Tax Dept Hauls Up NDTV For Alleged Bogus “Sale Of Dreams” Of Rs. 642 Cr In Alleged Complicity With PWC

The Income-tax Department (see embedded order at bottom of post) has made an addition of Rs. 642 crore on New Delhi Television Ltd (NDTV) in respect of AY 2009-10. It is claimed that a sum of Rs. 624 crore (US$ 150M) was received by a subsidiary of NDTV for allotting shares to NBC Universal Inc and Universal Studios International BV. It is claimed that the shares were allotted at Rs. 7,015 each even though the allotting companies had no business activities. It is also claimed that there was no independent valuation conducted of the shares. It is also claimed that in the immediately succeeding AY 2010-11, NDTV BV bought the shares at Rs. 634 per share, creating a loss of Rs. 584 crore for USBV.

(Source & image Credit: pgurus.com)

The AO has alleged that the transaction is a sham and is designed to route the assessee’s undisclosed money through its subsidiary. This finding has been upheld by the DRP and a sum of Rs. 642 crore has been directed to be assessed as the assessee’s undisclosed income u/s 69A of the Act.

NDTV, in its defense, appears to have justified the valuation on the basis that it “sold a dream” to the investor and that the “dream went bust”. However, the argument has been rejected by the AO and the DRP on the ground that there is no credible evidence of having “sold the dream” or of the “dream having gone bust”.

The AO has also issued a notice u/s 271(1)(c) of the Act for levying penalty of Rs. 436 crore being 200% of the tax sought to be evaded on the addition of Rs. 642 crore.

Alleged complicity by PWC in the alleged scam:

In the s. 271(1)(c) notice, the AO has alleged that there was complicity by PriceWaterhouse, the leading MNC firm of Chartered Accountants. Certain emails from one Mr. Vivek Mehra of PWC are quoted in which he has offered advice to NDTV that “We must not mention that NDTV is receiving the 150m as dividend or otherwise”. It is also stated “If asked a question what will the money be used for ??? We need to decide how to answer this question carefully”.

The AO has alleged that “The mail dated 21.05.2008 written by Mr. Vivek Mehra (PWC) to Dr. Prannoy Roy is an unambiguous advice to Dr. Roy to conceal the true import of the transaction and not to mention that NDTV was receiving the 150 million as dividend or otherwise”. He also quotes from another email from PWC which cautions Dr. Prannoy Roy that the “problem could become worse if we give a handle to the tax authorities”.

There is also an earlier allegation asking “Is NDTV muzzling an honest officer who caught their Tax Fraud?” It is alleged by S. Gurumurthy, a well-known Chartered Accountant and political activist that “Two lady officials of IT Dept became proxies for NDTV and PC. They charged Sanjay Srivastava with sexual harassment”.

Fro archives of @OpIndia_com: Is NDTV muzzling an honest officer who caught their Tax Fraud? https://t.co/GTn3QZRJfs

— Rahul Raj (@bhak_sala) August 2, 2016

Hope this just the beginning- NDTV claimed they sold dreams. IT said: No. Its a sham transaction, slaps ₹525 cr fine https://t.co/Disq0uD3Db

— Madhu Kishwar (@madhukishwar) August 2, 2016

Would be great to see a comment on this from @PrannoyRoyNDTV or any other NDTV promoter/journalist https://t.co/5eV6gCJMv7

— Sunil Jain (@thesuniljain) August 2, 2016

I wonder how long it will be before someone claims this is govt hounding the media #NDTVTaxNoticehttps://t.co/zCzJHePoLQ

— Sunil Jain (@thesuniljain) August 2, 2016

NDTV Income Tax Notice June 2016