Delhi HC quashes IT-dept’s reassessment proceedings against Radhika Roy and Prannoy Roy

Delhi High Court on Monday quashed reassessment proceedings initiated by the Income Tax Department against NDTV founders Radhika Roy and Dr Prannoy Roy for assessment year 2009–10, holding that the reopening of their tax cases was without jurisdiction and based on a mere change of opinion.

A division bench of Justice Dinesh Mehta and Justice Vinod Kumar set aside notices issued under Section 148 of the Income Tax Act in March 2016, nearly three years after a reassessment order for the same assessment year had already been passed in March 2013.

The court observed that allowing the tax department to revive proceedings on an identical set of facts, after having examined the issue in detail earlier, would amount to arbitrariness and cause grave injustice, particularly when the matter related to a transaction over 15 years old.

The case stemmed from interest free loans advanced by RRPR Holding Private Limited, a company in which Radhika Roy and Prannoy Roy held 50 percent shareholding, to the two promoters during financial year 2008–09. RRPR had raised a Rs 375 crore loan from ICICI Bank at an interest rate of 19 percent per annum and subsequently extended interest free loans to its directors, including Rs 71 crore to Radhika Roy and Rs 20.92 crore to Prannoy Roy.

The tax department initially reopened Radhika Roy’s assessment in July 2011, alleging that income had escaped assessment due to undervalued transactions involving NDTV shares between her and RRPR. During the reassessment proceedings, the Assessing Officer also examined whether the interest free loan from RRPR could be treated as deemed dividend under Section 2(22)(e) of the Act.

After calling for books of accounts, balance sheets, and shareholding details of RRPR, the Assessing Officer passed an order on March 30, 2013, assessing Radhika Roy’s income at Rs 3.17 crore. Crucially, no addition was made on account of the interest free loan, despite a specific show cause notice on the issue.

However, in March 2016, the department issued fresh notices under Section 148 to both Radhika Roy and Prannoy Roy for the same assessment year, citing complaints and a subsequent examination of RRPR’s assessment records. This time, the department sought to tax the notional interest allegedly foregone by RRPR as deemed income under Section 2(24)(iv) of the Act.

Senior advocate Sachit Jolly, appearing for the Roys, argued that all material facts, including RRPR’s loan transactions and books of accounts, had been fully disclosed and examined during the earlier reassessment. He contended that the second reopening was barred by law and amounted to a change of opinion on the same transaction.

The tax department countered that the earlier reassessment focused on deemed dividend under Section 2(22)(e), whereas the fresh proceedings were based on deemed income under a different provision, Section 2(24)(iv). It also argued that the petitioners had approached the court prematurely without responding to the fresh notices.

Rejecting the department’s stand, the High Court held that merely invoking a different provision of the Act could not justify reopening an assessment on the same factual foundation. The bench noted that the issue of interest free loans had been squarely examined during the earlier reassessment and consciously dropped by the Assessing Officer.

The court also took note of the fact that proceedings pursuant to the 2016 notice had been stayed since November 2017 and that reviving them now would be inequitable. It observed that relegating the petitioners to statutory remedies after eight years of interim protection would be a travesty of justice.

Holding that the impugned notices were issued without jurisdiction and were liable to be quashed, the High Court allowed both writ petitions filed by Radhika Roy and Dr Prannoy Roy, bringing the long running tax dispute for assessment year 2009–10 to a close.