How strong is ED's case against Rahul Gandhi and Sonia Gandhi

New Delhi: So what exactly is the alleged National Herald scam for which the Enforcement Directorate (ED) has summoned Congress present Sonia Gandhi and her son Rahul Gandhi for questioning?

According to the Income Tax (IT) department’s investigation, on the basis of which the ED launched a money laundering probe in the alleged scam, which Congress party denies and accuses the Narendra Modi government of carrying out political vendetta, it was in 2008 that the Associated Journals Limited or AJL, the company that used to publish National Herald, decided to close down printing and publishing the newspaper. 

The IT department alleged that the purpose closing down printing and publishing of newspaper was to use properties of AJL, located in posh areas of Delhi, Mumbai, Lucknow, Patna and Panchkula, for commercial purposes. 

The IT department said the properties were acquired by the AJL at “ridiculously low price” from the central and state governments. Therefore an alleged scheme was devised to allot 99 percent shares of AJL in another company named “Young Indian” without changing the legal ownership of AJL over these high-value properties. Two objectives of the scheme were - (a) to obtain high value assets of AJL and not to pay any tax on the earning income from the same. 

The IT department said Young Indian was incorporated on November 23, 2010 by Sonia Gandhi, Rahul Gandhi, Motilal Vora and  Oscar Fernandes. By February 26, 2011, that is within three months, allotment of 99% shares of AJL to Young Indian was complete. Investigators alleged that allotment of 99 percent shares of AJL to Young Indian was in violation of the provisions of Companies Act as well. 

It was also alleged that the so-called scheme included a transaction involving purchase of a loan of Rs. 90.21 crore by the All Indian Congress Committee to AJL for a sum of Rs. 50 lacs by Young Indian. The IT department termed the transaction as fraudulent and loan as “non-existent”. 

The IT department held that the alleged loan of Rs. 90.21 crore was actually a “book entry”  devised in a way to lead to allotment of 9.021 crore shares of AJL (99% of total shares) to Young Indian resulting in takeover of AJL.

Further, in order to have funds for buying loan of Rs 91.21 crore, Young Indian took loan of Rs 1 crore from Dotex Merchandise Private Limited of Kolkata but the IT department held that it was an “accommodation entry”. 

IT sleuths also alleged that in order to have smooth take over of AJL by Young India, some of the shareholders and directors of Young Indian were also made office bearers of AJL. 

Further, for taking over 100 percent shares of AJL (more than 99 percent shareholding) by Young Indian, its directors - Rahul Gandhi and her sister Priyanka Gandhi purchased additional 47,513 and 2,62,411 shares of the AJL through two trusts. The IT department said Sonia and Rahul benefited to the tune of Rs. 413.40 crore and it was revenue in nature and this was taxable. 

In an order issued in 2017, the status of Young Indian as a tax-exempt outfit was also cancelled as the it was alleged that it didn’t carry out activities as per its charitable objective. 

The IT department levied a tax of Rs 249.15 crore on the alleged benefit of around Rs 414 crore. Following an appeal, the Income Tax Appellate Tribunal held that actual benefit of Rs 395 crore, giving a relief of only Rs 17 crore. Now the Gandhi’s have taken legal recourse to challenge the orders issued in this regard. 

Also, the ministry of Housing and Urban Development held that the National Herald house was used for commercial purposes and cancelled the lease dead of the Herald House. The order too has been challenged in the court.