dotex for Rs. 1 crore was deposited in the bank account. On February 26, 2011, Young Indian issued a cheque of Rs. 50 lakhs as consideration for assignment of Rs. 90.21 crore debt payable by the AJL to the AICC.
Interestingly, the loan of Rs. 1 crore was also flagged as a suspicious transaction in the Suspicious Transactions Report (STR) by Financial Intelligence Unit (FIU).
According to the IT department, Young Indian had no business or income of its own and had not incurred any expenditure for the object of the company (Youth Commitment to the ideal of democratic and secular society) in the financial years 2010-11, 2011-12 and even in subsequent years. But it claimed expenditure of Rs. 50 lakh for purchase of loan of the AICC to the AJL as expenditure on the object of the company. The IT sleuths alleged that the primary motive of incurring an expenditure of Rs.50 lakh was to acquire a “real estate company” which it claimed the AJL was, therefore the claim the expenditure of Rs 50 lakh was incurred on “Youth Commitment to the ideal of democratic and secular society” is incorrect.
The IT sleuths alleged that Young Indian had only carried out a takeover of AJL with the sole intention to obtain benefit from the business assets of the AJL represented by its immovable properties. The takeover of immovable properties of the AJL was otherwise not possible without the sale of these properties to Young Indian at Fair Market Value which was several times more than the price at which such properties were purchased by the AJL.
The IT department said Young Indian filed its income tax return for the assessment year 2011-12 on October 11, 2012, declaring nil income. The said return was processed u/s 143(1) of the IT Act. But years later, an information was received from the Investigation Wing of the Income-tax Department that the Young Indian had purchased a loan of Rs.90.21 crores for only Rs 50 lakh, the IT department assessed that the purchase of loan and the transaction of transferring of shares from the AJL to Youn Indian was in fact transfer of its properties as well as accruals of business assets of the AJL. Therefore, it claimed that the income chargeable to tax has escaped assessment during the year under consideration and proceedings was initiated by issuing of summons on January 10, 2017.
As per IT documents, the 1 crore loan from Dotex (which belonged to RPG Group of Kolkata) was interest-bearing. But an IT survey conducted on Dotex found that the company was originally incorporated by persons engaged in providing “accommodation entries” and subsequently the company was purchased by RPG Group from the entry operators. The IT department further said previous directors of Dotex (before it was taken over by the RPG Group) were directors of 50 other companies engaged in the similar business of providing “accommodation entries”.
Why ED stepped in
Now, the question is how the ED has come into the picture which resulted in the questioning of Rahul Gandhi and summons to his mother Sonia Gandhi.
The ED officials say there is enough evidence on record to show that immovable properties to the tune of Rs 800 crore belonging to the AJL were taken over by Young Indian.
They further contend that a Delhi Metropolitan Magistrate's Court took cognisance of the offences under sections 403, 406, 420, and 120B of the Indian Penal Code (IPC) in connection with the alleged takeover of properties of the AJL by Young Indian. The court issued summons to Congress president Sonia Gandhi and Rahul Gandhi and other accused in the case and they all are on bail as of now.
The appeal of Sonia Gandhi and Rahul Gandhi was dismissed by the high court as well as by the Supreme Court, the officials argued.
They further pointed out that since the court of Metropolitan Magistrate has taken cognisance particularly sections 420 (cheating) and 120B (criminal conspiracy) of the IPC, they can pursue charges of money laundering against Sonia Gandhi and Rahul Gandhi as the offences under both the sections invoked in the matter are scheduled offences under the Prevention of Money Laundering Act (PMLA).
The ED sleuths claim Young Indian took over the AJL properties, worth more than Rs 800 crore, as a sequel to these offences, therefore they hold the amount of Rs 800 crore as "proceeds of crime" under the PMLA.
The ED officials added that their case is bolstered by the fact that the immovable properties in question were rented out and therefore used commercially and no charitable activity was being carried out since 2010, as claimed by the accused.
However, Congress leaders have repeatedly refuted all the charges.