NDTV created a complex structure of subsidiaries to enter into sham dealings; HC affirms reassessment

Facts:

a) New Delhi Television Ltd (NDTV) had filed writ petition against the notice proposing reassessment proceedings initiated under section 147/148.

b) The Assessing Officer (AO) was of the view that the amount received by NDTV from foreign subsidiaries was actually its unaccounted money and was a sham transaction.

c) Assessee contended that the "reasons to believe" supplied by the AO did not substantiate on how it had failed to disclose all material facts and instead merely repeated the statutory language. It further argued that during regular scrutiny assessment, AO had made requisite inquiries with respect to foreign investments.

The Delhi High Court held in favour of revenue as under:

1. AO had taken into account several specific tax evasion petitions received from shareholder of the NDTV that money introduced in foreign subsidiary through money laundering activities was actually transferred to the NDTV through liquidations and mergers.

2. The Director of the complainant company was part of the team of NDTV at some point of time, which designed the complex corporate structure to route and reroute funds with layering of funds. Further, complaints against NDTV were received from the shareholder wherein details regarding the raising and routing of funds through round tripping were given. 

3. AO took note of information contained in these tax evasion petitions, because the complaints of tax evasion were received from NDTV's shareholders, who were aware of its internal affairs and aim and object of floating complex corporate structure by the NDTV; therefore, the AO had reason to believe that information was credible.

4. The complex and circuitous structure of subsidiaries and the transactions entered into therein were closely connected and provided a live link for the formation of the belief of the AO that there had been escapement of income.

5. Therefore, AO was justified in forming an opinion that prima facie amount so received represented assessee's own unaccounted money which had escaped assessment and, thus, validity of reassessment proceedings initiated by him deserved to be upheld. [2017] 84 taxmann.com 136 (Delhi)